[Federal Register Volume 63, Number 210 (Friday, October 30, 1998)]
[Notices]
[Pages 58364-58366]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-29161]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-588-824]


Corrosion-Resistant Carbon Steel Flat Products from Japan; 
Initiation of Anticircumvention Inquiry on Antidumping Duty Order

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

ACTION: Notice of Initiation of Anticircumvention Inquiry; Cut-to-
Length Carbon Steel Plate from Japan.

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SUMMARY: In response to a request from USS-POSCO Industries (``UPI''), 
the Department of Commerce (the Department) is initiating an 
anticircumvention inquiry to determine whether imports of boron-added 
hot-dipped and electrolytic corrosion-resistant carbon steel sheet, 
falling within the physical dimensions outlined in the scope of the 
order, are circumventing the antidumping duty order on corrosion-
resistant carbon steel flat products from Japan (58 FR 44163, August 
19, 1993).

EFFECTIVE DATE: October 30, 1998.

FOR FURTHER INFORMATION CONTACT: Maria Dybczak, or Rick Johnson, Import 
Administration, International Trade Administration, U.S. Department of 
Commerce, 14th Street and Constitution Avenue, NW, Washington, DC, 
20230; telephone: (202) 482-1398, or (202) 482-3818, respectively.

Applicable Statute

    Unless otherwise stated, 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 
stated, all citations to the Department's regulations are references to 
the regulations as codified at 19 CFR part 351 (April 1998).

SUPPLEMENTAL INFORMATION:

Background

    On September 11, 1998, petitioner USS-POSCO Industries (``UPI'') 
requested that the Department conduct an anticircumvention inquiry 
pursuant to section 781(c) of the Tariff Act to determine whether 
imports of boron-added Japanese hot-dipped and electrolytic corrosion-
resistant steel sheet, falling within the physical dimensions outlined 
in the scope of the order, are circumventing the antidumping duty order 
on corrosion-resistant carbon steel sheet from Japan. See Antidumping 
Duty Orders: Certain Corrosion Resistent Carbon Steel Flat Products 
from Japan, 58 FR 44163 (August 19, 1993).
    Petitioner alleges that Japanese exporters have been circumventing 
the order by exporting hot-dipped and eletrolytically zinc coated sheet 
to which small amounts of boron (0.0020 and 0.0025 percent by weight 
based on laboratory tests of two samples) have been added. Carbon steel 
sheet, as defined by the HTSUS, has a maximum boron content of less 
than 0.0008% by weight. If the boron content is even slightly higher, 
the products enter the U.S. as a hot-dipped or electrolytic alloy 
rather than carbon steel sheet, thereby circumventing the order.
    Petitioner argues that import statistics indicate that imports of 
hot-dipped and electrolytic alloy sheet to West Coast ports have risen 
from 25,256 NT in 1996 to 50,478 NT for the first 6 months of 1998, 
while imports of the carbon sheet equivalent have decreased from 16,013 
NT in 1996 to 5,975 NT for the first six months of 1998. In addition, 
petitioner alleges that the addition of boron is generally immaterial 
(if not detrimental) to the performance characteristics of the 
merchandise, and that other than the addition of boron, the overall 
characteristics of the alloy vis-a-vis the carbon product are virtually 
identical. In fact, petitioner claims that, in some circumstances, the 
addition of boron could, in fact, hamper the product's formability. 
Petitioner also states that it has never received a customer inquiry 
for any product with boron added for any application.
    On September 29, 1998, in response to the Department's request for 
additional information, the petitioner submitted an amendment to the 
request for an anticircumvention inquiry. The petitioner identified the 
source of one of the samples tested. Provided with the supplemental 
response was an affidavit of Petitioner's Senior Metallurgical 
Engineer. The Senior Engineer evaluated the Japanese boron-added 
product, and concluded that the sample exhibited the same physical 
properties as a non-boron product of similar specification. In 
addition, the evaluator concluded that the ``physical properties 
exhibited by the sample were not a result of the boron addition.'' See 
Petitioner's September 29, 1998 submission, Affidavit of Senior 
Metallurgical Engineer, page 1.
    UPI secured a second sample from a different customer, and claims 
that it also ``exhibited the physical characteristics one would expect 
to achieve using a steel with identical chemical analysis in all 
respects except the addition of boron.'' See Petitioner's September 29, 
1998 submission, Affidavit of Karl W. Heralla, page 2.
    The petitioner maintains that during the last three years, in 
discussions between UPI's sales and marketing staff and with their 
customers (which were identified in Exhibit 4 of the petition), UPI has 
``been expressly or implicitly told that their customers do not need 
boron--and often do not know if boron is present'' in the merchandise 
in question. See Petitioner's September 29, 1998 submission, Affidavit 
of Karl W. Heralla, page 2.
    In its request to initiate an anticircumvention inquiry, petitioner 
stated its belief that Nippon Steel Corporation, NKK Corporation, and 
Nisshin Steel Corporation are producers of the subject merchandise with 
boron added. In addition, petitioner further

[[Page 58365]]

claimed that Kawasaki Steel Corporation, Kobe Steel Corporation, and 
Sumitomo Corporation are capable of producing and exporting subject 
merchandise with boron to the United States. See September 11, 1998 
submission, at page 11.

