[Federal Register Volume 64, Number 142 (Monday, July 26, 1999)]
[Notices]
[Pages 40336-40351]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-19019]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-412-810; C-412-811--A-428-811; C-428-812]


Hot-Rolled Lead and Bismuth Carbon Steel Products from Germany 
and the United Kingdom; Negative Final Determinations of Circumvention 
of Antidumping and Countervailing Duty Orders

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

ACTION: Notice of Negative Final Determinations of Circumvention of 
Antidumping and Countervailing Duty Orders.

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SUMMARY: On May 1, 1998, the Department of Commerce published 
preliminary negative determinations of circumvention of the antidumping 
and countervailing duty orders on hot-rolled lead and bismuth carbon 
steel products from Germany and the United Kingdom.
    We provided interested parties an opportunity to comment on the 
preliminary negative determinations. After our analysis of the case and 
rebuttal briefs, we have determined that imports into the United States 
of leaded steel billets that were exported from Germany and the United 
Kingdom do not constitute circumvention of the antidumping and 
countervailing duty

[[Page 40337]]

orders on hot-rolled lead and bismuth carbon steel products from 
Germany and the United Kingdom, within the meaning of section 781(a) of 
the Tariff Act of 1930, as amended.

EFFECTIVE DATE: July 26, 1999.

FOR FURTHER INFORMATION CONTACT: Russell Morris or Richard Herring, 
Office of AD/CVD Enforcement, Office VI, Group II, Import 
Administration, International Trade Administration, U.S. Department of 
Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 
20230; telephone (202) 482-2786.

SUPPLEMENTARY INFORMATION:

Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute are 
references to the provisions of the Tariff Act of 1930 (the Act), as 
amended, by the Uruguay Round Agreements Act (URAA), effective January 
1, 1995. In addition, unless otherwise indicated, all references to the 
Department's regulations are to 19 C.F.R. Parts 353 and 355 (1997).

Background

    On March 22, 1993, the Department of Commerce (the Department) 
published in the Federal Register the antidumping duty (AD) orders (58 
FR 15334) and countervailing duty (CVD) orders (58 FR 15325, 15327) on 
hot-rolled lead and bismuth carbon steel products (hot-rolled lead bar) 
from Germany and the United Kingdom. On April 14, 1997, the Department 
received an application (amended on May 14, 1997) filed by Inland Steel 
Bar Company and USS/KOBE Steel Company (the petitioners) requesting 
that the Department conduct anticircumvention inquiries of the AD and 
CVD orders on lead bar from Germany and the United Kingdom pursuant to 
section 781(a) of the Act. The petitioners alleged that the principal 
German (Saarstahl A.G. i.K. and Thyssen Stahl A.G.) and British 
(British Steel plc) producers of lead bar are circumventing their 
respective orders by shipping leaded-steel billets (lead billets) to 
the United States, where they are easily and inexpensively converted 
into the lead bar products covered by the orders.
    Pursuant to the petitioners' application and in accordance with 19 
C.F.R. 353.29(e) and 355.29(e), the Department initiated circumvention 
inquiries of the AD and CVD orders on hot-rolled lead bar from Germany 
and the United Kingdom (62 FR 34213; June 25, 1997).
    In conducting the inquiries, we requested and received detailed 
information on a range of topics, such as processing, pricing, and 
conversion costs. We also collected data on patterns of trade, sourcing 
patterns, and other trend data for the period January 1, 1991 through 
June 30, 1997, for the United Kingdom proceeding and January 1, 1988 
through June 30, 1997, for the German proceeding.
    The preliminary determination in this investigation was issued on 
April 23, 1998. See Hot-Rolled Lead and Bismuth Carbon Steel Products 
from Germany and the United Kingdom; Negative Preliminary 
Determinations of Circumvention of Antidumping and Countervailing Duty 
Orders, 63 FR 24156 (May 1, 1998) (Preliminary Determination).
    In May 1998, we verified the responses of two of the re-rollers, 
American Steel & Wire and Republic Engineered Steels. We followed 
standard verification procedures, including meeting with company 
officials, and examination of relevant accounting records and original 
source documents. Our verification results are outlined in detail in 
the verification reports, which are on file in public version form in 
the Central Records Unit, Room B-099, of the Commerce Department.
    In May 1998, the petitioners requested that the Department hold a 
public hearing on these circumvention inquiries. Based upon their 
request a hearing was held on July 29, 1998. Case and rebuttal briefs 
were filed by the interested parties prior to the hearing. Comments 
raised by the interested parties in their respective case and rebuttal 
briefs are addressed in the ``Analysis of Comments Received'' section 
of this notice.

