[Federal Register Volume 64, Number 1 (Monday, January 4, 1999)]
[Notices]
[Pages 108-116]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-34463]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-588-845]


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

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

EFFECTIVE DATE: January 4, 1999.

FOR FURTHER INFORMATION CONTACT: Letitia Kress, Cindy Sonmez or Karla 
Whalen, Import Administration,

[[Page 109]]

International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, N.W., Washington, D.C. 20230; 
telephone: (202) 482-6412, (202) 482-3362 or (202) 482-1391, 
respectively.

The Applicable Statute

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

Preliminary Determination

    We preliminarily determine that Stainless Steel Sheet and Strip in 
Coils (``SSS&S'') from Japan is being, or is likely to be, sold in the 
United States at less than fair value (``LTFV''), as provided in 
section 733 of the Act. The estimated margins of sales at LTFV are 
shown in the ``Suspension of Liquidation'' section of this notice. For 
Nippon Steel Corporation (``NSC''), the Department used the sales data 
submitted on December 2, 1998 and the cost of production and 
constructed value data submitted on November 19, 1998. For Kawasaki 
Steel Corporation (``Kawasaki'') the Department used the response 
submitted on November 30, 1998.

Case History

    On July 13, 1998, the Department initiated antidumping duty 
investigations of imports of stainless steel sheet and strip in coils 
from France, Germany, Italy, Japan, Mexico, South Korea, Taiwan and the 
United Kingdom (see Initiation of Antidumping 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 in a letter to interested 
parties on July 21, 1998. On July 27, 1998, Allegheny Ludlum 
Corporation, Armco, Inc.,1 J&L Specialty Steel, 
Inc.,2 Washington Steel Division of Bethlehem Steel 
Corporation (formerly Lukens, Inc.), the United Steelworkers of 
America, AFL-CIO/CLC, the Butler Armco Independent Union 3 
and the Zanesville Armco Independent Organization, Inc. 4 
(``petitioners'') submitted comments to the Department stating that 
they generally agree with the Department's product characteristics and 
model match criteria. However, petitioners noted that the reporting of 
products' actual alloy content, within certain ranges, must be 
incorporated from the outset into the product characteristics that 
comprise the product matching hierarchy that create the control numbers 
(``CONNUMs'').
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    \1\  Armco, Inc. is not petitioner in the Mexico case.
    \2\  J&L Specialty Steel, Inc, is not a petitioner in the France 
case.
    \3\  Butler Armco Independent Union is not a petitioner in the 
Mexico case.
    \4\  Zanesville Armco Independent Organization, Inc. is not a 
petitioner in the Mexico case.
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    On July 17, 1998, NSC submitted comments claiming that petitioners 
do not manufacture suspension foil and thus do not have standing to 
file a petition against this product. Also on July 17, 1998, NSC 
submitted a statement regarding petitioners agreement to exclude 
suspension foil from the scope of the investigation. Also on July 20, 
1998, Hutchinson Technology submitted comments regarding the definition 
of suspension foil. On July 20, 1998, Hitachi Metals America, Ltd. 
submitted comments concerning razor blade steel, flapper valve steel, 
and surgical/medical categories of stainless steel sheet and strip and 
that all of its products are outside of the scope of the investigation.
    On July 27, 1998, respondent NSC submitted comments stating that 
the criteria should be reordered and clarified and that the 
``additional information'' concerning chemical content is burdensome 
and unnecessary. On July 29, 1998, Hitachi Metals America, Ltd. 
submitted comments regarding an exclusion for flapper valve steel. On 
July 27, 1998, respondent Kawasaki Steel Corporation stated that it 
agrees with NSC's July 27, 1998 comments. On July 29, 1998 petitioners 
submitted a letter regarding the scope.
    On July 24, 1998, the International Trade Commission (``ITC'') 
notified the Department of its affirmative preliminary determination in 
this case.
    On August 3, 1998, the Department issued antidumping duty 
questionnaires to Kawasaki, NSC, and Hitachi Metals America, 
Ltd.5 On August 4, 1998, the Department issued antidumping 
duty questionnaires to Nisshin Steel Co., Ltd. (``Nisshin''), Nippon 
Yakin Kogyo (``Nippon Yakin''), Nippon Metal Industries (``Nippon 
Metal''), and Sumitomo Metal Industries (``Sumitomo''). On September 
21, 1998, the Department selected NSC, Kawasaki, Nippon Metal, Nippon 
Yakin, and Nisshin (collectively ``respondents'') as mandatory 
respondents. See Decision Memorandum from Division Directors, Office 
VII, to Joseph Spetrini, regarding Selection of Respondents, September 
21, 1998.
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    \5\ Counsel for Hitachi Metals America, Ltd. forwarded the 
questionnaire to Hitachi Metals, Ltd. in Japan.
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    On August 28, October 19 and 27, and November 2, 1998, in letters 
to the Department, NSC requested that it not be required to report 
downstream sales in Japan because relevant resales: (1) Involve sales 
to affiliated resellers which are at arm's length; (2) are all at a 
different level of trade from United States sales; (3) for the most 
part are not likely to match U.S. sales; and (4) would entail undue 
burden. On September 8 and November 25, 1998, petitioners rebutted 
NSC's requested exemption from reporting certain home market sales.
    On September 9, 1998, the Department received responses to Section 
A of the questionnaire from Kawasaki, NSC, and Sumitomo. On October 5 
and 7, 1998, petitioners filed comments to the Section A responses for 
Kawasaki and NSC, respectively. On September 29, 1998, the Department 
received Kawasaki and NSC's responses to Sections B and C of the 
questionnaire. On October 15, 1998, petitioners filed comments on 
Kawasaki and NSC's Section B and C questionnaire responses. On October 
20 and 21, 1998, the Department issued supplemental questionnaires on 
Sections A, B, and C to NSC and Kawasaki, respectively.
    On October 6, 1998, pursuant to section 733(c)(1)(A) of the Act, 
the petitioners made a timely request to postpone the preliminary 
determination for thirty days. The Department determined that this 
investigation is extraordinarily complicated and that the additional 
time is necessary for the Department to make its preliminary 
determination. On October 16, 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 for Antidumping Duty 
Investigations, 63 FR 56909, (October 23, 1998).
    On October 8 and 13, 1998, petitioners timely requested that the 
Department initiate a cost investigation against Kawasaki and NSC, 
respectively. Based on an adequate sales below cost of production 
allegation, the Department initiated a cost of