Scope

    The scope language contained in the final determination and 
antidumping duty order, as amended by a partial revocation, (see 
Certain Corrosion-Resistant Carbon Steel Flat Products from Japan: 
Final Determination of Changed Circumstances Antidumping Duty 
Administrative Review and Revocation in part of Antidumping Duty Order, 
62 FR 66848 (December 22, 1997)), describes the covered merchandise as 
follows:
    Although the Harmonized Tariff Schedule of the United States (HTS) 
subheadings are provided for convenience and customs purposes, our 
written descriptions of the scope of these proceedings are dispositive. 
. . .

Corrosion-Resistant Carbon Steel Flat Products from Japan

    These products include 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 HTSUS 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 
corrosion-resistant flat-rolled products of non-rectangular 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. Also 
excluded from this review are 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. Also 
excluded from this review are 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. Also excluded from this 
review are certain corrosion-resistant carbon steel flat products 
meeting the following specifications: widths ranging from 10 
millimeters (0.394 inches) through 100 millimeters (3.94 inches); 
thicknesses, including coatings, ranging from 0.11 millimeters (0.004 
inches) through 0.60 millimeters (0.024 inches); and a coating that is 
from 0.003 millimeters (0.00012 inches) through 0.005 millimeters 
(0.000196 inches) in thickness and that is comprised of three evenly 
applied layers, the first layer consisting of 99% zinc, 0.5% cobalt, 
and 0.5% molybdenum, followed by a layer consisting of chromate, and 
finally a layer consisting of silicate. See also Antidumping Duty 
Orders: Certain Corrosion-Resistant Carbon Steel Flat Products and 
Certain Cut-to-Length Carbon Steel Plate From Canada, 58 FR 44163 
(August 19, 1993).
    UPI describes the merchandise that is the subject of this 
anticircumvention inquiry as hot-dipped and electrolytic carbon steel 
sheet to which boron has been added.

Initiation of Anticircumvention Proceeding

    Section 781(c) of the Act states that the Department may find 
circumvention of an order when products which are of the class or kind 
of merchandise subject to an antidumping duty order have been ``altered 
in form or appearance in minor respects . . . whether or not included 
in the same tariff classification.'' The Department notes that, while 
the statute is silent as to what factors to consider in determining 
whether alterations are properly considered ``minor,'' the legislative 
history of this provision indicates that there are certain factors 
which should be considered before reaching an anticircumvention 
determination.
    In conducting circumvention inquiries under section 781(c) of the 
Act, the Department has generally relied upon ``such criteria as the 
overall physical characteristics of the merchandise, the expectations 
of the ultimate users, the use of the merchandise, the channels of 
marketing and the cost of any modification relative to the total value 
of the imported products.'' S. Rep. No.71, 100th Cong., 1st Sess. 100 
(1987) (``In applying this provision, the Commerce Department should 
apply practical measurements regarding minor alterations, so that 
circumvention can be dealt with effectively, even where such 
alterations to an article technically transform it into a differently 
designated article.'').
    As discussed below, the petitioner has presented evidence with 
respect to each of these criteria. See Anticircumvention Petition, with 
attachments (September 11, 1998).

Overall Physical Characteristics

    The current antidumping order covers corrosion-resistant carbon 
steel sheet from Japan. At issue is hot-dipped and electrolytic 
corrosion-resistant steel sheet, falling within the dimensions outlined 
in the scope of the order, to which boron has been added. The 
petitioner has tested two samples of Japanese origin, and determined 
that boron content ranged from 0.0020 to 0.0025 percent by weight. The 
petitioner claims that the addition of such small amounts of boron is 
immaterial to the performance characteristics of the final product. 
Continuing, the petitioner maintains that metallurgical considerations 
for the addition of boron would be to (1) increase the strength level 
in medium carbon sheets; (2) minimize earing in a low carbon specialty 
steel; or to (3) minimize secondary work embrittlement in ultra low 
carbon steels. Based on petitioner's experience of the end-uses of the 
product, and since all of the steel sheet at issue contains relatively 
higher levels of carbon (0.0349% and above), none of these 
considerations would be relevant, making the addition of boron 
metallurgically unnecessary.

Expectations of the Ultimate Users

    According to petitioner's description of the sales and distribution 
process for

[[Page 58366]]

the merchandise in question, the boron-added material is sold to steel 
service centers, and is expected to be purchased by fabricators who 
would further process the steel. Petitioner maintains that consumers/
fabricators of the product would not rely on or benefit from the 
presence of boron, and that the addition of the alloy into the carbon 
steel product offers no commercial advantage. In addition, petitioner 
notes that many fabricators, most of which are its own customers, are 
not aware of the presence of boron, and that it has never received any 
inquiry or request for boron-added carbon steel for any application. 
Finally, petitioner explains that in order to form the steel for 
specific uses, the product must have good ductility/formability 
characteristics. Thus, according to petitioner, the presence of high 
levels of boron would decrease the effectiveness of these 
characteristics, and would be counterproductive.

