[Federal Register Volume 63, Number 204 (Thursday, October 22, 1998)]
[Notices]
[Pages 56607-56613]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-28391]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-351-828, A-588-846, and A-821-809]


Initiation of Antidumping Duty Investigations: Certain Hot-Rolled 
Flat-Rolled Carbon-Quality Steel Products From Brazil, Japan, and the 
Russian Federation

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

EFFECTIVE DATE: October 22, 1998.

FOR FURTHER INFORMATION CONTACT: Rick Johnson (Russian Federation) at 
(202) 482-3818; Linda Ludwig (Brazil), at (202) 482-3833; and Steven 
Presing (Japan) at (202) 482-0194, Import Administration, International 
Trade Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW, Washington, DC 20230.

Initiation of Investigations

The Applicable Statute and Regulations

    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 (1998).

The Petition

    On September 30, 1998, the Department of Commerce (``the 
Department'') received petitions filed in proper form by Bethlehem 
Steel Corporation, U.S. Steel Group (a unit of USX Corporation), Ispat 
Inland Steel, LTV Steel Company, National Steel Company,1 
California Steel Industries, Gallatin Steel Company, Geneva Steel, Gulf 
States Steel, IPSCO Steel, Steel Dynamics, Weirton Steel Corporation, 
Independent Steelworkers Union, and United Steelworkers of America 
(collectively petitioners). The Department received supplemental 
information to the petitions on October 9, 1998.
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    \1\ National Steel is not a petitioner in the Japan case.
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    In accordance with section 732(b) of the Act, petitioners allege 
that imports of certain hot-rolled flat-rolled carbon-quality steel 
products (``hot-rolled steel'') from Japan, Brazil, and the Russian 
Federation (``Russia'') are being, or are likely to be, sold in the 
United States at less than fair value within the meaning of section 731 
of the Act, and that such imports are materially injuring an industry 
in the United States.
    The Department finds that petitioners filed these petitions on 
behalf of the domestic industry because they are interested parties as 
defined in sections 771(9)(C) and (D) of the Act and they have 
demonstrated sufficient industry support with respect to each of the 
antidumping investigations they are requesting the Department to 
initiate (see Determination of Industry Support for the Petition 
below).

Scope of Investigations

    For purposes of this investigation, the products covered are 
certain hot-rolled flat-rolled carbon-quality steel products of a 
rectangular shape, of a width of 0.5 inch or greater, neither clad, 
plated, nor coated with metal and whether or not painted, varnished, or 
coated with plastics or other non-metallic substances, in coils 
(whether or not in successively superimposed layers) regardless of 
thickness, and in straight lengths, of a thickness less than 4.75 mm 
and of a width measuring at least 10 times the thickness. Universal 
mill plate (i.e., flat-rolled products rolled on four faces or in a 
closed box pass, of a width exceeding 150 mm but not exceeding 1250 mm 
and of a thickness of not less than 4 mm, not in coils and without 
patterns in relief) is not included within the scope of these 
investigations.
    Specifically included in this scope are vacuum degassed, fully 
stabilized

[[Page 56608]]

