[Federal Register Volume 63, Number 43 (Thursday, March 5, 1998)]
[Notices]
[Pages 10841-10847]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-5600]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-401-806]


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

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

EFFECTIVE DATE: March 5, 1998.

FOR FURTHER INFORMATION CONTACT: Sunkyu Kim or Brian Smith, Import 
Administration, International Trade Administration, U.S. Department of 
Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 
20230; telephone: (202) 482-2613 or (202) 482-1766, respectively.

The Applicable Statute

    Unless otherwise indicated, all citations to the Tariff Act of 
1930, as amended (``the Act''), are references to the provisions 
effective January 1, 1995, the effective date of the amendments made to 
the Act by the Uruguay Round Agreements Act (``URAA''). In addition, 
unless otherwise indicated, all citations to the Department's 
regulations are to the regulations at 19 CFR part 351, 62 FR 27296 (May 
19, 1997).

Preliminary Determination

    We preliminarily determine that stainless steel wire rod (``SSWR'') 
from Sweden 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:
    In August 1997, the Department obtained information from the U.S. 
Embassy in Sweden identifying Fagersta Stainless AB (``Fagersta'') as 
the only potential producer and/or exporter of the subject merchandise 
to the United States. Based on this information, the Department issued 
the antidumping questionnaire to Fagersta in September 1997. Section A 
of the questionnaire requests general information concerning the 
company's corporate structure and business practices, the merchandise 
under investigation that it sells, and the sales of that merchandise in 
all markets. Sections B and C of the questionnaire request home market 
sales listings and U.S. sales listings. Section D of the questionnaire 
requests information regarding the cost of production of the foreign 
like product and the constructed value of the merchandise under 
investigation. Section E of the questionnaire requests information 
regarding the cost of further manufacture or assembly performed in the 
United States.
    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-770).
    In October 1997, the Department received a response to Section A of 
the

[[Page 10842]]

questionnaire from Fagersta. On October 14, 1997, Fagersta requested 
that the Department modify the reporting period for a U.S. affiliate. 
The Department granted this request on October 16, 1997. Fagersta 
(hereinafter ``the respondent'') submitted its response to sections B, 
C, and E of the questionnaire in November 1997.
    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, Incl, 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 period of 
investigation. On October 17, 1997, the respondent requested that the 
Department deny the petitioners' request. 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).
    On October 20, 1997, Fagersta requested that it be allowed to 
exclude from its sales listing U.S. sales of certain wire products 
further manufactured from subject merchandise. On November 6, 1997, the 
Department denied this request and required Fagersta to report these 
sales of further-manufactured products in its response. On November 7, 
1997, Fagersta requested that it be allowed to exclude certain other 
sales made in the United States. Fagersta stated that these sales 
constitute an insignificant amount of its total U.S. sales made during 
the period of investigation and that they are unrepresentative of 
Fagersta's normal sales. We granted Fagersta's request on November 12, 
1997.
    On November 25, 1997, the petitioners submitted a timely allegation 
pursuant to section 773(b) of the Act that Fagersta had made sales in 
the home market at less than the cost of production (``COP''). Our 
analysis of the allegation indicated that there were reasonable grounds 
to believe or suspect that Fagersta sold SSWR in the home market at 
prices at less than the COP. Accordingly, we initiated a COP 
investigation with respect to Fagersta pursuant to section 773(b) of 
the Act (see Memorandum from Team to Louis Apple, Office Director, 
dated December 16, 1997).
    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 received Fagersta's response to Section D of the questionnaire 
in January 1998. We issued supplemental questionnaires for Sections A, 
B, C and E to Fagersta in January 1998 and received responses to these 
questionnaires along with a revised U.S. sales listing in February 
1998. Fagersta also submitted additional clarifications to its 
responses in February 1998.

Postponement of Final Determination and Extension of Provisional 
Measures

    Pursuant to section 735(a)(2) of the Act, on February 9, 1998, 
Fagersta requested that, in the event of an affirmative preliminary 
determination in this investigation, the Department postpone its final 
determination until not later than 135 days after the date of the 
publication of an affirmative preliminary determination in the Federal 
Register. On February 12, 1998, Fagersta amended its request to include 
a request to extend the provisional measures to not more than six 
months. In accordance with 19 CFR 351.210(b), because (1) our 
preliminary determination is affirmative, (2) Fagersta accounts 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 
no later than 135 days after the publication of this notice in the 
Federal Register. Suspension of liquidation will be extended 
accordingly.