Use of the Merchandise

    According to petitioner, there are two primary uses for the 
merchandise in question: (1) Hot-dipped galvanized steel sheet is used 
for metal studs, siding, roofing, decking, gutters, downspouts, 
culverts and other construction materials; (2) electrogalvanized sheet 
(primarily from Japan) and petitioner's hot-dipped sheet are used for 
computer chassis, frames and housing for gaming equipment. Petitioner 
maintains that there are no uses of hot-dipped or electrolytically 
coated low carbon steel sheet containing boron that cannot be fully met 
without boron. The addition of boron neither responds to a new need in 
the market nor improves the way existing technical needs are met.

Channels of Marketing

    Petitioner states that it sells galvanized sheet without boron to 
virtually the same West Coast steel service centers that buy competing 
products from Japan with boron, and that since the boron-added and non-
boron merchandise are used for precisely the same products on the West 
Coast, the sales channels in that region are the same. Petitioner also 
provided the names and addresses of service centers most likely to be 
involved in the distribution of the merchandise in question for the 
West Coast.

Cost of Modification

    Petitioner alleges that the cost of adding boron to low carbon 
steel to attain a boron range of 0.0025 to 0.0045 percent by weight 
(similar to the sample examined by petitioner) is $0.55 per net ton, 
based on information obtained through one of its parent companies. This 
additional cost represents less than 0.1% of an approximate CIF value 
of $600.

Analysis

    Other interested parties, Nippon Steel Corporation, NKK 
Corporation, Kawasaki Steel Corporation, and Sumitomo Metal Industries, 
Ltd., submitted comments arguing: (1) that the Department cannot 
initiate a ``minor alterations'' anticircumvention inquiry on a type of 
merchandise which the Department has previously determined to be 
outside the scope of that order; and (2) that the petitioner, UPI, does 
not have standing as a ``domestic interested party.''
    These interested parties base their first argument on the decision 
of the Court of International Trade (CIT) in Hylsa, S.A. v. United 
States, Slip Op. 98-10 (February 3, 1998), which upheld the earlier 
decision of the CIT in Wheatland Tube Co. v. United States, 973 F. 
Supp. 149 (CIT 1997). The Department maintains that a determination 
under 19 CFR 353.29(i)(1) that merchandise is outside the scope of the 
order does not preclude the initiation of a ``minor alterations'' 
anticircumvention inquiry on the same merchandise 1. For the 
reasons discussed in Memorandum from Joseph Spetrini to Robert S. 
LaRussa, Anticircumvention Inquiry, Carbon Steel Plate from Canada, 
(May 20, 1998) the Department believes that it is not precluded in 
initiating a ``minor alterations'' anticircumvention inquiry in the 
instant case. The interested parties have also argued that petitioner, 
UPI, does not have standing as a ``domestic interested party'', since 
one of the company's parents is a South Korean steel producer. However, 
we disagree with the parties' conclusions. As defined by section 
771(9)(C) of the Act, an ``interested party'' is a manufacturer, 
producer, or wholesaler in the United States. Nippon Steel Corporation, 
et al. do not contest that UPI produces the subject merchandise in the 
United States. Therefore, the Department finds that UPI has standing 
under the statute. See also Memorandum from Joseph Spetrini to Robert 
S. LaRussa, October 26, 1998, Anticircumvention Inquiry, A-588-824, 
Corrosion-Resistant Carbon Steel Flat Products from Japan.
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    \1\ See Memorandum from Joseph Spetrini to Robert S. LaRussa, 
May 20, 1998, Anticircumvention Inquiry, A-122-823, Carbon Steel 
Plate from Canada, at 5 and 6.
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    Based on our evaluation of the application, we determine that a 
formal inquiry is warranted. Accordingly, we are initiating a 
circumvention inquiry concerning the antidumping duty order on 
corrosion-resistant carbon steel flat products from Japan, pursuant to 
section 781(c) of the Tariff Act. In accordance with 19 CFR 
351.225(l)(2), if we issue an affirmative preliminary determination, we 
will then instruct the Customs Service to suspend liquidation and 
require a cash deposit of estimated duties on the merchandise.
    The Department will, following consultation with the interested 
parties, establish a schedule for questionnaires and comments on the 
issues. The Department intends to issue its final determination within 
300 days of the date of publication of this initiation.
    This notice is published in accordance with section 781(c) of the 
Tariff Act (19 U.S.C. 1677j(c)) and 19 CFR 351.225.

    Dated: October 23, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-29161 Filed 10-29-98; 8:45 am]
BILLING CODE 3510-DS-P