(commonly referred to as interstitial-free (``IF'')) steels, high 
strength low alloy (``HSLA'') steels, and the substrate for motor 
lamination steels. IF steels are recognized as low carbon steels with 
micro-alloying levels of elements such as titanium and/or niobium added 
to stabilize carbon and nitrogen elements. HSLA steels are recognized 
as steels with micro-alloying levels of elements such as chromium, 
copper, niobium, titanium, vanadium, and molybdenum. The substrate for 
motor lamination steels contains micro-alloying levels of elements such 
as silicon and aluminum.
    Steel products to be included in the scope of this investigation, 
regardless of HTSUS definitions, are products in which: 1) iron 
predominates, by weight, over each of the other contained elements, 2) 
the carbon content is 2 percent or less, by weight, and 3) none of the 
elements listed below exceeds the quantity, by weight, respectively 
indicated:
    1.80 percent of manganese, or
    1.50 percent of silicon, or
    1.00 percent of copper, or
    0.50 percent of aluminum, or
    1.25 percent of chromium, or
    0.30 percent of cobalt, or
    0.40 percent of lead, or
    1.25 percent of nickel, or
    0.30 percent of tungsten, or
    0.012 percent of boron, or
    0.10 percent of molybdenum, or
    0.10 percent of niobium, or
    0.41 percent of titanium, or
    0.15 percent of vanadium, or
    0.15 percent of zirconium.
    All products that meet the written physical description, and in 
which the chemistry quantities do not exceed any one of the levels 
listed above, are within the scope of this investigation unless 
otherwise excluded. The following products, by way of example, are 
outside and/or specifically excluded from the scope of this 
investigation:
     Alloy hot-rolled steel products in which at least one of 
the chemical elements exceeds those listed above (including e.g., ASTM 
specifications A543, A387, A514, A517, and A506).
     SAE/AISI grades of series 2300 and higher.
     Ball bearing steels, as defined in the HTSUS.
     Tool steels, as defined in the HTSUS.
     Silico-manganese (as defined in the HTSUS) or silicon 
electrical steel with a silicon level exceeding 1.50 percent.
     ASTM specifications A710 and A736.
     USS abrasion-resistant steels (USS AR 400, USS AR 500).
    The merchandise subject to these investigations is classified in 
the Harmonized Tariff Schedule of the United States (HTSUS) at 
subheadings: 7208.10.15.00, 7208.10.30.00, 7208.10.60.00, 
7208.25.30.00, 7208.25.60.00, 7208.26.00.30, 7208.26.00.60, 
7208.27.00.30, 7208.27.00.60, 7208.36.00.30, 7208.36.00.60, 
7208.37.00.30, 7208.37.00.60, 7208.38.00.15, 7208.38.00.30, 
7208.38.00.90, 7208.39.00.15, 7208.39.00.30, 7208.39.00.90, 
7208.40.60.30, 7208.40.60.60, 7208.53.00.00, 7208.54.00.00, 
7208.90.00.00, 7210.70.30.00, 7210.90.90.00, 7211.14.00.30, 
7211.14.00.90, 7211.19.15.00, 7211.19.20.00, 7211.19.30.00, 
7211.19.45.00, 7211.19.60.00, 7211.19.75.30, 7211.19.75.60, 
7211.19.75.90, 7212.40.10.00, 7212.40.50.00, 7212.50.00.00. Certain 
hot-rolled flat-rolled carbon-quality steel covered by this 
investigation, including: vacuum degassed, fully stabilized; high 
strength low alloy; and the substrate for motor lamination steel may 
also enter under the following tariff numbers: 7225.11.00.00, 
7225.19.00.00, 7225.30.30.50, 7225.30.70.00, 7225.40.70.00, 
7225.99.00.90, 7226.11.10.00, 7226.11.90.30, 7226.11.90.60, 
7226.19.10.00, 7226.19.90.00, 7226.91.50.00, 7226.91.70.00, 
7226.91.80.00, and 7226.99.00.00. Although the HTSUS subheadings are 
provided for convenience and Customs purposes, the written description 