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


[[Page 10843]]

    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 period of investigation (``POI'') is July 1, 1996, through June 
30, 1997.

Fair Value Comparisons

    To determine whether sales of SSWR from Sweden to the United States 
were made at less than fair value, we compared the export price 
(``EP'') or constructed export price (``CEP'') to the Normal Value 
(``NV''), as described in the ``Export Price and Constructed Export 
Price'' and ``Normal Value'' sections of this notice, below. In 
accordance with section 777A(d)(1)(A)(i) of the Act, we calculated 
weighted-average EPs and CEPs 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 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.
    In instances where the respondent has reported a non-AISI grade (or 
an internal grade code) for a product that falls within a single AISI 
category, we have used the actual AISI grade rather than the non-AISI 
grades reported by respondents for purposes of our analysis. However, 
in instances where the chemical content ranges of reported non-AISI (or 
an internal grade code) grades are outside the parameters of an AISI 
grade, we have preliminarily used the grade code reported by the 
respondent for analysis purposes. We intend to examine this issue 
further for the final determination.
    With respect to home market sales of non-prime merchandise made by 
Fagersta 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 constructed value (``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).
    Fagersta reported one customer category (i.e., ``wire drawers'') 
and one channel of distribution (i.e., direct sales from mill to end 
users) for its home market sales. In its response, Fagersta claims that 
its sales to the unaffiliated customers are at a different LOT than its 
sales to the affiliated customers because Fagersta provides 
significantly different selling services to its affiliated customers 
than what it provides to its unaffiliated customers. Specifically, 
Fagersta identified the following selling services it provides to its 
unaffiliated customers: (1) General promotion and marketing services; 
(2) freight and delivery; (3) post-sale warranty services; and (4) pre-
sale technical services. For sales to its affiliated customers, 
Fagersta listed the following services: (1) Priority production and 
delivery or just-in-time processing; (2) high level of technical 
cooperation; (3) network data exchange; (4) prices set annually; (5) 
warranty service; (6) billet rebates; and (7) freight and delivery. 
Fagersta claims that, because it offers significantly different 
services to its affiliated customers, in comparison to its services to 
unaffiliated customers, Fagersta charges its affiliated customers 
higher prices. Therefore, Fagersta claimed an LOT adjustment on this 
basis.
    In determining whether separate levels of trade actually existed in 
the home market, we examined whether Fagersta's sales involved 
different marketing stages (or their equivalent) based on the channel 
of distribution, customer categories and selling functions. As noted 
above, Fagersta's sales to its unaffiliated and affiliated

[[Page 10844]]

customers were made through the same channel of distribution and to the 
same category of customer. With respect to selling activities, we note 
that, in some instances, the activities Fagersta characterized as 
selling functions (e.g., billet rebates and annual price setting) are 
not distinct selling functions which we consider to be relevant to our 
LOT analysis. Furthermore, based on our analysis, we note that, while 
there are some differences in selling activities between Fagersta's 
sales to affiliated customers and unaffiliated customers (e.g., just-
in-time processing services), we do not find that such differences are 
sufficient to establish a difference in marketing stage (or its 
equivalent). As discussed in the Department's regulations, substantial 
differences in selling activities are a necessary, but not sufficient, 
condition for determining that there is a difference in the stage of 
marketing. See 19 CFR 351.412. See also Notice of Final Results: 
Antidumping Duty Administrative Review of Antifriction Bearings from 
France et al., 62 FR 2081, 2105 (January 15, 1997). Based on this 
analysis, we find that Fagersta's home market sales comprise a single 
level of trade.
    Fagersta reported both EP and CEP sales in the U.S. market. For EP 
sales, Fagersta reported one channel of distribution (i.e., direct 
sales from the mill to unaffiliated end users). In analyzing Fagersta's 
selling activities for its EP sales, we noted that the sales involved 
basically the same selling functions associated with the home market 
level of trade described above. Therefore, based upon this information, 
we have determined that the level of trade for all EP sales is the same 
as that in the home market.
    The CEP sales were based on sales made by Fagersta to Sandvik Steel 
Company (``SSUS''), one of Fagersta's U.S. affiliates, which then sold 
the merchandise to unaffiliated purchasers in the United States. Based 
on our analysis, we find that the selling functions performed at the 
CEP level are essentially the same as those performed in the home 
market. Specifically, after making deductions pursuant to section 
772(d) of the Act, we determined that there were three selling 
activities performed by Fagersta associated with its sales to SSUS: (1) 
Freight and delivery; (2) post-sale warranty services; and (3) pre-sale 
technical services, which are the same functions we found in the home 
market. Therefore, we determine that Fagersta's CEP sales and its home 
market sales are made at the same level of trade. Accordingly, because 
we find the U.S. sales and home market sales to be at the same level of 
trade, no level-of-trade adjustment under section 773(a)(7)(A) of the 
Act is warranted.

