[Federal Register Volume 64, Number 1 (Monday, January 4, 1999)]
[Notices]
[Pages 137-147]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-34467]


-----------------------------------------------------------------------

DEPARTMENT OF COMMERCE

International Trade Administration
[A-580-834]


Notice of Preliminary Determination of Sales at Less Than Fair 
Value: Stainless Steel Sheet and Strip in Coils From South Korea

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

EFFECTIVE DATE: January 4, 1999.

FOR FURTHER INFORMATION CONTACT: Maria Dybczak (Pohang Iron and Steel 
Company, Ltd. (``POSCO'')), Brandon Farlander (Inchon Iron & Steel Co., 
Ltd. (``Inchon'')), or Rick Johnson, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, N.W., Washington, D.C. 20230; 
telephone: (202) 482-1398 (Dybczak), (202) 482-0182 (Farlander), or 
(202) 482-3818 (Johnson).

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's 
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 (``SSSS'') from South Korea 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.

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) (``Initiation''). 
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, petitioners, 
Allegheny Ludlum Corporation, Armco Inc., J&L Specialty Steel, Inc., 
Washington Steel Division of Bethlehem Steel Corporation (formerly 
Lukens, Inc.), the United Steelworkers of America, AFL-CIO/CLC, the 
Butler Armco Independent Union, and the Zanesville Armco Independent 
Organization, Inc., 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 For Joseph 
A. Spetrini, Re: Scope Issues, dated December 14, 1998.
    In July 1998, the Department requested information from the U.S. 
Embassy in South Korea to identify producers/exporters of the subject 
merchandise. On July 21, 1998 the U.S. Embassy in South Korea responded 
to the Department's request for this information. Also, on July 21, 
1998, the Department requested comments from petitioners and other 
interested parties regarding the criteria to be used for model matching 
purposes. On July 27, 1998, petitioners submitted comments on our 
proposed model matching criteria.
    On July 24, 1998, the United States International Trade Commission 
(``ITC'') notified the Department of its affirmative preliminary injury 
determination in this case. On August 3, 1998, the Department 
subsequently issued its antidumping questionnaire to the following 
respondents: Pohang Iron and Steel Co., Ltd. (``POSCO''); Inchon Iron 
and Steel Co., Ltd. (``Inchon''); Taihan Electric Wire Co., Ltd. 
(``Taihan''); Sammi Steel Co., Ltd. (``Sammi''); and Dai Yang Metal 
Co., Ltd. (``Dai Yang''). On August 7, 1998, Sammi submitted a letter 
to the Department stating that it did not export the subject 
merchandise to the United States during the period of investigation 
(``POI''), with a request that it be excluded from further 
participation in the investigation.
    POSCO, Inchon, Sammi, and Dai Yang submitted responses to section A 
of the questionnaire on September 8, 1998. Taihan did not respond to 
section A of the Department's questionnaire. On September 21, the 
Department issued a decision with regard to selection of respondents in 
the above-mentioned investigations (see Memorandum to Joseph A. 
Spetrini, dated September 21, 1998). On the basis of the analysis 
detailed in the memorandum, the Department chose three mandatory Korean 
respondents for the investigation: POSCO, Inchon, and Taihan. POSCO 
submitted responses to sections B through D on September 23, 1998. 
Taihan did not respond to sections B through D of the Department's 
questionnaire. Inchon submitted responses to sections B and C on 
September 23, 1998, and to section D on September 25, 1998. Petitioners 
filed comments on POSCO's section A through D responses on October 13, 
1998, and October 21, 1998. Petitioners filed comments on Inchon's 
section A on September 21, 1998; to sections B and C on October 14, 
1998; and to section D on October 16, 1998. We issued supplemental 
questionnaires for sections A, B and C to POSCO on October 23, 1998, 
and October 27, 1998. In addition, we issued a supplemental 
questionnaire to POSCO for section D on October 20, 1998. We issued 
supplemental questionnaires for sections A, B, C, and D to Inchon on 
October 26, 1998. POSCO responded to our supplemental questionnaires 
for sections A, B and C on November 23, 1998, and to our supplemental 
questionnaires for section D on November 17, 1998. Inchon responded to 
our supplemental questionnaires for sections A, B, C, and D on November 
19, 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 Act. The Department determined that these 
concurrent investigations are extraordinarily complicated and warranted 
the thirty-day postponement requested by petitioners. On October 23, 
1998, we postponed the preliminary determination until no later than 
December 17, 1998. See Stainless Steel Sheet and Strip in Coils From 
Italy, France, Germany, Mexico, Japan, the Republic of Korea, Taiwan, 
the United Kingdom, and Taiwan; Notice of Postponement of Preliminary 
Determinations in Antidumping Duty Investigations, 63 FR 56909 (October 
23, 1998). On October 30, 1998, petitioners alleged that there is a 
reasonable basis to believe or suspect that critical circumstances 
exist with respect to imports of SSSS from South Korea. The critical 
circumstances analysis for the preliminary determination is discussed

[[Page 138]]

in the ``Critical Circumstances'' section of the notice below.
    On December 3, 1998, petitioners submitted comments regarding 
product concordance. See Memorandum to File: Analysis for the 
Preliminary Determination in the Investigation of Stainless Steel Sheet 
and Strip in Coils from Korea--Pohang Iron and Steel Co., Ltd. 
(``POSCO'') (``Analysis Memo: POSCO'') (December 17, 1998) and 
Memorandum to File: Analysis for the Preliminary Determination in the 
Investigation of Stainless Steel Sheet and Strip in Coils from Korea--
Inchon Iron and Steel Co., Ltd. (``Inchon'') (``Analysis Memo: 
Inchon'') (December 17, 1998) for the Department's discussion and 
treatment regarding product concordance.

Postponement of Final Determination and Extension of Provisional 
Measures

    Pursuant to section 735(a)(2) of the Act, on December 15, 1998, 
POSCO informed the Department that, in the event of an affirmative 
preliminary determination in this investigation, it would request a 
full extension of the final determination, until not later than 135 
days after the date of publication of the preliminary determination. On 
December 16, 1998, POSCO amended its request 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) POSCO 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 date of publication in the Federal Register of the 
preliminary determination. Suspension of liquidation will be extended 
accordingly.

