[Federal Register Volume 63, Number 174 (Wednesday, September 9, 1998)]
[Notices]
[Pages 48173-48181]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-24167]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-580-815 & A-580-816]


Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat 
Products From Korea: Preliminary Results of Antidumping Duty 
Administrative Reviews

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

ACTION: Notice of preliminary results of antidumping duty 
administrative reviews.

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SUMMARY: In response to requests from three respondents and from the 
petitioners in the original investigation, the Department of Commerce 
(``the Department'') is conducting administrative reviews of the 
antidumping duty orders on certain cold-rolled and corrosion-resistant 
carbon steel flat products from Korea. These reviews cover three 
manufacturers and exporters of the subject merchandise. The period of 
review (``POR'') is August 1, 1996, through July 31, 1997.
    We preliminarily determine that sales have been made below normal 
value (``NV''). If these preliminary results are adopted in our final 
results of administrative reviews, we will instruct U.S. Customs to 
assess antidumping duties equal to the difference between export price 
(``EP'') or constructed export price (``CEP'') and NV.
    Interested parties are invited to comment on these preliminary 
results. Parties who submit argument in this proceeding are requested 
to submit with the argument: (1) a statement of the issue; and (2) a 
brief summary of the argument.

EFFECTIVE DATE: September 9, 1998.

FOR FURTHER INFORMATION CONTACT: Cindy Sonmez (Union), Becky Hagen or 
Steve Bezirganian (the POSCO Group), Lisette Lach (Dongbu), or James 
Doyle, Enforcement Group III--Office 7, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, N.W., Room 7866, Washington, D.C. 
20230; telephone (202) 482-0961 (Sonmez), -1102 (Hagen), -0162 
(Bezirganian), -0190 (Lach), or-0159 (Doyle).

SUPPLEMENTARY INFORMATION:

Applicable Statute

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

Background

    The Department published antidumping duty orders on certain cold-
rolled and corrosion-resistant carbon steel flat products from Korea on 
August 19, 1993 (58 FR 44159). The Department published a notice of 
``Opportunity to Request an Administrative Review'' of the antidumping 
duty orders for the 1996/97 review period on August 4, 1997 (62 FR 
41925). On August 29, 1997, respondents Dongbu Steel Co., Ltd. 
(``Dongbu'') and Union Steel Manufacturing Co., Ltd. (``Union'') 
requested that the Department conduct an administrative review of the 
antidumping duty order on corrosion-resistant carbon steel flat 
products from Korea. Also, on August 29, 1997, Pohang Iron and Steel 
Co., Ltd. (``POSCO'') requested that the Department conduct 
administrative reviews of the antidumping duty orders on cold-rolled 
and corrosion-resistant carbon steel flat products from Korea. On 
September 2, 1997, petitioners in the original less-than-fair-value 
(``LTFV'') investigations (AK Steel Corporation; Bethlehem Steel 
Corporation; Inland Steel Industries, Inc.; LTV Steel Company; National 
Steel Corporation; and U.S. Steel Group A Unit of USX Corporation) 
requested that the Department conduct administrative reviews of the 
antidumping duty orders on cold-rolled and corrosion-resistant carbon 
steel flat products from Korea with respect to all three of the 
aforementioned respondents. We initiated these reviews on September 19, 
1997 (62 FR 52092--September 25, 1997).
    Under the Act, the Department may extend the deadline for 
completion of administrative reviews if it determines that it is not 
practicable to complete the review within the statutory time limit of 
365 days. On March 31, 1998, the Department extended the time limits 
for the preliminary results in these cases. See Certain Cold-Rolled 
Carbon Steel Flat Products and Certain Corrosion-Resistant Carbon Steel 
Flat Products from Korea: Antidumping Duty Administrative Reviews: 
Extension of Time Limit, 63 FR 16971 (April 7, 1998).

[[Page 48174]]

    The Department is conducting these administrative reviews in 
accordance with section 751 of the Act.

