[Federal Register Volume 64, Number 1 (Monday, January 4, 1999)]
[Notices]
[Pages 85-92]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-34460]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-412-818]


Notice of Preliminary Determination of Sales at Less Than Fair 
Value and Postponement of Final Determination: Stainless Steel Sheet 
and Strip in Coils From the United Kingdom

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

EFFECTIVE DATE: January 4, 1999.

FOR FURTHER INFORMATION CONTACT: Charles Rast at (202) 482-5811 or 
Nancy Decker at (202) 482-0196, Antidumping and Countervailing Duty 
Enforcement Group III, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW, Washington, DC 20230.

Applicable Statute

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

Preliminary Determination

    We preliminarily determine that stainless steel sheet and strip in 
coils (SSSS) from the United Kingdom is being, or is likely to be, sold 
in the United States at less than fair value (LTFV), as provided in 
section 733 of

[[Page 86]]

the Tariff Act. The estimated margins of sales at LTFV are shown in the 
``Suspension of Liquidation'' section of this notice.

Case History

    On June 30, 1998, the Department initiated antidumping duty 
investigations of imports of SSSS from France, Germany, Italy, Japan, 
Mexico, South Korea, Taiwan, and the United Kingdom. See Initiation of 
Antidumping Duty Investigations: Stainless Steel Sheet and Strip in 
Coils From France, Germany, Italy, Japan, Mexico, South Korea, Taiwan, 
and the United Kingdom, 63 FR 37521, (July 13, 1998). Since the 
initiation of this investigation the following events have occurred.
    The Department set aside a period for all interested parties to 
raise issues regarding product coverage. On July 29, 1998, Allegheny 
Ludlum Corporation, Armco, Inc., J&L Specialty Steel, Inc., Washington 
Steel Division of Bethlehem Steel Corporation, United Steelworkers of 
America, AFL-CIO/CLC, Butler Armco Independent Union, and Zanesville 
Armco Independent Organization, Inc. (collectively ``petitioners'') 
filed comments proposing clarifications to the scope of these 
investigations. Also, from July through October 1998, the Department 
received numerous responses from respondents aimed at clarifying the 
scope of the investigations. See Memorandum to Joseph A. Spetrini, 
December 14, 1998.
    During July 1998, the Department requested and received information 
from the U.S. Embassy in London to identify producers/exporters of the 
subject merchandise. On July 21, 1998, the Department also requested 
comments from petitioners, potential respondents, and the British 
Embassy in Washington regarding the criteria to be used for model 
matching purposes. On July 27, 1998, petitioners and a potential 
respondent, Avesta Sheffield Ltd. and Avesta Sheffield NAD, Inc. 
(collectively ``Avesta''), submitted comments on our proposed model 
matching criteria.
    Also on July 24, 1998, the United States International Trade 
Commission (the Commission) notified the Department of its affirmative 
preliminary injury determination in this case.
    The Department subsequently issued its antidumping questionnaire to 
Avesta and to Lee Steel Strip Ltd. (``Lee'') on August 3, 1998. The 
questionnaire was divided into five parts, in which we requested that 
Avesta and Lee respond to section A (general information, corporate 
structure, sales practices, and merchandise produced), section B (home 
market or third-country sales), section C (U.S. sales), and section D 
(cost of production/constructed value).
    Avesta and Lee submitted their responses to section A of the 
questionnaire on September 8, 1998; Avesta's responses to sections B 
through D followed on September 28, 1998.
    On September 8, 1998, Lee requested to be excused from being a 
mandatory respondent because it accounted for a minimal share of 
imports of subject merchandise. On September 10, 1998, petitioners 
stated that they did not object to Lee's request. On September 14, 
1998, the Department granted Lee's request to withdraw from the 
investigation because of its minimal share of imports of subject 
merchandise (see Memorandum to Richard Weible, September 14, 1998). On 
September 21, 1998, the Department decided to (1) limit the examination 
of producers/exporters of subject merchandise, and (2) not investigate 
voluntary respondents in this investigation, as well as in the related 
investigations of Stainless Steel Sheet and Strip in Coils From France, 
Germany, Italy, Japan, Mexico, South Korea, and Taiwan (see Memorandum 
to Joseph A. Spetrini, September 21, 1998).
    Petitioners filed comments on Avesta's questionnaire responses on 
September 23 and October 13, 1998. We issued a supplemental 
questionnaire for section A to Avesta on October 9, 1998, and a 
supplemental questionnaire for sections B through D on October 28, 
1998. Avesta responded to our supplemental questionnaire for section A 
on November 2, 1998, and to our supplemental questionnaire for sections 
B through D on November 23, 1998.
    On August 28, 1998, Avesta requested that the Department exempt it 
from reporting certain U.S. resales of rejected merchandise. On 
September 4, 1998, petitioners argued that the Department should deny 
Avesta's request because these sales are needed for making a fair 
comparison of the company's U.S. and home market sales. On October 26, 
1998, the Department indicated in a decision memorandum that Avesta 
should report these U.S. sales subject to its exclusion request. 
However, if the Department determines based on verification that 
Avesta's claims about the nature of the resales are correct, they will 
not be used in the final antidumping margin calculations. (See 
Memorandum to Joseph A. Spetrini, October 26, 1998.)
    On October 6, 1998, petitioners made a timely request for a thirty-
day postponement of the preliminary determination pursuant to section 
733(c)(1)(A) of the Tariff Act. On October 23, 1998, we postponed the 
preliminary determination until no later than December 17, 1998. See 
Stainless Steel Sheet and Strip From Italy, France, Germany, Mexico, 
Japan, the Republic of Korea, the United Kingdom, and Taiwan; Notice of 
Postponement of Preliminary Determinations in Antidumping Duty 
Investigations, 63 FR 56909 (October 23, 1998).

