[Federal Register Volume 64, Number 37 (Thursday, February 25, 1999)]
[Notices]
[Pages 9312-9319]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-4840]



[[Page 9312]]

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DEPARTMENT OF COMMERCE

International Trade Administration
[A-821-809]


Notice of Preliminary Determination of Sales at Less Than Fair 
Value: Hot-Rolled Flat-Rolled Carbon-Quality Steel Products From the 
Russian Federation

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

EFFECTIVE DATE: February 25, 1999.

FOR FURTHER INFORMATION CONTACT: Lyn Baranowski (Severstal), Carrie 
Blozy (MMK), Lesley Stagliano (Novolipetsk), or Rick Johnson, Import 
Administration, International Trade Administration, U.S. Department of 
Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 
20230; telephone: (202) 482-3208, (202) 482-0165, (202) 482-0190, and 
(202) 482-3818, 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's 
regulations are to the regulations at 19 CFR part 351 (1998).

Preliminary Determination

    We preliminarily determine that hot-rolled flat-rolled carbon-
quality steel products (``hot-rolled steel'') from the Russian 
Federation 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 October 15, 1998, the Department initiated antidumping duty 
investigations of imports of hot-rolled steel from Brazil, Japan, and 
the Russian Federation. See Initiation of Antidumping Duty 
Investigations: Certain Hot-Rolled Flat-Rolled Carbon-Quality Steel 
Products from Brazil, Japan, and the Russian Federation, 63 FR 56607 
(October 22, 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. The Department received 
numerous filings from respondents and other interested parties 
proposing amendments to the scope of these investigations. On January 
6, 1999 and January 27, 1999, petitioners (Bethlehem Steel Corporation, 
U.S. Steel Group, a unit of USX Corporation, Ispat Inland Steel, LTV 
Steel Company, Inc., National Steel Corporation, California Steel 
Industries, Gallatin Steel Company, Geneva Steel, Gulf States Steel 
Inc., IPSCO Steel Inc., Steel Dynamics, Weirton Steel Corporation, the 
Independent Steelworkers Union, and the United Steelworkers of America) 
filed letters agreeing to amend the scope of these investigations to 
exclude those products for which Itochu International Inc., Nippon 
Steel Corporation, and others had requested exclusion. See Memorandum 
to Joseph A. Spetrini, from Richard Weible, Edward Yang, and Roland 
MacDonald; Re: Antidumping and Countervailing Duty Investigations of 
Hot-Rolled Flat-Rolled Carbon-Quality Steel Products from Brazil, 
Japan, and the Russian Federation: Scope Amendments, dated February 12, 
1999.
    On October 19, 1998, the Department requested comments from 
petitioners and respondents regarding the criteria to be used for model 
matching purposes. On October 22 and 27, 1998, petitioners and 
respondents (Companhia Siderurgica Nacional, Companhia Siderurgica 
Paulista, Usinas Siderurgicas de Minas Gerais, Nippon Steel 
Corporation, NKK Corporation, Kawasaki Steel, Sumitomo Metal 
Industries, Ltd., and Kobe Steel Ltd.) in the Japanese and Brazilian 
investigations submitted comments on proposed model matching criteria.
    On November 16, 1998, the United States International Trade 
Commission (``the ITC'') notified the Department of its November 13, 
1998 affirmative preliminary finding of threat of material injury with 
respect to subject imports from the Russian Federation. Additionally, 
on November 25, 1998, the ITC published its preliminary determination 
that there is a reasonable indication that an industry in the United 
States is being threatened with material injury by reason of imports of 
the subject merchandise from the Russian Federation (63 FR 65221).
    On October 19, 1998, the Department issued Section A of its 
antidumping questionnaire to JSC Severstal (``Severstal''), Novolipetsk 
Iron & Steel Corporation (``Novolipetsk''), Magnitogorsk Iron & Steel 
Works (``MMK''), Amursteel, Novosibprokat Joint-Stock Co., Chusovskoy 
Iron & Steel Works, Gorkovsky Metallurgichesky Zavod, Kuznetskiy Met 
Kombinat, Lysva Metallurgical Plant, Nosta, Shchelkovsky Sheet Rolling 
Mill, Taganrog, Tulachermet, Volgograd Steel Works (Red October), 
Zapsib Met Kombinat, and Mechel. On October 30, 1998, the Department 
issued Sections C and D of its antidumping questionnaire to the above-
named companies.
    On November 16, 1998, we received the section A questionnaire 
responses from Severstal, Novolipetsk, and MMK. Petitioners filed 
comments on all three of the respondents section A questionnaire 
responses on November 30, 1998 and December 1, 1998. We issued 
supplemental questionnaires for section A to Severstal, Novolipetsk, 
and MMK on December 4, 1998. On December 11, 1998, we issued a letter 
to respondents informing them that the Department would consider these 
supplemental questions for section A to have been issued on January 4, 
1999. On December 21, 1998, we received responses to sections C and D 
of the questionnaire from Severstal, Novolipetsk, and MMK. Petitioners 
filed comments on Severstal's, Novolipetsk's, and MMK's section C and D 
questionnaire responses on December 28, 1998. We issued supplemental 
questionnaires for sections C and D to Severstal, Novolipetsk, and MMK 
on January 4, 1999, and received responses to these questionnaires on 
January 25, 1999, as well as to our supplemental section A 
questionnaires. On February 2, 1999, we issued an additional 
supplemental questionnaire to Severstal, and received the company's 
response on February 5, 1999.
    On February 9, 1999, MMK submitted additional narrative explanation 
and worksheets describing its calculation of the factors of production. 
Because of the late date of this submission, the Department has not had 
time to fully analyze the information provided by MMK. Therefore, the 
Department has not considered this submission for its preliminary 
determination. However, the Department will consider MMK's February 9, 
1999 submission for its final determination.
    In the petition filed on September 30, 1998, petitioners alleged 
that there is a reasonable basis to believe or suspect that critical 
circumstances exist with respect to imports of hot-rolled steel from 
Brazil, Japan, and the Russian Federation. On November 23, 1998, in the 
investigations of Japan and the Russian Federation, the Department 
issued its preliminary critical circumstances decisions (63 FR 65750; 
November 30, 1998). In these determinations, the Department 
preliminarily determined that there is a reasonable basis to believe or 
suspect that critical circumstances exist for