of the merchandise under investigation is dispositive.
    During our review of the petition, we discussed the scope with the 
petitioners to ensure that the scope in the petition accurately 
reflects the product for which the domestic industry is seeking relief. 
Moreover, as we discussed in the preamble to the Department's 
regulations (62 FR 27323), we are setting aside a period for parties to 
raise issues regarding product coverage. In particular, we seek 
comments on the specific levels of alloying elements set out in the 
description above, the clarity of grades and specifications excluded by 
example from the scope, and the physical and chemical description of 
the product coverage. The Department encourages all parties to submit 
such comments by November 4, 1998. Comments should be addressed to 
Import Administration's Central Records Unit at Room 1870, U.S. 
Department of Commerce, 14th Street and Constitution Avenue, NW, 
Washington, D.C. 20230. The period of scope consultations is intended 
to provide the Department with ample opportunity to consider all 
comments and consult with parties prior to the issuance of the 
preliminary determination.

Determination of Industry Support for the Petition

    Section 732(b)(1) of the Act requires that a petition be filed on 
behalf of the domestic industry. Section 732(c)(4)(A) of the Act 
provides that a petition meets this requirement if the domestic 
producers or workers who support the petition account for: (1) at least 
25 percent of the total production of the domestic like product; and 
(2) more than 50 percent of the production of the domestic like product 
produced by that portion of the industry expressing support for, or 
opposition to, the petition.
    Section 771(4)(A) of the Act defines the ``industry'' as the 
producers of a domestic like product. Thus, to determine whether the 
petition has the requisite industry support, the statute directs the 
Department to look to producers and workers who produce the domestic 
like product. The International Trade Commission (ITC), which is 
responsible for determining whether ``the domestic industry'' has been 
injured, must also determine what constitutes a domestic like product 
in order to define the industry. While both the Department and the ITC 
must apply the same statutory definition regarding the domestic like 
product (section 771(10) of the Act), they do so for different purposes 
and pursuant to separate and distinct authority. In addition, the 
Department's determination is subject to limitations of time and 
information. Although this may result in different definitions of the 
like product, such differences do not render the decision of either 
agency contrary to the law.2
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    \2\ See Algoma Steel Corp. Ltd., v. United States, 688 F. Supp. 
639, 642-44 (CIT 1988); High Information Content Flat Panel Displays 
and Display Glass Therefore from Japan: Final Determination; 
Rescission of Investigation and Partial Dismissal of Petition, 56 FR 
32376. 32380-81 (July 16, 1991).
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    Section 771(10) of the Act defines the domestic like product as ``a 
product which is like, or in the absence of like, most similar in 
characteristics and uses with, the article subject to an investigation 
under this title.'' Thus, the reference point from which the domestic 
like product analysis begins is ``the article subject to an 
investigation,'' i.e., the class or kind of merchandise to be 
investigated, which normally will be the scope as defined in the 
petition. Moreover, petitioners do not offer a definition of domestic 
like product