Scope of the Investigation

    For purposes of this investigation, the products covered are 
certain stainless steel sheet and strip in coils. Stainless steel is an 
alloy steel containing, by weight, 1.2 percent or less of carbon and 
10.5 percent or more of chromium, with or without other elements. The 
subject sheet and strip is a flat-rolled product in coils that is 
greater than 9.5 mm in width and less than 4.75 mm in thickness, and 
that is annealed or otherwise heat treated and pickled or otherwise 
descaled. The subject sheet and strip may also be further processed 
(e.g., cold-rolled, polished, aluminized, coated, etc.) provided that 
it maintains the specific dimensions of sheet and strip following such 
processing.
    The merchandise subject to this investigation is classified in the 
Harmonized Tariff Schedule of the United States (``HTSUS'') at 
subheadings: 7219.13.00.30, 7219.13.00.50, 7219.13.00.70, 
7219.13.00.80, 7219.14.00.30, 7219.14.00.65, 7219.14.00.90, 
7219.32.00.05, 7219.32.00.20, 7219.32.00.25, 7219.32.00.35, 
7219.32.00.36, 7219.32.00.38, 7219.32.00.42, 7219.32.00.44, 
7219.33.00.05, 7219.33.00.20, 7219.33.00.25, 7219.33.00.35, 
7219.33.00.36, 7219.33.00.38, 7219.33.00.42, 7219.33.00.44, 
7219.34.00.05, 7219.34.00.20, 7219.34.00.25, 7219.34.00.30, 
7219.34.00.35, 7219.35.00.05, 7219.35.00.15, 7219.35.00.30, 
7219.35.00.35, 7219.90.00.10, 7219.90.00.20, 7219.90.00.25, 
7219.90.00.60, 7219.90.00.80, 7220.12.10.00, 7220.12.50.00, 
7220.20.10.10, 7220.20.10.15, 7220.20.10.60, 7220.20.10.80, 
7220.20.60.05, 7220.20.60.10, 7220.20.60.15, 7220.20.60.60, 
7220.20.60.80, 7220.20.70.05, 7220.20.70.10, 7220.20.70.15, 
7220.20.70.60, 7220.20.70.80, 7220.20.80.00, 7220.20.90.30, 
7220.20.90.60, 7220.90.00.10, 7220.90.00.15, 7220.90.00.60, and 
7220.90.00.80. Although the HTS subheadings are provided for 
convenience and Customs purposes, the Department's written description 
of the merchandise under investigation is dispositive.

[[Page 87]]