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 strip contains, by weight, 26 to 30 percent chromium, and 7 to 10 
percent

[[Page 139]]

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
---------------------------------------------------------------------------

    \1\ ``Arnokrome III'' is a trademark of the Arnold Engineering 
Company.
---------------------------------------------------------------------------

    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
---------------------------------------------------------------------------

    \2\ ``Gilphy 36'' is a trademark of Imphy, S.A.
---------------------------------------------------------------------------

    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
---------------------------------------------------------------------------

    \3\ ``Durphynox 17'' is a trademark of Imphy, S.A.
---------------------------------------------------------------------------

    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, and is supplied 
as, for example, ``GIN6''.5
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

Period of Investigation

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

Selection of Respondents

    Section 777A(c)(1) of the Act directs the Department to calculate 
individual dumping margins for each known exporter and producer of the 
subject merchandise. However, section 777A(c)(2) of the Act gives the 
Department discretion, when faced with a large number of exporters/
producers, to limit its examination to a reasonable number of such 
companies if it is not practicable to examine all companies. Where it 
is not practicable to examine all known producers/exporters of subject 
merchandise, this provision permits the Department to investigate 
either: (1) a sample of exporters, producers, or types of products that 
is statistically valid based on the information available at the time 
of selection; or (2) exporters and producers accounting for the largest 
volume of the subject merchandise that can reasonably be examined.
    After consideration of the complexities expected to arise in this 
proceeding and the resources available to the Department, we determined 
that it was not practicable in this investigation to examine all known 
producers/exporters of subject merchandise. Instead, we found that, 
given our resources, we would be able to investigate the Korean 
producers/exporters with the greatest export volume, as identified 
above. In total, these companies (POSCO, Inchon and Taihan) accounted 
for more than 85 percent of all known exports of the subject 
merchandise during the POI. For a more detailed discussion of 
respondent selection in this investigation, see Memorandum to Joseph A. 
Spetrini: Selection of Respondents, September 21, 1998.

Inflation

    Generally, when the annual inflation rate in the country under 
investigation exceeds 25 percent, the Department considers that 
inflation to be significant and uses a modified methodology. See, e.g., 
Import Administration Antidumping Manual, Chapter 8, Section 15, 
(January 1998).
    Petitioners allege that the Korean economy should be classified as 
hyperinflationary, basing their argument on an ``annualized'' monthly 
rate for three months of producer prices (see Petitioners' submissions 
of September 4, 1998 and December 2, 1998). However, in accordance with 
the Department's practice, we considered the Korean inflation rate for 
the POI, which was 17.06 percent. Although the inflation rate in Korea 
for December 1997 was 8.19 percent, the annual inflation rate during 
the POI was well below 25 percent. See International Monetary Fund's 
International Financial Statistics: Producer Prices (July 1998; March 
1998; December 1997; July 1997). Therefore, we preliminarily determine 
that it is not appropriate to use the Department's high inflation 
methodology in this case. For a further discussion of this issue, see 
Analysis Memo: POSCO.

Fair Value Comparisons

    To determine whether sales of SSSS from Korea to the United States 
were made at less than fair value, we compared the 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

[[Page 140]]

777A(d)(1)(A)(i) of the 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 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 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

POSCO

    POSCO reported that it made sales of subject merchandise to 
affiliated resellers during the POI, but claimed that less than five 
percent of these resales were sales of subject merchandise. In its 
response to the Department's October 23, 1998 supplemental 
questionnaire, POSCO provided detailed information regarding the sales 
of subject merchandise made to its affiliates. The Department 
preliminarily finds that the sales of subject merchandise made to 
affiliated resellers constitutes less than five percent of POSCO's 
total sales in the home market (subject to verification), and thus, the 
Department considered POSCO's sales to the affiliated service centers.
    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 calculated 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., Notice of Preliminary 
Determination of Sales at Less Than Fair Value and Postponement of 
Final Determination: Emulsion Styrene-Butadiene Rubber from Brazil, 63 
Fed. Reg. 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 Fed, Reg, 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.
    For its home market and U.S. sales, POSCO reported the date of 
invoice as the date of sale, because POSCO stated that the invoice date 
represented the date when the essential terms of sales, i.e., price and 
quantity, are definitively set, and that up to the invoice date, these 
terms were subject to change. Petitioners have alleged that the sales 
documentation provided by POSCO does not appear to support POSCO's 
claim that price and quantity may change at any time between the order 
acceptance date (confirmation date) and the final invoice date. Given 
the relevance of petitioners' comments and the nature of marketing 
these types of made-to-order products, petitioners claims have merit. 
Consequently, the Department requested further information concerning 
date of sale. On November 23, 1998, in its supplemental questionnaire 
response, POSCO provided additional information concerning the nature 
and frequency of price and quantity changes occurring between the date 
of order and date of invoice. This information appears to support 
POSCO's contention that terms of the contract are not finalized until 
the invoice date. We will conduct an in-depth examination of 
information concerning the designation of date of sale (i.e., order 
date versus invoice date) at verification. However, based on POSCO's 
record submissions to date, we preliminarily determine that the date of 
invoice is the appropriate indicator of the actual date of sale because 
price and quantity are subject to negotiation until the date of 
invoice. For a further discussion of this issue, see Analysis Memo: 
POSCO.
    In calculating EP, the Department determined that those U.S. sales 
for which POSCO was not paid should be excluded from the U.S. database. 
We preliminarily determine that the U.S. sales for which POSCO did not 
receive payment because the customer went bankrupt are atypical and not 
part of POSCO's normal business practice. Therefore, for this 
preliminary determination, the Department has excluded these sales from 
our margin analysis. Nevertheless, record evidence indicates that 
POSCO's U.S. sales affiliate, Pohang Steel America Corp. (``POSAM''), 
recognized the cost of these sales. Petitioners suggest that the 
Department treat the cost of these sales as a direct expense. However, 
direct expenses are typically expenses that are incurred as a direct 
and unavoidable consequence of the sale (i.e., in the absence of the 
sale these expenses would not be incurred), whereas indirect expenses 
are fixed expenses that are incurred whether or not a sale is made. In 
this case, the cost of these sales would have occurred whether or not 
other sales had been made, and therefore, the Department preliminarily 
determines that the costs associated with these sales are more 
appropriately treated as indirect selling expenses incurred on U.S. 
sales.