[[Page 9313]]

imports of hot-rolled steel from Japan and the Russian Federation.
    The Department notes that it has requested company specific export 
information from Severstal, Novolipetsk, and MMK. We invite interested 
parties to comment on the issue of critical circumstances, and we will 
consider these comments and the company-specific data in making our 
final determination.

Scope of Investigation

    For purposes of this investigation, the products covered are 
certain hot-rolled flat-rolled carbon-quality steel products of a 
rectangular shape, of a width of 0.5 inch or greater, neither clad, 
plated, nor coated with metal and whether or not painted, varnished, or 
coated with plastics or other non-metallic substances, in coils 
(whether or not in successively superimposed layers) regardless of 
thickness, and in straight lengths, of a thickness less than 4.75 mm 
and of a width measuring at least 10 times the thickness. Universal 
mill plate (i.e., flat-rolled products rolled on four faces or in a 
closed box pass, of a width exceeding 150 mm but not exceeding 1250 mm 
and of a thickness of not less than 4 mm, not in coils and without 
patterns in relief) of a thickness not less than 4.0 mm is not included 
within the scope of these investigations.
    Specifically included in this scope are vacuum degassed, fully 
stabilized (commonly referred to as interstitial-free (``IF'')) steels, 
high strength low alloy (``HSLA'') steels, and the substrate for motor 
lamination steels. IF steels are recognized as low carbon steels with 
micro-alloying levels of elements such as titanium and/or niobium added 
to stabilize carbon and nitrogen elements. HSLA steels are recognized 
as steels with micro-alloying levels of elements such as chromium, 
copper, niobium, titanium, vanadium, and molybdenum. The substrate for 
motor lamination steels contains micro-alloying levels of elements such 
as silicon and aluminum.
    Steel products to be included in the scope of this investigation, 
regardless of HTSUS definitions, are products in which: (1) iron 
predominates, by weight, over each of the other contained elements; (2) 
the carbon content is 2 percent or less, by weight; and (3) none of the 
elements listed below exceeds the quantity, by weight, respectively 
indicated:

1.80 percent of manganese, or
1.50 percent of silicon, or
1.00 percent of copper, or
0.50 percent of aluminum, or
1.25 percent of chromium, or
0.30 percent of cobalt, or
0.40 percent of lead, or
1.25 percent of nickel, or
0.30 percent of tungsten, or
0.012 percent of boron, or
0.10 percent of molybdenum, or
0.10 percent of niobium, or
0.41 percent of titanium, or
0.15 percent of vanadium, or
0.15 percent of zirconium.

    All products that meet the physical and chemical description 
provided above are within the scope of this investigation unless 
otherwise excluded. The following products, by way of example, are 
outside and/or specifically excluded from the scope of this 
investigation:
     Alloy hot-rolled steel products in which at least one of 
the chemical elements exceeds those listed above (including e.g., ASTM 
specifications A543, A387, A514, A517, and A506).
     SAE/AISI grades of series 2300 and higher.
     Ball bearing steels, as defined in the HTSUS.
     Tool steels, as defined in the HTSUS.
     Silico-manganese (as defined in the HTSUS) or silicon 
electrical steel with a silicon level exceeding 1.50 percent.
     ASTM specifications A710 and A736.
     USS Abrasion-resistant steels (USS AR 400, USS AR 500).
     Hot-rolled steel coil which meets the following chemical, 
physical and mechanical specifications:

----------------------------------------------------------------------------------------------------------------
      C              Mn             P             S            Si            Cr            Cu            Ni
----------------------------------------------------------------------------------------------------------------
0.10-0.14%...     0.90% Max    0.025% Max    0.005% Max    0.30-0.50%    0.50-0.70%    0.20-0.40%     0.20% Max
----------------------------------------------------------------------------------------------------------------

    Width = 44.80 inches maximum; Thickness = 0.063-0.198 inches; Yield 
Strength = 50,000 ksi minimum; Tensile Strength = 70,000-88,000 psi.
     Hot-rolled steel coil which meets the following chemical, 
physical and mechanical specifications:

--------------------------------------------------------------------------------------------------------------------------------------------------------
         C                  Mn                  P                  S                  Si                 Cr                 Cu                 Ni
--------------------------------------------------------------------------------------------------------------------------------------------------------
0.10-0.16%........  0.70-0.90%........  0.025% Max.......  0.006% Max.......  0.30-0.50%.......  0.50-0.70%.......  0.25% Max........  0.20% Max
Mo................  ..................  .................  .................  .................  .................  .................  .................
0.21% Max.........  ..................  .................  .................  .................  .................  .................  .................
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Width = 44.80 inches maximum; Thickness = 0.350 inches maximum; 
Yield Strength = 80,000 ksi minimum; Tensile Strength = 105,000 psi 
Aim.
     Hot-rolled steel coil which meets the following chemical, 
physical and mechanical specifications:

--------------------------------------------------------------------------------------------------------------------------------------------------------
         C                  Mn                  P                  S                  Si                 Cr                 Cu                 Ni
--------------------------------------------------------------------------------------------------------------------------------------------------------
0.10-0.14%........  1.30-1.80%........  0.025% Max.......  0.005% Max.......  0.30-0.50%.......  0.50-0.70%.......  0.20-0.40%.......  0.20% Max
V (wt.)...........  Cb................  .................  .................  .................  .................  .................  .................
0.10 Max..........  0.08% Max.........  .................  .................  .................  .................  .................  .................
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Width = 44.80 inches maximum; Thickness = 0.350 inches maximum; 
Yield Strength = 80,000 ksi minimum; Tensile Strength = 105,000 psi 
Aim.
     Hot-rolled steel coil which meets the following chemical, 
physical and mechanical specifications:

[[Page 9314]]



--------------------------------------------------------------------------------------------------------------------------------------------------------
         C                  Mn                  P                  S                  Si                 Cr                 Cu                 Ni
--------------------------------------------------------------------------------------------------------------------------------------------------------
0.15% Max.........  1.40% Max.........  0.025% Max.......  0.010% Max.......  0.50% Max........  1.00% Max........  0.50% Max........  0.20% Max
Nb................  Ca................  Al...............  .................  .................  .................  .................  .................
0.005% Min........  Treated...........  0.01-0.07%.......  .................  .................  .................  .................  .................
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Width = 39.37 inches; Thickness = 0.181 inches maximum; Yield 
Strength = 70,000 psi minimum for thicknesses  0.148 inches 
and 65,000 psi minimum for thicknesses >0.148 inches; Tensile Strength 
= 80,000 psi minimum.
     Hot-rolled dual phase steel, phase-hardened, primarily 
with a ferritic-martensitic microstructure, contains 0.9 percent up to 
and including 1.5 percent silicon by weight, further characterized by 
either (i) tensile strength between 540 N/mm2 and 640 N/
mm2 and an elongation percentage  26 percent for 
thicknesses of 2 mm and above, or (ii) a tensile strength between 590 
N/mm2 and 690 N/mm2 and an elongation percentage 
 25 percent for thicknesses of 2mm and above.
     Hot-rolled bearing quality steel, SAE grade 1050, in 
coils, with an inclusion rating of 1.0 maximum per ASTM E 45, Method A, 
with excellent surface quality and chemistry restrictions as follows: 
0.012 percent maximum phosphorus, 0.015 percent maximum sulfur, and 
0.20 percent maximum residuals including 0.15 percent maximum chromium.
    The merchandise subject to these investigations is classified in 
the Harmonized Tariff Schedule of the United States (``HTSUS'') at 
subheadings: 7208.10.15.00, 7208.10.30.00, 7208.10.60.00, 
7208.25.30.00, 7208.25.60.00, 7208.26.00.30, 7208.26.00.60, 
7208.27.00.30, 7208.27.00.60, 7208.36.00.30, 7208.36.00.60, 
7208.37.00.30, 7208.37.00.60, 7208.38.00.15, 7208.38.00.30, 
7208.38.00.90, 7208.39.00.15, 7208.39.00.30, 7208.39.00.90, 
7208.40.60.30, 7208.40.60.60, 7208.53.00.00, 7208.54.00.00, 
7208.90.00.00, 7210.70.30.00, 7210.90.90.00, 7211.14.00.30, 
7211.14.00.90, 7211.19.15.00, 7211.19.20.00, 7211.19.30.00, 
7211.19.45.00, 7211.19.60.00, 7211.19.75.30, 7211.19.75.60, 
7211.19.75.90, 7212.40.10.00, 7212.40.50.00, 7212.50.00.00. Certain 
hot-rolled flat-rolled carbon-quality steel covered by this 
investigation, including: vacuum degassed, fully stabilized; high 
strength low alloy; and the substrate for motor lamination steel may 
also enter under the following tariff numbers: 7225.11.00.00, 
7225.19.00.00, 7225.30.30.50, 7225.30.70.00, 7225.40.70.00, 
7225.99.00.90, 7226.11.10.00, 7226.11.90.30, 7226.11.90.60, 
7226.19.10.00, 7226.19.90.00, 7226.91.50.00, 7226.91.70.00, 
7226.91.80.00, and 7226.99.00.00. Although the HTSUS subheadings are 
provided for convenience and Customs purposes, the written description 
of the merchandise under investigation is dispositive.

Period of Investigation

    The period of investigation (POI) is January 1, 1998 through June 
30, 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. When 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 to examine all known producers/exporters of 
subject merchandise. Instead, we found that, given our resources, we 
would be able to investigate the three Russian producers/exporters with 
the greatest export volume. Based on the responses to section A from 
Severstal, Novolipetsk, and MMK, these companies accounted for 
substantially 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, from the Russia 
Team; Re: Selection of Respondents (``Respondent Selection Memo''), 
dated November 19, 1998.