Scope of AD and CVD Orders

    Imports covered by these orders include hot-rolled bars and rod of 
non-alloy or other alloy steel, whether or not descaled, containing by 
weight 0.03 percent of lead or 0.05 percent of bismuth, in coils or cut 
lengths, and in numerous shapes and sizes. The order excludes ``other 
alloy steels,'' as defined by Chapter 72, note 1(f) of the Harmonized 
Tariff Schedule of the United States (HTSUS), ``except steels 
classified as other alloy steel by reason of containing by weight 0.4 
percent or more of lead or 0.1 percent or more of bismuth, tellurium or 
selenium.'' Most of the products covered are provided for under 
subheadings 7213.20.00.00 and 7214.30.00.00 of the HTSUS. Small 
quantities of these products may also enter the United States under the 
following HTSUS subheadings: 7213.31.30.00, 60.00; 7213.39.00.30, 
00.60, 00.90; 7214.40.00.10, 00.30, 00.50; 7214.50.00.10, 00.30, 00.50; 
7214.60.00.10, 00.30, 00.50; and 7228.30.80.00. Although the HTSUS 
subheadings are provided for convenience and for customs purposes, the 
written description of the scope of the order remains dispositive.

Scope of the Circumvention Inquiries

    The products subject to these circumvention inquiries are carbon or 
alloy steel billets containing 0.03 percent or more of lead or 0.05 
percent or more of bismuth (the only accepted metallurgical equivalent 
to lead), and other alloy steel billets by reason of containing by 
weight 0.4 percent or more of lead or 0.1 percent or more of bismuth, 
tellurium or selenium, that meet the chemical requirements for the 
merchandise subject to the orders.

Facts Available

    Section 776(a)(2) of the Act requires the Department to use facts 
available if ``an interested party or any other person * * * withholds 
information that has been requested by the administering authority * * 
* under this title.'' The facts on the record show that Bar Tech did 
not comply with the Department's requests for information required to 
calculate the value of the processing performed in the United States. 
In our initial questionnaire dated September 10, 1997, the Department 
requested information regarding the total amount of lead billet 
consumed in the production of one unit of lead bar (lead billet 
consumption rate). Bar Tech responded to our questionnaire on October 
29, 1997, but did not provide its lead billet consumption rate.
    The Department's supplemental questionnaires dated November 18, 
1997 and January 7, 1998, again requested that Bar Tech report its lead 
billet consumption rate. Bar Tech, however, did not provide its lead 
billet consumption rate to the Department.
    Section 776(b) of the Act permits the administering authority to 
use an inference that is adverse to the interests of an interested 
party if that party has ``failed to cooperate by not acting to the best 
of its ability to comply with a request for information.'' Such an 
adverse inference may include reliance on information derived from (1) 
the petition, (2) a final determination in the investigation under this 
title, (3) any previous review under section 751 or determination under 
section 753 regarding the country under consideration, or (4) any other 
information placed on the record. Because Bar Tech did not comply with 
the Department's requests to provide its

[[Page 40338]]

lead billet consumption rate, we find that Bar Tech failed to cooperate 
by not acting to the best of its ability to comply with the 
Department's information requests. Therefore, we are using adverse 
inferences in accordance with section 776(b) of the Act. In making an 
adverse inference for Bar Tech's lead billet consumption rate, the 
Department has used the highest average lead billet consumption rate 
submitted by another U.S. re-roller participating in these inquiries. 
Corroboration of this data is not necessary because this information is 
not considered secondary information. See Statement of Administrative 
Action (SAA) accompanying the URAA, H.Doc. 103-316, Vol. 1, at 870 
(1994).