Scope of the Reviews

    The review of ``certain cold-rolled carbon steel flat products'' 
covers cold-rolled (cold-reduced) carbon steel flat-rolled products, of 
rectangular shape, neither clad, plated nor coated with metal, whether 
or not painted, varnished or coated with plastics or other nonmetallic 
substances, in coils (whether or not in successively superimposed 
layers) and of a width of 0.5 inch or greater, or in straight lengths 
which, if of a thickness less than 4.75 millimeters, are of a width of 
0.5 inch or greater and which measures at least 10 times the thickness 
or if of a thickness of 4.75 millimeters or more are of a width which 
exceeds 150 millimeters and measures at least twice the thickness, as 
currently classifiable in the Harmonized Tariff Schedule (``HTS'') 
under item numbers 7209.15.0000, 7209.16.0030, 7209.16.0060, 
7209.16.0090, 7209.17.0030, 7209.17.0060, 7209.17.0090, 7209.18.1530, 
7209.18.1560, 7209.18.2550, 7209.18.6000, 7209.25.0000, 7209.26.0000, 
7209.27.0000, 7209.28.0000, 7209.90.0000, 7210.70.3000, 7210.90.9000, 
7211.23.1500, 7211.23.2000, 7211.23.3000, 7211.23.4500, 7211.23.6030, 
7211.23.6060, 7211.23.6085, 7211.29.2030, 7211.29.2090, 7211.29.4500, 
7211.29.6030, 7211.29.6080, 7211.90.0000, 7212.40.1000, 7212.40.5000, 
7212.50.0000, 7215.50.0015, 7215.50.0060, 7215.50.0090, 7215.90.5000, 
7217.10.1000, 7217.10.2000, 7217.10.3000, 7217.10.7000, 7217.90.1000, 
7217.90.5030, 7217.90.5060, 7217.90.5090. Included in this review are 
flat-rolled products of nonrectangular cross-section where such cross-
section is achieved subsequent to the rolling process (i.e., products 
which have been ``worked after rolling'')--for example, products which 
have been beveled or rounded at the edges. Excluded from this review is 
certain shadow mask steel, i.e., aluminum-killed, cold-rolled steel 
coil that is open-coil annealed, has a carbon content of less than 
0.002 percent, is of 0.003 to 0.012 inch in thickness, 15 to 30 inches 
in width, and has an ultra flat, isotropic surface.
    The review of ``certain corrosion-resistant carbon steel flat 
products'' covers flat-rolled carbon steel products, of rectangular 
shape, either clad, plated, or coated with corrosion-resistant metals  
such  as  zinc,  aluminum,  or  zinc-, aluminum-, nickel- or iron-based 
alloys, whether or not corrugated or painted, varnished or coated with 
plastics or other nonmetallic substances in addition to the metallic 
coating, in coils (whether or not in successively superimposed layers) 
and of a width of 0.5 inch or greater, or in straight lengths which, if 
of a thickness less than 4.75 millimeters, are of a width of 0.5 inch 
or greater and which measures at least 10 times the thickness or if of 
a thickness of 4.75 millimeters or more are of a width which exceeds 
150 millimeters and measures at least twice the thickness, as currently 
classifiable in the HTS under item numbers 7210.30.0030, 7210.30.0060, 
7210.41.0000, 7210.49.0030, 7210.49.0090, 7210.61.0000, 7210.69.0000, 
7210.70.6030, 7210.70.6060, 7210.70.6090, 7210.90.1000, 7210.90.6000, 
7210.90.9000, 7212.20.0000, 7212.30.1030, 7212.30.1090, 7212.30.3000, 
7212.30.5000, 7212.40.1000, 7212.40.5000, 7212.50.0000, 7212.60.0000, 
7215.90.1000, 7215.90.3000, 7215.90.5000, 7217.20.1500, 7217.30.1530, 
7217.30.1560, 7217.90.1000, 7217.90.5030, 7217.90.5060, 7217.90.5090. 
Included in this review are flat-rolled products of nonrectangular 
cross-section where such cross-section is achieved subsequent to the 
rolling process (i.e., products which have been ``worked after 
rolling'')--for example, products which have been beveled or rounded at 
the edges. Excluded from this review are: flat-rolled steel products 
either plated or coated with tin, lead, chromium, chromium oxides, both 
tin and lead (``terne plate''), or both chromium and chromium oxides 
(``tin-free steel''), whether or not painted, varnished or coated with 
plastics or other nonmetallic substances in addition to the metallic 
coating; clad products in straight lengths of 0.1875 inch or more in 
composite thickness and of a width which exceeds 150 millimeters and 
measures at least twice the thickness; and certain clad stainless flat-
rolled products, which are three-layered corrosion-resistant carbon 
steel flat-rolled products less than 4.75 millimeters in composite 
thickness that consist of a carbon steel flat-rolled product clad on 
both sides with stainless steel in a 20%-60%-20% ratio.
    These HTS item numbers are provided for convenience and customs 
purposes. The written descriptions remain dispositive.
    The POR is August 1, 1996 through July 31, 1997. These reviews 
cover entries associated with sales of certain cold-rolled and 
corrosion-resistant carbon steel flat products by Dongbu, Union, and 
the POSCO Group.

Verification

    We verified information provided by POSCO with respect to its 
costs, including on-site inspection of facilities, the examination of 
relevant accounting and financial records, and selection of original 
documentation containing relevant information. Our verification results 
are outlined in the cost verification report (see the August 5, 1998, 
Cost Verification Report--Pohang Iron and Steel Company, Ltd. from Bill 
Jones and Symon Monu to Christian Marsh).

Transactions Reviewed

    In determining NV, based on our review of the submissions by 
Dongbu, the Department determined that Dongbu need not report 
``downstream'' sales by affiliated resellers in the home market because 
of their small quantity. In addition, the Department determined that 
POSCO need not report the home market downstream sales of only those 
affiliated service centers in which POSCO owns a minority stake, 
because it appears that they would have a minimal effect upon the 
calculation of NV, and such reporting, to the extent it would be 
possible, would constitute an enormous burden. (See the July 24, 1998, 
memorandum from Becky Hagen to Roland MacDonald).
    Consistent with prior reviews, for Union and the POSCO Group we 
excluded from our analysis home market sales identified by respondents 
as overruns because such sales were outside the ordinary course of 
trade. Petitioners have argued that the Department should also exclude 
Dongbu's lowest-priced home market sales because Dongbu refused to 
identify which of its home market sales involved overruns. However, 
Dongbu explained that it no longer tracked overruns in the ordinary 
course of business and that it sold its prime overruns as normal prime 
merchandise. In past reviews of Dongbu, we have excluded sales 
characterized as overrun sales, but we have not excluded sales simply 
because they appear to have been low-priced. We have preliminarily 
determined that it would be inappropriate to conclude that a broad 
portion of relatively low-priced Dongbu home market sales database 
should be treated as overruns and excluded from our analysis. However, 
we have also preliminarily determined that certain Dongbu home market 
sales

[[Page 48175]]

were outside the ordinary course of trade, and have excluded those 
transactions from our analysis. These sales were categorized by Dongbu 
as slow moving prime grade painted material of undesired colors which 
appear to have been either obsolete or clearance merchandise, and were 
at aberrationally low prices. See the August 31, 1998, analysis 
memorandum from Lisette Lach through James Doyle to the File.

