[Federal Register Volume 63, Number 43 (Thursday, March 5, 1998)]
[Notices]
[Pages 10854-10860]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-5604]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-588-843]


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

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

EFFECTIVE DATE: March 5, 1998.

FOR FURTHER INFORMATION CONTACT: David Genovese, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, NW, Washington, D.C. 20230; telephone: 
(202) 482-0498.

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 of Commerce's (the 
Department's) regulations are references to 19 CFR part 351 (62 FR 
27296 (May 19, 1997)).

Preliminary Determination

    We preliminarily determine that stainless steel wire rod (SSWR) 
from Japan 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 Duty 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:
    During August and September 1997, the Department obtained 
information from the U.S. Embassy in Tokyo and the Embassy of Japan in 
Washington, D.C., identifying potential producers and/or exporters of 
the subject merchandise to the United States. Based on this 
information, in September 1997, the Department issued antidumping 
questionnaires to the following ten companies: Aichi Steel Works Ltd. 
(Aichi), Daido Steel Co. Ltd. (Daido), Hitachi Metals Ltd. (Hitachi), 
Kobe Steel Ltd. (Kobe), Nippon Steel Corporation (Nippon), Pacific 
Metals Co. Ltd. (Pacific), Sanyo Special Steel Co. Ltd. (Sanyo), 
Sumitomo Electric Industries Ltd. (SEI), Sumitomo Metal Industries Ltd. 
(SMI), and Toa Steel Co. Ltd. (Toa).
    On September 15, 1997, the United States International Trade 
Commission (ITC) issued an affirmative preliminary injury determination 
in this case (see ITC Investigation Nos. 731-TA-769-775).
    In October and November 1997, the Department received questionnaire 
responses from all ten companies. Five of the companies (Nippon, Daido, 
Hitachi, Sanyo, and SEI) reported that they had made sales of subject 
merchandise to the United States during the period of investigation 
(POI) and five (Aichi, Kobe, Pacific, SMI, and Toa) reported that they 
had not made sales of subject merchandise to the United States during 
the POI. Because Daido, Hitachi, Nippon, Sanyo, and SEI made sales of 
subject merchandise to the United States during the POI, they were 
selected as mandatory respondents. See Memorandum To Louis Apple From 
the Team, regarding respondents' selection, dated October 22, 1997. Of 
these companies, Nippon, Daido, and Hitachi provided complete responses 
to the Department's questionnaire; Sanyo provided a response to 
questions 1, 2, 5 and 6, of Section A, and SEI provided a response only 
to question 1 of Section A, but did not respond to the remaining 
portion of Section A or Sections B and C of the Department's 
questionnaire. In its partial response to the Department's 
questionnaire, Sanyo requested to be excluded from the group of 
companies investigated in this antidumping investigation, due to its 
insubstantial exports of SSWR during the POI. The petitioners did not 
support Sanyo's request (see Memorandum to the File from Jim Maeder, 
dated December 4, 1997) and, thus, we were unable to grant Sanyo's 
request, pursuant to 19 CFR 351.204(c)(1). On December 5, 1997, we 
informed Sanyo that we considered it to be a mandatory respondent in 
this investigation and that it was required to provide a complete 
response to the remaining portion of our questionnaire. Sanyo never 
responded to that request. With regard to SEI, when it failed to 
respond to the remainder of the questionnaire, we informed it again on 
October 8, 1997, that it was a mandatory respondent and was required to 
respond to our questionnaire and we extended the deadline for its 
response. SEI never responded to that request.
    Because Sanyo and SEI failed to respond fully to our questionnaire, 
we have assigned to these companies a margin based on the facts 
available. (See the ``Facts Available'' section below for further 
discussion.)
    In its October 10, 1997, submission, Nippon stated that it was 
affiliated with a number of SSWR producers. On October 22, 1997, based 
on this information, the Department determined that Nippon was required 
to provide a single response which included the information on all of 
its affiliates. On October 28, 1997, Nippon requested that the 
Department reconsider its position. On November 20, 1997, we informed 
Nippon that, because we do not believe that it has a significant 
potential to manipulate the pricing or production decisions of its 
affiliates, Nippon would not be required to submit a single response 
that includes the information