Nature of the Circumvention Inquiry

    Section 781(a)(1) of the Act provides that the Department, after 
taking into account any advice provided by the United States 
International Trade Commission (ITC) under section 781(e), may include 
the imported merchandise under review within the scope of an order if 
the following criteria have been met:
    A. The merchandise sold in the United States is of the same class 
or kind as any other merchandise that is the subject of--
    (i) an antidumping duty order issued under section 736,
    (ii) a finding issued under the Antidumping Act, 1921, or
    (iii) a countervailing duty order issued under section 706 or 
section 303;
    B. Such merchandise sold in the United States is completed or 
assembled in the United States from parts or components produced in the 
foreign country with respect to which such order or finding applies;
    C. The process of assembly or completion in the United States is 
minor or insignificant; and
    D. The value of the parts or components [produced in the foreign 
country with respect to which the order applies], is a significant 
portion of the total value of the merchandise.
    If one of the four elements does not apply, there can be no finding 
of circumvention. However, even if all four of these criteria are met, 
the Act requires that the Department also consider additional factors. 
Section 781(a)(3) of the Act directs the Department to consider, in 
determining whether to include parts or components produced in a 
foreign country within the scope of an AD and CVD order, such factors 
as: (A) the pattern of trade, including sourcing patterns; (B) whether 
the manufacturer or exporter of the parts or components is affiliated 
with the person who assembles or completes the merchandise sold in the 
United States from the parts or components produced in the foreign 
country; and (C) whether imports into the United States of the parts or 
components produced in such foreign country have increased after the 
initiation of the investigation which resulted in the issuance of such 
order or finding.

U.S. Re-Rollers

    We requested information from U.S. re-rollers with respect to these 
circumvention inquiries. Information was submitted by the following 
five U.S. re-rollers: (1) American Steel & Wire (AS&W), a wholly-owned 
subsidiary of Birmingham Steel Corporation; (2) Bar Tech; (3) Nucor 
Steel Corporation (Nucor); (4) Republic Engineered Steels (Republic); 
and (5) Sheffield Steel Corporation (Sheffield). Based upon our 
analysis of the information submitted by the foreign respondents and 
the U.S. re-rollers, we have determined that no affiliation exists 
between the U.S. re-rollers and the foreign respondents, as defined in 
section 771(33) of the Act. A determination with respect to sections 
781(a)(1) and (2) of the Act is based solely on the processing of lead 
billets into hot-rolled lead bar by these unaffiliated U.S. re-rollers. 
The rolling facilities owned by each of the U.S. re-rollers, except Bar 
Tech, were in operation before the initiation of the respective AD and 
CVD investigations of hot-rolled lead bar from Germany and the United 
Kingdom. Bar Tech was established after the issuance of the AD and CVD 
orders when Bar Tech purchased Bethlehem Steel's Bar, Rod & Wire (BRW) 
facilities in Lackawanna, New York in 1994. Bethlehem Steel, a former 
roller of lead billet into hot-rolled lead bar, was one of the original 
petitioners in the lead bar investigations.
    Much of the information provided by the U.S. re-rollers is 
proprietary. Therefore, in most instances, the information used in our 
analysis below has been ranged, and our discussion of this information 
has been generalized in order to maintain the proprietary treatment of 
submitted information. In addition, for most of the U.S. re-rollers, 
the source of their imported lead billet supply is also proprietary. 
Therefore, the analysis below refers to imports from both Germany and 
the United Kingdom.

Statutory Analysis

(1) Whether the Class or Kind of Merchandise Is Sold in the United 
States

    AS&W, Bar Tech, Republic, and Sheffield sell hot-rolled lead bar in 
the United States. Nucor processes lead billets into hot-rolled lead 
bar, which the company further processes into cold-finished products.

(2) Whether Merchandise Sold in the United States is Completed or 
Assembled in the United States from Foreign Parts or Components

    All of the U.S. re-rollers purchase lead billets from one or more 
of the foreign respondents subject to the AD and CVD orders. They each 
use the lead billets to produce hot-rolled lead bar in the United 
States.