Affiliated Parties

    For purposes of these reviews, we are treating POSCO, Pohang Coated 
Steel Co., Ltd. (``POCOS''), and Pohang Steel Industries Co., Ltd. 
(``PSI'') as affiliated parties and have ``collapsed'' them as a single 
producer of certain cold-rolled carbon steel flat products (POSCO and 
PSI) and certain corrosion-resistant carbon steel flat products (POSCO, 
POCOS, and PSI). We refer to the collapsed respondent as the POSCO 
Group. POSCO, POCOS, and PSI were already collapsed in previous 
segments of these proceedings. 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 (July 9, 1993). POSCO has submitted 
no information which would cause us to change that treatment.
    As in prior reviews, during this, the fourth POR, both Dongbu and 
Union were involved in commercial relationships with the POSCO Group. 
For example, both Dongbu and Union purchased hot-rolled steel coil 
inputs from POSCO, and Union and POCOS have a common owner, Dongkuk 
Steel Mill (``DSM''). Because the parties have submitted no new 
information regarding these commercial relationships, we have not 
altered our finding that these relationships do not give rise to 
affiliation between either Dongbu or Union and the POSCO Group.
    During this review, the parties submitted information and argument 
regarding a joint venture in Venezuela--POSCO Venezuela C.A. 
(``POSVEN'')--in which Dongbu U.S.A., POSCO and other investors, held 
interests during the POR. When on line, POSVEN will produce hot-
briquetted iron, an input into the steelmaking process. Petitioners 
argue that Dongbu and POSCO are affiliated by virtue of Dongbu U.S.A.'s 
and POSCO's participation in POSVEN. We preliminarily disagree. While 
two or more persons that jointly control another person are affiliated 
under section 771(33)(F) of the Act, in this case the entity that is 
jointly controlled is only indirectly connected with the manufacture 
and sale of the subject merchandise. The joint venture was created to 
produce an input that can be used as part of the production process for 
a wide array of steel products. We note also that Dongbu itself is not 
a shareholder in POSVEN, and that Dongbu U.S.A. no longer holds any 
interest.

Product Comparisons

    In accordance with section 771(16) of the Act, we considered all 
cold-rolled carbon steel flat products produced by the respondents, 
covered by the descriptions in the ``Scope of the Reviews'' section of 
this notice, supra, and sold in the home market during the POR, to be 
foreign like products for the purpose of determining appropriate 
product comparisons to U.S. sales of cold-rolled carbon steel flat 
products. Likewise, we considered all corrosion-resistant carbon steel 
flat products produced by the respondents and sold in the home market 
during the POR to be foreign like products for the purpose of 
determining appropriate product comparisons to corrosion-resistant 
carbon steel flat products sold in the United States. Where there were 
no sales of identical merchandise in the home market to compare to U.S. 
sales, we compared U.S. sales to the next most similar foreign like 
product on the basis of the characteristics listed in Appendix V of the 
Department's antidumping questionnaire. In making the product 
comparisons, we matched foreign like products based on the physical 
characteristics reported by the respondent. Where sales were made in 
the home market on a different weight basis from the U.S. market 
(theoretical versus actual weight), we converted all quantities to the 
same weight basis, using the conversion factors supplied by the 
respondents, before making our fair-value comparisons.

Fair-Value Comparisons

    To determine whether sales of certain cold-rolled and corrosion-
resistant carbon steel flat products by the respondents to the United 
States were made at less than fair value, we compared CEP to NV, as 
described in the ``Constructed Export Price'' and ``Normal Value'' 
sections of this notice. In accordance with section 777A(d)(2) of the 
Act, we calculated monthly weighted-average prices for NV and compared 
these to individual U.S. transactions.

Interested Party Comments

    On July 24, 1998, and August 7, 1998, the petitioners submitted 
comments regarding Union. On July 24, 1998, August 7, 1998, and August 
20, 1998, the petitioners submitted comments regarding Dongbu. On 
August 10, 1998, and August 13, 1998, the petitioners submitted 
comments regarding the POSCO Group. On July 31, 1998, August 18, 1998, 
and August 21, 1998, the POSCO Group submitted comments. On August 18, 
1998, Union and Dongbu submitted comments. While we have considered 
these comments for purposes of our preliminary results, because of the 
lateness of these submissions, we are not able to fully address the 
comments for these results.

Intent to Revoke

POSCO

    On August 29, 1997, POSCO submitted a request, in accordance with 
19 CFR 351.222(e), that the Department revoke the orders covering 
certain cold-rolled carbon steel flat products and certain corrosion-
resistant carbon steel flat products from Korea with respect to its 
sales of this merchandise.
    In accordance with 19 CFR 351.222(e), these requests were 
accompanied by a certification from POSCO that it had not sold the 
subject merchandise at less than NV for a three-year period, including 
this review period, and would not do so in the future. POSCO also 
agreed to its immediate reinstatement in the relevant antidumping 
order, as long as any firm is subject to the order, if the Department 
concludes under 19 CFR 351.216 that, subsequent to revocation, POSCO 
sold the subject merchandise at less than NV.
    The POSCO Group was not reviewed during the first administrative 
review period. In the second administrative reviews, we determined that 
the POSCO Group had de minimis margins on both cold-rolled and 
corrosion-resistant steel. However, in the third administrative 
reviews, we determined that the POSCO Group sold both cold-rolled and 
corrosion-resistant carbon steel flat products at less than fair value. 
See Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat 
Products from Korea: Final Results of Antidumping Duty Administrative 
Reviews, 63 FR 13170 (March 18, 1998), as amended at 63 FR 20572 (April 
27, 1998) (``Third Reviews''). Therefore the POSCO Group does not have 
three consecutive years of zero or de minimis margins on corrosion-
resistant steel or cold-rolled steel, and thus is not eligible for 
revocation of the orders on

[[Page 48176]]

corrosion-resistant steel and cold-rolled steel under 19 CFR 
351.222(e).

Dongbu

    On August 29, 1997, Dongbu submitted a request, in accordance with 
19 CFR 351.222(e), that the Department revoke the orders covering 
certain corrosion-resistant carbon steel flat products from Korea with 
respect to its sales of this merchandise.
    In accordance with 19 CFR 351.222(e), the request was accompanied 
by a certification from Dongbu that it had not sold the subject 
merchandise at less than NV for a three-year period, including this 
review period, and would not do so in the future. Dongbu also agreed to 
its immediate reinstatement in the relevant antidumping order, as long 
as any firm is subject to the order, if the Department concludes under 
19 CFR 351.216 that, subsequent to revocation, Dongbu sold the subject 
merchandise at less than NV.
    In the third administrative review of corrosion-resistant steel, we 
determined that Dongbu sold corrosion-resistant carbon steel flat 
products at less than fair value. See Third Reviews at 63 FR 13170 
(March 18, 1998), as amended at 63 FR 20572 (April 27, 1998). 
Additionally, as discussed below, we have preliminarily determined that 
during the fourth review period Dongbu sold certain corrosion-resistant 
carbon steel flat products at less than fair value. Consequently, we 
preliminarily determine that because Dongbu does not have three 
consecutive years of zero or de minimis margins on corrosion-resistant 
steel, it is not eligible for revocation of the order on corrosion-
resistant steel under 19 CFR 351.222(e).