Date of Sale

    For its U.S. sales, Severstal and Novolipetsk reported the date of 
order specification as the date of sale. MMK has argued that the 
Department should use the date of shipment as the date of sale.
    As stated in 19 CFR 351.401(i), the Department will use as the date 
of sale that date which best reflects the date on which the exporter or 
producer establishes the material terms of sale. Severstal has stated 
that the material terms of sale, namely price, quantity and product 
characteristics, are set on the order specification date, and, 
therefore it is the most appropriate date to use as date of sale. 
Novolipetsk reported that the order specification date is the first 
time that the material terms of the sale are recorded, making this date 
the appropriate date of sale. However, Novolipetsk stated that it does 
not date its order specifications. Novolipetsk reported that, to the 
best of its knowledge, order specifications are not signed more than 30 
days prior to commencing delivery. Therefore, the company claimed to 
have reported as sales within the POI all specification orders with 
delivery dates between January and July 1998 (one month beyond the POI) 
to ensure that the entire universe of sales with order specification 
dates within the POI was properly reported. In its supplemental 
questionnaire response, Novolipetsk further stated that the company 
reported the date on which the order was accepted, as evidenced by the 
date stamp on the document. For a further discussion of this issue, see 
Memorandum to the File from Lesley Stagliano, Case Analyst; Re: 
Analysis for Novolipetsk Iron & Steel Corporation (Novolipetsk), dated 
February 22, 1999.
    In its section A questionnaire response, MMK stated that it 
considered date of shipment to be the date of sale. However, MMK also 
stated that the date of the order specification would most likely be 
considered by the Department to be the most appropriate date of sale, 
because the terms of sale are set in the order specification. See MMK's 
section A questionnaire response at 13. Nevertheless, in MMK's 
subsequent

[[Page 9315]]

questionnaire responses, MMK maintained that the Department should 
treat the date of shipment as the date of sale because this is the date 
that MMK recognizes as the date of sale in its accounting system and 
because the terms of sale are subject to change until the shipment 
date. See, e.g., supplemental section A questionnaire response at SA-1. 
MMK identified sales for which the order specifications were amended 
after the order was signed and reported the date of the order amendment 
as the date of sale. Based on the sample order specification and the 
order amendments provided by MMK, it appears that the terms of sale are 
set in the order specification or, if applicable, in the order 
amendment. We note that there is no evidence on the record which 
indicates that, when no order amendment was provided, the terms of sale 
for the merchandise shipped differed from the terms of sale set in the 
order specification. Therefore, for the preliminary determination, the 
Department is using the date of the order specification or order 
amendment, if applicable, as the date of sale.
    The Department is preliminarily using the date of sale for U.S. 
sales as reported by respondents Severstal and Novolipetsk. For MMK, we 
have preliminarily decided to use the order specification date as the 
date of sale for 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. Due to the complexity of this 
issue, we invite all interested parties to submit comments on this 
issue in accordance with the schedule set forth in this notice.

Nonmarket Economy Country Status

    The Department has treated the Russian Federation as a nonmarket 
economy (``NME'') country in all past antidumping investigations and 
administrative reviews (see, e.g., Titanium Sponge from the Russian 
Federation: Final Results of Antidumping Administrative Review, 64 FR 
1599 (January 11, 1999); Notice of Final Determination of Sales at Less 
Than Fair Value: Certain Cut-to-Length Carbon Steel Plate from the 
Russian Federation, 62 FR 61787 (November 19, 1997); Notice of Final 
Determination of Sale at Less Than Fair Value: Pure Magnesium and Alloy 
Magnesium from the Russian Federation, 60 FR 16440 (March 30, 1995); 
Notice of Preliminary Determination of Sales at Less Than Fair Value 
and Postponement of the Final Determination: Ferrovanadium and Nitridid 
Vanadium from the Russian Federation, 60 FR 438 (January 4, 1995)). A 
designation as an NME remains in effect until it is revoked by the 
Department (see section 771(18)(C) of the Act). Therefore, for this 
preliminary determination, the Department is continuing to treat the 
Russian Federation as an NME.