[[Page 10855]]

of its affiliates. We also informed Nippon that, should we find 
evidence of significant potential for price manipulation during 
verification, we may use facts available for purposes of the final 
determination. For further discussion of this issue, see Memorandum 
From the Team to Louis Apple, dated November 20, 1997.
    On November 25, 1997, the petitioners submitted a timely allegation 
pursuant to section 773(b) of the Act that Daido and Nippon had made 
sales in the home market below the cost of production (COP). Based on 
our analysis of these allegations, we initiated a COP investigation 
with respect to Daido and Nippon and informed these companies that they 
needed to complete Section D of our 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. On December 16, 1997, we granted this request and 
postponed the preliminary determination until no later than February 
25, 1998. See 62 FR 66849 (December 22, 1997).
    In December 1997, we issued to Daido supplemental sales 
questionnaires and received responses in January 1998. In December 
1997, we issued to Hitachi supplemental sales questionnaires and 
received responses in the same month. In January 1998, we received 
responses from Daido and Nippon to section D of the Department's 
questionnaire. In addition, in January 1998, we issued a supplemental 
cost questionnaire to Hitachi and received Hitachi's response in the 
same month.
    In February 1998, we issued additional supplemental sales 
questionnaires to Daido, Hitachi, and Nippon, and supplemental cost 
questionnaires to Daido and Nippon. Also in February 1998, Nippon 
submitted revised home market and U.S. sales listings, which identified 
prime and non-prime merchandise and corrected the inventory carrying 
cost calculation. This information, except for Nippon's recalculation 
of the inventory carrying cost adjustment which was a minor correction, 
was received too late to be considered for purposes of this preliminary 
determination. We will consider it, however, for purposes of the final 
determination.

Postponement of Final Determination and Extension of Provisional 
Measures

    On February 13, 1998, the respondents 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. The respondents also 
requested that the Department extend provisional measures pursuant to 
section 733(d) of the Act from four months to not more than six months. 
In accordance with 19 CFR 351.210(e), because: (1) Our preliminary 
determination is affirmative; (2) the respondents account for a 
significant proportion of exports of the subject merchandise; (3) no 
compelling reasons for denial exist; and (4) respondents have requested 
an extension of provisional measures, we are granting this 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.

Facts Available

    As noted above, Sanyo only provided a response to questions 1, 2, 
5, and 6 of Section A of the Department's questionnaire and SEI only 
provided a response to question 1 of Section A of the Department's 
questionnaire. They failed to respond to the remainder of the 
questionnaire. Section 776(a)(2) of the Act provides that, if an 
interested party: (A) Withholds information that has been requested by 
the Department; (B) fails to provide such information in a timely 
manner or in the form or manner requested; (C) significantly impedes a 
proceeding under the antidumping statute; or (D) provides such 
information but the information cannot be verified, the Department 
shall, subject to subsections 782(c)(1) and (e), use facts otherwise 
available in reaching the applicable determination. Because Sanyo and 
SEI failed to respond to the Department's questionnaire and because 
that failure is not overcome by the application of subsections (c)(1) 
and (e) of section 782, we must use facts otherwise available to 
calculate the dumping margins for these companies.
    Section 776(b) of the Act provides that adverse inferences may be 
used against a party that has failed to cooperate by not acting to the 
best of its ability to comply with the Department's requests for 
information. See also Statement of Administrative Action accompanying 
the URAA, H.R. Rep. No. 316, 103d Cong., 2d Sess. 870 (1994) (SAA). 
Sanyo's and SEI's decision not to reply to the Department's antidumping 
questionnaire demonstrates that they have failed to act to the best of 
their ability to comply with a request for information under section 
776 of the Act. Thus, the Department has determined that, in selecting 
among the facts otherwise available, an adverse inference is warranted.
    In accordance with our standard practice, as adverse facts 
available, we are assigning to Sanyo and SEI the higher of: (1) The 
highest margin stated in the notice of initiation; or (2) the highest 
margin calculated for any respondent in this investigation. In this 
case, this margin is 31.38 percent, which is the highest margin 
calculated for a respondent in this investigation.
    Section 776(b) states that an adverse inference may include 
reliance on information derived from the petition or any other 
information placed on the record. See also SAA at 829-831. 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. To corroborate secondary information, the Department will, to 
the extent practicable, examine the reliability and relevance of the 
information to be used. In an investigation, if the Department chooses 
as facts available a calculated dumping margin of another respondent, 
it is not necessary to question the reliability of that calculated 
margin. With respect to relevance, however, the Department will 
consider information reasonably at its disposal as to whether there are 
circumstances that would render a margin not relevant. Where 
circumstances indicate that the selected margin may not be appropriate, 
the Department will attempt to find a more appropriate basis for facts 
available (see, e.g., Fresh Cut Flowers from Mexico; Final Results of 
Antidumping Duty Administrative Review, 61 FR 6812, 6814 (February 22, 
1996) (where the Department disregarded the highest margin as adverse 
best information available because the margin was based on another 
company's uncharacteristic business expense resulting in an unusually 
high margin)).
    For both Sanyo and SEI, the rate specified above is reliable and 
relevant because it is a calculated rate for another respondent in this 
investigation and there is no information on the record that 
demonstrates that the rate selected is not an appropriate total adverse 
facts available rate. Thus, for Sanyo and SEI, the Department considers 
the rate calculated for Daido, 31.38, to be appropriate adverse facts 
available.