Date of Sale

    It is the Department's current practice normally to use the invoice 
date as the date of sale, although we may use a date other than the 
invoice date if we are satisfied that a different date better reflects 
the date on which the exporter or producer establishes the material 
terms of sale. See 19 CFR 351.401(i). We have preliminarily determined 
that there is no reason to depart from the Department's normal practice 
with respect to date of sale. Consequently, for Union, Dongbu and the 
POSCO Group, we used the date of invoice as the date of sale: for home 
market sales, the reported date of the invoice from the Korean 
manufacturer; for U.S. sales, the reported date of invoice from the 
U.S. sales affiliate to the first unaffiliated U.S. customer, which is 
typical for CEP sales.

Constructed Export Price

    We calculated the price of United States sales based on CEP, in 
accordance with section 772(b) of the Act. The Act defines the term 
``constructed export price'' as ``the price at which the subject 
merchandise is first sold (or agreed to be sold) in the United States 
before or after the date of importation by or for the account of the 
producer or exporter of such merchandise or by a seller affiliated with 
the producer or exporter, to a purchaser not affiliated with the 
producer or exporter, as adjusted under subsections (c) and (d).'' In 
contrast, ``export price'' is defined as ``the price at which the 
subject merchandise is first sold (or agreed to be sold) before the 
date of importation by the producer or exporter of the subject 
merchandise outside of the United States.'' Sections 772(a)-(b) of the 
Act (emphasis added). In these cases, the record establishes that the 
respondents' affiliates in the United States were in most instances the 
parties first contacted by unaffiliated U.S. customers desiring to 
purchase the subject merchandise and also that the sales affiliates in 
question signed the sales contracts and performed other selling 
functions. Respondents have submitted no new evidence warranting a 
change in our finding in the third reviews--based in part on exhaustive 
sales verifications--that the subject merchandise is first sold in the 
United States by the affiliated seller, and that the sales in question 
are therefore CEP transactions. See Third Reviews, 63 FR at 13172.
    For all three respondents, we calculated CEP based on packed prices 
to unaffiliated customers in the United States. Where appropriate, we 
made deductions from the gross unit price for foreign inland freight, 
foreign inland insurance, foreign brokerage and handling, international 
freight, marine insurance, U.S. inland freight, U.S. brokerage and 
handling, U.S. Customs duties, commissions, discounts and rebates, pre-
sale warehousing expenses, credit expenses, warranty expenses, 
inventory carrying costs incurred in the United States, and other 
direct and indirect selling expenses. Our calculation of indirect 
selling expenses does not include interest expenses of the U.S. sales 
affiliates because we have preliminarily determined that virtually all 
of those interest expenses relate to the financing of receivables or to 
borrowings involving non-subject merchandise. We adjusted the 
calculation of U.S. indirect selling expenses for Dongbu to exclude 
categories of expenses more properly categorized as other types of 
expenses (e.g., movement) (see the August 31, 1998, analysis memorandum 
from Lisette Lach through James Doyle to the File). Pursuant to section 
772(d)(3), we made an adjustment for CEP profit. For each respondent, 
where appropriate, we added interest revenue to the gross unit price. 
For each respondent, consistent with the Department's normal practice, 
we added duty drawback to the gross unit price. We did so in accordance 
with the Department's long-standing test, which requires: (1) that the 
import duty and rebate be directly linked to, and dependent upon, one 
another; and (2) that the company claiming the adjustment demonstrate 
that there were sufficient imports of imported raw materials to account 
for the duty drawback received on the exports of the manufactured 
product.

Normal Value

    Based on a comparison of the aggregate quantity of home-market and 
U.S. sales, we determined that the quantity of the foreign like product 
sold in the exporting country was sufficient to permit a proper 
comparison with the sales of the subject merchandise to the United 
States, pursuant to section 773(a) of the Act. Therefore, in accordance 
with section 773(a)(1)(B)(i) of the Act, we based NV on the price at 
which the foreign like product was first sold for consumption in the 
home market, in the usual commercial quantities and in the ordinary 
course of trade.
    Where appropriate, we deducted rebates, discounts, inland freight 
(offset, where applicable, by freight revenue), inland insurance, and 
packing. We made adjustments to NV, where appropriate, for differences 
in credit expenses (offset, where applicable, by interest income), 
warranty expenses, post-sale warehousing, and for differences in weight 
basis. Because the POSCO Group did not demonstrate that the rental 
payments made to one of its affiliated parties were at arm's length, we 
have revised the reported post-sale warehousing expense for the 
warehouse in question by the portion of the reported expense accounted 
for by those rental payments. We also made adjustments, where 
appropriate, for home-market indirect selling expenses to offset U.S. 
commissions in CEP comparisons. We examined the calculations of imputed 
credit expense for home market customers that were based on very long 
credit periods. Respondents indicated that they cannot systematically 
tie payments to actual shipments because they allow their customers to 
maintain open balances. To calculate credit days for their customers, 
respondents divided average

[[Page 48177]]