Surrogate Country

    When the Department is investigating imports from an NME, section 
773(c) of the Act provides for the Department to base normal value 
(``NV'') on the NME producers'' factors of production, valued in a 
surrogate market economy country or countries considered appropriate by 
the Department. In accordance with section 773(c)(4), the Department, 
in valuing the factors of production, shall utilize, to the extent 
possible, the prices or costs of factors of production in one or more 
market economy countries that are comparable in terms of economic 
development to the NME country and are significant producers of 
comparable merchandise. The sources of individual factor values are 
discussed under the NV section below.
    The Department has determined that Tunisia, Colombia, Poland, 
Venezuela, South Africa, and Turkey are countries comparable to the 
Russian Federation in terms of overall economic development. See 
Memorandum to Rick Johnson, Program Manager, from Jeff May, Director, 
Office of Policy; Re: Certain Hot-Rolled Flat-Rolled Carbon-Quality 
Steel Products from the Russian Federation: Nonmarket Economy Status 
and Surrogate Country Selection (``Policy Memorandum''), dated December 
21, 1998. According to the available information on the record, we have 
determined that Turkey is an appropriate surrogate because it is at a 
comparable level of economic development and is a significant producer 
of comparable merchandise. Furthermore, there is a wide array of 
publicly available information for Turkey. Accordingly, we have 
calculated NV using Turkish prices to value the Russian producers' 
factors of production, when available and where appropriate. We have 
obtained and relied upon public information wherever possible.
    We note that, in this investigation, Severstal, Novolipetsk, and 
MMK have argued that Poland is a more appropriate surrogate than 
Turkey. See January 7 and January 15, 1999 Letters to the Department 
from Novolipetsk and MMK, and January 7, 1999 Letter to the Department 
from Severstal. The Department concurs with respondents that Poland 
also meets the above-mentioned criteria of being comparable in terms of 
economic development to the Russian Federation and is likewise a 
significant producer of comparable merchandise.
    However, as noted in the Policy Memorandum, in the event that more 
than one country satisfies both statutory requirements, the Department 
should narrow the field to a single country on the basis of data 
availability and quality. See also Notice of Final Determination of 
Sales at Less Than Fair value: Certain Cased Pencils from the People's 
Republic of China, 59 FR 55625 (November 8, 1994). Based on the 
information submitted by interested parties in response to the 
Department's solicitation of surrogate values, as well as information 
independently gathered by the Department for the purposes of this 
preliminary determination, we find that the Turkish data is more 
complete and, for most values, of either the same or superior quality 
when compared with the Polish data.
    In accordance with section 351.301(c)(3)(i) of the Department's 
regulations, for a final determination in an antidumping investigation, 
interested parties may submit publicly available information to value 
factors of production within 40 days after the date of publication of 
the preliminary determination. Therefore, in the event that interested 
parties submit timely additional information, including information 
pertaining to Polish surrogate values, the Department will re-examine 
its selection of Turkey as the primary surrogate country for the 
purposes of its final determination. For a further discussion of the 
Department's selection of Turkey as the primary surrogate, see 
Memorandum to the File, from Carrie Blozy, Case Analyst; Re: Selection 
of a Surrogate Country, dated February 22, 1999.

Separate Rates

    The Department presumes that a single dumping margin is appropriate 
for all exporters in an NME country. See Final Determination of Sales 
at Less Than Fair Value: Silicon Carbide from the People's Republic of 
China, 59 FR 22585 (May 2, 1994) (``Silicon Carbide''). The Department 
may, however, consider requests for a separate rate from individual 
exporters. Severstal, Novolipetsk, and MMK have each requested a 
separate, company-specific rate. To establish whether a firm is 
sufficiently independent from government control to be entitled to a 
separate rate, the Department analyzes each exporting entity under a 
test arising out of the Final Determination of Sales at Less Than Fair 
Value: Sparklers from the People's Republic of China, 56

[[Page 9316]]

FR 20588 (May 6, 1991) and amplified in Silicon Carbide. Under the 
separate rates criteria, the Department assigns separate rates in NME 
cases only if a respondent can demonstrate the absence of both de jure 
and de facto government control over export activities. For a complete 
analysis of separate rates, see Memorandum to Edward C. Yang from 
Lesley Stagliano, Case Analyst; Re: Separate Rates for Exporters that 
Submitted Questionnaire Responses (``Separate Rates Memo''), dated 
February 22, 1999.
1. Absence of De Jure Control
    An individual company may be considered for separates rates if it 
meets the following de jure criteria: (1) an absence of restrictive 
stipulations associated with an individual exporter's business and 
export licenses; (2) any legislative enactments decentralizing control 
of companies; and (3) any other formal measures by the government 
decentralizing control of companies.
    The respondents have placed on the administrative record a number 
of documents to demonstrate absence of de jure control. These documents 
include laws, regulations, and provisions enacted by the central 
government of the Russian Federation, describing the deregulation of 
Russian enterprise as well as the deregulation of the Russian export 
trade, except for a list of products that may be subject to central 
government export constraints. Respondents claim that the subject 
merchandise is not on this list. This information supports a 
preliminary finding that there is an absence of de jure government 
control. See Separate Rates Memo.
2. Absence of De Facto Control
    The Department typically considers four factors in evaluating 
whether each respondent is subject to de facto governmental control of 
its export functions: (1) whether the export prices (``EP'') are set by 
or subject to the approval of a governmental authority; (2) whether the 
respondent has authority to negotiate and sign contracts and other 
agreements; (3) whether the respondent has autonomy from the government 
in making decisions regarding the selection of management; and (4) 
whether the respondent retains the proceeds of its export sales and 
makes independent decisions regarding disposition of profits or 
financing of losses. All three respondents have reported that they are 
publicly-owned companies. In no case is there aggregate government 
ownership greater than 25 percent.
    Severstal has asserted that the company establishes its prices in 
negotiation with its customers, and that these prices are not subject 
to review or guidance from any government organization. Furthermore, 
Severstal's management has the authority to negotiate and sign 
contracts, also without review or guidance from outside organizations. 
Severstal stated that it can retain all export earnings, and that there 
are no restrictions on the use of the company's export revenues or 
utilization of profits. Severstal further reports that its management 
is appointed by the company's shareholders, and that the government has 
no role in, and is not advised of, the selection of its management.
    Novolipetsk stated that it either negotiates directly with 
customers or contracts with agents in determining price. The company 
has reported that its prices are not subject to review by, or guidance 
from, any government nor does the government have any involvement in 
decisions involving the allocation of export profits. Novolipetsk 
stated that only its Board of Directors makes decisions as to how 
profits will be used. Novolipetsk's shareholders elect the Board of 
Directors and the company's Director General at the annual 
shareholder's meeting. Novolipetsk reports that the company's sales 
director is authorized to contractually bind the company, and that no 
organization outside the company reviews or approves any aspect of the 
company's sales transactions.
    MMK stated that it also negotiates prices directly with its 
customers. These negotiations are conducted by the export department. 
MMK reports that no outside authority or organization reviews or 
approves pricing or any other aspect of the company's sales 
transactions. Additionally, MMK reported that the allocation of MMK's 
profits is determined by the General Shareholder's Meeting (with 
respect to the payment of dividends) and MMK's management. MMK stated 
that the members of the Board of Directors are elected to the Board by 
the shareholders of MMK and the Chairman is elected by the Board of 
Directors.
    In addition, the respondents' questionnaire responses indicate that 
company-specific pricing during the POI does not suggest coordination 
among exporters. This information supports a preliminary finding that 
there is an absence of de facto governmental control of the export 
functions of these companies. Consequently, we preliminarily determine 
that Severstal, Novolipetsk, and MMK meet the criteria for application 
of separate rates. For a further discussion of this issue, see Separate 
Rates Memo.