Inchon

    For both home market and U.S. transactions, Inchon reported the 
invoice date as the date of sale, i.e., the date when price and 
quantity are finalized, because Inchon states that the price and 
quantity may change until the time of shipment and invoicing. However, 
petitioners have requested that the Department examine whether the 
material terms of sale (i.e., price and quantity) change and, if the 
material terms do change, how frequently are the material terms of sale 
changed. Also, petitioners have requested that the Department determine 
whether Inchon charges a fee for changes to the terms of sale and how 
much time, on average, exists between the purchase order date and the 
shipment/invoice date. Given the relevance of petitioners' comments and 
the nature of marketing these types of made-to-order products, 
petitioners claims have merit. Consequently, on October 26, 1998, the 
Department issued a supplemental questionnaire, requesting that Inchon 
answer several questions regarding changes, if any, in Inchon's 
material terms of sale between

[[Page 141]]

the order confirmation date and the invoice date. In Inchon's November 
19, 1998 supplemental questionnaire, Inchon stated that for 
approximately 17 percent of U.S. sales, based on sales volume, there 
was a change in the material terms of sale (i.e., price or quantity) 
between the order date and the invoice date. Based on this information, 
the Department has determined that the invoice date is the most 
appropriate date to use for the date of sale for U.S. sales, because 
the frequency of changes in price and quantity between order 
confirmation and invoice date indicate that the essential terms of sale 
are not fixed until the invoice date.
    Inchon claimed that it could not report the frequency of changes 
made in the material terms of sale for home market sales. In Inchon's 
November 19, 1998 supplemental questionnaire response, Inchon stated 
that most of its home market sales are from inventory. Inchon stated 
that when a sale is made from inventory, the terms of sale rarely 
change because the order is filled within one or two days. However, if 
Inchon receives an order that it does not have in inventory, Inchon 
will usually produce the requested product. Inchon claims that if a 
product is produced to fill the order, there can be significant changes 
in the terms of sale between the order date and the invoice date. 
Because, as Inchon states, the majority of its sales in the home market 
are made from inventory, and thus the terms are set, and because Inchon 
has not been able to substantiate its claim of frequent changes in the 
terms of its non-inventory sales, the Department preliminarily 
determines that the order date is the most appropriate date to use for 
the date of sale for home market sales. For a further discussion of 
this issue, see Analysis Memo: Inchon.

Product Comparisons

    In accordance with section 771(16) of the Act, we considered all 
products produced by the respondents 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 August 3, 1998 questionnaire.

Export Price and Constructed Export Price

    The Department considers several factors in making its 
determination concerning whether sales made prior to importation 
through a U.S. affiliate to an unaffiliated customer in the United 
States are EP sales. These factors are: (1) whether the merchandise was 
shipped directly from the manufacturer to the unaffiliated U.S. 
customer without being introduced into the physical inventory of the 
affiliated selling agent; (2) whether the sales follow customary 
commercial channels between the parties involved; and (3) whether the 
functions of the U.S. sales affiliates are limited to those of a 
``processor of sales-related documentation'' and a ``communication 
link'' with the unrelated U.S. buyer. Where the factors indicate that 
the activities of the U.S. sales affiliate are ancillary to the sale, 
we treat the transactions as EP sales. Where the U.S. sales affiliate 
has a significant role in the sales process, we treat the transactions 
as CEP sales. See Certain Cut-to-Length Carbon Steel Plate from 
Germany: Final Results of Antidumping Administrative Review, 62 FR 
18389, 18391 (April 15, 1997); Mitsubishi Heavy Industries v. United 
States, Slip Op. 98-82 at 6 (CIT, June 23, 1998).

POSCO

    POSCO reported three channels of distribution for U.S. sales. In 
channel 1, POSCO Steel Sales and Service Co., Ltd. (``POSTEEL''), which 
is POSCO's affiliated trading company, sold directly to a U.S. 
customer. In channel 3, POSTEEL sold directly to unaffiliated Korean 
trading companies for resale of subject merchandise to the United 
States. We classified sales made through these two channels as EP 
sales, since the U.S. affiliate, POSAM, had no involvement in the 
selling process. In channel 2, however, POSAM was involved in all the 
sales made to unaffiliated U.S. customers, and reported that although 
the majority of sales were EP sales, there were some sales classified 
as CEP.
    For U.S. sales channels one and three, we based our calculation on 
EP, in accordance with section 772 (a) of the Act, because the subject 
merchandise was sold by the producer or exporter directly to the first 
unaffiliated purchaser in the United States prior to importation, and 
CEP methodology was not otherwise indicated. For U.S. sales channel 
two, for those sales for which POSCO categorized as EP sales, we based 
our calculations on EP, in accordance with section 772(a) of the Act. 
For sales for which POSCO categorized as CEP, we based our calculations 
on CEP, in accordance with 772(b) of the Act.
    The record indicates that those of POSCO's channel 2 sales reported 
as EP sales were shipped directly from the manufacturer to the 
unaffiliated U.S. customer and that the reported U.S. sales, with the 
exception of ``bankrupt'' sales not included in our analysis (see 
``Transactions Investigated'', above), were made in the customary 
commercial channel, thereby satisfying the first two criteria mentioned 
above. In determining whether the U.S. affiliate acted solely as a 
``processor of sales-related documentation'' and a ``communication 
link'' with the unaffiliated U.S. customer, we reviewed the selling 
functions performed by POSAM and the sales process for these sales.
    POSAM performed a variety of selling functions on behalf of POSCO 
in connection with POSCO's SSSS sales in the United States. These 
functions include forwarding inquiries and confirmations to and from 
the customer and POSTEEL, invoicing customers, arranging for freight to 
the customer from the U.S. port, extending credit and collecting 
payment, and serving as importer of record. POSCO has stated that 
POSTEEL determined price and terms of sale and performed ``all other'' 
sales related activities, including meeting with U.S. customers on 
standard marketing trips, warranty-related functions, market research 
and technical assistance.
    In addition, according to POSCO's response, POSTEEL ``communicates 
a variety of general price information to and from POSAM,'' including 
``quarterly FOB price guidelines'' (see November 23, 1998 response at 
11). Record evidence indicates that although POSTEEL presents POSAM 
with quarterly guidelines, each sale must be approved by POSTEEL. In 
some instances, POSTEEL has rejected terms of particular inquiries 
submitted by POSAM.
    We will conduct an in-depth examination of the information 
concerning classification of POSCO's U.S. sales through POSAM (i.e., 
CEP versus EP) at verification. However, based on POSCO's record 
statements, we preliminarily determine that POSCO's U.S. sales of SSSS 
through POSAM reported as EP sales qualify as EP sales. For further 
discussion of this issue, see Analysis Memo: POSCO.
    As discussed in ``Transactions Investigated'', above, one of 
POSCO's customers declared bankruptcy during the POI. During this time, 
shipments to