POR monthly receivables by average POR daily sales. This methodology 
used by respondents was identical to that used in prior segments. 
Petitioners have indicated that, as a general matter, this methodology 
may lead to distortions when there are not uniform volumes of sales and 
payments, and note that for certain customers in these reviews it 
results in credit days of several hundreds of days. For customers with 
such long calculated credit days, we requested that respondents 
recalculate the credit days using the most recent two completed fiscal 
years (1996 and 1997) rather than just the POR. In most instances, the 
calculated credit days using the two full years (January 1996 through 
December 1997) were less than one-half of the calculated credit days 
using only the POR (August 1996 through July 1997).
    Petitioners indicated that for Dongbu and Union the Department 
should recalculate the credit days using this two-year information or 
using POR information that excludes receivables that existed at the 
beginning of the POR. However, the two-year methodology does not result 
in uniform volumes of sales and payments, and the shorter periods 
calculated based on such a two-year methodology could be the result of 
the fact that the sample we chose for analysis was composed of 
aberrationally high credit days. Using POR information that excludes 
receivables that existed at the beginning of the POR is not appropriate 
because it would maintain sales in the denominator that were sold in 
the POR but not paid for until after the POR. We have preliminarily 
determined that we are not adjusting credit days for sales made by 
Dongbu or Union. The methodology employed by Dongbu and Union was the 
same as in prior reviews, and the Department finds no reason to deviate 
from that methodology.
    The POSCO Group explained its highest credit days by noting that it 
used 365 credit days when its credit day calculation resulted in values 
of either less than zero days or greater than 365 days. Petitioners 
state that for all POSCO Group home market sales the Department should 
use the reported sale-specific payment terms as the basis for home 
market credit days. Petitioners note that in a recent SEC filing POSCO 
expressed the importance of a change in the credit terms it was 
providing to its domestic customers in light of the recent 
deterioration of the Korean economy and the financial difficulties 
faced by POSCO customers. We have preliminarily determined to deny the 
imputed credit expense adjustment in instances where the POSCO Group 
arbitrarily set credit days to 365 days, noting that this aspect of its 
methodology was not explained in its response and does not appear to be 
appropriate. We have not made any additional adjustments, as the 
methodology employed by the POSCO Group was the same as in prior 
reviews, and the Department finds no reason to deviate from that 
methodology.
    In comparisons to CEP sales, we also increased NV by U.S. packing 
costs in accordance with section 773(a)(6)(A) of the Act. We made 
adjustments to NV for differences in cost attributable to differences 
in physical characteristics of the merchandise, pursuant to section 
773(a)(6)(C)(ii) of the Act. In accordance with the Department's 
practice, where all contemporaneous matches to a U.S sale observation 
resulted in difference-in-merchandise adjustments exceeding 20 percent, 
we based NV on constructed value (``CV'').

Differences in Levels of Trade

    In accordance with section 773(a)(1)(B)(i) of the Act and the 
Statement of Administrative Action (``SAA'') at 829-831, to the extent 
practicable, the Department will calculate NV based on sales at the 
same level of trade as the U.S. sales (either EP or CEP). When the 
Department is unable to find sales in the comparison market at the same 
level of trade as the U.S. sale(s), the Department may compare sales in 
the U.S. and foreign markets at different levels of trade, and adjust 
NV if appropriate. The NV level of trade is that of the starting-price 
sales in the home market. As the Department explained in Gray Portland 
Cement and Clinker From Mexico: Final Results of Antidumping Duty 
Administrative Review (62 FR 17148, 17156--April 9, 1997), for both EP 
and CEP, the relevant transaction for the level-of-trade analysis is 
the sale from the exporter to the importer.
    To determine whether comparison market NV sales are at a different 
LOT than EP or CEP, we examine stages in the marketing process and 
selling functions along the chain of distribution between the producer 
and 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)(&)(A) of the Act. 
Finally, 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, 61732 
(November 17, 1997), and Granular Polytetrafluoroethylene Resin From 
Italy; Preliminary Results of Antidumping Duty Administrative Review, 
63 FR 25826 (May 11, 1998).
A. Dongbu
    Dongbu argues that with the change in classification of its U.S. 
sales from EP to CEP, it should now be granted a CEP offset. Dongbu has 
argued during this review that there are not significant differences in 
selling activities within or between each market, but notes that under 
CEP a deduction from U.S. price is made for those functions performed 
by the U.S. sales affiliate, Dongbu U.S.A., and that the expenses 
relating to such functions incurred in the home market are still 
reflected in home market price unless a CEP offset is granted. We 
disagree because, even after accounting for the functions performed by 
Dongbu U.S.A., there are no variations in level of trade within or 
between markets.
    In identifying the level of trade for home market sales, we 
consider the selling functions reflected in the starting price of home 
market sales before any adjustments, pursuant to section 
773(a)(1)(B)(i) of the Act. Dongbu's description of selling functions 
in the home market makes no distinction with regard to customer 
categories or channels of trade, and there is no evidence on the record 
indicating that such functions vary within the home market.
    In identifying the level of trade for CEP sales, we considered only 
the selling activities reflected in the U.S. price after deduction of 
expenses and profit under section 772(d) of the Act. Dongbu stated that 
it performs the same functions for customers in both markets, such as 
arrangement for freight when the terms of sale include delivery. Dongbu 
indicated that after-sales services in both markets are limited to the 
processing of claims for delivery of defective merchandise. However, it 
notes that the expenses associated with functions performed by Dongbu 
U.S.A. (i.e., the contact between the U.S. affiliate and the 
unaffiliated U.S. customers, and other ancillary functions--in 
particular, the arranging of credit terms) are deducted in the 
calculation of CEP as indirect selling expenses, but that such expenses