Scope of Investigation

    For purposes of this investigation, SSWR comprises products that 
are hot-

[[Page 10856]]

 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.

Fair Value Comparisons

    To determine whether sales of SSWR from Japan 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/Constructed Export Price'' and ``Normal Value'' 
sections of this notice, below. As discussed in the ``Export Price/
Constructed Export Price'' section of this notice, Daido and Nippon 
made only EP sales to the United States and Hitachi made only CEP sales 
to the United States. 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. For Hitachi, because its home market was not 
viable and because it did not have sales to third countries, we made no 
price-to-price comparisons. Instead, we based normal value on 
constructed value (CV). See the ``Normal Value'' section of this 
notice, below, for further discussion.
    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 a 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 
respondents for analysis purposes. We intend to examine this issue 
further for the final determination.

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 as the EP or CEP. The NV level of trade 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

[[Page 10857]]

selling, general and administrative expenses (SG&A) and profit. For EP, 
the U.S. level of trade 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 sales, we examine 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 level of trade, 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 level of trade of the export transaction, we make a 
level-of-trade 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 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, 23761 (November 19, 1997).
    Neither Daido nor Nippon claimed a level-of-trade adjustment. 
Nevertheless, we evaluated whether such an adjustment was necessary by 
examining Daido's and Nippon's distribution systems, including selling 
functions, classes of customers, and selling expenses. We found that 
there was no substantive difference in the selling functions performed 
by Daido or Nippon at either of its claimed marketing stages in the 
home market and in the U.S. market. For a detailed explanation of the 
Department's level-of-trade analysis, see Memorandum from the Team to 
James Maeder, dated February 25, 1998. Consequently, we determine that 
only one level of trade exists with respect to sales made by Daido and 
Nippon to all customers and, therefore, a level-of-trade adjustment 
pursuant to section 773(a)(7)(A) of the Act is not warranted.
    Hitachi reported that its home market was not viable because the 
quantity of sales in the home market was less than five percent of the 
quantity of U.S. sales. In addition, Hitachi reported that it did not 
have sales to third countries. Consequently, we have not made a level-
of-trade adjustment or granted a CEP-offset adjustment to the CVs 
reported by Hitachi. For a detailed explanation of the Department's 
level-of-trade analysis, see Memorandum from the Team to James Maeder, 
dated February 25, 1998.