    Excluded from the scope of this investigation are the following: 
(1) sheet and strip that is not annealed or otherwise heat treated and 
pickled or otherwise descaled, (2) sheet and strip that is cut to 
length, (3) plate (i.e., flat-rolled stainless steel products of a 
thickness of 4.75 mm or more), (4) flat wire (i.e., cold-rolled 
sections, with a prepared edge, rectangular in shape, of a width of not 
more than 9.5 mm), and (5) razor blade steel. Razor blade steel is a 
flat rolled product of stainless steel, not further worked than cold-
rolled (cold-reduced), in coils, of a width of not more than 23 mm and 
a thickness of 0.266 mm or less, containing, by weight, 12.5 to 14.5 
percent chromium, and certified at the time of entry to be used in the 
manufacture of razor blades. See Chapter 72 of the HTSUS, ``Additional 
U.S. Note'' 1(d).
    In response to comments by interested parties the Department has 
determined that certain specialty stainless steel products are also 
excluded from the scope of this investigation. These excluded products 
are described below:
    Flapper valve steel is defined as stainless steel strip in coils 
containing, by weight, between 0.37 and 0.43 percent carbon, between 
1.15 and 1.35 percent molybdenum, and between 0.20 and 0.80 percent 
manganese. This steel also contains, by weight, phosphorus of 0.025 
percent or less, silicon of between 0.20 and 0.50 percent, and sulfur 
of 0.020 percent or less. The product is manufactured by means of 
vacuum arc remelting, with inclusion controls for sulphide of no more 
than 0.04 percent and for oxide of no more than 0.05 percent. Flapper 
valve steel has a tensile strength of between 210 and 300 ksi, yield 
strength of between 170 and 270 ksi, plus or minus 8 ksi, and a 
hardness (Hv) of between 460 and 590. Flapper valve steel is most 
commonly used to produce specialty flapper valves in compressors.
    Also excluded is a product referred to as suspension foil, a 
specialty steel product used in the manufacture of suspension 
assemblies for computer disk drives. Suspension foil is described as 
302/304 grade or 202 grade stainless steel of a thickness between 14 
and 127 microns, with a thickness tolerance of plus-or-minus 2.01 
microns, and surface glossiness of 200 to 700 percent Gs. Suspension 
foil must be supplied in coil widths of not more than 407 mm, and with 
a mass of 225 kg or less. Roll marks may only be visible on one side, 
with no scratches of measurable depth. The material must exhibit 
residual stresses of 2 mm maximum deflection, and flatness of 1.6 mm 
over 685 mm length.
    Certain stainless steel foil for automotive catalytic converters is 
also excluded from the scope of this investigation. This stainless 
steel strip in coils is a specialty foil with a thickness of between 20 
and 110 microns used to produce a metallic substrate with a honeycomb 
structure for use in automotive catalytic converters. The steel 
contains, by weight, carbon of no more than 0.030 percent, silicon of 
no more than 1.0 percent, manganese of no more than 1.0 percent, 
chromium of between 19 and 22 percent, aluminum of no less than 5.0 
percent, phosphorus of no more than 0.045 percent, sulfur of no more 
than 0.03 percent, lanthanum of between 0.002 and 0.05 percent, and 
total rare earth elements of more than 0.06 percent, with the balance 
iron.
    Permanent magnet iron-chromium-cobalt alloy stainless strip is also 
excluded from the scope of this investigation. This ductile stainless 
steel strip contains, by weight, 26 to 30 percent chromium, and 7 to 10 
percent cobalt, with the remainder of iron, in widths 228.6 mm or less, 
and a thickness between 0.127 and 1.270 mm. It exhibits magnetic 
remanence between 9,000 and 12,000 gauss, and a coercivity of between 
50 and 300 oersteds. This product is most commonly used in electronic 
sensors and is currently available under proprietary trade names such 
as ``Arnokrome III.''1
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    \1\ ``Arnokrome III'' is a trademark of the Arnold Engineering 
Company.
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    Certain electrical resistance alloy steel is also excluded from the 
scope of this investigation. This product is defined as a non-magnetic 
stainless steel manufactured to American Society of Testing and 
Materials (ASTM) specification B344 and containing, by weight, 36 
percent nickel, 18 percent chromium, and 46 percent iron, and is most 
notable for its resistance to high temperature corrosion. It has a 
melting point of 1390 degrees Celsius and displays a creep rupture 
limit of 4 kilograms per square millimeter at 1000 degrees Celsius. 
This steel is most commonly used in the production of heating ribbons 
for circuit breakers and industrial furnaces, and in rheostats for 
railway locomotives. The product is currently available under 
proprietary trade names such as ``Gilphy 36.'' 2
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    \2\ ``Gilphy 36'' is a trademark of Imphy, S.A.
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    Certain martensitic precipitation-hardenable stainless steel is 
also excluded from the scope of this investigation. This high-strength, 
ductile stainless steel product is designated under the Unified 
Numbering System (UNS) as S45500-grade steel, and contains, by weight, 
11 to 13 percent chromium, and 7 to 10 percent nickel. Carbon, 
manganese, silicon and molybdenum each comprise, by weight, 0.05 
percent or less, with phosphorus and sulfur each comprising, by weight, 
0.03 percent or less. This steel has copper, niobium, and titanium 
added to achieve aging, and will exhibit yield strengths as high as 
1700 Mpa and ultimate tensile strengths as high as 1750 Mpa after 
aging, with elongation percentages of 3 percent or less in 50 mm. It is 
generally provided in thicknesses between 0.635 and 0.787 mm, and in 
widths of 25.4 mm. This product is most commonly used in the 
manufacture of television tubes and is currently available under 
proprietary trade names such as ``Durphynox 17.'' 3
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    \3\ ``Durphynox 17'' is a trademark of Imphy, S.A.
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    Finally, three specialty stainless steels typically used in certain 
industrial blades and surgical and medical instruments are also 
excluded from the scope of this investigation. These include stainless 
steel strip in coils used in the production of textile cutting tools 
(e.g., carpet knives).4 This steel is similar to ASTM grade 
440F, but containing, by weight, 0.5 to 0.7 percent of molybdenum. The 
steel also contains, by weight, carbon of between 1.0 and 1.1 percent, 
sulfur of 0.020 percent or less, and includes between 0.20 and 0.30 
percent copper and between 0.20 and 0.50 percent cobalt. This steel is 
sold under proprietary names such as ``GIN4 Mo.'' The second excluded 
stainless steel strip in coils is similar to AISI 420-J2 and contains, 
by weight, carbon of between 0.62 and 0.70 percent, silicon of between 
0.20 and 0.50 percent, manganese of between 0.45 and 0.80 percent, 
phosphorus of no more than 0.025 percent and sulfur of no more than 
0.020 percent. This steel has a carbide density on average of 100 
carbide particles per square micron. An example of this product is 
``GIN5'' steel. The third specialty steel has a chemical composition 
similar to AISI 420 F, with carbon of between 0.37 and 0.43 percent, 
molybdenum of between 1.15 and 1.35 percent, but lower manganese of 
between 0.20 and 0.80 percent, phosphorus of no more than 0.025 
percent, silicon of between 0.20 and 0.50 percent, and sulfur of no 
more than 0.020 percent. This product is supplied with a hardness of 
more than Hv 500 guaranteed after customer processing,

[[Page 88]]

and is supplied as, for example, ``GIN6''.5
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    \4\ This list of uses is illustrative and provided for 
descriptive purposes only.
    \5\ ``GIN4 Mo'', ``GIN5'' and ``GIN6'' are the proprietary 
grades of Hitachi Metals America, Ltd.
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Period of Investigation

    The period of investigation (POI) is April 1, 1997, through March 
31, 1998.

Postponement of Final Determination and Extension of Provisional 
Measures

    Pursuant to Section 735(a)(2) of the Tariff Act, on December 8 and 
9, 1998, Avesta requested that, in the event of an affirmative 
preliminary determination in this investigation, the Department 
postpone its final determination until not later than 135 days after 
the date of the publication of an affirmative preliminary determination 
in the Federal Register, and request to extend the provisional measures 
to not more than six months. In accordance with 19 CFR 351.210(b), 
because (1) our preliminary determination is affirmative, (2) Avesta 
accounts for a significant proportion of exports of the subject 
merchandise, and (3) no compelling reasons for denial exist, we are 
granting the respondent's request and are postponing the final 
determination until no later than 135 days after the publication of 
this notice in the Federal Register. Suspension of liquidation will be 
extended accordingly.