[[Page 48178]]

incurred by Dongbu for home market sales are not deducted in the 
calculation of NV. Dongbu argues that the Department should grant it a 
CEP offset to account for this variation in selling functions between 
markets. We disagree. For U.S. sales, Dongbu performed essentially the 
same functions for its Korean and U.S. affiliates (Dongbu Corp. and 
Dongbu U.S.A.) as Dongbu U.S.A. performed with respect to the 
unaffiliated U.S. customers. Although the expenses related to Dongbu 
U.S.A.'s activities have been deducted from CEP, the expenses incurred 
by Dongbu are still reflected in CEP. Because we find there are no 
substantive difference in selling functions performed in the different 
markets, there is no difference in level of trade and, therefore, no 
basis for granting a CEP offset.
B. Union
    Union argues that with the change in classification of its U.S. 
sales from EP to CEP, it should now be granted a CEP offset. Union has 
argued during this review that there are not significant differences in 
selling activities within or between each market, but notes that under 
CEP a deduction from U.S. price is made for those functions performed 
by the U.S. sales affiliate, DKA, and that the expenses relating to 
such functions incurred in the home market are still reflected in home 
market price unless a CEP offset is granted. We disagree because, even 
after accounting for the functions performed by DKA, there are no 
variations in level of trade within or between markets.
    In identifying the level of trade for home market sales, we 
consider the selling functions reflected in the starting price of home 
market sales before any adjustments, pursuant to section 
773(a)(1)(B)(i) of the Act. Union's description of selling functions in 
the home market makes no distinction with regard to customer categories 
or channels of trade, and there is no evidence on the record indicating 
that such functions vary within the home market.
    In identifying the level of trade for CEP sales, we considered only 
the selling activities reflected in the U.S. price after deduction of 
expenses and profit under section 772(d) of the Act. Union stated that 
it performs the same functions for customers in both markets (e.g., 
after sales services/warranties, post-sale warehousing, technical 
advice, freight & delivery arrangement, and arrangement of credit 
terms). However, it notes that the expenses associated with functions 
performed by DKA (i.e., contact between the U.S. affiliate and the 
unaffiliated U.S. customers, after sales services, arrangement of 
credit terms, and arrangement for freight and delivery under certain 
circumstances) are deducted in the calculation of CEP as indirect 
selling expenses, but that such expenses incurred by Union for home 
market sales are not deducted in the calculation of NV. Union argues 
that the Department should grant it a CEP offset to account for this 
variation in selling functions between markets. We disagree. For U.S. 
sales, Union performed essentially the same functions for DKA as DKA 
performed with respect to the unaffiliated U.S. customers. Although the 
expenses related to DKA's activities have been deducted from CEP, the 
expenses incurred by Union are still reflected in CEP. Because we find 
there are no substantive difference in selling functions performed in 
the different markets, there is no difference in level of trade and, 
therefore, no basis for granting a CEP offset.
C. The POSCO Group
    The POSCO Group has argued during this review that the collapsed 
companies sold in the home market and to the United States at the same 
level of trade. Sales are made to order for both markets, and the same 
range of services (e.g., arrangement for movement, technical advice, 
and warranty services) is provided for both markets and, within the 
home market, to each type of customer (e.g., end-users vs. service 
centers). The POSCO Group has not claimed that any difference in level 
of trade exists between its reported sales in either market, and, based 
on our analysis of the selling functions reported, we determine that 
there is no basis to find there is any such difference. Additional 
functions performed by the U.S. affiliates with respect to U.S. sales 
(e.g., expenses associated with contacts with unaffiliated customers) 
were also performed by POSCO and POCOS with respect to its transactions 
with its U.S. sales affiliates, so even after accounting for the 
functions performed by the U.S. sales affiliates there is no basis for 
determining differences in levels of trade between markets. While the 
POSCO Group has argued that the home market downstream sales of its 
service centers in which it owns a minority stake are at a different 
level of trade than all of its other sales, the level of trade of those 
downstream sales is irrelevant because the Department determined that 
the POSCO Group need not report the home market resales of those 
affiliated service centers (as noted above), and the POSCO Group in 
fact did not report those downstream sales.

Cost-of-Production/Constructed Value

    At the time the questionnaires were issued in these reviews, the 
second annual administrative reviews were the most recently completed 
segments of these proceedings in which each of the three respondents 
had participated. In accordance with section 773(b)(2)(A)(ii) of the 
Act, because we disregarded certain below-cost sales by each of the 
three respondents in those reviews, we found reasonable grounds in 
these reviews to believe or suspect that those respondents made sales 
in the home market at prices below the cost of producing the 
merchandise. We therefore initiated cost investigations with regard to 
Dongbu, the POSCO Group, and Union in order to determine whether the 
respondents made home-market sales during the POR at prices below their 
COP within the meaning of section 773(b) of the Act.
    Before making concordance matches and fair-value comparisons, we 
conducted the COP analysis described below.
A. Calculation of COP
    We calculated the COP for Dongbu and Union based on the sum of each 
respondent's cost of materials and fabrication for the foreign like 
product, plus amounts for home-market selling expenses, general and 
administrative expenses (``G&A''), and packing costs in accordance with 
section 773(b)(3) of the Act. As discussed below, we have rejected 
POSCO's reported cost data and have relied on non-adverse facts 
available for purposes of calculating its COP.
    The Department made adjustments to Dongbu's calculations of G&A and 
interest expenses to reflect the exclusion of certain transactions from 
the total cost of sales figure used in the denominator of the 
calculation of the G&A and interest expense factors; a corresponding 
adjustment to Dongbu's cost of manufacturing (``COM'') was not 
possible, given that the information needed for such an adjustment is 
not available (see the August 31, 1998, analysis memorandum from 
Lisette Lach through James Doyle to the File).
    We made adjustments to Union's fixed overhead (``FOH'') due to our 
recalculation of depreciation to be consistent with the Department's 
treatment of depreciation for the previous review period. See Third 
Reviews, 63 FR at 13191. We rejected Union's reported depreciation 
costs which were calculated using an acceptable straight-line 
depreciation