U.S. Sample Sales

    Hitachi has requested that the Department exclude from its analysis 
all of Hitachi's U.S. sales that it claims are sales of samples. The 
Department does not automatically exclude from its analysis of U.S. 
sales any transaction to which a respondent applies the label 
``sample.'' See Antifriction Bearings (Other Than Tapered Roller 
Bearings) and Parts Thereof From France, Germany, Italy, Japan, 
Romania, Singapore, Sweden and the United Kingdom; Final Results of 
Antidumping Duty Administrative Reviews, 62 FR 54043, 54068 (Oct. 17, 
1997). Pursuant to the recent Court of Appeals for the Federal Circuit 
decision in NSK v. United States, 115 F.3d 965, 975 (1997), the 
Department's policy is to exclude those sample transactions from the 
antidumping calculations for which a respondent has established that 
there is either no transfer of ownership or no consideration (i.e., 
payment). The Department makes its determinations regarding sample 
sales by examining the relevant facts of each individual case, and the 
burden of proof in demonstrating that (1) ownership of the merchandise 
has not changed hands, or (2) the sample was returned to the respondent 
or destroyed in the testing process rests with the respondent. See 
Granular Polytetrafluoroethylene Resin from Japan, 58 FR 50343, 50345 
(September 27, 1993).
    In this case, Hitachi reported that it received payment (i.e., 
consideration) for its U.S. sales of the SSWR proprietary grade. Thus, 
it appears that the ownership of the merchandise has changed hands. 
Further, Hitachi has neither claimed, nor provided evidence, that the 
alleged samples were either returned to it or destroyed by the customer 
during testing. Accordingly, consistent with our practice and the 
Court's decision in NSK, we have included these sample sales in our 
margin calculations.

Services Performed by Affiliated Parties

    Daido, Hitachi, and Nippon reported that affiliated companies 
provided various services for home market and U.S. sales. Hitachi 
reported that an affiliated party in the home market provided brokerage 
and handling and packing services. Daido reported that affiliated 
parties performed transportation, warehousing and packing services for 
home market and U.S. sales. Nippon reported that affiliated parties 
provided transportation services for home market and U.S. sales. In 
their questionnaire responses, Daido, Hitachi, and Nippon reported the 
amounts charged to them by their affiliated service providers rather 
than the actual costs incurred by these providers, claiming that the 
prices charged for the services were at arm's length. The petitioners 
contend that the respondents should be required to demonstrate that the 
services provided by their affiliates were offered at arm's-length 
prices. Alternatively, in the absence of such a demonstration, 
petitioners assert that the respondents must show that the costs of the 
affiliated service providers were fully absorbed.
    It is the Department's practice to accept the payment made by a 
respondent for a service as the basis for reported adjustments, as long 
as it can be demonstrated that it was performed at arm's-length prices. 
If this cannot be demonstrated, we require the respondent to provide 
the affiliate's cost of performing the service. See, e.g., Certain 
Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products From 
Korea: Final Results of Antidumping Duty Administrative Reviews, 62 FR 
18404, 18427 (April 15, 1997), and Final Determination of Sales at Less 
Than Fair Value; Certain Internal Combustion, Industrial Forklift 
Trucks from Japan, 53 FR 12552 (April 15, 1988). In February 1998, we 
issued supplemental questionnaires to the respondents, asking them to 
either demonstrate that the services provided by their affiliated 
companies were at arm's-length prices or provide the cost incurred by 
the affiliated companies for providing these services. Because we will 
not receive this information in time for purposes of the preliminary 
determination, we will use the amounts charged for these services by 
the affiliated companies as reported by respondents. However, the 
supplemental information provided by respondents will be subject to 
verification and taken into consideration for purposes of the final 
determination.

Export Price/Constructed Export Price

    For Daido and Nippon, 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 CEP methodology was not otherwise indicated.
    For Hitachi, since sales to the first unaffiliated purchaser took 
place after importation into the United States, we

[[Page 10858]]

used CEP methodology, in accordance with section 772(b) of the Act.
    We made company-specific adjustments as follows:

A. Daido

    We calculated EP based on packed, FOB port-of-export prices, to 
unaffiliated purchasers in the United States. We made deductions to the 
starting price, where appropriate, for foreign inland freight and 
foreign inland insurance expense, pre-sale warehousing expense, and 
foreign brokerage and handling fees, pursuant to section 772(c)(2)(A) 
of the Act.