Fair Value Comparisons

    To determine whether sales of SSSS from the United Kingdom to the 
United States were made at less than fair value, we compared export 
price (EP) or constructed export price (CEP) to the normal value (NV), 
as described in the ``Export Price and Constructed Export Price'' and 
``Normal Value'' sections of this notice, below. In accordance with 
section 777A(d)(1)(A)(i) of the Tariff Act, we calculated weighted-
average EPs and CEPs for comparison to weighted-average NVs.
    On January 8, 1998, the Court of Appeals for the Federal Circuit 
issued a decision in CEMEX v. United States, 1998 WL 3626 (Fed Cir.). 
In that case, based on the pre-URAA version of the Tariff Act, the 
Court discussed the appropriateness of using constructed value (CV) as 
the basis for foreign market value when the Department finds home 
market sales to be outside the ``ordinary course of trade.'' The URAA 
amended the definition of sales outside the ``ordinary course of 
trade'' to include sales below cost. See Section 771(15) of the Tariff 
Act. Consequently, the Department has reconsidered its practice in 
accordance with this court decision and has determined that it would be 
inappropriate to resort directly to CV, in lieu of foreign market 
sales, as the basis for NV if the Department finds foreign market sales 
of merchandise identical or most similar to that sold in the United 
States to be outside the ``ordinary course of trade.'' Instead, the 
Department will use sales of similar merchandise, if such sales exist. 
The Department will use CV as the basis for NV only when there are no 
above-cost sales that are otherwise suitable for comparison.

Transactions Investigated

    For its home market and U.S. sales, Avesta reported the date of 
invoice as the date of sale, in keeping with the Department's stated 
preference for using the invoice date as the date of sale. Avesta 
stated that the invoice date best reflects the date on which the 
material terms of sale are established and that price and/or quantity 
can and do change between order date and invoice date. However, 
petitioners have alleged that the sales documentation indicates that 
the order date appears to be the date when the material terms of sale 
are set for the majority of Avesta's sales of SSSS. Given the relevance 
of petitioners comments and the nature of marketing these types of 
made-to-order products, petitioners claims have some merit. 
Consequently, on October 9 and 28, 1998, the Department requested that 
Avesta provide additional information concerning the nature and 
frequency of price and quantity changes occurring between the date of 
order and date of invoice. We also asked Avesta to report order date 
for all home market and U.S. sales and to ensure that all sales with 
order or invoice dates within the POI are reported. On November 2 and 
23, 1998, Avesta reiterated that invoice date is the appropriate date 
of sale and stated that it is unable to gather the data within a 
reasonable period of time. Avesta did not report order date for home 
market sales. However, Avesta reported the order date for U.S. sales, 
including sales with order dates within the POI but invoices after the 
POI. The Department is preliminarily using the invoice date as the date 
of sale for both home market and U.S. sales. We intend to fully examine 
this issue at verification, and we will incorporate our findings, as 
appropriate, in our analysis for the final determination. If we 
determine that order confirmation is the appropriate date of sale, we 
may resort to facts available for the final determination to the extent 
that this information has not been reported.
    In its September 28, 1998, response, Avesta noted that slabs, which 
are initially produced in the U.K., are hot-rolled outside of the U.K. 
(i.e., in Sweden), and then returned to the U.K. for annealing and 
pickling. Avesta asserts that hot-rolled merchandise, which is sold 
only in the home market, should be considered a product of Sweden and, 
thus, sales of hot-rolled merchandise should be excluded from the 
Department's analysis. Avesta also asserts that a small amount of 
merchandise reported in the U.S. and/or home market databases is: (1) 
hot-rolled and cold-rolled in Sweden, and then further cold-rolled, 
annealed and finally processed in the U.K. (affecting U.S. and home 
markets); and (2) hot-rolled and cold-rolled in Sweden and then further 
processed in the U.K. (affecting the home market). Avesta claims that 
this cold-rolled merchandise should also be considered a product of 
Sweden and, as such, it should be excluded from the Department's 
analysis. In Stainless Steel Plate from Sweden, we determined that hot 
bands rolled in Sweden from British slab are within the scope of that 
antidumping finding (see Memorandum to Joseph A. Spetrini, December 22, 
1997, the public version of which is attached to our Preliminary 
Determination Analysis Memorandum, December 17, 1998). Therefore, we 
preliminarily determine, pending the results of verification, to 
exclude from our analysis (1) Avesta's hot-rolled sales, and (2) those 
sales of merchandise that are first cold-rolled in Sweden. The 
Department invites parties to submit information and comment on this 
issue. Interested parties are instructed to submit their comments, 
along with any additional supporting information, to the Department by 
January 7, 1998.

Product Comparisons

    In accordance with section 771(16) of the Tariff Act, we considered 
all products produced by the respondent covered by the description in 
the ``Scope of the Investigation'' section, above, and sold in the home 
market during the POI, to be foreign like products for purposes of 
determining appropriate product comparisons to U.S. sales. 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 and reporting 
instructions listed in the Department's questionnaire.

Level of Trade

    In accordance with section 773(a)(1)(B) of the Tariff Act, to the 
extent practicable, we determine NV

[[Page 89]]