Fair Value Comparisons

    To determine whether hot-rolled steel products from the Russian 
Federation sold to the United States by the Russian producers/exporters 
receiving separate rates were made at less than fair value, we compared 
the EP to the NV, as described in the ``Export Price'' and ``Normal 
Value'' sections of this notice.



Export Price

    For Severstal, we preliminarily calculated EP in accordance with 
section 772(a) of the Act, because the subject merchandise was sold to 
the first unaffiliated purchaser in the United States prior to 
importation and constructed export price (``CEP'') methodology was not 
otherwise indicated. We will examine the EP/CEP designation further at 
verification. In accordance with section 777A(d)(1)(A)(i) of the Act, 
we compared POI-wide weighted-average EPs to the NV based on factors of 
production.
    We calculated EP based on either packed FOB prices or FCA prices to 
unaffiliated trading companies. When appropriate, for FOB sales, we 
made deductions from the starting price for brokerage and handling. 
These services were assigned a surrogate value based on public 
information from Certain Circular Welded Carbon Steel Pipe and Tube 
from Turkey. See Memorandum to Edward C. Yang; Re: Factor Valuation for 
Severstal, MMK, and Novolipetsk (``Factor Valuation Memo''), dated 
February 22, 1999. We also made adjustments for foreign inland freight, 
which was valued using Polish transportation rates, since public 
information on Turkish values was unavailable. Because the mode of 
transportation reported by Severstal is proprietary, for a further 
discussion, see Factor Valuation Memo (proprietary version).
    For MMK, we preliminarily calculated EP in accordance with section 
772(a) of the Act, because the subject merchandise was sold to the 
first unaffiliated purchaser in the United States prior to importation 
and CEP methodology was not otherwise indicated. We will examine the 
EP/CEP designation further at verification. In accordance with section 
777A(d)(1)(A)(i) of the Act, we compared POI-wide weighted-average EPs 
to the NV based on factors of

[[Page 9317]]

production. We calculated EP based on packed prices to unaffiliated 
trading companies.
    For Novolipetsk, we preliminarily calculated EP in accordance with 
section 772(a) of the Act, because the subject merchandise was sold to 
the first unaffiliated purchaser in the United States prior to 
importation and CEP methodology was not otherwise indicated. We will 
examine the EP/CEP designation further at verification. In accordance 
with section 777A(d)(1)(A)(i) of the Act, we compared POI-wide 
weighted-average EPs to the factors of production.
    For Novolipetsk, we calculated EP based on either packed FOB prices 
to the port of loading in the Russian territory or FCA rail prices to 
unaffiliated trading companies. With regard to FOB sales, we made 
deductions from the starting price, when appropriate, for brokerage and 
handling. We assigned a surrogate value based on public information 
from Certain Circular Welded Carbon Steel Pipe and Tube from Turkey. 
See Factor Valuation Memo.

Normal Value

    Section 773(c)(1) of the Act provides that the Department shall 
determine the NV using a factors-of-production methodology if: (1) the 
merchandise is exported from an NME country; and (2) the information 
does not permit the calculation of NV using home-market prices, third-
country prices, or constructed value under section 773(a) of the Act.
    Factors of production include: (1) hours of labor required; (2) 
quantities of raw materials employed; (3) amounts of energy and other 
utilities consumed; and (4) representative capital costs, including 
depreciation. We calculated NV based on factors of production reported 
by Severstal, Novolipetsk and MMK, with the following exceptions: 
Severstal's ``charge by-products,'' packing bands, packing fasteners 
and cleaning gas; Novolipetsk's by-products; and MMK's fluxing agents 
and quantities purchased of raw materials (used in freight 
calculation). For further discussions of these exceptions, see Factor 
Valuation Memo, Memorandum to the File, from Lyn A. Baranowski, Case 
Analyst; Re: Margin Calculation for the Preliminary Determination for 
JSC Severstal (Severstal), dated February 22, 1999 and Memorandum to 
the File, from Carrie Blozy, Case Analyst; Re: Analysis for 
Magnitogorsk Iron and Steel Works (``MMK'') (``Analysis Memo: MMK''), 
dated February 22, 1999. We valued all the input factors using publicly 
available published information as discussed in the ``Surrogate 
Country'' and ``Factor Valuations'' sections of this notice.