[[Page 56609]]

distinct from the scope of the investigation.
    In this case, ``the article subject to investigation'' includes 
certain products which have not previously been included within the 
scope of investigations involving hot-rolled carbon steel products. To 
this end, the Department has reviewed reasonably available information 
to determine whether the products within the scope of the investigation 
constitute one or more than one domestic like product(s).
    Some steel products classified as alloy steels based on the HTSUS 
are recognized as carbon steels by the industry and/or the marketplace. 
For example, The Book of Steel, a 1996 publication by Sollac, a flat-
rolled steel division of Usinor, one of the largest steel companies in 
the world, identifies HSLA, IF, and motor lamination steels as falling 
within categories of plain carbon sheet steels (see chapters 44, 45 and 
52). Also, Carbon and Alloy Steels, published in 1996 by ASM 
International, a major materials society, indicates that HSLA steels 
are not considered to be alloy steels, but are in fact similar to as-
rolled mild-carbon steel and are generally priced by reference to the 
base price for carbon steels (see page 29). Carbon and Alloy Steels 
also distinguishes between carbon-boron and alloy-boron steels; the 
former may contain boron at levels which would classify it as alloy 
under the HTSUS, but would not classify it as an alloy steel 
commercially because, unlike the alloy-boron steels, higher levels of 
other alloying elements are not specified (see, e.g., pages 159 and 
161).
    We discussed these issues with representatives of the International 
Trade Commission (``ITC'') and the ITA's Office of Trade Development. 
Other than the fact that the AISI technically defines alloy steels 
based on alloy levels comparable to those in the HTSUS, none of the 
agency representatives cited reasons why the products in question might 
be treated as distinct from hot-rolled carbon steels. Regarding the 
AISI classification, the ITC representatives noted that their initial 
research indicates that various companies, in reporting shipment data 
by chemical category (e.g., carbon or alloy) to the AISI, categorized 
steels such as those in question as carbon steels even if they fit the 
AISI (and HTSUS) definition of alloy steel. See Attachment to the 
Initiation Checklist, Re: Industry Support, October 15, 1998.
    Thyssen Inc., an importer and interested party in this proceeding, 
filed comments with the Department on October 8, 1998, and on October 
13, 1998, alleging that deficiencies in petitioners' domestic like 
product analysis undermine petitioners' allegation of industry support. 
First, Thyssen argues that petitioners have not clearly defined the 
scope, specifically with regard to the inclusion of certain alloy steel 
within the product description, and, that as a result, petitioners' 
claims regarding industry support are called into question. The 
Department has clarified the language used in the ``Scope of 
Investigation'' section above. In addition to the research discussed 
above, the Department has determined that, with respect to certain 
steel products, such as high-strength low-alloy steel, industry sources 
indicate that these steel products are manufactured by similar 
processes, are priced from similar bases, are marketed in comparable 
ways, and are used for similar applications. See the Attachment to the 
Initiation Checklist, Re: Industry Support, October 15, 1998. For these 
reasons, the Department determines that for purposes of these 
investigations, the domestic like product definition is the single 
domestic like product defined in the ``Scope of the Investigation'' 
section above.
    Thyssen also argues that including cut-to-length sheet and strip 
products in the scope calls into question petitioners' industry support 
allegations. Thyssen asserts that petitioners do not produce cut-to-
length sheet and strip in any significant quantities, and that, in 
ongoing investigations of stainless steel sheet and strip, petitioners 
(including certain of the same petitioning domestic producers as in 
these carbon hot-rolled investigations) have argued that cut-to-length 
sheet and strip is a downstream product, and therefore not encompassed 
within the same domestic like product as sheet and strip in coils. 
However, in recent cases the Department has not treated cut-to-length 
carbon sheet and strip as a separate like product from other carbon 
hot-rolled merchandise (see, e.g., Notice of Preliminary Determination 
of Sales at Less Than Fair Value: Certain Cold Rolled Carbon Steel Flat 
Products from Argentina, 58 FR 7066 (February 4, 1993) and Notice of 
Final Determination of Sales at Less Than Fair Value: Certain Cold-
Rolled Carbon Steel Flat Products from Argentina, 58 FR 37062, 37063 
(July 9, 1993) (collectively, ``Flat Products from Argentina''). 
Furthermore, the classification of cut-to-length sheet and strip as a 
``downstream'' product, relative to coiled sheet and strip, is not 
itself an indication that the latter should be considered a different 
like product from the former. It has not been established that the 
additional processing stage (cutting to length) has an effect upon the 
typical ultimate uses, costs, prices, or marketing associated with 
these products which is significant enough to result in their 
classification as a separate like product. The earlier investigations 
involving Flat Products from Argentina, the Department considered the 
cut-to-length versus coiled distinction as relatively unimportant in 
its product matching hierarchy, and there is no evidence suggesting 
that such treatment would no longer be appropriate.
    Thyssen also argues that including pickled and oiled coiled sheet 
in the scope calls into question petitioners' industry support 
allegations. Thyssen asserts that petitioners internally consume coils 
that they have pickled and oiled, and that this should be taken into 
account in the Department's determination of the level of industry 
support accounted for by petitioners. However, Thyssen has presented no 
legal argument for distinguishing, in the context of an industry 
support determination, between internally and externally consumed 
products, and we find no basis here for such a distinction. For a 
further description of this methodology, see Attachment to the 
Initiation Checklist, Re: Industry Support, October 15, 1998. 
Furthermore, as in the case of cut-to-length sheet and strip, the 
Department, in recent cases, has not treated pickled and oiled carbon 
steel coils as separate like products from other carbon hot-rolled 
merchandise (see, e.g., Flat Products from Argentina). Thyssen has 
provided no evidence that the additional processing stage (pickling and 
oiling) has an effect upon the typical ultimate uses, costs, prices, or 
marketing associated with these products significant enough to result 
in their classification as a separate like product. In the earlier 
investigations involving Flat Products from Argentina, the Department 
considered the pickled versus not pickled distinction as relatively 
unimportant in its product matching hierarchy, and there is no evidence 
suggesting that such treatment would no longer be appropriate.
    Thyssen also argues that the inclusion in the scope of hot-rolled 
sheet and strip in widths less than 600 mm calls into question 
petitioners' industry support allegations. Thyssen asserts that 
petitioners do not produce these narrow products domestically. As in 
the case of cut-to-length sheet and strip, the Department has not in 
recent cases treated such narrower products as separate like products 
from other carbon hot-rolled merchandise (see, e.g., Flat Products from 
Argentina). Furthermore,