based on sales in the comparison market at the same level of trade 
(LOT) as the EP or CEP transaction. The NV LOT is that of the starting-
price sales in the comparison market or, when NV is based on CV, that 
of the sales from which we derive selling, general and administrative 
(SG&A) expenses and profit. For EP it is the level of the sale from the 
exporter to the importer. For CEP, it is the level of the constructed 
sale from the exporter to the importer. If the sales being compared are 
at different LOTs, and the difference affects price comparability, as 
manifested in a pattern of consistent price differences between the 
sales on which NV is based and the U.S. sales being compared, we make a 
LOT adjustment under section 773(a)(7)(A) of the Tariff Act.
    To determine whether NV sales are at a different LOT than EP or CEP 
sales, we examine stages in the marketing process and selling functions 
along the chain of distribution. If the comparison market sales are at 
a different LOT, 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 LOT of 
the export transaction, we make a LOT adjustment under section 
773(a)(7)(A) of the Tariff Act. Finally, for CEP sales, if the NV level 
is more remote from the factory than the CEP level and there is no 
basis for determining whether the differences in the levels between NV 
and CEP sales affect price comparability, we adjust NV under section 
773(A)(7)(B) of the Tariff Act (the CEP offset provision). (See, e.g., 
Certain Carbon Steel Plate from South Africa, Final Determination of 
Sales at Less Than Fair Value, 62 FR 61731 (November 19, 1997).)
    In the home market, Avesta made sales to distributors and end-
users. The company claims five channels of distribution with respect to 
these sales: (1) mill ``super direct'' sales (i.e., sales shipped 
directly to affiliated and unaffiliated end-user customers and invoiced 
from the producing mill); (2) mill ``direct'' sales to unaffiliated 
distributor and end-user customers (i.e., sales shipped directly from 
the mill, using Avesta Sheffield Distribution Ltd. (AVSD), an 
affiliated sales company/service center, as a sales agent); (3) AVSD 
``service center distributor'' sales (i.e., the producing mills sell to 
AVSD, which resells the merchandise in original form or following 
further processing) ; (4) Billing Stainless, an affiliated sales 
company, sales (i.e., resales of offcuts and non-prime merchandise from 
the mills); and (5) AVSD consignment sales. Avesta claims that each 
channel of distribution represents a separate LOT. In the U.S. market, 
Avesta reported sales made to distributors and end-users, claiming 
three channels of distribution for these sales: (1) Mill ``direct'' 
sales (i.e., sales shipped directly from the mill to the unaffiliated 
U.S. distributor and end-user customers, using Avesta Sheffield, Inc. 
(ASI), an affiliated sales company, as a sales agent); (2) sales from 
warehouse stock which includes ASI ``master distributor'' sales; and 
(3) ASI consignment sales. Avesta claims two LOTs in the U.S.: (1) CEP 
sales; and (2) EP sales. The first channel of distribution (i.e., mill 
direct sales) includes both CEP and EP sales, while the other two 
channels of distribution (i.e., ASI master distributor and ASI 
consignment sales) consist solely of CEP sales. Avesta also asserts 
that prices charged to customers in the United States and in the United 
Kingdom tend to vary across channels of distribution and that these 
variations typically reflect differences in the selling activities 
performed. Avesta claims that CEP sales were made at a LOT comparable 
to ``super direct'' mill sales in the home market. Avesta requests that 
the Department make a LOT adjustment or, alternatively, grant a CEP 
offset to the extent ASI's CEP sales cannot be compared to sales at the 
same LOT.
    In determining whether separate LOT actually existed in the home 
market, we first examined whether Avesta's sales involved different 
marketing stages (or their equivalent) and selling functions along the 
chain of distribution between Avesta and its unaffiliated customers. We 
found that Avesta provided no detailed narrative explanation supporting 
its claim that the channels of distribution represent different LOTs, 
nor did it explain why each of these channels represents a different 
stage of marketing. Normally, stages of marketing focus on whether 
sales are to service centers or end-users, in some instances taking 
into account whether or not sales are made through intermediate 
parties. On this basis, it appears that Avesta's mill super direct 
sales may be at a different stage of marketing than its other sales 
because these sales were sold directly from the mill to the 
unaffiliated customer, whereas sales through the other four channels of 
distribution involved an affiliated intermediary before going to the 
unaffiliated customer. This would indicate that Avesta has, at most, 
two home market LOTs, rather than five.
    In further analyzing Avesta's LOT claims in the home market, we 
reviewed available information on the record about the company's 
selling functions at each marketing stage. Avesta identified 30 
different selling functions (see Attachment SRA-5 of Avesta's November 
2, 1998, supplemental section A response). We closely examined these 
functions and concluded that the following ten functions do not appear 
to be selling functions relevant to the Department's LOT analysis 
because they do not characterize significant services provided to 
customers: issuing purchase order confirmations; inputting orders; 
sending a mill certificate; sending packing lists; issuing invoices; 
buying coils from mills; acting as commission agent; buying merchandise 
on account; repacking; and issuing product brochures and data sheets. 
We also decided to combine several other functions because we found 
that they were not sufficiently different to warrant being treated as 
unique selling functions. Thus, we consolidated negotiating price/
discounts/rebates to unaffiliated and affiliated customers and 
maintaining internal and external warehouses into two single 
categories. Similarly, we have combined several sales and marketing 
support functions (i.e., identifying customers, acting as mill and 
customer liaison, promoting new products, maintaining sales department, 
sales and marketing support, and developing sales strategies) into a 
single sales and marketing support selling function. As a result of our 
analysis, we concluded that Avesta performed 13 separate selling 
functions in its home market, rather than 30.
    Next, we tested whether these selling functions are provided 
consistently across all five channels of distribution in the home 
market, finding that the following eight functions were provided across 
all channels of distribution: negotiating prices; performing credit 
checks; extending credit; collecting payment; assuming warranty 
obligations; maintaining inventory; arranging shipment logistics; and 
providing sales and marketing support. Of the remaining five selling 
functions, we noted the following differences: processing services are 
not provided on super direct and mill direct sales; warehousing 
services are not provided on mill direct sales; technical services and 
market research are not provided on Billing Stainless sales; and R&D is 
only provided on super direct sales.
    In conclusion, while Avesta claimed differences in selling 
functions in connection with each channel of distribution, we find that 
the actual differences in selling functions between channels are 
relatively minor. Thus, we conclude that the company did not