[[Page 142]]

this customer were canceled en route to the United States, and POSCO 
had to place the merchandise into an unaffiliated warehouse. POSCO then 
resold the merchandise with POSTEEL as the facilitator. As these sales 
to the first unaffiliated purchaser took place after importation into 
the United States, they have been correctly classified by POSCO as CEP 
sales.
    We based EP on the packed prices to unaffiliated purchasers in the 
United States. We made deductions for foreign inland freight, brokerage 
and handling, ocean freight, marine insurance, U.S. inland freight 
(where applicable), U.S. brokerage and wharfage charges (where 
applicable) and U.S. Customs duties in accordance with section 
772(c)(2)(A) of the Act. Additionally, we added to the U.S. price an 
amount for duty drawback pursuant to section 772(c)(1)(B) of the Act. 
For a further discussion of this issue, see Analysis Memo: POSCO.
    We calculated CEP, in accordance with subsections 772(b), (c), and 
(d) of the Act, for those sales to the first unaffiliated purchaser 
that took place after importation into the United States. We based CEP 
on the packed, delivered, duty paid or delivered prices to unaffiliated 
purchasers in the United States. We made deductions for movement 
expenses in accordance with section 772(c)(2)(A) of the Act; these 
included, where appropriate, foreign inland freight, foreign wharfage 
and loading, international freight, marine insurance, domestic inland 
freight, U.S. brokerage and wharfage, and U.S. warehousing expenses. In 
accordance with section 772(d)(1) of the Act, we deducted those selling 
expenses associated with economic activities occurring in the United 
States, including direct selling expenses (credit costs and bank 
charges) and indirect selling expenses (e.g., inventory carrying 
costs). For CEP sales, we also made an adjustment for profit in 
accordance with section 772(d)(3) of the Act. Additionally, we added to 
the U.S. price an amount for duty drawback pursuant to section 
772(c)(1)(B) of the Act. For a further discussion of this issue, see 
Analysis Memo: POSCO.

Inchon

    For U.S. sales channels two and three, which are defined in the 
Level of Trade section below, we based our calculation on EP, in 
accordance with section 772 (a) of the Act, because the subject 
merchandise was sold by the producer or exporter directly to the first 
unaffiliated purchaser in the United States prior to importation, and 
CEP methodology was not otherwise indicated. For U.S. sales channel 
one, which is defined in the Level of Trade section below, we based our 
calculation on CEP, in accordance with section 772 (b) of the Act, 
because the merchandise was sold by or for the account of the producer 
or exporter of such merchandise or by a seller affiliated with the 
producer or exporter, to a purchaser not affiliated with the producer 
or exporter, and based on our analysis of the facts as discussed in 
this section.
    We have preliminarily determined that the affiliated purchaser in 
the United States, Hyundai U.S.A., did more than merely act as a 
``processor of sales-related documentation and a communication link 
with the unrelated U.S. buyer.'' Inchon claimed that all of its U.S. 
sales of subject merchandise are EP sales, including those sales made 
prior to importation through Hyundai U.S.A., Hyundai Corporation's 
wholly-owned U.S. subsidiary (i.e., channel 1 sales). Inchon claims 
that Hyundai U.S.A., did not act in a significant role in the sales 
negotiation process. We preliminarily disagree with this 
characterization.
    To ensure proper application of statutory definitions, where a U.S. 
affiliate is involved in making a sale, we normally consider the sale 
to be CEP unless the record demonstrates that the U.S. affiliate's 
involvement in making the sale is incidental or ancillary. The record 
demonstrates that Hyundai U.S.A.'s role exceeds that of an incidental 
or ancillary role.
    Hyundai U.S.A. participates in several significant pre- and post-
sale selling activities. At the initial stages, Inchon and Hyundai 
U.S.A. jointly call on U.S. customers to discuss sales and prices. 
Hyundai U.S.A. quotes prices to prospective customers and if the price 
is acceptable, the customer submits a purchase order to Hyundai U.S.A. 
When the merchandise arrives in the United States, Hyundai U.S.A. acts 
as the importer of record and arranges for U.S. inland freight. For a 
significant number of channel 1 transactions, Hyundai U.S.A. also 
arranged and paid for post-sale warehousing and freight to the 
warehouse. Hyundai U.S.A. invoices and collects payment from the U.S. 
customer, including any late payments and/or outstanding accounts 
receivable. Additionally, there is one other selling function which 
supports our determination that these sales are CEP. However, because 
this information is business proprietary, please see our discussion in 
the analysis memorandum. See Analysis Memo: Inchon, page 4. Based on 
the record as stated above, we have determined that these sales are CEP 
transactions. For a further discussion of this issue, see Analysis 
Memo: Inchon.
    We based EP on the packed, delivered, tax and duty unpaid price to 
unaffiliated purchasers in the United States. We made deductions for 
movement expenses in accordance with section 772(c)(2)(A) of the Act; 
these included, where appropriate, foreign inland freight, foreign 
wharfage and loading, international freight, marine insurance, domestic 
inland freight, and U.S. brokerage and wharfage. Additionally, we added 
to the U.S. price an amount for duty drawback pursuant to section 
772(c)(1)(B) of the Act. For a further discussion of this issue, see 
Analysis Memo: Inchon.
    We calculated CEP, in accordance with subsections 772(b), (c), and 
(d) of the Act, for those sales to the first unaffiliated purchaser 
that took place after importation into the United States. We based CEP 
on the packed, delivered, duty paid or delivered prices to unaffiliated 
purchasers in the United States. We made deductions for movement 
expenses in accordance with section 772(c)(2)(A) of the Act; these 
included, where appropriate, foreign inland freight, foreign wharfage 
and loading, international freight, marine insurance, domestic inland 
freight, U.S. brokerage and wharfage, and U.S. warehousing expenses. In 
accordance with section 772(d)(1) of the Act, we deducted those selling 
expenses associated with economic activities occurring in the United 
States, including direct selling expenses (credit costs and bank 
charges), and indirect selling expenses. For CEP sales, we also made an 
adjustment for profit in accordance with section 772(d)(3) of the Act. 
Additionally, we added to the U.S. price an amount for duty drawback 
pursuant to section 772(c)(1)(B) of the Act. For a further discussion 
of this issue, see Analysis Memo: Inchon.