[[Page 56610]]

Thyssen has provided no evidence or information that the variation in 
processing (whether it is slitting wider coils, or rolling more narrow 
coils) has an effect upon the typical ultimate uses, costs, prices, or 
marketing associated with these products significant enough to result 
in their classification as a separate like product. In the earlier 
investigations involving Flat Products from Argentina, the Department 
considered the width of products as unimportant in its product matching 
hierarchy, and there is no evidence suggesting that such treatment 
would no longer be appropriate.
    Based on our analysis of the information and arguments presented to 
the Department and the information independently obtained and reviewed 
by the Department, we have determined that there is a single domestic 
like product which is defined as stated in the ``Scope of 
Investigation'' section above. Moreover, the Department has determined 
that the petitions (and subsequent amendments) and supplemental 
information obtained through Department research contain adequate 
evidence of industry support and, therefore, polling is unnecessary 
(see Attachment to the Initiation Checklist, Re: Industry Support, 
October 15, 1998). For Japan, Brazil, and Russia, petitioners 
established industry support representing over 50 percent of total 
production of the domestic like product.
    Accordingly, the Department determines that these petitions are 
filed on behalf of the domestic industry within the meaning of section 
732(b)(1) of the Act.

Export Price and Normal Value

    The following are descriptions of the allegations of sales at less 
than fair value upon which our decisions to initiate these 
investigations are based. Should the need arise to use any of this 
information in our preliminary or final determinations for purposes of 
facts available under section 776 of the Act, we may re-examine the 
information and revise the margin calculations, if appropriate.
Japan
    The petitioners identified Nippon Steel Corporation, NKK 
Corporation, Kawasaki Steel Corporation, Kobe Steel, Ltd., Sumitomo 
Metal Industries, Ltd., and Nisshin Steel Co., Ltd. as possible 
exporters of hot-rolled steel from Japan. The petitioners further 
identified these exporters as the primary producers of subject 
merchandise in Japan. The petitioners based export price (EP) for 
Nippon and NKK on a U.S. price offering for the first sales to 
unaffiliated purchasers in August 1998. According to petitioners, these 
two producers account for approximately 60 percent of exports to the 
United States during the July 1997 to June 1998 time period. Because 
the terms of Nippon and NKK's U.S. sales were delivered to the U.S. 
customer, the petitioners calculated a net U.S. price by subtracting 
estimated costs for shipment from the factory in Japan to the port of 
export (from foreign market research). In addition, the petitioners 
subtracted ocean freight and insurance, unloading charges, and wharfage 
(from official U.S. tariff rates and official U.S. import statistics), 
U.S. trading company mark-ups (from an industry expert's affidavit), 
Japanese trading company mark-ups (from foreign market research), and 
estimated costs for U.S. import duties and fees (both from the 1997 
HTSUS schedule).
    With respect to normal value (``NV''), petitioners stated that the 
volume of Japanese home market sales was sufficient to form a basis for 
normal value, pursuant to section 773(a)(1)(C)(ii) of the Act. 
Petitioners obtained gross unit prices (from foreign market research) 
for the products offered for sale to customers in Japan which are 
either identical or similar to those sold to the United States. 
Petitioners adjusted these prices by subtracting estimated average 
delivery costs, packaging expenses, and credit expenses (from foreign 
market research). Petitioners provided information in the petition 
demonstrating reasonable grounds to believe or suspect that sales of 
hot-rolled steel in the home market were made at prices below the cost 
of production (``COP''), within the meaning of section 773(b) of the 
Act, and requested that the Department conduct a country-wide sales 
below cost investigation. Because the home market sales prices used in 
the petition were below the calculated COP, pursuant to sections 
773(a)(4) and 773(e) of the Act, the petitioners based NV for these 
sales in Japan on constructed value (``CV'').
    Pursuant to section 773(e) of the Act, CV consists of the cost of 
materials, fabrication, other processing (i.e., cost of manufacturing 
(``COM'')) and selling, general, and administrative expenses (``SG&A'') 
and profit. To calculate COM and SG&A, the petitioners relied on market 
research data, Nippon and NKK's 1997/1998 financial statements, and 
their own production experience, adjusted for known differences between 
costs incurred to produce hot-rolled steel in the United States and in 
the foreign market. The petitioners added to CV an amount for profit 
obtained from Nippon and NKK's 1997/1998 financial statements. We 
relied on the cost data contained in the petition.
    The estimated dumping margins in the petition, based on a 
comparison between Nippon and NKK's U.S. prices and CV, are 56.09 
percent and 64.11 percent, respectively. Although petitioners found 
that the home market sales prices used in the petition were below the 
calculated COP, petitioners also compared Nippon and NKK's U.S. prices 
to these same home market prices, and on that basis calculated 
estimated dumping margins of 27.20 percent and 28.25 percent, 
respectively.
Brazil
    The petitioners identified Cia Acos Especiais Itabira 
(``Acesita''), Cia Siderurgica Paulista, (``Cosipa''), Cia Siderurgica 
Nacional (``CSN''), and Usinas Siderurgica de Minais Gerais, S.A. 
(``Usiminas'') as possible exporters of hot-rolled carbon steel from 
Brazil. The petitioners further identified these exporters as the 
primary producers of subject merchandise in Brazil. The petitioners 
based EP on a U.S. price offer from one Brazilian producer for a sale 
to an unaffiliated U.S. purchaser in July 1998. Two other price quotes 
for February 1998 and March 1998 were obtained by petitioners' sales 
personnel in the course of sales calls to customers and recorded 
contemporaneously as part of their respective sales reports. Both 
parties provided affidavits attesting to the validity of the two 
quotes. The terms for all three prices were FOB U.S. dock. For the July 
1998 price, the petitioners believe that the quoted price includes 
barge freight, loading and handling charges from the boat to the barge, 
port charges (based on the commercial experience of a domestic 
producer), import duties, and CIF charges. Import duties and CIF 
charges for all three prices were taken directly from the Commerce 
Department IM-145 import statistics (``IM-145 reports'') for entries 
during the first six months of 1998 (the most recent period for which 
data was available). For the price quote obtained in February 1998, the 
petitioners also deducted truck freight (the ultimate destination was 
inland), barge freight, and port and handling costs (based on the 
commercial experience of a domestic producer). For the price quote 
obtained in March 1998 petitioners also deducted port and unloading 
charges, and foreign inland freight. The adjustments to EP for these 
March 1998 sale items were calculated in the same way as the other two 
U.S. prices, with the exception of port charges, which were based on 
the most current port tariffs at the quoted

[[Page 56611]]