(3) Whether the Process of Assembly or Completion is Minor or 
Insignificant

    Section 781(a)(2) lists the factors the Department will consider in 
determining whether the process of assembly or completion is minor or 
insignificant. The SAA states that no single factor listed in section 
781(a)(2) of the Act will be controlling. SAA at 893. The SAA also 
states that the Department will evaluate each of the factors as they 
exist in the United States depending on the particular circumvention 
scenario. Id. Therefore, the importance of any one of the factors 
listed under 781(a)(2) of the Act can vary from case to case depending 
on the particular circumstances unique to each specific circumvention 
inquiry. As discussed below, each of the factors set forth in section 
781(a)(2) of the Act is examined below for the U.S. re-rollers.
(a) The Level of Investment in the United States
    The rolling facilities owned by each of the U.S. re-rollers were in 
operation before the initiation of the respective AD and CVD 
investigations of hot-rolled lead bar from Germany and the United 
Kingdom. Although Bar Tech did not exist before the initiation of the 
investigations, the facility producing subject merchandise that is 
operated by the company does pre-date the investigations. Each of the 
U.S. re-rollers has made substantial capital investments in its 
respective rolling mills.
    AS&W entered the hot-rolled lead bar market in 1986, with its 
purchase of rolling facilities from U.S. Steel. In 1993, Birmingham 
Steel acquired AS&W and entered the specialty bar, rod, and wire 
products business. In 1996, Birmingham Steel invested $132 million

[[Page 40339]]