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 CV, that of the sales from which we derive selling, 
general and administrative (``SG&A'') expenses and profit. For EP, the 
LOT is also the level of the starting price sale, which is usually from 
the exporter to the importer. For CEP, it is the level of the 
constructed sale from the exporter to the importer.

[[Page 143]]

    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 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 differences in the levels between NV and 
CEP sales 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 Carbon Steel 
Plate from South Africa, 62 FR 61731 (November 19, 1997).
    In the present review, none of the respondents requested a LOT 
adjustment. To ensure that no such adjustment was necessary, in 
accordance with the principles discussed above, we examined information 
regarding the distribution systems in both the United States and Korean 
markets, including the selling functions, classes of customer, and 
selling expenses for each respondent.

POSCO

    POSCO did not claim a LOT adjustment. POSCO identified two channels 
of distribution in the home market: (1) sales made by POSCO directly to 
its customers; and (2) sales made by POSCO through its selling arm, 
POSTEEL, to customers. Both POSCO and POSTEEL made sales to domestic 
trading companies, service centers, and unaffiliated and affiliated 
end-users. For both channels, POSCO and POSTEEL report that they 
perform similar selling functions. Either POSCO or POSTEEL contacted 
customers, managed inventory, arranged for shipment and freight, and 
invoiced the customer. In addition, POSCO claims that either POSCO or 
POSTEEL offered, as needed, technical services and warranty processing. 
Because channels of distribution do not qualify as separate LOTs when 
the selling functions performed for each customer class are 
sufficiently similar, we preliminarily determine that there exists one 
LOT for POSCO's home market sales.
    POSCO reports three channels of distribution in the U.S. market: 
(1) sales made by POSTEEL directly to a U.S. end-user; (2) sales to 
U.S. end-users made by POSTEEL through its wholly-owned U.S. 
subsidiary, POSAM; and (3) sales made by POSTEEL to unaffiliated Korean 
trading companies for shipment to the United States. POSCO claimed two 
LOTs in the U.S. market, but requested no LOT adjustment for the U.S. 
LOT purported to be different from the home market LOT. The Department 
examined the claimed selling functions performed by POSCO and its 
subsidiaries, POSTEEL and POSAM (although we did not consider POSAM's 
selling functions in determining CEP LOT), for all U.S. sales. These 
selling functions included freight and delivery arrangements, invoicing 
customers, and extending credit.
    In order to determine whether NV was established at a different LOT 
than CEP sales, we examined stages in the marketing process and selling 
functions along the chains of distribution between POSCO and its home 
market and U.S. customers. We compared the selling functions performed 
for home market sales with those performed with respect to the CEP 
transactions, after deductions for economic activities occurring in the 
United States, pursuant to section 772(d) of the Act, to determine if 
the home market level of trade constituted a more advanced stage of 
distribution than the CEP level of trade.
    Based on our analysis of the chains of distribution and selling 
functions performed for sales in the home market and CEP and EP sales 
in the U.S. market, we preliminarily find that CEP and EP sales to all 
three channels of distribution are made at the same stage in the 
marketing process and involve identical selling functions. Therefore, 
we preliminarily determine that POSCO and its subsidiaries POSTEEL and 
POSAM (for EP sales) provided a sufficiently similar degree of services 
on sales to all three channels of distribution, and that the sales made 
to the United States constitute one LOT.
    Based on a comparison of the selling activities performed in the 
U.S. market to the selling activities in the home market, we 
preliminarily determine that there is not a significant difference in 
the selling functions performed in both markets, and thus, a LOT 
adjustment is not appropriate. For a further discussion, see Analysis 
Memo: POSCO.

Inchon

    In the home market, Inchon reported two sales channels: (1) to 
unaffiliated distributors; and (2) to affiliated and unaffiliated end-
users. We examined the selling functions performed for both channels. 
These selling functions included inventory maintenance, freight and 
delivery arrangements, and credit services. Because there are no 
differences between the selling functions on sales made to either 
unaffiliated distributors or affiliated and unaffiliated end-users in 
the home market, sales to both of these customer categories represent a 
similar stage of marketing. Therefore, we preliminarily conclude that 
sales to unaffiliated distributors and affiliated and unaffiliated end-
users constitute one LOT in the home market.
    For its EP and CEP sales in the U.S. market, Inchon reported three 
sales channels: (1) Inchon sales through Hyundai Corporation, Inchon's 
affiliated trading company, to Hyundai U.S.A., a wholly owned 
subsidiary of Hyundai Corporation located in the United States and an 
affiliate of Inchon, and finally, to an unaffiliated customer; (2) 
Inchon sales through Hyundai Corporation, to an unaffiliated customer; 
and (3) Inchon sales to an unaffiliated trading customer. Inchon's U.S. 
customers for all three sales channels are to trading companies and 
distributors. We examined the selling functions performed for each of 
the three U.S. sales channels. These selling functions included freight 
and delivery arrangements, credit services, and post-sale warehousing. 
With the exception of post-sale warehousing for one sale in channel 
one, selling functions performed in the three sales channels were 
identical. Thus, sales to these customer categories represent a similar 
stage of marketing. Therefore, we preliminarily determine that Inchon 
provided a sufficiently similar degree of services on sales to all 
three channels of distribution, and that the sales made to the United 
States constitute one LOT.
    Further, because we preliminarily conclude that the U.S. LOT and 
the home market LOT included similar selling functions, we conclude 
that these sales are made at the same LOT. Therefore, a LOT adjustment 
for Inchon is not appropriate. For a further discussion, see Analysis 
Memo: Inchon.

Normal Value

    After testing home market viability and whether home market sales 
were made at below-cost prices, we calculated NV as noted in the 
``Price-to-Price Comparisons'' and ``Price-to-CV Comparison'' sections 
of this notice.

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

[[Page 144]]

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)(B) of the Act. Since both POSCO's and 
Inchon'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 for the subject merchandise, we determined that the home markets 
for both companies were viable. Therefore, we have based NV on home 
market sales in the usual commercial quantities and in the ordinary 
course of trade.