Export Price and Constructed Export Price

    Fagersta reported as EP transactions its sales of subject 
merchandise sold to unaffiliated U.S. customers prior to importation 
through two affiliated companies in the United States (Avesta Sheffield 
Inc. (``ASI'') and SSUS). Fagersta reported as CEP transactions its 
sales of subject merchandise sold to SSUS for its own account. SSUS 
then resold the subject merchandise to unaffiliated customers or 
further manufactured the wire rod into wire products which are outside 
the scope of this investigation.
    With respect to sales made through ASI and SSUS prior to 
importation, Fagersta claims that these sales are properly classified 
as EP sales because ASI and SSUS act only as sales-document processors 
and communication links to facilitate Fagersta's U.S. sales to 
unaffiliated customers. Specifically, Fagersta states the following: 
(1) neither ASI nor SSUS takes physical possession of the merchandise; 
(2) the merchandise is shipped directly from Fagersta to the customer; 
(3) neither ASI nor SSUS has independent authority to establish prices; 
(4) the essential terms of sales are set and approved by Fagersta in 
Sweden; and (5) all relevant sales activities are performed by Fagersta 
in Sweden before exportation. Therefore, according to Fagersta, ASI and 
SSUS are mere conduits of sales information for Fagersta's direct mill 
sales to unaffiliated U.S. customers.
    We examine several factors to determine whether sales made prior to 
importation through an affiliated sales agent to an unaffiliated 
customer in the United States are EP sales, such as (1) whether the 
merchandise was shipped directly from the manufacturer to the 
unaffiliated U.S. customer; (2) whether the sales follow customary 
commercial channels between the parties involved; and (3) whether the 
function of the U.S. selling agent is limited to that of a ``processor 
of sales-related documentation'' and a ``communication link'' with the 
unrelated U.S. buyer. Where the factors indicate that the activities of 
the U.S. affiliate are ancillary to the sale (e.g., arranging 
transportation or customs clearance), we treat the transactions as EP 
sales. Where the U.S. affiliate is substantially involved in the sales 
process (e.g., negotiating prices), we treat the transactions as CEP 
sales.
    Based on our review of the selling activities of Fagersta's U.S. 
affiliates, we preliminarily determine that EP is appropriate for 
Fagersta's sales to the United States through ASI and SSUS. The 
customary commercial channel between Fagersta and its unaffiliated 
customers is that Fagersta ships the EP merchandise directly to the 
unaffiliated U.S. customers without having the merchandise enter into 
the inventory of the U.S. affiliates and that the U.S. affiliates' 
activities are limited to that of a ``processor of sales-related 
documentation'' and a ``communication link'' with the unaffiliated U.S. 
buyers. Accordingly, for purposes of the preliminary determination, we 
are treating the sales in question as EP transactions. We will examine 
this issue further at verification.
    We calculated EP, in accordance with section 772(a) of the Act, for 
those sales where the merchandise was sold to the first unaffiliated 
purchaser in the United States prior to importation and CEP methodology 
was not otherwise warranted, based on the facts of record. We based EP 
on the packed delivered price to unaffiliated purchasers in the United 
States. We added to the starting price any alloy surcharges and, where 
appropriate, made adjustments for price-billing errors and freight 
revenue. We made deductions for early payment discounts and rebates, 
where applicable. We also made deductions for movement expenses in 
accordance with section 772(c)(2)(A) of the Act; these included, where 
appropriate, ocean freight, marine insurance, U.S. brokerage and 
handling, U.S. customs duties (including harbor maintenance fees and 
merchandise processing fees), U.S. inland insurance, and U.S. inland 
freight expenses (freight from port to warehouse and freight from 
warehouse to the customer).
    We calculated CEP, in accordance with subsections 772(b) of the 
Act, for those sales to the first unaffiliated purchaser that took 
place after importation into the United States. In addition, Fagersta 
reported sales of wire and wire products (non-subject merchandise) 
which were further manufactured from wire rod (subject merchandise) by 
one of its affiliates in the United States. In deciding whether to base 
CEP on the sales of subject merchandise that are further manufactured, 
the Department determines whether the value added is likely to exceed 
substantially the value of the subject merchandise in accordance with 
section 772(e) of the Act. Section 772(e) of the Act provides 
alternatives to backing out the value added after importation, when 
doing so