[[Page 90]]

adequately support these claims. Therefore, we preliminarily determine 
that only one LOT existed for Avesta in the home market.
    In determining whether two LOTs existed in the U.S. market, as 
Avesta claims, we examined the selling functions performed by Avesta 
for both EP and CEP sales. According to Avesta, it provides no selling 
functions in support of its CEP sales, when the expenses associated 
with the sales by ASI to the unaffiliated buyer are excluded pursuant 
to the Department's practice. Avesta reported that the following 
selling functions were provided for EP sales: sales and marketing 
support (including negotiating prices); logistics; credit checks; 
credit; collecting payment; and assuming warranty obligations. Based on 
our analysis of the information on the record, we find that these 
functions were not provided for Avesta's CEP sales. Consequently, we 
determine that Avesta provided significantly different selling 
functions for its EP sales than it did on CEP sales.
    In analyzing the differences between stages of marketing, we have 
also concluded that Avesta's EP and CEP sales are at two separate 
stages of marketing. See Preliminary Analysis Memorandum, December 17, 
1998, a public version of which is on file in room B-099 of the main 
Commerce building. Based on our analysis, we have preliminarily 
determined that Avesta has two separate LOTs in the United States.
    We next compared EP sales to home market sales to determine whether 
they were made at the same LOT. To perform this analysis, we compared 
the selling functions offered by Avesta on its EP sales to the 
functions performed by it on its home market sales. The information on 
the record indicates that, for both EP and home market transactions, 
Avesta performed numerous similar selling functions, such as sales and 
marketing support, negotiating prices, logistics, credit checks, 
extending credit, collecting payment and assuming warranty obligations. 
We also noted that there were some selling functions performed by 
Avesta that were not common to its EP and home market sales (e.g., 
inventory maintenance, processing services, R&D, warehousing, technical 
support and market research). We believe these differences are 
qualitatively and quantitatively significant. See Preliminary Analysis 
Memorandum, December 17, 1998. Because we compared these EP sales to 
home market sales at a different LOT, we examined whether a LOT 
adjustment may be appropriate. In this case, Avesta sold at one LOT in 
the home market; therefore, there is no basis upon which Avesta has 
demonstrated a pattern of consistent price differences between LOTs. 
Further, we do not have the information which would allow us to examine 
pricing patterns of Avesta's sales of other similar products, and there 
are no other respondents or other record evidence on which such an 
analysis could be based. Therefore, we cannot make a LOT adjustment, 
and a CEP offset, pursuant to section 773(a)(7)(B) of the Tariff Act, 
is not appropriate because these are EP sales.
    Avesta requested a CEP offset in this investigation. Section 
773(a)(7)(B) of the Tariff Act establishes that a CEP ``offset'' may be 
made when two conditions exist: (1) NV is established at a LOT which 
constitutes a more advanced stage of distribution than the LOT of the 
CEP; and (2) the data available do not provide an appropriate basis to 
determine a LOT adjustment. In this case, we note that for CEP sales, 
after excluding the expenses associated with the sales by ASI to the 
unaffiliated buyers in the United States, Avesta performed no services 
for the customer. Therefore, the differences in selling functions 
between home market sales and CEP sales are even greater than those 
described above. Because Avesta's home market sales are at a more 
advanced stage of distribution than its CEP sales, these sales are at a 
different LOT. See Preliminary Analysis Memorandum, December 17, 1998.
    Because we compared these CEP sales to home market sales at a 
different LOT, we examined whether a LOT adjustment may be appropriate. 
See discussion above. Because the data available do not provide an 
appropriate basis for making a LOT adjustment, but the home market LOT 
is at a more advanced stage than the LOT of the CEP sales, a CEP offset 
is appropriate in accordance with section 773(a)(7)(B) of the Tariff 
Act, as claimed by Avesta. We based the CEP offset amount on the amount 
of home market indirect selling expenses, and limited the deduction for 
home market indirect selling expenses to the amount of indirect selling 
expenses deducted from CEP in accordance with section 772(d)(1)(D) of 
the Tariff Act. We applied the CEP offset to NV, whether based on home 
market prices or CV.

Export Price and Constructed Export Price

    Avesta reported as EP transactions its sales of subject merchandise 
to unaffiliated U.S. customers, in which sales arrangements are 
negotiated with sales representatives at the U.K.-producing mill, 
although paperwork, invoicing, and shipment are handled by ASI. For EP 
sales, Avesta has claimed that the prices are negotiated by sales 
representatives in the United Kingdom before importation into the 
United States, and the products were shipped directly to the customer 
through ASI without being introduced into U.S. inventory. Avesta 
reported as CEP transactions its sales of subject merchandise sold to 
ASI for its own account. ASI then resold the subject merchandise to 
unaffiliated customers in the United States.
    We calculated EP, in accordance with section 772(a) of the Tariff 
Act, for those sales where the merchandise was sold to the first 
unaffiliated purchaser in the United States prior to importation and 
CEP methodology was not otherwise warranted, based on the facts of 
record. We based EP on the packed, delivered, duty paid price to 
unaffiliated purchasers in the United States. We made deductions for 
freight charged to the customer and other movement expenses in 
accordance with section 772(c)(2)(A) of the Tariff Act; these included, 
where appropriate, freight charged to the customer (the amount included 
in reported gross unit price), foreign inland freight, foreign inland 
insurance, international freight, marine insurance, U.S. inland 
freight, U.S. inland insurance, unloading charges, U.S. duty, and 
foreign and U.S. brokerage and handling.
    We calculated CEP, in accordance with subsection 772(b) of the 
Tariff Act, for those sales made by ASI to unaffiliated purchasers in 
the United States. We based CEP on the packed, delivered, duty paid 
prices to unaffiliated purchasers in the United States. We made 
adjustments for discounts and rebates, where applicable. We also made 
deductions for freight charged to the customer and other movement 
expenses in accordance with section 772(c)(2)(A) of the Tariff Act; 
these included, where appropriate, foreign inland freight, foreign 
inland insurance, international freight, marine insurance, U.S. inland 
freight, U.S. warehousing, U.S. inland insurance, unloading charges, 
U.S. duty, and foreign and U.S. brokerage and handling. In accordance 
with section 772(d)(1) of the Tariff Act, we deducted those selling 
expenses associated with economic activities occurring in the United 
States, including direct selling expenses (credit costs, warranty 
expenses), inventory carrying costs, and indirect selling expenses. In 
accordance with section 772(d)(2) of the Tariff Act, we deducted the 
cost of further manufacturing (slitting costs). For CEP sales, we also 
made an adjustment for

[[Page 91]]

profit in accordance with section 772(d)(3) of the Tariff Act.

