[Federal Register Volume 63, Number 204 (Thursday, October 22, 1998)]
[Notices]
[Pages 56623-56627]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-28392]


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DEPARTMENT OF COMMERCE

International Trade Administration
[C-351-829]


Initiation of Countervailing Duty Investigation: Certain Hot-
Rolled Flat-Rolled Carbon-Quality Steel Products From Brazil

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

EFFECTIVE DATE: October 22, 1998.

FOR FURTHER INFORMATION CONTACT: Christopher Cassel, at (202) 482-4847, 
or Kristen Johnson, at (202) 482-4406, Import Administration, U.S. 
Department of Commerce, Room 1870, 14th Street and Constitution Avenue, 
NW, Washington, D.C. 20230.

INITIATION OF INVESTIGATION:

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

[[Page 56624]]

Department) received a petition filed in proper form on behalf of 
Bethlehem Steel Corporation, US Steel Group, a unit of USX Corporation, 
Ispat Inland Steel, LTV Steel Company, Inc., National Steel 
Corporation, California Steel Industries, Gallatin Steel Company, 
Geneva Steel, Gulf States Steel Inc., IPSCO Steel Inc., Steel Dynamics, 
Weirton Steel Corporation, Independent Steelworkers Union, and United 
Steelworkers of America (the petitioners). The Department received 
supplemental information to the petition on October 13, 1998.
    In accordance with section 702(b)(1) of the Act, petitioners allege 
that manufacturers, producers, or exporters of hot-rolled flat-rolled 
carbon-quality steel products (subject merchandise or hot-rolled steel) 
in Brazil receive countervailable subsidies within the meaning of 
section 701 of the Act. Petitioners also allege that imports of the 
subject merchandise are materially injuring, or threaten material 
injury to, an industry in the United States.
    The Department finds that the petitioners are interested parties as 
defined in sections 771(9)(C) and (D) of the Act. Further, the 
petitioners have demonstrated industry support for the petition, as 
required by section 732(c)(4) of the Act. See Determination of Industry 
Support for the Petition section, below.

Scope of the Investigation

    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) of a thickness not less than 4.0 mm is not included 
within the scope of this investigation.
    Specifically included in this scope are vacuum degassed, fully 
stabilized (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 the Harmonized Tariff Schedule of the United States 
(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 this investigation is classified in the 
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, DC 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.

Consultations

    Pursuant to section 702(b)(4)(A)(ii) of the Act, the Department 
invited representatives of the Brazilian

[[Page 56625]]

government for consultations with respect to the petition filed. On 
October 7, 1998, the Department held consultations with a 
representative of the Government of Brazil. See October 8, 1998, 
memoranda to the file regarding these consultations (public document on 
file in the Central Records Unit of the Department of Commerce, Room B-
099).

Determination of Industry Support for the Petition

    Section 702(b)(1) of the Act requires that a petition be filed on 
behalf of the domestic industry. Section 702(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.1
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    \1\ 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 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 ITC and 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 (public document on file in the 
Central Records Unit of the Department of Commerce, Room B-099).
    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 their 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 this investigation, 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 
this carbon hot-rolled investigation) 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

[[Page 56626]]

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, 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 petition (and subsequent amendment) 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 this investigation, petitioners have established 
industry support representing over 50 percent of total production of 
the domestic like product.
    Accordingly, the Department determines that the petition was filed 
on behalf of the domestic industry within the meaning of section 
702(b)(1) of the Act.

Injury Test

    Because Brazil is a ``Subsidies Agreement Country'' within the 
meaning of section 701(b) of the Act, section 701(a)(2) applies to this 
investigation. Accordingly, the ITC must determine whether imports of 
the subject merchandise from Brazil materially injure, or threaten 
material injury to, a U.S. industry.

Initiation of Countervailing Duty Investigation

    Section 702(b) of the Act requires the Department to initiate a 
countervailing duty proceeding whenever an interested party files a 
petition, on behalf of an industry, that (1) alleges the elements 
necessary for an imposition of a duty under section 701(a) and (2) is 
accompanied by information reasonably available to petitioners 
supporting the allegations.
    The Department has examined the petition on hot-rolled steel from 
Brazil and found that it complies with the requirements of section 
702(b) of the Act. Therefore, in accordance with section 702(b) of the 
Act, we are initiating a countervailing duty investigation to determine 
whether manufacturers, producers, or exporters of hot-rolled steel from 
Brazil receive subsidies. See Initiation Checklist, October 15, 1998 
(public document on file in the Central Records Unit of the Department 
of Commerce, Room B-099).
    We are including in our investigation the following programs 
alleged in the petition to have provided subsidies to producers and 
exporters of the subject merchandise in Brazil:

1. Pre-1992 GOB Equity Infusions to COSIPA, CSN, and USIMINAS
2. GOB Equity Infusion to CSN in 1992
3. GOB Equity Infusions to COSIPA in 1992 and 1993
4. GOB Assumption of Debt owed by COSIPA in 1993.

Allegations and Evidence of Material Injury and Causation

    The petition alleges that the U.S. industry producing the domestic 
like product is being materially injured, and is threatened with 
material injury, by reason of subsidized imports of the subject 
merchandise. 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 sufficiently supported by accurate and adequate 
evidence and meet the statutory requirements for initiation. See 
Attachment to Initiation Checklist, Re: Material Injury, October 15, 
1998 (public document on file in the Central Records Unit of the 
Department of Commerce, Room B-099).

Distribution of Copies of the Petition

    In accordance with section 702(b)(4)(A)(i) of the Act, copies of 
the public version of the petition have been provided to the 
representatives of the Brazilian government. We will attempt to provide 
copies of the public version of the petition to all the producers/

[[Page 56627]]

exporters named in the petition, as provided for under 
Sec. 351.203(c)(2) of the Department's regulations.

ITC Notification

    Pursuant to section 702(d) of the Act, we have notified the ITC of 
this initiation.

Preliminary Determination by the ITC

    The ITC will determine by November 16, 1998, whether there is a 
reasonable indication that an industry in the United States is 
materially injured, or is threatened with material injury, by reason of 
imports of hot-rolled steel from Brazil. A negative ITC determination 
will result in the investigation being terminated; otherwise, the 
investigation 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. 98-28392 Filed 10-21-98; 8:45 am]
BILLING CODE 3510-DS-P