[[Page 10845]]

would cause an undue burden on the Department. See Statement of 
Administrative Action, H.R. Doc. No. 316, Vol. 1, 103d Cong., 2d. Sess. 
(1994), 825-826. Normally, when the estimated value-added amount 
exceeds 65% of the value of the merchandise sold to unaffiliated 
purchasers, the CEP for such merchandise will be established by an 
alternative methodology in accordance with section 772(e) of the Act. 
See 19 CFR 351.402(c)(2). In this case, we determine that section 
772(e) of the Act does not apply because the value added in the United 
States by the affiliated person is not likely to exceed substantially 
the value of the subject merchandise. Therefore, for subject 
merchandise further manufactured in the United States, we used the 
starting price of the subject merchandise and deducted the costs of 
further manufacturing to determine CEP for such merchandise, in 
accordance with section 772(d)(2) of the Act.
    We based CEP on the packed FOB or delivered prices to unaffiliated 
purchasers in the United States. We added to the starting price any 
alloy surcharges and, where appropriate, made adjustments for price-
billing errors and freight revenue. We made deductions for early 
payment discounts and rebates, where applicable. We also made 
deductions for movement expenses in accordance with section 
772(c)(2)(A) of the Act; these included, where appropriate, ocean 
freight, marine insurance, U.S. brokerage and handling, U.S. customs 
duties (including harbor maintenance fees and merchandise processing 
fees), U.S. inland insurance, U.S. inland freight expenses (freight 
from port to warehouse and freight from warehouse to the customer), and 
post-sale warehousing expenses. In accordance with section 772(d)(1) of 
the Act, we deducted those selling expenses associated with economic 
activities occurring in the United States, including direct selling 
expenses (credit costs and warranty expenses), inventory carrying 
costs, U.S. repacking expenses, and indirect selling expenses. We also 
deducted an amount for further-manufacturing costs, where applicable, 
in accordance with section 772(d)(2) of the Act and made an adjustment 
for profit in accordance with section 772(d)(3) of the Act.

Normal Value

    After testing (1) home market viability; (2) whether sales to 
affiliates were at arm's-length prices and (3) 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 respondent's 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 respondent's 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 respondent.
2. Affiliated-Party Transactions and Arm's-Length Test
    Fagersta, in its response, claimed that we should not include in 
our analysis Fagersta's sales of wire rod to its affiliated customers 
in the home market. According to Fagersta, due to the close 
relationship between Fagersta and its affiliates based on their common 
ownership and interdependence in the production of wire rod and wire 
products, Fagersta's transactions with these affiliated companies 
should be treated as internal transfers. Fagersta cited to the Certain 
Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products From 
Korea: Final Results of the Antidumping Duty Administrative Reviews, 62 
FR 18404 (April 15, 1997) (``Carbon Steel Flat Products From Korea'') 
in support of its claim. This case upon which Fagersta relied is 
inapposite. The issue in Carbon Steel Flat Products from Korea was 
whether to ``collapse'' affiliated producers/exporters for margin-
calculation purposes. We do not use that type of analysis to determine 
whether transactions between affiliated parties are an appropriate 
basis for determining NV. The Department's standard practice with 
respect to the use of home market sales to affiliated parties for NV is 
to determine whether such sales are at arm's-length prices. Therefore, 
in accordance with that practice, we performed an arm's-length test on 
Fagersta's sales to affiliates as follows.
    Sales to affiliated customers in the home market not made at arm's-
length prices (if any) were excluded 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 the starting prices of sales to 
affiliated and unaffiliated customers net of all movement charges, 
direct selling expenses, and packing. 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. In instances where no 
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 model.
3. Cost of Production Analysis
    As stated in the ``Case History'' section of the notice, based on a 
timely allegation filed by the petitioners, the Department initiated a 
COP investigation of Fagersta to determine whether sales were made at 
prices less than the COP.
    We conducted the COP analysis described below.