Factor Valuations

    The selection of the surrogate values was based on the quality and 
contemporaneity of the data. When possible, we valued material inputs 
on the basis of tax-exclusive domestic prices in the surrogate country. 
When we were not able to rely on domestic prices, we used import prices 
to value factors. As appropriate, we adjusted import prices to make 
them delivered prices. For those values not contemporaneous with the 
POI, we adjusted for inflation using producer or wholesale price 
indices, as appropriate, published in the International Monetary Fund's 
International Financial Statistics.
    To value coal, iron ore concentrate, iron ore pellets, sinter, 
aluminum, dolomite, ferro-alloys, recycled materials, lime and scrap, 
we used public information published by the United Nations Trade 
Commodity Statistics for 1997 (``UNTCS''). Neither Novolipetsk nor 
Severstal provided information on the record regarding iron content for 
iron ore pellets. For the preliminary determination, we have valued 
iron ore pellets based on the 1997 UNTCS Turkish value for HTS 260112, 
which represents iron ore pellets with a low iron content. We have 
based our valuation on evidence from The Making, Shaping and Treating 
of Steel that indicates low iron content iron ore pellets are used in 
blast furnaces. See Factor Valuation Memo,  Attachment 6. We intend to 
fully review actual iron ore content at verification.
    For limestone, coal tar, grease and kerosene, we used information 
from 1996 UNTCS. For packing, Severstal reports that it uses a certain 
material for bands. Therefore, we have used the 1996 UNTCS for valuing 
bands, as well as fasteners (for which Severstal has not reported the 
composition). For packing, MMK reports that it uses straps, wire rods 
and cold-rolled sheets. For wire rods and sheets, we have used 1996 
UNTCS for carbon wire rod and cold-rolled sheets. For packing straps, 
we have based their value on the value of packing bands reported in 
public information from the antidumping investigation, Stainless Steel 
Plate in Coils from South Africa (see July 15, 1998 response of 
Columbus Stainless Steel Company, page 48).
    We note that certain inputs into the production of subject 
merchandise have been reported by all three companies as being self-
produced. The Department instructed respondents, in the initial 
questionnaire, that ``if you manufacture or produce one or more 
products in a separate production process that is then used in a 
subsequent process to manufacture the subject merchandise (e.g., if 
your company produces), report separately the materials, labor, and 
energy factors (Fields 2.0 through 6.n) consumed in each production 
stage or process. If you have any questions regarding the reporting of 
intermediate production factors, please contact the Official In Charge 
immediately.'' See page D-3 of the original questionnaire.
    Subsequently, in supplemental questionnaires to Severstal, 
Novolipetsk, and MMK, the Department noted that each respondent had 
reported that it produced certain inputs internally. We again indicated 
that ``these and any other factors produced internally should be 
included in your calculation of factors of production for subject 
merchandise. As requested in the original questionnaire, you should 
provide a complete narrative description of your calculations, 
including supporting documentation and calculation worksheets.'' See, 
e.g., Supplemental Questionnaire to JSC Severstal, page 10, dated 
January 4, 1999. Nevertheless, we note that none of the three 
respondents appear to have reported the factors of production for these 
self-produced inputs in their supplemental responses of January 25, 
1999 (see Novolipetsk's response to supplemental section D 
questionnaire, pgs. 23-24; Severstal's response to supplemental section 
D questionnaire, pg. 23; MMK's response to supplemental section D 
questionnaire, pg. SD-6).
    For this preliminary determination, the Department has used the 
direct factors reported by respondents for these self-produced inputs. 
However, should the Department find at verification that reporting the 
factors used to produce these intermediate products would lead to 
higher overall usage rates, we may apply facts available with adverse 
inferences for the final determination.
    MMK has not reported any direct usage rates for fluxing agents in 
its factors of production database for hot-rolled steel. Therefore, we 
have assigned, as facts available, usage rates for certain fluxing 
agents, as reported in Exhibit D-2 of MMK's section D questionnaire 
response, dated December 21, 1998. For a further discussion of this 
issue, see Analysis Memo: MMK.
    We have valued by-products in the production of hot-rolled steel 
reported by these companies. We have valued non-solid by-products at 
their natural gas equivalents. We have valued solid

[[Page 9318]]

by-products based on 1996 and 1997 UNTCS. However, we note that 
Novolipetsk apparently aggregated the production of all of its by-
products into a single database field. As discussed in the Factor 
Valuation Memo, we found Novolipetsk's by-product factors to be 
aberrational. Moreover, Novolipetsk failed to support those factors 
with requested calculation worksheets. For these reasons, we have 
disregarded Novolipetsk's by-product factors for the preliminary 
determination. As facts available for the preliminary determination, 
the Department has allocated a theoretical output for Novolipetsk's by-
products based on outputs of the two largest components of the 
aggregate by-products field reported by Novolipetsk. For a further 
discussion of this issue, see Factor Valuation Memo (proprietary 
version).
    For some of the energy inputs reported (natural gas, blast furnace 
gas, coke oven gas, and electricity), we relied on public information 
from ``Energy Prices and Taxes: 2nd quarter 1998,'' published by the 
International Energy Agency, OECD. In addition to these inputs, MMK 
reported coal as an energy input, while Novolipetsk reported grease as 
an energy input. We valued coal and grease based on 1997 and 1996 UNTCS 
Turkish values, respectively. Because we were unable to obtain publicly 
available Turkish values, we used Polish transport information to value 
transport for raw materials. Since the mode of transportation reported 
by all respondents is proprietary, for a full discussion of this issue, 
see Factor Valuation Memo (proprietary version).
    For labor, we used the Russian regression-based wage rate at Import 
Administration's homepage, Import Library, Expected Wages of Selected 
NME Countries, revised on June 2, 1997. Because of the variability of 
wage rates in countries with similar per capita gross domestic 
products, section 351.408(c)(3) of the Department's regulations 
requires the use of a regression-based wage rate. The source of this 
wage rate data on the Import Administration's homepage is found in the 
1996 Year Book of Labour Statistics, International Labour Office 
(``ILO''), (Geneva: 1996), Chapter 5B: Wages in Manufacturing.
    To value overhead, general expenses and profit, we used public 
information reported in the 1997 financial statements of Eregli Demir 
ve Celik Fabrikalari TAS (``Erdemir''), a Turkish steel producer. We 
adjusted Erdemir's depreciation expenses for the effects of high 
inflation, and we reduced its financial expenses for estimated short-
term interest income and excluded estimated long-term foreign exchange 
losses. For a further discussion of this issue, see Attachment 10 of 
the Factor Valuation Memo.