in a new high-quality rolling mill at AS&W's Cleveland, Ohio facility, 
enabling the company to produce larger-sized bar products and bars with 
tighter size tolerances and more stringent mechanical properties. AS&W 
primarily produces nonlead hot-rolled bars, and less than a quarter of 
the mills' production utilizes lead billets. AS&W sells the hot-rolled 
lead bar that it produces to unaffiliated customers.
    Bar Tech came into existence in 1994, with the purchase of 
Bethlehem Steel's BRW facilities for $19 million. From 1994 through 
1997, Bar Tech made additional investments in the rolling facilities' 
buildings, machinery, and equipment. In April 1996, Bar Tech acquired 
Bliss & Laughlin (B&L), the largest cold-finishing company in the 
United States. In September 1997, Bar Tech announced plans to invest 
$30 million in its steelmaking facilities. Approximately half of the 
investment is allocated for the production of lead and nonlead semi-
finished steels at its Johnstown meltshop. The majority of the 
remaining investment is designated for equipment upgrades at its 13-
inch rolling mill in Lackawanna, New York to roll both lead and nonlead 
billets.
    Nucor's steel mill in Darlington, South Carolina became operational 
as a new steel mill in 1969. Prior to 1991, Nucor added a high-speed 
rolling line to its mill. The addition of such equipment allows for 
automatic straightening, shearing, stacking, and bundling of bar, and 
has significantly enhanced Nucor's ability to produce hot-rolled lead 
and nonlead bar from lead and nonlead billets. Since 1991, Nucor has 
made several investments for a variety of improvements.
    In November 1989, Republic was created through an employee stock 
ownership plan with the purchase of LTV's Bar Division. With the 
purchased steelmaking facilities, Republic gained the ability to 
produce lead and nonlead ingots, and hot-rolled and cold-finished bar 
products. Republic currently produces lead billets via the ingot 
process in a shared facility; however, the quantity it can produce is 
restricted by environmental permit limits. During the 1990's, Republic 
invested in the construction of a continuous casting facility which has 
the capability to produce both lead and nonlead billets; however, 
Republic currently only produces nonlead billets at the facility.
    Sheffield was established in the early 1980's, with the purchase of 
the Sand Springs, Oklahoma meltshop and rolling facility in 1981, and 
the construction of the Kansas City, Missouri rolling facility in 1985. 
In 1986, Sheffield purchased a 12-inch rolling mill facility in Joliet, 
Illinois from Continental Steel for $3.5 million. This rolling mill was 
originally installed around 1957. Since acquiring the Joliet mill in 
1986, Sheffield has made additional investments of approximately $6 
million in the facility, which is the company's only rolling mill which 
produces hot-rolled lead bar. Sheffield entered the hot-rolled lead bar 
market in 1992.
(b) The Level of Research and Development (R&D) in the United States
    Four of the five re-rollers had little or no R&D related to the 
production of hot-rolled lead bar. One U.S. re-roller reported that it 
conducted some R&D with respect to the development of heating, rolling 
and inspection practices used in the production of leaded steels. The 
U.S. re-rollers reported that there have been few technological 
breakthroughs affecting leaded steels since 1991. Because the rolling 
of hot-rolled lead bar is a technically mature process, R&D is not a 
significant factor in this industry.
(c) The Nature of the Production Process in the United States
    The ITC states that the manufacturing process for the production of 
hot-rolled lead bar consists of three different stages: (1) melting, 
(2) casting, and (3) hot-rolling. See Certain Hot-Rolled Lead and 
Bismuth Carbon Steel Products From Brazil, France, and the United 
Kingdom, Final Determinations of the Commission in Investigations Nos. 
701-TA-314 thru 317, USITC Publication 2611 (March 1993). Lead billets 
are created during the second stage; the U.S. re-rollers perform the 
third and final stage in the manufacturing process of hot-rolled lead 
bar.
    Each of the U.S. re-rollers are fully operational hot-rolled lead 
and nonlead bar producers, manufacturing bar in a like manner. The 
nature of the process overall consists of a series of steps for the 
purpose of sizing and shaping the lead billets to produce specific 
sized and shaped hot-rolled bar on rolling equipment used to 
manufacture either hot-rolled lead or nonlead bars. The rolling process 
does not require equipment devoted exclusively to the production of 
hot-rolled lead bar. Three of the five re-rollers also have cold-
finishing operations to further process the hot-rolled lead bar. In the 
cold-finishing process, the bar undergoes surface treatments in the 
form of polishing, turning, grinding, and straightening.
    The process for producing hot-rolled lead bar from lead billets is 
as follows. First, the lead billets are placed in a re-heat furnace and 
heated to a temperature usually above 2200 degrees Fahrenheit. This 
heating procedure increases the malleability of the steel, reducing 
energy consumption and wear on the rolling mill. Once the lead billets 
reach the necessary temperature, walking beams gradually discharge them 
from the re-heat furnace onto the rolling lines. The lead billets are 
then rolled on a series of rolling mills, including roughing, 
intermediate, and finishing mills. Each rolling mill has a series of 
stands which compress and shape the lead billets with each pass 
through. As a lead billet passes through the stands, it becomes 
elongated and its cross-section becomes smaller. This process 
transforms a lead billet into a hot-rolled lead bar product having a 
specific size and shape. Generally four to 15 percent of a lead 
billet's weight is lost in the rolling process.
    The hot-rolled lead bar is then placed on a hot bed and cooled to a 
temperature of about 800 degrees Fahrenheit. Once cooled, the hot-
rolled lead bar undergoes straightening, non-destructive testing, 
deburring, and saw cutting. The hot-rolled lead bar is either coiled or 
cut into various lengths at the finishing shear. At this stage, some 
re-rollers apply a surface treatment to clean and coat their products. 
After being inspected for straightness, length, and defects, the hot-
rolled lead bars are weighed, packaged, and placed in the warehouse for 
later shipment.
    There are environmental issues and limitations in rolling lead 
billets versus nonlead billets. Environmental controls, worker safety, 
and health regulations are more stringent for lead than for nonlead 
grades. For instance, additional ventilation of exhaust fumes is 
necessary as lead and bismuth steel wastes are classified as hazardous 
waste, necessitating their segregation and separate treatment from 
other scrap. Specialized safety equipment and more rigorous operating 
procedures must also be used in compliance with Occupational Safety and 
Health Administration (OSHA) standards.
(d) The Extent of Production Facilities in the United States
    In general, each of the U.S. re-rollers has production facilities 
in various states throughout the United States, but the rolling of hot-
rolled lead bar mainly takes place in Illinois, Ohio, Utah, South 
Carolina, and New York. As we have noted earlier, most of the U.S. re-
rollers were rolling lead billets into hot-rolled lead bar before the 
initiation of the AD and CVD investigations of hot-rolled lead bar from 
Germany and the United Kingdom.