[[Page 110]]

production investigation against Kawasaki and NSC on October 28, 1998. 
See Memorandum from William Jones and Taija Slaugher to Roland 
MacDonald regarding Allegations of Sales Below the Cost of Production 
for Kawasaki Steel Corporation and Nippon Steel Corporation dated 
October 28, 1998. On November 19, 1998, Kawasaki and NSC submitted 
their Section D responses.
    On October 28, 1998, NSC submitted a request that it not be 
required to report sales based on order confirmation date as was 
requested in the supplemental questionnaire that the Department issued 
on October 20, 1998. On November 18, 1998, Kawasaki requested a waiver 
from the Department's request to submit a new database using order 
confirmation date.
    On October 30, 1998, petitioners timely alleged that critical 
circumstances exist with respect to imports of stainless steel sheet 
and strip in coils from Japan. On November 19, 1998, Kawasaki submitted 
shipment information in regards to this allegation. On December 4, 
1998, NSC submitted shipment information in regards to this allegation.
    On December 2, 1998, NSC submitted the order confirmation date for 
the sales it previously reported in its Section B and C responses as 
well as downstream sales. On December 3, 1998, petitioners submitted 
comments on appropriate product comparisons. On December 7, 1998, 
Kawasaki submitted its sales made to unaffiliated parties based on 
order confirmation date. On December 4 and 8, 1998, petitioners 
submitted comments regarding preliminary determination guidance for 
Kawasaki and NSC, respectively. On December 11, 1998, NSC submitted a 
rebuttal to petitioners' December 8, 1988 preliminary determination 
comments. On December 11, 1998, NSC submitted additional order 
confirmation reporting. On December 9, 1998, Kawasaki submitted a 
rebuttal to petitioners' December 4th preliminary determination 
comments.