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: 
(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.
    As discussed in the Factor Valuation Memo, and the ``Factor 
Valuations'' section above, the Department had requested information 
regarding by-products both in its initial and supplemental 
questionnaires. Novolipetsk did not report the by-products as 
instructed, and failed to adequately answer the Department's questions 
regarding the calculation of the quantities of these by-products. 
Having found the reported quantities of by-product to be aberrationally 
high, the Department has instead utilized an applied theoretical output 
for the two largest by-products. These output factors were based on 
information published in a steel industry treatise, The Making, Shaping 
and Treating of Steel.
    As discussed in the ``Factor Valuations'' section above, and in 
Analysis Memo: MMK, MMK failed to report direct usage rates for certain 
fluxing agents in its database. As a result, we have assigned usage 
rates based on information included in Exhibit D-2 of MMK's section D 
questionnaire response, dated December 21, 1998.

Suspension of Liquidation

    In accordance with section 733(d) and (e) 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 90 days prior to 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 EP, as indicated below. These suspension-of-liquidation 
instructions will remain in effect until further notice. The weighted-
average dumping margins are as follows:

------------------------------------------------------------------------
                                                             Weighted-
                  Exporter/manufacturer                   average margin
                                                             (percent)
------------------------------------------------------------------------
JSC Severstal...........................................           70.66
Novolipetsk Iron & Steel Corp...........................          217.67
Magnitogorsk Iron & Steel Works.........................          149.54
All Others..............................................          156.58
------------------------------------------------------------------------

The All-Others Rate

    The three companies selected by the Department have all 
preliminarily qualified for a separate rate. Moreover, the information 
on the record indicates that these three companies account for all 
imports of subject merchandise during the period of investigation. See 
Respondent Selection Memo. We have no evidence that there are any other 
Russian exporters of subject merchandise that may be subject to common 
government control. For this reason, we have not calculated a Russia-
wide rate in this investigation. We have calculated an all-others rate 
in accordance with section 735(c)(5) of the Act. See Notice of Final 
Determination of Sales at Less Than Fair Value; Polyvinyl Alcohol From 
the People's Republic of China, 61 FR 14057, 14059 (1996). This all-
others rate has been calculated based on the weighted-average of all 
margins that are not zero, de minimis or based on facts available. The 
all-others rate applies to all entries of subject merchandise except 
for entries from exporters/factories that are identified individually 
above.

International Trade Commission 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 imports of hot-rolled steel from the Russian Federation are 
materially injuring, or threatening material injury to, the U.S. 
industry.

Public Comment

    Case briefs or other written comments may be submitted to the 
Assistant Secretary for Import Administration no later than fifty days 
after the date of publication of this notice, and rebuttal briefs, 
limited to issues raised in case briefs, no later than fifty-five days 
after

[[Page 9319]]

the date of publication of this preliminary determination. A list of 
authorities used and an executive summary of issues should accompany 
any briefs submitted to the Department. This summary should be limited 
to five pages total, including footnotes. In accordance with section 
774 of the Act, we will hold a public hearing, if requested, to afford 
interested parties an opportunity to comment on arguments raised in 
case or rebuttal briefs. Tentatively, any hearing will be held fifty-
seven days after publication of this notice at the U.S. Department of 
Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C. 
20230, at a time and location to be determined. Parties should confirm 
by telephone the date, time, and location of the hearing two days 
before the scheduled date.
    Interested parties who wish to request a hearing, or to participate 
if one is requested, must submit a written request to the Assistant 
Secretary for Import Administration, U.S. Department of Commerce, Room 
1870, within 30 days of the date of publication of this notice. 
Requests should contain: (1) the party's name, address, and telephone 
number; (2) the number of participants; and (3) a list of the issues to 
be discussed. At the hearing, each party may make an affirmative 
presentation only on issues raised in that party's case brief, and may 
make rebuttal presentations only on arguments included in that party's 
rebuttal brief. See 19 CFR 351.310(c). If this investigation proceeds 
normally, we will make our final determination no later than May 10, 
1999.
    This determination is issued and published in accordance with 
sections 733(d) and 777(i)(1) of the Act.

    Dated: February 22, 1999.
Richard W. Moreland,
Acting Assistant Secretary for Import Administration.
[FR Doc. 99-4840 Filed 2-24-99; 8:45 am]
BILLING CODE 3510-DS-P