[[Page 40340]]

    In analyzing the extent of production facilities, we considered the 
square footage of building space dedicated to rolling lead billet into 
hot-rolled lead bar, the number of employees involved in rolling the 
lead billets, and the capital equipment used in the production of hot-
rolled lead bar. Sheffield, for example, reported that its Joliet 
rolling facility encompasses 334,305 square feet for the processing of 
lead billet into hot-rolled lead bar.
    With regard to the number and level of skilled employees involved 
in rolling lead billets into hot-rolled lead bar, Sheffield, for 
example, reported that in the production process of hot-rolled lead 
bar, from the time the lead billets are received in the billet yard to 
the time that hot-rolled lead bar is shipped to a customer, there are 
25 skilled workers responsible for the rolling of a lead billet into 
hot-rolled lead bar, and all of the other ancillary functions.
    With respect to the capital equipment used in the processing of 
lead billet into hot-rolled lead bar, the U.S. re-rollers have invested 
a substantial amount of money not only in the construction of factory 
buildings used in rolling operations for both lead and nonlead 
products, but also in the purchase of sophisticated machinery required 
to produce hot-rolled bar from lead and nonlead billets, and in the 
maintenance required for such machinery.
(e) Whether the Value of the Processing Performed in the United States 
Represents a Small Proportion of the Value of the Merchandise Sold in 
the United States
    We calculated the difference in value between the hot-rolled lead 
bar sold in the United States and the value of the lead billets 
purchased from the foreign respondents that were used in the production 
of that merchandise. For AS&W, BarTech, Republic, and Sheffield, we 
based our calculation of value added to the merchandise sold in the 
United States on the difference between the delivered lead billet 
import price and the ex-factory sales price of the hot-rolled lead bar. 
This methodology was used because both transactions (lead billet 
purchases and hot-rolled lead bar sales) were sales between 
unaffiliated parties. To derive the value of processing performed by 
each U.S. re-roller, we subtracted from the ex-factory sales price of 
hot-rolled lead bar to unaffiliated customers the delivered price of 
lead billets, after adjusting for a yield factor (to account for 
additional lead billet consumed in the production of one unit of hot-
rolled lead bar).
    In regard to Nucor, because the company uses all the hot-rolled 
lead bar that it produces to further manufacture cold-finished 
products, we applied a different value-added methodology. We based our 
calculation of value-added on the comparison between the conversion fee 
Nucor's rolling mill charged its affiliated cold-finisher and the 
resulting total input cost of hot-rolled lead bar to the cold-finisher, 
after adjusting both for a yield factor (to account for additional lead 
billet consumed in the production of one unit of hot-rolled lead bar).
    Some of the U.S. re-rollers purchased lead billets from all three 
suppliers of lead billets subject to these inquiries, while others 
purchased exclusively from one source. Some of the U.S. re-rollers, 
however, were unable to identify the supplier of lead billets on a 
transaction-specific basis with respect to the U.S. sales of the 
processed hot-rolled lead bar. Therefore, for each U.S. re-roller, the 
calculation of value-added is based upon a weighted-average price of 
imported lead billet from the foreign respondent(s) from whom the U.S. 
re-roller purchased its lead billets. Because the processing of the 
imported lead billet into hot-rolled lead bar is virtually identical 
regardless of the source of the imported lead billet, we consider this 
weighted-average, non-supplier specific calculation of value-added to 
be appropriate in those instances. However, where possible, we used the 
supplier-specific information to calculate the value-added to each 
supplier.
    The value of processing performed in the United States ranges from 
approximately 10 percent to 29 percent for the U.S. re-rollers. The 
relative value of processing varies because of the lead billet prices 
charged by the foreign respondents to the U.S. re-rollers, the U.S. re-
roller's yield factor for rolling one unit of lead billet into one unit 
of hot-rolled lead bar, and the different prices charged by the U.S. 
re-rollers to their customers due to size and shape of the hot-rolled 
lead bar. Because the calculation of the value of processing is based 
upon proprietary data, the value-added percentages presented above have 
been ranged.

(4) Whether the Value of Imported Parts is a Significant Portion of 
Value of Lead Bar

    Under section 781(a)(1)(D) of the Act, the value of the imported 
parts or components must be a significant portion of the total value of 
the subject merchandise sold in the United States in order to find 
circumvention. The imported lead billet is the sole material input into 
the completed hot-rolled lead bar and a significant portion of the 
value of the completed hot-rolled lead bar is for this material cost.