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.
    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

[[Page 111]]

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 
``Arnokrome.'' 6
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    \6\ ``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.''7
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    \7\ ``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.''8
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    \8\ ``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).9 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, and is supplied 
as, for example, ``GIN6''.10
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    \9\ This list of uses is illustrative and provided for 
descriptive purposes only.
    \10\ ``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 Act, on November 19 and 25, 
1998, Kawasaki and NSC respectively, 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. On December 15, 1998, NSC and 
Kawasaki amended their requests to include a 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) NSC and Kawasaki account for a significant proportion 
of exports of the subject merchandise, and (3) no compelling reasons 
for denial exist, we are granting the respondents' requests 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.

Preliminary Determination of Critical Circumstances

    On October 30, 1998, petitioners alleged that there is a reasonable 
basis to believe or suspect that critical circumstances exist with 
respect to the subject merchandise. Petitioners based their allegation 
on a comparison of import data from April-June and July-September, 
1998, arguing comparison of these periods due to a one-month shipping 
time lag. In accordance with 19 CFR 351.206(c)(2), since this 
allegation was filed earlier than the deadline for the Department's 
preliminary determination, we must issue our preliminary critical 
circumstances determinations not later than the preliminary 
determination. See Policy Bulletin 98/4 regarding Timing of Issuance of 
Critical Circumstances Determinations, 63 FR 55364, (October 15, 1998).
    Section 733(e)(1) of the Act provides that if a petitioner alleges 
critical circumstances, the Department will determine whether there is 
a reasonable basis to believe or suspect that: (A)(i) there is a 
history of dumping and material injury by reason of dumped imports in 
the United States or elsewhere of the subject merchandise; or (ii) the 
person by whom, or for whose account, the merchandise was imported knew 
or should have known that the exporter was selling the subject 
merchandise at less than fair value and that there was likely to be 
material injury by reason of such sales; and (B) there have been 
massive imports of the subject merchandise over a relatively short 
period.
    The statute and the Statement of Administrative Action (``SAA'') 
which accompanies the Uruguay Round Agreements Act are silent as to how 
we are to make a finding that there was knowledge that there was likely 
to be material injury. Therefore, Congress has left the method of 
implementing this provision to the Department's discretion.
    In determining whether there is a reasonable basis to believe or 
suspect that an importer knew or should have known that the exporter 
was selling the product at less than fair value, the Department 
normally considers margins

[[Page 112]]