Normal Value

    In order to determine whether there was a sufficient volume of 
sales in the home market to serve as a viable basis for calculating NV 
(i.e., the aggregate volume of home market sales of the foreign like 
product was equal to or greater than five percent of the aggregate 
volume of U.S. sales), we compared the respondent's volume of home 
market sales of the foreign like product to the volume of U.S. sales of 
the subject merchandise, in accordance with section 773(a)(1)(C) of the 
Tariff Act. As Avesta's aggregate volume of home market sales of the 
foreign like product was greater than five percent of its aggregate 
volume of U.S. sales of the subject merchandise, we determined that the 
home market was viable. Therefore, we have based NV on home market 
sales in the usual commercial quantities and in the ordinary course of 
trade.

Affiliated-Party Transactions and Arm's-Length Test

    Sales to affiliated customers in the home market not made at arm's-
length prices (if any) were excluded from our analysis because we 
considered them to be outside the ordinary course of trade. See 19 CFR 
351.102. To test whether these sales were made at arm's-length prices, 
we compared, on a model-specific basis, the starting prices of sales to 
affiliated and unaffiliated customers net of all movement charges, 
direct selling expenses, and packing. Where, for the tested models of 
subject merchandise, prices to the affiliated party were on average 
99.5 percent or more of the price to unaffiliated parties, we 
determined that sales made to the affiliated party were at arm's 
length. See 19 CFR 351.403(c). In instances where no price ratio could 
be constructed for an affiliated customer because identical merchandise 
was not sold to unaffiliated customers, we were unable to determine 
that these sales were made at arm's-length prices and, therefore, 
excluded them from our LTFV analysis. See, e.g., Final Determination of 
Sales at Less Than Fair Value: Certain Cold-Rolled Carbon Steel Flat 
Products from Argentina, 58 FR 37062, 37077 (July 9, 1993); Notice of 
Preliminary Determination of Sales at Less Than Fair Value and 
Postponement of Final Determination: Emulsion Styrene-Butadiene Rubber 
from Brazil, 63 FR 59509 (Nov. 8, 1998), citing to Final Determination 
of Sales at Less Than Fair Value: Certain Cold-Rolled Carbon Steel Flat 
Products from Argentina, 58 FR 37062 (July 9, 1993). Where the 
exclusion of such sales eliminated all sales of the most appropriate 
comparison product, we made a comparison to the next most similar 
model.

Cost of Production Analysis

    Based on a cost allegation filed by petitioners, the Department 
found reasonable grounds to believe or suspect that Avesta's sales of 
the foreign like product were made at prices which represent less than 
the cost of production (COP). See section 773(b)(2)(A) of the Tariff 
Act. As a result, the Department has initiated an investigation to 
determine whether the respondent made home market sales during the POI 
at prices below their respective COPs, within the meaning of section 
773(b) of the Tariff Act. (See Initiation, 63 FR 37521, July 13, 1998).
    In accordance with section 773(b)(3) of the Tariff Act, we 
calculated COP based on the sum of Avesta's cost of materials and 
fabrication for the foreign like product, plus an amount for G&A, 
interest expenses, and packing costs. In addition, on a transaction 
specific basis, we added to COP, tolling costs for slitting work done 
by an unaffiliated party.
    We used the information from Avesta's section D questionnaire 
responses to calculate COP. We compared the weighted-average COP for 
Avesta to home market sales prices of the foreign like product, as 
required under section 773(b) of the Tariff Act. In determining whether 
to disregard home market sales made at prices less than the COP, we 
examined whether such sales were made (i) in substantial quantities 
over an extended period of time, and (ii) at prices which permitted the 
recovery of all costs within a reasonable period of time. On a product-
specific basis, we compared COP to home market prices, less any 
applicable movement charges, billing adjustments, and discounts and 
rebates.
    Pursuant to section 773(b)(2)(C)(i) of the Tariff Act, where less 
than twenty 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 
that product because we determined that the below-cost sales were not 
made in ``substantial quantities.'' Where twenty percent or more of a 
respondent's sales of a given product during the POI were at prices 
less than the COP, we determined such sales to have been made in 
substantial quantities, in accordance with section 773(b)(2)(C)(i) of 
the Tariff Act. In addition, we determined that such below-cost sales 
were made within an extended period of time, in accordance with section 
773(b)(2)(B) of the Tariff Act. In such cases, pursuant to section 
773(b)(2)(D) of the Tariff Act, we also determined that such sales were 
not made at prices which would permit recovery of all costs within a 
reasonable period of time. Therefore, we disregarded the below-cost 
sales. Where all sales of a specific product were at prices below the 
COP, we disregarded all sales of that product and relied on similar 
merchandise to match, if available (see CEMEX v. United States, 1998 WL 
3626 (Fed. Cir.)).
    Our cost test for Avesta revealed that less than twenty percent of 
Avesta's home market sales of certain products were at prices below 
Avesta's COP. We retained all such sales in our analysis. For other 
products, more than twenty percent of Avesta's sales were at below-cost 
prices. In such cases we disregarded the below-cost sales, while 
retaining the above-cost sales for our analysis. See Preliminary 
Determination Analysis Memorandum, December 17, 1998.