[[Page 48179]]

methodology, but which were derived using net asset values and extended 
useful lives of assets. The application of this method would be 
inconsistent with longstanding Departmental treatment of depreciation 
in fixed overhead. For the preliminary margin calculations, we 
calculated an adjustment to Union's depreciation expense using the 
straight-line depreciation methodology, with the original asset values 
and original useful lives of the assets, as in the prior review. See 
the August 31, 1998, analysis memorandum from Cindy Sonmez through 
James Doyle to the File.
B. Facts Available
    After careful consideration, we determined that we could not use 
POSCO's costs as reported in its Section D response. As explained 
below, we are using as non-adverse facts available an allocation 
methodology which we obtained during the cost verification. For the 
following reasons, we have determined that an adverse inference, 
pursuant to section 776(b) of the Act, is not warranted: the values 
weighted by POSCO to derive its CONNUM-specific costs included all 
costs and reconciled to its books and records; the overstatement of 
production quantities does not appear to contain a systematic bias in 
favor of POSCO; and POSCO officials prepared, at the Department's 
request, an extensive matrix to estimate the potential distortion in 
its cost submission.
    POSCO grouped its products together using the physical 
characteristics designated by the Department and calculated weighted-
average control number (``CONNUM'') specific costs. These CONNUM-
specific costs were combined with the costs of POSCO's affiliated 
producers to derive weighted-average costs for the collapsed POSCO 
Group. In calculating its own weighted-average CONNUM-specific costs, 
POSCO overstated the production quantities used in the weight-
averaging. The overstatement occurred because the total production 
quantities of certain products were assigned to more than one CONNUM. 
POSCO's weighting methodology therefore used a weighting factor that 
was, in aggregate, several times greater than actual amounts. The 
problem is compounded by the fact that the product values being weight-
averaged within a CONNUM can vary substantially. In addition, since the 
overstated production quantities were used in the weight-averaging of 
POSCO's costs with the production costs of POSCO's affiliated 
producers, POSCO's costs were overstated relative to those of the other 
producers. POSCO's production quantities are weighted much more heavily 
than they would have been if the calculations were based on the actual 
production quantities of POSCO and its affiliates. The Department 
therefore is unable to use the per-unit costs reported by POSCO in its 
Section D questionnaire response as these costs were not properly 
weight-averaged using the actual production quantities associated with 
the Department's product groupings or between POSCO Group producers.
    The Department requested in its September 16, 1997, Section D 
questionnaire that POSCO report COP and CV data, using model-specific 
production quantities as the weighting factor. In a supplemental 
questionnaire dated March 13, 1998, the Department asked POSCO to 
identify the level of detail at which it tracks production and the 
physical characteristics reflected in its production data. POSCO's 
supplemental response was unclear in regard to the availability of 
detailed production data. The Department included several verification 
steps in its June 8, 1998 agenda that involved identifying the level of 
detail at which POSCO tracks quantities throughout the production 
process. POSCO officials answered all questions posed by the 
Department's verifiers during the cost verification and, for the first 
time, explained that detailed production data is generated at the time 
of production and is retained on computer tapes in storage.
    Section 776(a) of the Act directs the Department to use facts 
otherwise available when necessary information is not available on the 
record or when an interested party withholds information that has been 
requested, fails to provide information in a timely manner, 
significantly impedes a proceeding, or provides information that cannot 
be verified. In the instant case, detailed production data necessary 
for a recalculation of POSCO's costs is not on the record. The 
Department therefore must rely on facts available to calculate revised 
COP amounts for both POSCO and the POSCO Group.
    At verification, we requested that POSCO officials prepare a 
comprehensive matrix in order to assess the magnitude of distortion 
inherent in POSCO's submitted costs. The requested matrix was prepared 
using POSCO's home market sales quantities to estimate production 
quantities associated with Department groupings and to calculate 
revised CONNUM-specific costs for both POSCO and the POSCO Group. As 
facts available, we have used the revised costs contained in the matrix 
to calculate COP and CV amounts for both POSCO and the POSCO Group. 
Although the matrix calculates costs using estimated rather than actual 
production quantities, it more appropriately reflects the actual 
production quantities associated with the Department's product 
groupings. The matrix also alleviates the problem of POSCO's costs 
being unfairly weighted in relation to the costs of other POSCO Group 
producers. We note that this is a very complex and difficult issue. The 
Department invites parties to submit information and comment on this 
issue. Any such information or argument should be included in parties' 
case and rebuttal briefs. We intend to examine this issue carefully for 
the final results of this review. Any information or arguments parties 
provide will be fully analyzed in making this final decision.
    Additionally, we made adjustments to the COM for certain POSCO and 
POCOS products. Specifically, we adjusted the per-unit costs from the 
matrix to reflect differences in production costs associated with 
quality and coating weight. See the August 31, 1998, Preliminary 
Results Cost Calculation Memo from William Jones through Michael Martin 
to Neal Halper.
    Finally, we have declined to consider the appropriateness of the 
startup adjustment claimed by the POSCO Group, as the effect of such an 
adjustment, if granted, would be insignificant within the meaning of 
section 777A(a)(2) of the Act and 19 CFR Sec. 351.413.
C. Test of Home-Market Prices
    We used the respondents' weighted-average COP, as adjusted (see 
above), for the period July 1996 to June 1997. 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) 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 (not including VAT), less any applicable movement 
charges, discounts, and rebates.
D. Results of COP Test
    Pursuant to section 773(b)(2)(C) of the Act, where less than 20 
percent of a respondent's sales of a given product were at prices less 
than the COP, we did not disregard any below-cost sales of

[[Page 48180]]

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 POR were at prices 
less than the COP, we found that sales of that model were made in 
``substantial quantities'' within an extended period of time, in 
accordance with sections 773(b)(2)(B) and (C) of the Act, and were not 
at prices which would permit recovery of all costs within an extended 
period of time, in accordance with section 773(b)(2)(D) of the Act. 
When we found that below-cost sales had been made in ``substantial 
quantities'' and were not at prices which would permit recovery of all 
costs within a reasonable period of time, we disregarded the below-cost 
sales in accordance with section 773(b)(1) of the Act. Where all sales 
of a specific product were at prices below the COP, we disregarded all 
sales of that product, and calculated NV based on CV.
E. Calculation of CV
    In accordance with section 773(e) of the Act, we calculated CV for 
Dongbu and Union based on the sum of each respondent's cost of 
materials, fabrication, SG&A, U.S. packing costs, interest expenses, 
and profit. 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. As noted in the ``Calculation of COP'' 
section of this notice, we made adjustments to the reported COMs of 
Union and to the reported G&A and interest expenses of Dongbu. For the 
POSCO Group, we calculated CV using the non-adverse facts available 
approach described above, with adjustments to certain CONNUMs for 
differences in quality and coating weight. For all respondents, we made 
adjustments, where appropriate, for home-market indirect selling 
expenses to offset U.S. commissions in CEP comparisons.