B. Hitachi

    We calculated CEP based on packed, ex-factory prices to 
unaffiliated purchasers in the United States. We made deductions from 
the starting price, where appropriate, for foreign inland freight and 
foreign inland insurance expense, foreign brokerage and handling, 
international freight, U.S. Customs merchandise processing fees, U.S. 
brokerage and handling fees, and U.S. inland freight and U.S. inland 
insurance expense, pursuant to section 772(c)(2)(A) of the Act.
    We made additional deductions from the starting price, in 
accordance with sections 772(d)(1) and (2) of the Act, for credit 
expenses, indirect selling expenses, inventory carrying costs, U.S. 
repacking expenses, and U.S. further-manufacturing costs. In 
calculating U.S. further-manufacturing costs, we adjusted the further-
manufacturing general and administrative expense ratio to reflect the 
company-wide general and administrative expenses of HMA. See Memorandum 
from Taija Slaughter to Chris Marsh, dated February 25, 1998. Pursuant 
to section 772(d)(3) of the Act, the price was further reduced by an 
amount for profit to arrive at the CEP. In accordance with section 
772(f)(2)(C)(ii) and 772(f)(2)(D) of the Act, the CEP profit rate was 
calculated using the internal financial statements of Yasugi Works, the 
division that produces the subject merchandise for sale in the home 
market and for export to the United States and the company-level 
financial statements of HMA. For further explanation, see Concurrence 
Issues Memorandum from the Team to Louis Apple dated February 25, 1998.

C. Nippon

    We calculated EP based on packed sales prices to unaffiliated 
purchasers in the United States. We made deductions from the starting 
price, where appropriate, for discounts. We also made deductions from 
the starting price for foreign inland freight and foreign inland 
insurance expense, foreign brokerage and handling fees, and 
international freight, where appropriate, pursuant to section 
772(c)(2)(A) of the Act.

Normal Value

    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, we 
compared each respondent's volume of home market sales of the foreign 
like product to the volume of its U.S. sales of the subject 
merchandise, in accordance with section 773(a)(1)(C) of the Act. 
Because Daido's and Nippon's aggregate volume of each company's home 
market sales of the foreign like product was greater than five percent 
of its aggregate volume of U.S. sales of the subject merchandise, we 
determined that the home market was viable for Daido and Nippon. 
Because Hitachi's volume of home market sales of the foreign like 
product was not greater than five percent of its aggregate volume of 
U.S. sales of the subject merchandise, we determined that its home 
market was not viable. In addition, Hitachi reported that it did not 
have sales of subject merchandise to third countries. Accordingly, for 
Hitachi, we have based NV on the CV of the subject merchandise sold in 
the United States.
    Because Nippon and Daido reported home market sales during the POI 
to affiliated parties, as defined by section 771(33) of the Act, we 
tested these sales to ensure that they were made at arm's-length 
prices, in accordance with our practice. To conduct this test, we 
compared the starting prices of sales to affiliated and unaffiliated 
customers net of all direct selling expenses, movement charges, 
discounts, and packing, where appropriate. Based on the results of our 
test, we excluded sales from Nippon and Daido to their affiliated 
parties when weighted-average prices to an affiliated party were on 
average less than 99.5 percent of weighted-average prices to 
unaffiliated parties. We also excluded sales to affiliated parties when 
there were no sales to unaffiliated parties to serve as a benchmark by 
which to determine whether the sales to affiliated parties were made at 
arm's-length prices.
    Based on the information contained in cost allegations submitted by 
the petitioners, the Department found reasonable grounds to believe or 
suspect that Daido and Nippon made sales in the home market at prices 
below the cost of producing the subject merchandise, in accordance with 
section 773(b)(1) of the Act. As a result, the Department initiated 
investigations to determine whether Daido or Nippon made home market 
sales during the POI at prices below their respective cost of 
production (COP) during the POI, within the meaning of section 773(b) 
of the Act. See Memorandum to Louis Apple from the Team, regarding the 
Analysis of Petitioners' Allegation of Sales Below the Cost of 
Production, dated December 10, 1997. Before making any fair value 
comparisons, we conducted the COP analysis described below.
    We calculated the COP based on the sum of each respondent's 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 adjusted the numerator used in Daido's 
G&A expense ratio calculation to exclude certain income and expense 
items, and we adjusted the denominator to use unconsolidated cost of 
sales. See Memorandum to Chris Marsh from Taija Slaughter, regarding 
the COP calculation, dated February 25, 1998.
    We compared Daido's and Nippon's weighted-average COP figures to 
home market sales of the foreign like product, as required under 
section 773(b) of the Act, in order to determine whether these sales 
had been made at prices below their respective COPs. On a product-
specific basis, we compared the COP to home market price, less any 
applicable movement charges, discounts, direct selling expenses and 
packing expenses.
    In determining whether to disregard home market sales made at 
prices below the COP, we examined whether such sales were made: (1) In 
substantial quantities within an extended period of time; and (2) at 
prices which permitted the recovery of all costs within a reasonable 
period of time in the normal course of trade, pursuant to section 
773(b)(1) of the Act.
    Pursuant to section 773(b)(2)(C) of the Act, 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