Constructed Value

    In accordance with section 773(e)(1) of the Tariff Act, we 
calculated CV based on the sum of respondent's cost of materials, 
fabrication, SG&A, interest expenses, and profit. In accordance with 
section 773(e)(2)(A) of the Tariff Act, we based SG&A and profit on the 
amounts incurred and realized by Avesta in connection with the 
production and sale of the foreign like product in the ordinary course 
of trade for consumption in the foreign country. We used the CV data 
Avesta supplied in its section D questionnaire responses.

Price-to-Price Comparisons

    We calculated NV based on FOB or delivered prices to unaffiliated 
customers or prices to affiliated customers that we determined to be at 
arm's-length prices. We made adjustments for billing adjustments and 
discounts and rebates. We made deductions, where appropriate, for 
foreign inland freight, warehousing, and inland insurance, pursuant to 
section 773(a)(6)(B) of the Tariff Act. In addition, we made 
adjustments for differences in physical characteristics of the 
merchandise pursuant to section 773(a)(6)(C)(ii) of the Tariff Act, as 
well as for differences in circumstances of sale (COS) in accordance 
with section 773(a)(6)(C)(iii) of the Tariff Act and 19 CFR 351.410. We 
made COS adjustments for imputed credit expenses and warranties. 
Finally, we deducted home market packing costs and added U.S. packing 
costs in accordance with

[[Page 92]]

section 773(a)(6)(A) and (B) of the Tariff Act.

Price-to-CV Comparisons

    In accordance with section 773(a)(4) of the Tariff Act, we based NV 
on CV if we were unable to find a home market match of identical or 
similar merchandise. We calculated CV based on the costs of materials 
and fabrication employed in producing the subject merchandise, SG&A, 
and profit. In accordance with section 773(a)(2)(A) of the Tariff Act, 
we based SG&A expense 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 United Kingdom. For selling expenses, we used the weighted-average 
home market selling expenses. Where appropriate, we made adjustments to 
CV in accordance with section 773(a)(8) of the Tariff Act. For 
comparisons to EP, we made COS adjustments by deducting home market 
direct selling expenses and adding U.S. direct selling expenses. When 
we compared CV to CEP, we deducted from CV the weighted-average home 
market direct selling expenses.

Currency Conversion

    We made currency conversions into U.S. dollars based on the 
exchange rates in effect on the dates of the U.S. sales, as certified 
by the Federal Reserve Bank, in accordance with section 773A(a) of the 
Tariff Act.

Verification

    As provided in section 782(i) of the Tariff Act, we will verify all 
information relied upon in making our final determination.

Suspension of Liquidation

    In accordance with section 733(d) of the Tariff Act, we are 
directing the Customs Service to suspend liquidation of all imports of 
subject merchandise that are entered, or withdrawn from warehouse, for 
consumption on or after the date of publication of this notice in the 
Federal Register. We will instruct the Customs Service to require a 
cash deposit or the posting of a bond equal to the weighted-average 
amount by which the NV exceeds the export price, as indicated below. 
These suspension-of-liquidation instructions will remain in effect 
until further notice. The weighted-average dumping margins are as 
follows:

------------------------------------------------------------------------
                                                            Weighted-
                 Exporter/manufacturer                    average margin
                                                           (percentage)
------------------------------------------------------------------------
Avesta Sheffied........................................            13.45
All Others.............................................            13.45
------------------------------------------------------------------------

Commission Notification

    In accordance with section 733(f) of the Tariff Act, we have 
notified the Commission of our determination. If our final 
determination is affirmative, the Commission will determine before the 
later of 120 days after the date of this preliminary determination or 
45 days after our final determination whether imports of stainless 
steel sheet and strip in coils are materially injuring, or threaten 
material injury to, the U.S. industry.

Public Comment

    Case briefs or other written comments may be submitted to the 
Assistant Secretary for Import Administration no later than fifty days 
after the date of publication of this notice, and rebuttal briefs, 
limited to issues raised in case briefs, no later than fifty-five days 
after the date of publication of this preliminary determination. A list 
of authorities used and an executive summary of issues should accompany 
any briefs submitted to the Department. This summary should be limited 
to five pages total, including footnotes. In accordance with section 
774 of the Tariff Act, we will hold a public hearing, if requested, to 
afford interested parties an opportunity to comment on arguments raised 
in case or rebuttal briefs. Tentatively, any hearing will be held 
fifty-seven days after publication of this notice at the U.S. 
Department of Commerce, 14th Street and Constitution Avenue, N.W., 
Washington, D.C. 20230, at a time and location to be determined. 
Parties should confirm by telephone the date, time, and location of the 
hearing 48 hours before the scheduled time.
    Interested parties who wish to request a hearing, or to participate 
if one is requested, must submit a written request to the Assistant 
Secretary for Import Administration, U.S. Department of Commerce, Room 
1870, within 30 days of the date of publication of this notice. 
Requests should contain: (1) The party's name, address, and telephone 
number; (2) the number of participants; and (3) a list of the issues to 
be discussed. At the hearing, each party may make an affirmative 
presentation only on issues raised in that party's case brief, and may 
make rebuttal presentations only on arguments included in that party's 
rebuttal brief. See 19 CFR 351.310(c). If this investigation proceeds 
normally, we will make our final determination by no later than 135 
days after the publication of this notice in the Federal Register.
    This determination is issued and published in accordance with 
sections 733(d) and 777(i)(1) of the Tariff Act.

    Dated: December 17, 1998.
Richard W. Moreland,
Acting Assistant Secretary for Import Administration.
[FR Doc. 98-34460 Filed 12-31-98; 8:45 am]
BILLING CODE 3510-DS-P