of 15 percent or more sufficient to impute knowledge of dumping for 
constructed export price (``CEP'') sales, and margins of 25 percent or 
more for export price (``EP'') sales. See, e.g., Preliminary Critical 
Circumstances Determination: Honey from the People's Republic of China, 
60 FR 29824 (June 6, 1995). Since the company specific margin for EP 
sales in our preliminary determination for stainless steel sheet and 
strip in coils are greater than 25 percent for Kawasaki, we have 
imputed importer knowledge of dumping for Kawasaki. Since the company 
specific margins for EP sales in our preliminary determination for 
stainless steel sheet and strip in coils are less than 25 percent for 
NSC, we have not imputed knowledge of dumping based on this margin. 
There is no evidence on the record regarding history of dumping by NSC. 
Therefore, NSC does not meet the first prong of the analysis.
    In determining whether there is a reasonable basis to believe or 
suspect that an importer knew or should have known that there was 
likely to be material injury by reason of dumped imports, the 
Department normally will look to the preliminary injury determination 
of the ITC. If, as in this case, the ITC finds a reasonable indication 
of present material injury to the relevant U.S. industry, the 
Department will determine that a reasonable basis exists to impute 
importer knowledge that there was likely to be material injury by 
reason of dumped imports during the critical circumstance period--the 
90-day period beginning with the initiation of the investigation. See 
19 CFR 351.206. Therefore, the Department finds it is reasonable to 
impute importer knowledge of injury by reason of dumped imports in this 
case.
    Since Kawasaki has met the first prong of the critical 
circumstances allegation, we must examine whether or not it had massive 
imports. To determine whether imports were massive over a relatively 
short time period, the Department typically compares the import volume 
of the subject merchandise for the three months immediately preceding 
and following the filing of the petition. See 19 CFR 351.206(i). 
Pursuant to 19 CFR 351.206(h)(2), the Department will consider an 
increase of 15 percent or more in the imports of the subject 
merchandise over the relevant period to be massive. On November 19, 
1998, Kawasaki submitted shipment information which shows that its 
imports decreased during the comparison period (July-September, 1998) 
from the level of the preceding three months. Therefore, we do not find 
that critical circumstances exist for Kawasaki, since it did not have 
massive imports, or for NSC, since it does not have a history of 
dumping or a margin high enough to impute knowledge.
    In addition, for companies which did not respond to the 
Department's questionnaire, we are imputing knowledge based on the 
facts available rate assigned, which is the highest petition rate. 
Therefore, we determine, based on facts available, that there were 
massive imports of stainless steel sheet and strip in coils by 
companies that did not respond to the Department's questionnaire. 
Therefore, we preliminarily determine that critical circumstances exist 
with regard to these companies. Regarding all other exporters, because 
we find that critical circumstances exist for three out of five 
investigated companies, we also determine that critical circumstances 
exist for all other exporters.

Product Comparisons

    In accordance with section 771(16) of the Act, all products 
produced by the respondents covered by the description in the Scope of 
Investigation section above, and sold in Japan during the POI, are 
considered to be foreign like products for purposes of determining 
appropriate product comparisons to U.S. sales. We have relied on nine 
characteristics to match U.S. sales of subject merchandise to 
comparison market sales of the foreign like product (listed in order of 
significance): grade; hot/cold rolled; gauge; finish; metallic coating; 
non-metallic coating; width; temper/tensile strength; and, edge trim. 
These characteristics have been weighted by the Department where 
appropriate. Where there were no sales of identical merchandise in the 
home market to compare to U.S. sales, we compared U.S. sales to the 
next most similar foreign like product on the basis of the 
characteristics listed in the antidumping duty questionnaire and 
reporting instructions.

Date of Sale

    For its home market and U.S. sales, NSC and Kawasaki reported the 
date of invoice (shipment date) as the date of sale, in keeping with 
the Department's stated preference for using the invoice date as the 
date of sale. Both respondents 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 these 
respondents' sales of SSSS. Given the relevance of petitioners' 
comments and the nature of marketing these types of made-to-order 
products, we determined that petitioners' claims have some merit. 
Consequently, on October 20 and 21, 1998, the Department requested that 
NSC and Kawasaki, respectively, 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 
NSC and Kawasaki to report the 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 October 28 and November 18, 1998, NSC and 
Kawasaki reiterated that invoice date is the appropriate date of sale 
and requested that they not have to report sales based on order 
confirmation date. On December 21, 1998, NSC reported the order date 
for sales reported in its section B and C responses. NSC supplemented 
this filing on December 11, 1998 reporting sales with final order date 
within the POI, and invoice dates within the POI. On December 7, 1998, 
Kawasaki submitted its response to the Department's request for order 
confirmation date reporting.
    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 the order confirmation date 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.

Fair Value Comparisons

    To determine whether sales of SSS&S from Japan to the United States 
were made at LTFV, we compared EP to the normal value (``NV''), as 
described in the ``Export Price'' and ``Normal Value'' sections of this 
notice, below. In accordance with section 772(a) and (c), we calculated 
EP for all of Kawasaki and NSC's sales, since the subject merchandise 
was sold to the first unaffiliated purchaser in the United States prior 
to importation, and CEP was not otherwise warranted based on the facts 
on the record.