port of entry, rather than the experience of a domestic producer.
    In addition, petitioners chose as the basis of EP the average 
customs value for each of the HTSUS categories containing imports of 
subject hot-rolled steel from Brazil that matched the characteristics 
of the products for which NVs were obtained. Petitioners maintain that 
since both importers and exporters are required to report accurately 
the customs values reported in the IM-145 (see 19 U.S.C. 1401 and 19 
CFR 152.101), the values for hot-rolled steel in the IM-145 approximate 
the FOB price of the merchandise, packaged and ready for delivery at 
the foreign port.
    With respect to NV, the petitioners used home market prices for 
hot-rolled steel obtained from foreign market research consultants. The 
prices used in the calculation of NV were ex-factory prices, for cash, 
exclusive of taxes. The foreign market research consultants provided 
petitioners with a range of price quotes for the subject merchandise 
from service centers and stockholders. Since the Department must use 
specific prices in its calculations, we used the highest price quote 
within the range provided by the market research consultants (see 
Memorandum to the File, October 15, 1998). Because the entire range of 
these quotes is below cost, this was the conservative path. No other 
adjustments were required. For the calculation of dumping margins, 
petitioners identified the matching HTSUS item for each home market 
product. Petitioners provided information in the petition demonstrating 
reasonable grounds to believe or suspect that sales of hot-rolled steel 
in the home market were made at prices below the COP, within the 
meaning of section 773(b) of the Act, and requested that the Department 
conduct a country-wide sales below cost investigation.
    In those instances in which home market prices in the petition were 
below the producer's COP, petitioners based NV on CV, pursuant to 
sections 773(a)(4) and 773(e) of the Act. Pursuant to section 773(e) of 
the Act, CV consists of the cost of materials, fabrication, other 
processing (i.e., COM), SG&A, and profit. To calculate COM, petitioners 
relied on one U.S. producer's COM of hot-rolled steel during the first 
half of 1998. The sole exception was for the costs associated with the 
electric arc furnace (``EAF'') production of liquid steel, which were 
based on the costs of a different U.S. plant because the producer's 
plant does not have an EAF. Because we could find no indication that 
the Brazilian producer used an EAF, nor any other steel production 
process other than basic oxygen furnaces (BOF), we adjusted the 
petitioner's computed COMs to reflect the costs of only the BOF 
production methodology. Where appropriate, the U.S. producer's costs 
were adjusted for known differences between manufacturing costs in the 
U.S. and Brazil. Petitioners valued the major inputs in hot-rolled 
steel production based on the per unit values reported in foreign 
market research material. Material and labor usage factors were based 
on the experience of the two aforementioned U.S. production plants. 
Petitioners calculated company-specific SG&A and financial cost ratios 
based on the ratios of SG&A and financial expenses to COGS, as reported 
in one of the Brazilian company's 1997 financial statement. Petitioners 
derived a company-specific profit ratio from the same company based on 
the ratio of profit to fully-loaded COP, as reported in the company's 
1997 financial statement.
    The petitioners calculated estimated dumping margins for price-to-
price comparisons ranging from 30.11 percent to 85.71 percent. The 
estimated dumping margins based on comparison of CV to U.S. prices is 
41.56 percent to 67.04 percent.
Russia
    The petitioners identified AmurSteel, Chusovskoy Iron and Steel 
Works, Gorkovsky Metallurgichesky Zavod, Magnitogorskiy 
Metallurgischeskiy Kombinat (``Magnitogorskiy''), Mechel, Nosta, 
Novosibprokat Joint-Stock Co., JSC Severstal (``Severstal''), 
Kuznetskiy Met Kombinat (``Kuznetsk''), Lysva Metallurgical Plant, Novo 
Lipetsk Met Kombinat (``Novolipetsk''), Shchelkovsky Sheet Rolling 
Mill, Taganrog Iron and Steel Works, Tulachermet, Volgograd Steel Works 
(``Red October''), and Zapsib Met Kombinat (``West Siberian'') as 
possible exporters of hot-rolled steel from Russia. The petitioners 
further identified three of these producers (Novolipetsk, Severstal, 
and Magnitogorskiy) as the primary producers of subject merchandise in 
Russia.
    The petitioners based EP for these three companies on two methods: 
(1) Import values declared to the U.S. Customs Service; and (2) actual 
U.S. selling prices known to petitioners based on affidavits provided 
by U.S. importers. In calculating import values declared to the U.S. 
Customs Service, petitioners used the HTSUS categories which represent 
the import categories with the largest volumes of imports from Russia 
and which contained only subject merchandise (e.g., 7208.37.0060, 
7208.38.0030, 7208.38.0090, 7208.39.0030, and 7208.39.0090). 
Petitioners deducted foreign inland freight from the customs values in 
order to obtain ex-factory prices. In order to calculate foreign inland 
freight, petitioners used Indian barge rates and Brazilian rail rates 
because they were the only appropriate public figures reasonably 
available to the petitioners. Petitioners used the Indian barge rate 
because the per-capita GNP of India is much closer to Russia's GNP than 
U.S. GNP is and because they found barge rates for India that revealed 
the information needed to permit calculation of a rate in dollars-per-
ton. Further, petitioners stated that only for Brazil could they find 
data on rail rates which would permit the calculation of rail freight 
costs in dollars-per-ton. Based on the information presented by 
petitioners, we believe that the use of Indian barge and Brazilian rail 
rates represents information reasonably available to petitioners and is 
acceptable for purposes of initiation of this investigation.
    In order to calculate actual U.S. selling prices known to 
petitioners, petitioners relied on 11 U.S. sales offerings to 
unaffiliated purchasers. A net U.S. price was derived by subtracting 
amounts attributed to foreign inland freight (see paragraph above for a 
description of the methodology), U.S. delivery, where appropriate (from 
an industry expert's affidavit), CIF charges (from official U.S. import 
statistics), and duties, where appropriate (from official U.S. import 
statistics).
    Petitioners asserted that Russia is a non-market economy country 
(``NME'') to the extent that sales or offers for sale of such or 
similar merchandise in Russia or to third countries do not permit 
calculation of normal value under 19 CFR 351.404. Petitioners, 
therefore, constructed a normal value based on the factors of 
production methodology pursuant to section 773(c) of the Act. In 
previous investigations, the Department has determined that Russia is 
an NME. See, e.g., Cut-to-Length Carbon Steel Plate from the Russian 
Federation, 62 FR 61780 (November 19, 1997) (``Russian CTL Plate''). In 
accordance with section 771(18)(C)(i) of the Act, the presumption of 
NME status remains in effect until revoked by the Department. The 
presumption of NME status for Russia has not been revoked by the 
Department and, therefore, remains in effect for purposes of the 
initiation of this investigation. Accordingly, the normal value of the 
product appropriately is based on factors of