A. Calculation of COP

    In accordance with section 773(b)(3) of the Act, we calculated COP 
based on the sum of Fagersta's cost of materials and fabrication for 
the foreign like product, plus an amount for home market SG&A, interest 
expenses, and packing costs. We used the information from Fagersta's 
January 26, 1998, questionnaire response to calculate COP.
    Fagersta purchased a major input (i.e., steel billets) for SSWR 
from affiliated parties. In accordance with section 773(f)(3) of the 
Act, we used the higher of the transfer price or cost of production to 
value the billets in our analysis. No information on the market value 
of billets was available. We excluded from billet costs the net foreign 
exchange gain that had been charged to material acquisitions because 
Fagersta did not describe in its response how it derived the amount of 
the gain and how the gain was related to purchases of materials used to 
produce the subject merchandise. See

[[Page 10846]]

Memorandum to Chris Marsh from Art Stein, dated February 25, 1998.

B. Test of Home Market Sales Prices

    We compared the weighted-average COP for Fagersta, adjusted where 
appropriate, 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 less than the COP, we 
examined whether (1) within an extended period of time, such sales were 
made in substantial quantities, and (2) such sales were made at prices 
which permitted the recovery of all costs within a reasonable period of 
time. On a product-specific basis, we compared the COP to the home 
market prices, less any applicable movement charges, rebates, 
discounts, and direct and indirect selling expenses.

C. Results of the COP Test

    Pursuant to section 773(b)(2)(C), where less than 20 percent of 
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 a 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 grades of SSWR, more than 20 percent of 
Fagersta's home market sales within an extended period of time were at 
prices less than COP. Further, the prices did not provide for the 
recovery of costs within a reasonable period of time. We therefore 
excluded these sales and used the remaining above-cost sales as the 
basis for determining NV if such sales existed, in accordance with 
section 773(b)(1). For those U.S. sales of SSWR for which there were no 
comparable (above-cost) home market sales in the ordinary course of 
trade, we compared export prices or constructed export prices to CV in 
accordance with section 773(a)(4) of the Act.

D. Calculation of CV

    In accordance with section 773(e)(1) of the Act, we calculated CV 
based on the sum of Fagersta's cost of materials, fabrication, SG&A, 
interest, and U.S. packing costs. As noted above in the ``Calculation 
of COP'' section of the notice, for CV we adjusted billet costs to 
exclude the net foreign exchange gain that had been charged to 
materials acquisitions. In accordance with sections 773(e)(2)(A) of the 
Act, we based SG&A and profit on the amounts incurred and realized by 
the respondent in connection with the production and sale of the 
foreign like product in the ordinary course of trade for consumption in 
the foreign country. For selling expenses, we used the weighted-average 
home market selling expenses.

Price-to-Price Comparisons

    We calculated NV based on delivered prices to unaffiliated 
customers or prices to affiliated customers that we determined to be at 
arm's-length prices. We made deductions, where appropriate, from the 
starting price for discounts, rebates, inland freight, and ``billing 
error'' rebates. We made adjustments for differences in the merchandise 
in accordance with section 773(a)(6)(C)(ii) of the Act. In addition, we 
made adjustments under section 773(a)(6)(C)(iii) of the Act for 
differences in circumstances of sale for imputed credit expenses and 
warranties. Finally, we deducted home market packing costs and added 
U.S. packing costs in accordance with section 773(a)(6)(A) and (B) of 
the Act.

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 we compared CV 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. Where we compared CV to CEP, we deducted from CV the weighted-
average home market direct selling expenses.

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) of the Act 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) of the Act 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 Swedish Krona did not undergo a sustained movement.

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 the 
Customs Service to suspend liquidation of all imports of subject 
merchandise that are entered, or withdrawn from warehouse, for 
consumption on or after the date of publication of this notice in the 
Federal Register. We will instruct the Customs Service to require a 
cash deposit or the posting of a bond equal to the weighted-average 
amount by which the NV exceeds the export price, 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 
------------------------------------------------------------------------
Fagersta Stainless AB.....................................          6.51
All Others................................................          6.51
------------------------------------------------------------------------

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

[[Page 10847]]

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 June 1, 1998, and rebuttal briefs no later than June 8, 
1998. A list of authorities used and an executive summary of issues 
should 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 12, 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.
    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. 98-5600 Filed 3-4-98; 8:45 am]
BILLING CODE 3510-DS-P