Export Price

    We calculated EP based on the packed delivered price to 
unaffiliated purchasers in the United States. For Kawasaki, we made 
deductions from the starting price (gross unit price), where

[[Page 113]]

appropriate, for foreign inland freight, insurance, rebates and 
brokerage and handling, and we added duty drawback. For NSC, we made 
deductions from the starting price (gross unit price), where 
appropriate, for foreign inland freight, inland insurance, discounts 
and rebates, credit, and warranty expenses.

Normal Value

    After testing home market viability, as discussed below, we 
calculated NV as noted in the ``Price-to-CV Comparisons'' and ``Price-
to-Price Comparisons'' sections of this notice.
1. Home Market Viability
    In order to determine whether there is 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 
is equal to or greater than five percent of the aggregate volume of 
U.S. sales), we compared each 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)(B) of the Act. Since 
each respondent'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 provides a viable basis for calculating NV. Therefore, we have 
based NV on home market sales.
2. Cost of Production Analysis
    Based on a cost allegation filed by the petitioners, the Department 
found reasonable grounds to believe or suspect that sales by Kawasaki 
and NSC in the home market were made at prices below the costs of 
production (``COP''), pursuant to section 773(b)(1) of the Act. As a 
result, the Department initiated an investigation to determine whether 
Kawasaki or NSC made home market sales during the POI at prices below 
their respective COPs, within the meaning of section 773(b) of the Act. 
We conducted the COP analysis described below.
A. Calculation of COP
    In accordance with section 773(b)(3) of the Act, we calculated COP 
based on the sum of Kawasaki's and NSC's respective costs for materials 
and fabrication for the foreign like product, plus amounts for selling, 
general and administrative expenses, interest expenses, research and 
development, and packing costs. We relied on the COP data submitted by 
Kawasaki and NSC, except as discussed below, where Kawasaki submitted 
costs were not sufficiently reported, quantified or valued.
    1. Kawasaki did not report costs for some CONNUMs that were sold in 
the home market. In these instances, we assigned the highest reported 
costs to those CONNUMs.
    2. Kawasaki reported no costs for secondary merchandise. Therefore, 
we have assigned the highest reported costs to those products.
    3. In any instances where Kawasaki reported more than one cost for 
the same CONNUM, we calculated a single weighted-average cost for each 
CONNUM using the reported production quantities.
    4. We revised Kawasaki's general and administrative (``G&A'') 
expenses to include losses related to the disposal of tangible fixed 
assets and expenses related to retirement payments and pension costs 
see Cost of Production and Constructed Value Calculation Adjustments 
for the Preliminary Determination from William Jones and Taija 
Slaughter to Neal Halper, dated December 17, 1998.
B. Test of Home Market Prices
    We compared the weighted-average COP for each respondent, adjusted 
where appropriate (see above), to home market sales of the foreign like 
product, as required under section 773(b) of the Act, in order to 
determine whether these sales had been made at prices below the COP. In 
determining whether to disregard home market sales made at prices below 
the COP, we examined whether such sales were made (1) within an 
extended period of time in substantial quantities, and (2) at prices 
which permitted the recovery of all costs within a reasonable period of 
time in the normal course of trade, in accordance with sections 
773(b)(1)(A) and (B) of the Act. On a product-specific basis, we 
compared the COP to home market prices, less any applicable movement 
charges, discounts and rebates, other selling expenses, and home market 
packing.
C. Results of the COP Test
    Pursuant to section 773(b)(2)(C) of the Act, where less than 20 
percent of the 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 20 percent or more of a respondent's 
sales of a given product during the POI were at prices less than the 
COP, we determined that such sales have been made in substantial 
quantities within an extended period of time, in accordance with 
section 773(b)(2)(B) of the Act. Because we compared prices to POI 
average costs, we also determined that such sales were not made at 
prices which would permit recovery of all costs within a reasonable 
period of time, in accordance with section 773(b)(2)(D) of the Act. 
Therefore, we disregarded the below-cost sales.
D. Calculation of CV
    In accordance with section 773(e)(1) of the Act, we calculated CV 
based on the sum of each respondent's cost of materials, fabrication, 
G&A expenses, U.S. packing costs, direct and indirect selling expenses, 
interest expenses, research and development expenses, and profit. We 
made adjustments to Kawasaki's reported costs as indicated above in the 
COP section. In accordance with section 773(e)(2)(A) of the Act, we 
based selling, general, and administrative expenses and profit on the 
amounts incurred and realized by each respondent in connection with the 
production and sale of the foreign like product in the ordinary course 
of trade, for consumption in the foreign country. For selling expenses, 
we used the actual weighted-average home market direct and indirect 
selling expenses.