Currency Conversion

    For purposes of the preliminary results, we made currency 
conversions based on the official exchange rates in effect on the dates 
of the U.S. sales as certified by the Federal Reserve Bank of New York. 
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.'' In accordance with the Department's 
practice, we have determined that a fluctuation exists when the daily 
exchange rate differs from a benchmark by 2.25 percent. See, e.g., 
Certain Stainless Steel Wire Rods from France: Preliminary Results of 
Antidumping Duty Administrative Review (61 FR 8915, 8918--March 6, 
1996). The benchmark is defined as the rolling average of rates for the 
past 40 business days. When we determine a fluctuation exists, we 
substitute the benchmark for the daily rate. However, for the 
preliminary results we have not determined that a fluctuation existed 
during the POR, and we have not substituted the benchmark for the daily 
rate.

Preliminary Results of the Reviews

    As a result of these reviews, we preliminarily determine that the 
following weighted-average dumping margins exist:

------------------------------------------------------------------------
      Producer/Manufacturer/Exporter           Weighted-average margin  
------------------------------------------------------------------------
Certain Cold-Rolled Carbon Steel Flat                                   
 Products:                                                              
  Dongbu..................................  No U.S. sales in POR.       
  The POSCO Group.........................  0.00%.                      
  Union...................................  No U.S. sales in POR.       
Certain Corrosion-Resistant Carbon Steel                                
 Flat Products:                                                         
  Dongbu..................................  1.47%.                      
  The POSCO Group.........................  0.02%                       
  Union...................................  0.19%.                      
------------------------------------------------------------------------

    Pursuant to 19 CFR 351.224(b), the Department will disclose to 
parties to the proceeding any calculations performed in connection with 
these preliminary results within five days after the publication of 
this notice. Pursuant to 19 CFR 351.309, interested parties may submit 
written comments in response to these preliminary results. Case briefs 
must be submitted within 30 days after the date of publication of this 
notice, and rebuttal briefs, limited to arguments raised in case 
briefs, must be submitted no later than five days after the time limit 
for filing case briefs. Parties who submit argument in this proceeding 
are requested to submit with the argument: (1) A statement of the 
issue, and (2) a brief summary of the argument. Case and rebuttal 
briefs must be served on interested parties in accordance with 19 CFR 
351.303(f). Also, pursuant to 19 CFR 351.310, within 30 days of the 
date of publication of this notice, interested parties may request a 
public hearing on arguments to be raised in the case and rebuttal 
briefs. Unless the Secretary specifies otherwise, the hearing, if 
requested, will be held two days after the date for submission of 
rebuttal briefs, that is, thirty-seven days after the date of 
publication of these preliminary results. The Department will publish 
the final results of this administrative review, including the results 
of its analysis of issues raised in any case or rebuttal brief or at a 
hearing.
    The Department shall determine, and the U.S. Customs Service shall 
assess, antidumping duties on all appropriate entries. Because the 
number of transactions involved in these reviews and other 
simplification methods prevent entry-by-entry assessments, we have 
calculated exporter/importer-specific assessment rates. We divided the 
total dumping margins for the reviewed sales by the total entered value 
of those reviewed sales for each importer. We will direct the U.S. 
Customs Service to assess the resulting percentage margin against the 
entered customs values for the subject merchandise on each of that 
importer's entries under the relevant order during the review period. 
While the Department is aware that the entered value of the reviewed 
sales is not necessarily equal to the entered value of entries during 
the POR (particularly for CEP sales), use of entered value of sales as 
the basis of the assessment rate permits the Department to collect a 
reasonable approximation of the antidumping duties which would have 
been determined if the Department had reviewed those sales of 
merchandise actually entered during the POR.

Cash Deposit

    The following cash deposit requirements will be effective upon 
publication of the final results of this administrative review for all 
shipments of the subject merchandise entered, or withdrawn from 
warehouse, for consumption on or after the publication date, as 
provided for by section 751(a)(1) of the Act: (1) the cash deposit rate 
for each respondent will be the rate established in the final results 
of these administrative reviews (except that no deposit will be 
required for firms with zero or de minimis margins, i.e., margins lower 
than 0.5 percent); (2) for previously reviewed or investigated 
companies not listed above, the cash deposit rate will continue to be 
the company-specific rate published for the most recent period; (3) if 
the exporter is not a firm covered in these reviews, a prior review, or 
the original LTFV investigations, but the manufacturer is, the cash 
deposit rate will be the rate established for the most recent period 
for the manufacturer of the merchandise; and (4) if neither the

[[Page 48181]]

exporter nor the manufacturer is a firm covered in these or any prior 
reviews, the cash deposit rate will be 14.44 percent (for certain cold-
rolled carbon steel flat products) and 17.70 percent (for certain 
corrosion-resistant carbon steel flat products), the ``all others'' 
rate established in the LTFV investigations. These deposit 
requirements, when imposed, shall remain in effect until publication of 
the final results of the next administrative reviews.
    This notice also serves as a preliminary reminder to importers of 
their responsibility under 19 CFR 351.402(f) to file a certificate 
regarding the reimbursement of antidumping duties prior to liquidation 
of the relevant entries during this review period. Failure to comply 
with this requirement could result in the Secretary's presumption that 
reimbursement of antidumping duties occurred and the subsequent 
assessment of double antidumping duties.
    These administrative reviews and notice are in accordance with 
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 351.213 
and 19 CFR 351.221(b)(4).

    Dated: August 31, 1998.
Joseph A. Spetrini,
Acting Assistant Secretary for Import Administration.
[FR Doc. 98-24167 Filed 9-8-98; 8:45 am]
BILLING CODE 3510-DS-P