[[Page 56612]]

production valued in a surrogate market economy country in accordance 
with section 773(c) of the Act. In the course of this investigation, 
all parties will have the opportunity to provide relevant information 
related to the issues of Russia's NME status and the granting of 
separate rates to individual exporters. See, e.g., Final Determination 
of Sales at Less Than Fair Value: Silicon Carbide from the PRC, 59 FR 
22585 (May 2, 1994).
    For the normal value calculation, petitioners based the factors of 
production, as defined by section 773(c)(3) of the Act (raw materials, 
labor, energy and capital cost), for hot-rolled steel on the quantities 
of inputs used by petitioners, adjusted for known differences in 
production efficiencies on the basis of available information. 
Petitioners asserted that detailed information is not available 
regarding the quantities of inputs used by hot-rolled steel producers 
in Russia. Thus, they have assumed, for purposes of the petition, that 
producers in Russia use the same inputs in the same quantities as 
petitioners, except where a variance from petitioners' cost model can 
be justified on the basis of available information. Petitioners argued 
that the use of petitioners' factors is conservative because the U.S. 
steel industry is more efficient than the Russian steel industry. Based 
on the information provided by petitioners, we believe that 
petitioners' use of their own adjusted factors of production represents 
information reasonable available to petitioners and is appropriate for 
purposes of initiation of this investigation.
    Petitioners selected Turkey as their primary surrogate. Petitioners 
stated that the per-capita GNP of Turkey differs only slightly from 
that of Russia and, thus, they maintain that Turkey is the most 
suitable surrogate among the potential surrogates, because it is at a 
comparable level of economic development and is a significant producer 
of comparable merchandise (in accordance with section 773(c)(4) of the 
Act). Based on the information provided by petitioners, we believe that 
petitioners' use of Turkey as a surrogate country is appropriate for 
purposes of initiation of this investigation.
    In accordance with section 773(c)(4) of the Act, petitioners valued 
factors of production, where possible, on reasonably available, public 
surrogate country data. Materials were valued based on Turkish import 
values reported in USD, as published in the 1995 UN Trade Commodity 
Statistics, and inflated based on U.S. inflation rates. Labor was 
valued using the regression-based wage rate for Russia provided by the 
Department, in accordance with 19 CFR 351.408(c)(3). Electricity was 
valued using the rate for Turkey published in a quarterly report of the 
OECD's International Energy Agency from the fourth quarter of 1997. For 
overhead (exclusive of depreciation), depreciation, SG&A and profit, 
the petitioners applied rates derived from the 1997 public annual 
report of a Turkish producer of subject merchandise, Erdemir. We 
revised the SG&A ratio to exclude any non-interest generating assets in 
estimating short term interest income (see the Russia: Normal Value 
portion of the Initiation Checklist) and recalculated NV and the 
margins based on this revision. Based on the information provided by 
petitioners, we believe that their surrogate values represent 
information reasonably available to petitioners and are acceptable for 
purposes of initiation of this investigation.
    Based on comparisons of EP to NV, calculated in accordance with 
section 773(c) of the Act, the calculated dumping margins for hot-
rolled steel from Russia range from 100.28 to 189.58 percent.

Initiation of Cost Investigations

    Pursuant to section 773(b) of the Act, petitioners provided 
information demonstrating reasonable grounds to believe or suspect that 
sales in the home markets of Japan and Brazil were made at prices below 
the fully allocated COP and, accordingly, requested that the Department 
conduct a country-wide sales-below-COP investigation in connection with 
the requested antidumping investigations in Brazil and Japan. The 
Statement of Administrative Action (``SAA''), submitted to the Congress 
in connection with the interpretation and application of the URAA, 
states that an allegation of sales below COP need not be specific to 
individual exporters or producers. SAA, H.R. Doc. No. 316 at 833 
(1994). The SAA, at 833, states that ``Commerce will consider 
allegations of below-cost sales in the aggregate for a foreign country, 
just as Commerce currently considers allegations of sales at less than 
fair value on a country-wide basis for purposes of initiating an 
antidumping investigation.''
    Further, the SAA provides that ``new section 773(b)(2)(A) retains 
the current requirement that Commerce have `reasonable grounds to 
believe or suspect' that below cost sales have occurred before 
initiating such an investigation. `Reasonable grounds' . . . exist when 
an interested party provides specific factual information on costs and 
prices, observed or constructed, indicating that sales in the foreign 
market in question are at below-cost prices.'' Id. Based upon the 
comparison of the adjusted prices from the petition for the 
representative foreign like products to their costs of production, we 
find the existence of ``reasonable grounds to believe or suspect'' that 
sales of these foreign like products in both Japan and Brazil were made 
below their respective COPs within the meaning of section 
773(b)(2)(A)(i) of the Act. Accordingly, the Department is initiating 
the requested country-wide cost investigations (see country-specific 
sections above).