Price-to-Price Comparisons

    For those product comparisons for which there were sales at prices 
above the COP, we based NV on prices to home market customers. We made 
adjustments, where appropriate, for physical differences in the 
merchandise in accordance with section 773(a)(6)(C) of the Act. In 
accordance with Section 773(a)(6), we deducted home market packing 
costs and added U.S. packing costs.

Kawasaki

    We based home market prices on the packed, delivered prices to 
affiliated and unaffiliated purchasers in the home market. We made 
adjustments, where applicable, in accordance with section 773(a)(6) of 
the Act. Where applicable, we made adjustments for rebates and movement 
expenses. To adjust for differences in circumstances of sale between 
the home market and the United States, we reduced home market prices by 
the amounts of direct selling expenses (i.e., warranty and credit 
expenses) and added U.S. credit expenses. In order to adjust for 
differences in packing between the two markets, we deducted HM packing 
costs and added U.S. packing costs.

NSC

    We calculated NV based on prices to unaffiliated home market 
customers. We

[[Page 114]]

made deductions for direct selling expenses, discounts and rebates, 
inland freight charges, insurance, warehousing, and packing expenses, 
where appropriate. In accordance with section 773(a)(6), we deducted 
home market packing costs and added U.S. packing costs. Lastly, in our 
NV calculations, we did not use NSC's reported downstream sales because 
the sales by NSC to its first affiliated reseller passed the arm's-
length test (see section on Arm's Length Test).

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 each respondent's cost 
of materials, fabrication, G&A expenses, U.S. packing, direct and 
indirect expenses, interest expense, research and development expenses 
employed in producing the subject merchandise as well as 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 Japan. 
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.

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 the 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 Notice of 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). Where the 
exclusion of such sales eliminated all sales of the most appropriate 
comparison product, we made a comparison to the next most similar 
product.

Level of Trade

    In accordance with section 773(a)(1)(B) of the Act, to the extent 
practicable, we determine NV 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 constructed value (``CV''), that of the sales from 
which we derive selling, general and administrative (``SG&A'') expenses 
and profit. For EP, the U.S. LOT is also the level of the starting-
price sale, which is usually from exporter to importer. For CEP, it is 
the level of the constructed sale from the exporter to the importer. To 
determine whether NV sales are at a different LOT than EP or CEP, we 
examine stages in the marketing process and selling functions along the 
chain of distribution between the producer and the unaffiliated 
customer. 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 an LOT adjustment under section 773(a)(7)(A) of the 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 difference 
in the levels between NV and CEP affects price comparability, we adjust 
NV under section 773(a)(7)(B) of the Act (the CEP offset provision). 
See Notice of Final Determination of Sales at Less Than Fair Value: 
Certain Cut-to-Length Carbon Steel Plate from South Africa, 62 FR 61731 
(November 19, 1997).