Cost of Production (``COP'') Analysis

    Based on the cost allegations submitted by the petitioners in their 
June 10, 1998 petition, the Department found reasonable grounds to 
believe or suspect that POSCO and Inchon had made sales in the home 
market at prices below the cost of producing the merchandise, in 
accordance with section 773(b)(1) of the Act. As a result the 
Department initiated an investigation to determine whether POSCO and 
Inchon made home market sales during the POI at prices below their 
respective COPs within the meaning of section 773(b) of the Act. See 
Initiation.
    We conducted the COP analysis described below.
A. Calculation of COP
    In accordance with section 773(b)(3) of the Act, for each 
respondent we calculated COP based on the sum of the cost of materials 
and fabrication for the foreign like product, plus amounts for home 
market selling, general and administrative expenses (``SG&A''), 
interest expenses, and packing costs, respectively. We used the 
information from POSCO's and Inchon's section D supplemental 
questionnaire responses to calculate each company's COP.
    In a letter dated August 12, 1998, POSCO asked that the Department 
examine fiscal year 1997 (January-December 1997) cost data rather than 
cost data for the full POI, April 1, 1997 to March 31, 1998. On 
September 4, 1998, petitioners responded to respondent's request, 
noting that the cost data submitted would not coincide with the sales 
data, particularly in light of the won's devaluation during the POI. On 
September 28, 1998, the Department requested that POSCO report its 
costs using costs incurred during the POI.
B. Test of Home Market Prices
    We compared the weighted-average COP for POSCO and Inchon to each 
company's respective home market sales of the foreign like product as 
required under section 773(b) of the Act. In determining whether to 
disregard home market sales made at prices less than the COP, we 
examined whether (1) within an extended period of time, such sales were 
made in substantial quantities, and (2) such sales were made at prices 
which permitted the recovery of all costs within a reasonable period of 
time. On a product-specific basis, we compared POSCO's and Inchon's COP 
to their respective home market prices, less any applicable movement 
charges and direct and indirect selling expenses.
C. Results of the COP Test
    Pursuant to section 773(b)(2)(C) of the Act, where less than 20 
percent of 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 such sales to have been made in ``substantial 
quantities'' within an extended period of time in accordance with 
sections 773(b)(2)(B) and 773(b)(2)(C)(i) of the Act. In such cases, 
because we compared prices to weighted-average COPs for the POI, 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. Where all sales of a specific product 
were at prices below the COP, we disregarded all sales of that product 
in determining NV.
D. Calculation of CV
    In accordance with section 773(e)(1) of the Act, we calculated each 
respondent's CV based on the sum of the respondent's cost of materials, 
fabrication, SG&A, interest expenses and profit. In accordance with 
section 773(e)(2)(A) of the Act, we based SG&A and profit on the 
amounts incurred and realized by the respondents in connection with the 
production and sale of the foreign like product in the ordinary course 
of trade, for consumption in South Korea.

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)(ii) of the Act.

POSCO

    We calculated NV for EP sales based on prices to unaffiliated home 
market customers. We made a deduction for inland freight. We made 
circumstance-of-sale (``COS'') adjustments based on differences in 
direct selling expenses (i.e., credit, warranty expense and interest 
revenue) incurred on U.S. and home market sales, where appropriate. In 
accordance with section 773(a)(6), we deducted home market packing 
costs and added U.S. packing costs.
    We calculated NV for CEP sales based on prices to unaffiliated home 
market customers, as sales to affiliated customers failed the arm's 
length test. We made a deduction for inland freight. We made COS 
adjustments based on differences in direct selling expenses (i.e., 
credit, warranty expense and interest revenue) incurred on U.S. and 
home market sales, where appropriate. In accordance with section 
773(a)(6), we deducted home market packing costs and added U.S. packing 
costs.

Inchon

    We calculated NV for EP sales based on prices to unaffiliated home 
market customers. We made a deduction for inland freight. We made 
billing adjustments, where appropriate. We made COS adjustments based 
on differences in direct selling expenses (i.e., credit) incurred on 
U.S. and home market sales, where appropriate. In accordance with 
section 773(a)(6), we deducted home market packing costs and added U.S. 
packing costs.
    We calculated NV for CEP sales based on prices to unaffiliated home 
market customers. We made a deduction for inland freight. We made 
billing adjustments, where appropriate. We made COS adjustments based 
on differences in direct selling expenses (i.e., credit) incurred on 
U.S. and home market sales, where appropriate. In accordance with 
section 773(a)(6), we deducted home market packing costs and added U.S. 
packing costs.

Price-to-CV Comparisons

    In accordance with section 773(a)(4) of the Act, we based NV on CV 
if we were unable to find a home market match of the foreign like 
product. We made adjustments to CV in accordance with section 773(a)(8) 
of the Act. For comparisons to EP, we made COS adjustments by deducting 
home market direct selling expenses and adding U.S.

[[Page 145]]

direct selling expenses. Where we compared CV to CEP, we deducted the 
weighted-average home market direct selling expenses from CV.