Fair Value Comparisons

    Based on the data provided by petitioners, there is reason to 
believe that imports of hot-rolled steel from Japan, Brazil, and Russia 
are being, or are likely to be, sold at less than fair value.

Critical Circumstances

    The petitioners have alleged that critical circumstances exist. 
Petitioners have supported their allegations with the following 
information. For Russia, petitioners state that there is a history of 
injurious dumping because Chile, Indonesia, and Mexico have imposed 
antidumping measures on hot-rolled steel in coils from Russia. For 
Brazil, petitioners claim that there is a history of injurious dumping 
because Mexico has imposed antidumping measures against hot-rolled 
sheet from Brazil.
    Petitioners also have made alternative claims that the importers 
knew or should have known that the hot-rolled steel was being sold at 
less than normal value and that there was likely to be material injury 
be reason of such sales. Specifically, for Japan, petitioners allege 
that the margins calculated in the petition exceed the 25 percent 
threshold used by the Department to impute importer knowledge of 
dumping and the likelihood of material injury due to that dumping.
    Petitioners also have alleged that imports from Japan, Brazil, and 
Russia have been massive over a relatively short period. Petitioners 
allege that there was sufficient pre-filing notice of these antidumping 
petitions and that the Department should compare imports during 
February-April 1998 to imports during May-July 1998 for purposes of 
this determination. According to the import statistics contained in the 
petition, for the periods February-April 1998 and May-July 1998, 
imports of hot-rolled steel from Russia increased by 36 percent, 
imports from Japan increased by 74 percent, and imports from Brazil 
increased by 47 percent. Taking into

[[Page 56613]]

consideration the foregoing, we find that petitioners have alleged the 
elements of critical circumstances and supported them with information 
reasonably available. For these reasons, we will investigate this 
matter further and will make a preliminary determination as soon as 
practicable.

Allegations and Evidence of Material Injury and Causation

    The petitions allege that the U.S. industry producing the domestic 
like product is being materially injured, and is threatened with 
material injury, by reason of the individual and cumulated imports of 
the subject merchandise sold at less than NV. Petitioners explained 
that the industry's injured condition is evident in the declining 
trends in net operating profits, net sales volumes, profit to sales 
ratios, and capacity utilization. The allegations of injury and 
causation are supported by relevant evidence including U.S. Customs 
import data, lost sales, and pricing information. The Department 
assessed the allegations and supporting evidence regarding material 
injury and causation and determined that these allegations are 
supported by accurate and adequate evidence and meet the statutory 
requirements for initiation (see Attachments to Initiation Checklist, 
Re: Material Injury, October 15, 1998).

Initiation of Antidumping Investigations

    Based upon our examination of the petitions on hot-rolled steel and 
petitioners' responses to our supplemental questionnaire clarifying the 
petitions, as well as our discussion with the authors of the foreign 
market research reports supporting the petition on Brazil and other 
measures to confirm the information contained in these reports (see 
memorandum to the file, dated October 14, 1998), we have found that the 
petitions meet the requirements of section 732 of the Act. Therefore, 
we are initiating antidumping duty investigations to determine whether 
imports of certain hot-rolled flat-rolled carbon-quality steel products 
from Japan, Brazil, and Russia are being, or are likely to be, sold in 
the United States at less than fair value. Unless this deadline is 
extended, we will make our preliminary determinations no later than 140 
days after the date of publication of this notice.

Distribution of Copies of the Petitions

    In accordance with section 732(b)(3)(A) of the Act, a copy of the 
public version of each petition has been provided to the 
representatives of Japan, Brazil, and Russia. We will attempt to 
provide a copy of the public version of each petition to each exporter 
named in the petition (as appropriate).

International Trade Commission Notification

    We have notified the ITC of our initiations, as required by section 
732(d) of the Act.

Preliminary Determinations by the ITC

    The ITC will determine, by November 16, 1998, whether there is a 
reasonable indication that imports of hot-rolled steel from Japan, 
Brazil, and Russia are causing material injury, or threatening to cause 
material injury, to a U.S. industry. A negative ITC determination for 
any country will result in the investigation being terminated with 
respect to that country; otherwise, these investigations will proceed 
according to statutory and regulatory time limits.
    This notice is published pursuant to section 777(i) of the Act.

    Dated: October 15, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-28391 Filed 10-21-98; 8:45 am]
BILLING CODE 3510-DS-P