Kawasaki

    In its questionnaire responses, Kawasaki stated that it sold 
subject merchandise through a total of five channels of trade during 
the period of investigation, four in the home market and one in the 
United States. Kawasaki's U.S. sales were all made to unaffiliated 
trading companies. Its four home market channels were sales from 
Kawasaki to end users, sales from Kawasaki to unaffiliated trading 
companies, sales from Kawasaki to affiliated trading companies and then 
to affiliated customers (which used the subject merchandise to 
manufacture products outside the scope of the proceeding), and finally, 
sales from Kawasaki to affiliated trading companies and then to 
unaffiliated customers. Thus, Kawasaki sold subject merchandise to two 
types of customers: trading companies, whether affiliated or not, and 
unaffiliated end users. These sales represent two different points in 
the chain of distribution between the producer and the final end user, 
as in one instance (sales to trading companies), the subject 
merchandise passes through the intermediary parties, while in the other 
case, sales are made without any intervening parties at all. As a 
result, these sales to different points in the distribution chain could 
represent different levels of trade in the home market.
    The Department then examined whether any differences existed with 
respect to the selling functions Kawasaki performed in making sales to 
these two types of customers. Regardless of the type of customer, all 
of Kawasaki's home market sales were manufactured to order and the 
merchandise was shipped directly from the factory to the end user. The 
packing processes were also identical for all sales, and the reported 
selling expenses were comparable for all sales. There is no evidence on 
the record to suggest that Kawasaki had formal policies for providing 
special payment terms, such as discounts, to different types of 
customers. Regarding the selling functions with respect to the sales to 
end users, Kawasaki conducted price negotiations, communications with 
the customers, payment collection activity, and warranty activity, in 
addition to maintaining a long-term cooperative relationship designed 
to assist the customers' utilization of Kawasaki's products. None of 
these qualitatively different functions were performed regarding the 
sales to trading companies. Based on the different points in the chain 
of distribution and the differences in selling functions, the 
Department has preliminarily determined that two levels of trade exist 
for Kawasaki's sales in the home market.
    Regarding U.S. sales, the Department found that no evidence existed 
to differentiate the selling functions between sales made to trading 
companies for sale to the United States and sales made to trading 
companies for sale in the home market. Therefore, the Department 
preliminarily considers sales made through trading companies,

[[Page 115]]

whether to the United States or the home market, to be at the same 
level of trade.
    The Department then checked to determine whether a pattern of 
consistent price differences existed between these two levels of trade. 
The Department found that no consistent significant pattern existed and 
therefore did not adjust NV if U.S. sales were compared to home market 
sales made at a different LOT.

NSC

    In the home market NSC sold to unaffiliated and affiliated trading 
companies and to end users. In the U.S. market, NSC sold only to 
unaffiliated trading companies. NSC claims that there is no difference 
in the selling expenses between channels. Although the sales in the 
home market represent different points in the chain of distribution 
between the producer and the final end-user which could represent 
different levels of trade, NSC provided essentially the same level of 
marketing assistance and selling functions to all three types of 
customers. For its U.S. sales, NSC reported sales to unaffiliated 
resellers as its only method of distribution.
    When comparing NSC's sales at its EP LOT to its home market LOT, we 
found that NSC provided essentially the same level of strategic or 
economic planning, market research, engineering services, or post-sale 
warehousing at both the EP or home market LOT. All packing expenses and 
freight arrangements were similar (in the activities performed) in both 
markets. NSC provided similar degrees of after-sales and technical 
support at both the EP and home market LOT. Based upon our examination 
of the information on the record, we agree with NSC that it had one 
LOT.
    We have not, therefore, made a LOT adjustment because all price 
comparisons are at the same LOT and an adjustment pursuant to section 
773(a)(7)(A) of the Tariff Act is not appropriate.