Currency Conversion

    Our preliminary analysis of Federal Reserve dollar-won exchange 
rate data shows that the won declined rapidly at the end of 1997, 
losing over 40 percent of its value between the beginning of November 
and the end of December. The decline was, in both speed and magnitude, 
many times more severe than any change in the dollar-won exchange rate 
during the previous eight years. Had the won rebounded quickly enough 
to recover all or almost all of the initial loss, the Department might 
have been inclined to view the won's decline at the end of 1997 as 
nothing more than a sudden, but only momentary drop, despite the 
magnitude of that drop. As it was, however, there was no significant 
rebound.
    We have preliminarily determined that the decline in the won at the 
end of 1997 was so precipitous and large that the dollar-won exchange 
rate cannot reasonably be viewed as having simply fluctuated during 
this time, i.e., as having experienced only a momentary drop in value. 
Therefore, in making this preliminary determination, the Department 
used daily rates exclusively for currency conversion purposes for home 
market sales matched to U.S. sales occurring between November 1, 1997 
and December 31, 1997.
    For sales occurring after December 31, but before March 1, 1998, 
the Department relied on the standard exchange rate model, but used a 
modified benchmark. In calculating a benchmark rate, the Department's 
standard practice is to incorporate rates extending back 40 days from 
the date of sale. However, using such a benchmark rate would 
incorporate rates during November and December of 1997, when the 
dollar-won exchange rate dropped, and hence would result in apparent 
significant fluctuations in the dollar-won exchange rates used in the 
Department's margin calculation.
    In order to ensure that rates used are more indicative of the 
exchange rate climate during January and February 1998, the benchmark 
was modified to include rates extending back only to January 1, 1998. 
Therefore, we have applied an up-to-date (post-precipitous drop) 
benchmark, while at the same time we have avoided making sales 
comparisons using exchange rates with excessive day-to-day 
fluctuations. By March 1, 1998, the dollar-won exchange rate had 
stabilized sufficiently so that the Department's standard model could 
be employed. For sales occurring after March 1, the standard model and 
benchmark rate were used.
    Petitioners have suggested that the Department segregate the 
current POI into multiple periods to account for the effect of the 
devaluation of the Korean won during the last portion of the POI. See 
petitioners' submission of December 2, 1998. Petitioners state that the 
Department has examined this question in a recent preliminary 
determination involving the same POI and Korea, namely, Emulsion 
Styrene-Butadiene Rubber from the Republic of Korea. See Notice of 
Preliminary Determination of Sales at Less Than Fair Value and 
Postponement of Final Determination: Emulsion Styrene-Butadiene Rubber 
from the Republic of Korea, 63 FR 59514 (November 4, 1998). However, 
the Department used the same currency conversion methodology described 
above in that case, and for the preliminary determination, did not 
average margins based on multiple periods within the POI. In the one 
case cited by petitioners in support of averaging multiple periods, PVA 
from Taiwan, the Department used multiple periods when there was a 
significant change in pricing. However, in that case, the decline in 
pricing was due to a company-specific change in selling practices made 
at a particular point in the POI (i.e., the use of long term contracts 
versus purchase orders), rather than a devaluation of the local 
currency. See Notice of Final Determination of Sales at Less Than Fair 
Value: Polyvinyl Alcohol from Taiwan, 61 FR 14064 (March 29, 1996). The 
Department preliminarily determines that the modification of currency 
conversion reasonably accounts for the devaluation of the won, and that 
the use of multiple periods for averaging purposes is unwarranted.
    The Department makes this determination without the benefit of 
extensive case precedent dealing with this area of our currency 
conversion policy. The Department therefore welcomes comments from 
interested parties on all aspects of our analysis and the time period-
specific exchange rates used. For the purposes of the final 
determination, the Department will continue to analyze the 
implications, if any, of the decline in the won during 1997 for price 
averaging and whether multiple averages are warranted. The Department 
is examining this issue in Mushrooms from Indonesia and Emulsion 
Styrene-Butadiene Rubber from the Republic of Korea. See Notice of 
Preliminary Determination of Sales at Less Than Fair Value and 
Postponement of Final Determination: Certain Preserved Mushrooms from 
Indonesia, 63 FR 41783 (August 5, 1998); also, see Notice of 
Preliminary Determination of Sales at Less Than Fair Value and 
Postponement of Final Determination: Emulsion Styrene-Butadiene Rubber 
from the Republic of Korea, 63 FR 59514 (November 4, 1998).

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 imports of SSSS from Korea. In accordance with 19 CFR 
351.206(c)(2)(i), since this allegation was filed at least 20 days 
prior to the Department's preliminary determination, we must issue our 
preliminary critical circumstances determination no later than the 
preliminary determination.
    Section 733(e)(1) of the Act provides that the Department will 
determine that there is a reasonable basis to believe or suspect that 
critical circumstances exist if: (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 its 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.
    To determine whether there is a history of injurious dumping of the 
merchandise under investigation, in accordance with Section 
733(e)(1)(A)(i), the Department considers evidence of an existing 
antidumping order on SSSS from the country in question in the United 
States or elsewhere to be sufficient. We are not aware of any 
antidumping order in any country on SSSS from any of the countries 
subject to this investigation.
    In determining whether an importer knew or should have known that 
the exporter was selling SSSS at less than fair value and thereby 
causing material injury, the Department normally considers margins of 
15 percent for CEP sales and 25 percent for EP sales or more sufficient 
to impute knowledge of dumping and of resultant material injury. See 
Notice of Final Determination of Sales Less than Fair Value: Certain 
Cut-to-Length Carbon Steel Plate from the People's Republic of China, 
63 FR 61964, 61967 (November 20, 1997); see also Notice of Final

[[Page 146]]

Determination of Sales Less Than Fair Value: Manganese Sulphate from 
People's of Republic of China 60 FR 52155, 52161 (October 5, 1995).
    In this investigation, respondents POSCO and Inchon, which the 
Department has preliminarily determined have both EP and CEP sales, do 
not have margins over 15 percent. Based on these facts, we determine 
that the first criterion for ascertaining whether critical 
circumstances exist is not satisfied. Therefore, we preliminarily 
determine that there is no reasonable basis to believe or suspect that 
critical circumstances exist with respect to imports of SSSS from 
respondents POSCO or Inchon. We have not analyzed the respondent's 
shipment data to examine whether imports of SSSS have been massive over 
a relatively short period. See e.g., Notice of Preliminary 
Determination of Sales at Less Than Fair Value and Postponement of 
Final Determination: Collated Roofing Nails from Korea, 63 FR 25895, 
25898 (May 12, 1997).
    However, because respondent Taihan has not responded to the 
Department's questionnaires, and has been assigned a margin based on 
facts otherwise available (see ``Facts Available'' section, below), its 
margin exceeds 25 percent, thus meeting the first criterion. Also, as 
facts available, we consider Taihan to have had massive imports over a 
relatively short period. Therefore, having met both criteria, critical 
circumstances exist for imports of subject merchandise from Taihan.
    Regarding all other exporters, an ``All Others'' rate has been 
determined (see ``The All Others Rate'', below); because this rate does 
not exceed 15 percent, we determine that critical circumstances do not 
exist for companies covered by the ``All Others'' rate. We will make a 
final determination concerning critical circumstances when we make our 
final determination in this investigation, if that final determination 
is affirmative.