[[Page 10859]]

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. For those U.S. sales 
of SSWR for which there were no comparable home market sales in the 
ordinary course of trade, we compared the EP or CEP to CV in accordance 
with section 773(a)(4) of the Act.
    We found that, for certain models of SSWR, more than 20 percent of 
the respondent'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 
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) of the Act.
    In accordance with section 773(e) of the Act, we calculated CV 
based on the sum of each respondent's cost of materials, fabrication, 
SG&A expenses, profit, and U.S. packing costs. As noted above, for 
Daido we adjusted the numerator used in the G&A expense ratio 
calculation to exclude certain income and expense items, and the 
denominator to use unconsolidated cost of sales. For Daido and Nippon, 
in accordance with section 773(e)(2)(A) of the Act, we based SG&A 
expenses and profit on the amounts incurred and realized by each 
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 Hitachi, we based SG&A expenses and profit on the weighted-
average of the SG&A and profit data computed for those respondents with 
home market sales of the foreign like product in the ordinary course of 
trade, in accordance with section 773(e)(2)(B)(ii) of the Act because 
Hitachi had no viable home or third-country market.

A. Daido

    We based NV on packed, delivered prices to home market customers. 
We made deductions for foreign inland freight and foreign inland 
insurance expenses, and pre- and post-sale warehousing expenses, 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.
    We added export packing costs incurred for U.S. export shipments of 
SSWR, in accordance with section 773(a)(6) of the Act. We made no 
adjustment for home market packing costs because Daido included these 
expenses in the cost of manufacture and did not report them separately. 
Where appropriate, we made an adjustment 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.

B. Hitachi

    As noted above, for Hitachi, we based NV on CV because Hitachi's 
home market was not viable and because Hitachi did not have sales of 
subject merchandise to third countries. We did not make any adjustments 
to the CV amounts reported by Hitachi. In addition, because Hitachi's 
home market was not viable, we based SG&A and profit expenses on the 
weighted-average SG&A and profit data computed for Daido's and Nippon's 
home market sales of the foreign like product in the ordinary course of 
trade, in accordance with section 773(e)(2)(B)(ii) of the Act.

C. Nippon

    We based NV on packed, ex-factory or delivered prices to home 
market customers. Where appropriate, we made deductions for discounts. 
We also made deductions for foreign inland freight and foreign inland 
insurance expense, 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 for differences in 
credit and warranty expenses.
    Because Nippon paid commissions on U.S. sales, in calculating NV we 
offset these commissions using the weighted-average amount of indirect 
selling expenses, including inventory carrying costs, incurred on the 
home market sales of the comparison product, up to the amount of U.S. 
commissions, in accordance with 19 CFR 351.410(e).
    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.

Currency Conversion

    For purposes of the preliminary determination, 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. See Notice of Final 
Determination of Sales at Less Than Fair Value: Certain Cut-to-Length 
Carbon Steel Plate From South Africa, 62 FR 61971 (November 19, 1997). 
The benchmark is defined as the rolling average of rates for the past 
40 business days. When we determine that a fluctuation exists, 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 Japanese Yen did not undergo a sustained movement nor were 
there currency fluctuations 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 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:

[[Page 10860]]



------------------------------------------------------------------------
                                                               Weighted-
                                                                average 
                    Exporter/manufacturer                       margin  
                                                              percentage
------------------------------------------------------------------------
Daido Steel Co. Ltd.........................................       31.38
Nippon Steel Corporation....................................       24.41
Hitachi Metals Ltd..........................................       27.81
Sanyo Special Steel Co., Ltd................................       31.38
Sumitomo Electric Industries, Ltd...........................       31.38
All Others..................................................       26.69
------------------------------------------------------------------------

    Pursuant to section 735(c)(5)(A) of the Act, the Department has 
excluded any zero and de minimis margins, and any margins determined 
entirely under section 776 of the Act, from the calculation of the 
``All Others Rate.''

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 place to be determined, at the 
U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, 
Washington, D.C. 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 ten 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. 98-5604 Filed 3-4-98; 8:45 am]
BILLING CODE 3510-DS-P