Facts Available

    Section 776(a)(2) of the Act provides that, if an interested party: 
(A) withholds information that has been requested by the Department; 
(B) fails to provide such information in a timely manner or in the form 
or manner requested; (C) significantly impedes a proceeding under the 
antidumping statute; or (D) provides such information but the 
information cannot be verified, as provided in section 782(i), the 
Department shall, subject to subsections 782(d), use facts otherwise 
available in reaching the applicable determination. Because Nisshin, 
Nippon Yakin, and Nippon Metal failed to respond to the Department's 
questionnaire, and because that failure is not overcome by the 
application of section 782, we must use facts otherwise available to 
calculate the dumping margins for each company.
    Section 776(b) of the Act provides that adverse inferences may be 
used against a party that has failed to cooperate by not acting to the 
best of its ability to comply with the Department's requests for 
information. See also Statement of Administrative Action accompanying 
the URAA, H.R. Rep. No. 316, 103d Cong., 2d Sess. 870 (1994). The non-
responsive companies' decisions not to reply to the Department's 
antidumping questionnaire demonstrates that they have failed to act to 
the best of their ability to comply with a request for information 
under section 776 of the Act. Thus, the Department has determined that, 
in selecting among the facts otherwise available, an adverse inference 
is warranted.
    Consistent with Department practice, as adverse facts available, 
the Department is assigning to Nisshin, Nippon Yakin, and Nippon Metal 
the higher of: (1) the highest margin stated in the petition; or (2) 
the highest margin calculated for any respondent in this investigation.
    Section 776(b) states that an adverse inference may include 
reliance on information derived from the petition or any other 
information placed on the record. See also SAA at 829-831. Section 
776(c) provides that, when the Department relies on secondary 
information (e.g., the petition) as the facts otherwise available, it 
must, to the extent practicable, corroborate that information from 
independent sources that are reasonably at its disposal. We reviewed 
the adequacy and accuracy of the information in the petition during our 
pre-initiation analysis of the petition, to the extent appropriate 
information was available for this purpose (e.g., import statistics, 
call reports, and data from business contacts). In this case, the 
highest margin alleged in the petition for any Japanese producer is 
57.87 percent (see Import Administration AD Investigation Initiation 
Checklist, dated June 30, 1998 for a discussion of the margin 
calculations in the petition).
    The Department was provided with no other useful information by the 
respondents or other interested parties, and is aware of no other 
independent sources of information, that would enable it to further 
corroborate the remaining components of the margin calculation in the 
petition.

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 773(A) of the Act.

Verification

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

Suspension of Liquidation

    In accordance with section 733(d)(2) of the 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. For all companies except Kawasaki and NSC, 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 90 days prior to the date of 
publication of this notice in the Federal Register. See section 
733(e)(2). 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 EP, as indicated in the chart below. These 
suspension of liquidation instructions will remain in effect until 
further notice. The weighted-average dumping margins are as follows:

------------------------------------------------------------------------
                                                              Weighted-
                                                               average
                   Exporter/manufacturer                       margin
                                                             percentage
------------------------------------------------------------------------
Kawasaki Steel Corporation................................         48.41
Nippon Steel Corporation..................................         24.94
Nisshin Steel Co., Ltd....................................         57.87
Nippon Yakin Kogyo........................................         57.87
Nippon Metal Industries...................................         57.87
All Others................................................         35.61
------------------------------------------------------------------------

Pursuant to section 735(c)(5)(A) of the Act, the Department has 
excluded any zero and de minimis margins and any margins determined 
entirely under section 776 of the Act, from the calculation of the 
``All Others Rate.''

ITC Notification

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

[[Page 116]]

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 publication of this notice. A list of authorities used and an 
executive summary of issues should accompany any briefs submitted to 
the Department. Such summary should be limited to five pages total, 
including footnotes. In accordance with section 774 of the 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, the hearing will be held fifty-seven days after 
publication of this notice, time and room to be determined, at the U.S. 
Department of Commerce, 14th Street and Constitution Avenue, N.W., 
Washington, D.C. 20230. Parties should confirm by telephone the time, 
date, and place 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 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. 
Oral presentations will be limited to issues raised in the briefs. If 
this investigation proceeds normally, we will make our final 
determination no later than 135 days after publication of this notice.
    This determination is issued and published in accordance with 
sections 733(d) and 777(i)(1) of the Act.

    Dated: December 17, 1998.
Richard Moreland,
Acting Assistant Secretary for Import Administration.
[FR Doc. 98-34463 Filed 12-31-98; 8:45 am]
BILLING CODE 3510-DS-P