Verification

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

Facts Available

    Section 776(a)(2) of the Act provides that if an interested party 
or any other person (A) withholds information that has been requested 
by the administrating authority; (B) fails to provide such information 
by the deadlines for the submission of information or in the form and 
manner requested, subject to subsections (c)(1) and (e) of section 782 
of the Act; (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) of the 
Act, the administrating authority shall, subject to section 782(d) of 
the Act, use facts otherwise available in reaching the applicable 
determination. As discussed above, Taihan failed to respond to the 
Department's questionnaire. Accordingly, we have preliminarily 
determined, under section 776(a)(2)(A), that we must base our 
determination for that company on facts available.
    Section 776(b) of the Act further provides that adverse inferences 
may be used for a party that has failed to cooperate by not acting to 
the best of its ability to comply with a request for information (see 
also the Statement of Administrative Action (``SAA''), accompanying the 
URAA, H.R. Rp. No. 316, 103rd Cong., 2d Sess. 870). Given the company's 
refusal to comply with the Department's request for information, Taihan 
has failed to cooperate to the best of its ability in this 
investigation. Therefore, the Department has determined that an adverse 
inference is warranted with respect to Taihan.
    In this proceeding, we used the information from the petition, as 
adjusted by the Department for the purposes of initiation, to form the 
basis for a dumping margin for this respondent. Thus, consistent with 
the Department's practice (see Notice of Preliminary Determination of 
Sales at Less Than Fair Value: Stainless Steel Wire Rod from Germany, 
63 FR 10847 (March 5, 1998) (``Stainless Steel Wire Rod from 
Germany'')), the Department is assigning to Taihan the highest margin 
alleged in the petition, as adjusted, for Korean producers, which is 
58.79 percent (see June 30, 1998, ``Import Administration Antidumping 
Investigation Initiation Checklist (``Initiation Checklist'') and the 
Notice of Initiation for a discussion of the margin calculations in the 
petition).
    Section 776(c) of the Act provides that when the Department relies 
on ``secondary information'' (e.g., the petition) as the facts 
available, the Department shall, to the extent practicable, corroborate 
that information with independent sources reasonably at the 
Department's disposal. The SAA accompanying the URAA clarifies that the 
petition is ``secondary information.'' See SAA at 870. The SAA also 
clarifies that ``corroborate'' means to determine whether the 
information used has probative value. Id.
    We reviewed the accuracy and adequacy 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, foreign market research reports, and data from U.S. 
producers). See Initiation Checklist. Specifically, in the petition, 
the petitioners based both EP and NV on foreign market research, 
affidavits concerning prices and freight costs, official U.S. import 
statistics, U.S. government sources and International Financial 
Statistics.
    As certain information included in the petition's margin 
calculation is from public sources (e.g., international freight and 
insurance, U.S. harbor maintenance and U.S. merchandise processing 
fees, SG&A, and profit), we find for the purpose of the preliminary 
determination, that the information has probative value and is 
therefore corroborated. In addition, with respect to certain data 
included in the margin calculations included in the petition (e.g., 
gross U.S. and home market unit prices), the Department was provided 
information by other respondents that corroborates the remaining 
portions of the margin calculation in the petition. We have examined 
the reliability of this information. See Memorandum to the File, dated 
June 20, 1998. Finally, we note that the Department has, in other 
cases, for facts available purposes, used margins developed in a 
petition that are based in part on foreign market research. However, 
with respect to certain data included in the margin calculations in the 
petition (e.g., gross U.S. and home market unit prices), the Department 
was provided no 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. The implementing regulation to 
section 776 of the Act, at 19 CFR 351.308(c), states ``[t]he fact that 
corroboration may not be practicable in a given circumstance will not 
prevent the Secretary from applying an adverse inference as appropriate 
and using the secondary information in question.'' Additionally, we 
note that the SAA at 870 specifically states that, where 
``corroboration may not be practicable in a given circumstance'', the 
Department may nevertheless apply an adverse inference. We note further 
that the Department has used as the facts available margins developed 
in the petition that are based in part on foreign market research in 
other cases. See e.g., Stainless Steel Wire Rod from Germany, and 
Notice of Preliminary Determination of Sales at Less Than

[[Page 147]]

Fair Value and Postponement of Final Determination: Melamine 
Institutional Dinnerware Products from Indonesia, 61 FR 43333 (August 
22, 1996).

The All Others Rate

    Section 735(c)(5) of the Act provides that, where the dumping 
margins established for all exporters and producers individually 
investigated are determined entirely under section 776 of the Act, the 
Department may use any reasonable method to establish the estimated 
all-others rate for exporters and producers not individually 
investigated. For this preliminary determination, since Inchon has a 
zero margin, the all other's rate is simply the calculated rate for 
POSCO.

Suspension of Liquidation

    In accordance with section 733(d) of the Act, we are directing the 
U.S. 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 U.S. 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 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)
------------------------------------------------------------------------
POSCO.....................................................        12.35
Inchon....................................................         0.0
Taihan....................................................        58.79
All Others................................................        12.35
------------------------------------------------------------------------

    In addition, in accordance with section 733(e)(2) of the Act, on 
the date of publication of affirmative preliminary determinations in 
these investigations, the Department will direct the U.S. Customs 
Service to suspend liquidation of all entries of SSSS from Korea for 
exporter Taihan, for which we found critical circumstances, that are 
entered, or withdrawn from warehouse, for consumption on or after 90 
days prior to the date of publication of our preliminary determination 
in the Federal Register. The Customs Service shall require a cash 
deposit or posting of a bond equal to the estimated preliminary dumping 
margins reflected in the preliminary determinations published in the 
Federal Register. This suspension of liquidation will remain in effect 
until further notice.

ITC Notification

    In accordance with section 733(f) of the Act, we are notifying 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.

Public Comment

    Case briefs or other written comments in at least ten copies must 
be submitted to the Assistant Secretary for Import Administration no 
later than 50 days after the publication of the preliminary 
determination, and rebuttal briefs, limited to issues raised in case 
briefs, no later than 55 days after the publication of the preliminary 
determination. 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 57 days after the publication of the preliminary 
determination, 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. We 
will make our final determination no later than 135 days after the date 
of publication in the Federal Register of our preliminary 
determination.
    This determination is issued and published in accordance with 
sections 733(d) and 777(i)(1) of the Act.

    Dated: December 17, 1998.
Richard W. Moreland,
Acting Assistant Secretary for Import Administration.
[FR Doc. 98-34467 Filed 12-31-98; 8:45 am]
BILLING CODE 3510-DS-P