Other Factors To Consider

    In making a determination whether to include parts or components 
within an order, section 781(a)(3) of the Act instructs us to take into 
account such factors as: the pattern of trade, including sourcing 
patterns; whether affiliation exists between the exporter of the parts 
and the person who assembles or completes the merchandise sold in the 
United States; and whether imports into the United States of the parts 
produced in the foreign country have increased after the initiation of 
the investigation which resulted in the issuance of the order. Each of 
these factors are examined below.

(1) Pattern of Trade And Sourcing

    The first factor to consider under section 781(a)(3) is changes in 
the pattern of trade, including changes in the sourcing patterns of the 
lead billets. SAA at 894. Unlike our examination of the processing of 
lead billets into hot-rolled lead bar in the United States, which was 
essentially the same for all of the U.S. re-rollers, there are 
differences in the pattern of trade among the U.S. re-rollers and the 
three foreign respondents (British Steel, Thyssen, and Saarstahl). 
Among the foreign respondents, British Steel and Thyssen are the two 
largest lead billet exporters to the United States. In comparison, 
Saarstahl is a small exporter of lead billets.
    British Steel began selling lead billets to the United States in 
1994. By 1996, the company's lead billet sales doubled. British Steel's 
sales of hot-rolled lead bar peaked in 1992, declined in 1993 and 1994, 
rebounded in 1995, and continued to trend upwards in 1996. In general, 
sales of hot-rolled lead bar by British Steel have greatly exceeded its 
sales of lead billets to the U.S. market (despite the AD and CVD 
orders). British Steel's sales of hot-rolled lead bar in the U.S. 
market have remained substantial since the imposition of the orders. In 
fact, Sheffield reported that its primary competition for hot-rolled 
lead bar shapes is imports from British Steel.
    Thyssen has been selling lead billets to the United States since 
1988, well before the Department initiated its hot-rolled lead bar 
investigations in May 1992. Thyssen's lead billet shipments to the 
United States increased steadily from 1991 to 1996, peaking in 1996, 
while its hot-rolled lead bar sales to the U.S. market terminated in 
1992. Thyssen has stated that lead billets, and not hot-rolled lead 
bar, have always

[[Page 40341]]

been its primary U.S. market, and the pattern of trade for both 
products indicates this to be accurate.
    Saarstahl began selling lead billets to the United States in 1992, 
the last year the steelmaker sold hot-rolled lead bar to U.S. 
customers. Saarstahl's exports of lead billets to the United States 
peaked in 1993, and since then have significantly decreased.
    AS&W has been purchasing lead billets since its inception in 1986. 
AS&W reported that since 1992, the company has sourced lead billets 
from both foreign and domestic suppliers. A major change in the 
company's sourcing was the termination of a billet supply agreement 
(inclusive of lead and nonlead billets) with USS/KOBE. When Birmingham 
Steel purchased AS&W in 1993, there was a lead billet supply agreement 
in effect with USS/Lorain Works, which subsequently became USS/KOBE. 
USS/KOBE terminated the supply agreement in 1996, citing a lack of lead 
billet availability. With the termination of this supply agreement, 
AS&W was no longer able to source lead billets domestically.
    Bar Tech began purchasing lead billets in 1996. Bar Tech has not 
sourced lead billets from domestic producers. Bar Tech never purchased 
lead bar from the foreign respondents.
    Nucor did not begin purchasing lead billets until 1992, when the 
company began sourcing from foreign respondents. Purchases from the 
foreign respondents have been generally declining. Nucor had previously 
purchased hot-rolled lead bar from foreign sources.
    Republic's predecessor began purchasing lead billets from foreign 
sources in the mid-80's. Since becoming an independent company in 1989, 
Republic has continued to source its lead billets from foreign sources 
to supplement its own production. Republic has not purchased lead 
billets from domestic producers. The company did purchase hot-rolled 
lead bar from foreign sources in the early 1990's; however, since 1993, 
Republic has sourced hot-rolled lead bar exclusively from domestic 
suppliers.
    Sheffield has sourced lead billets from both domestic and foreign 
producers since it began purchasing lead billets in 1992. Throughout 
much of 1993, Sheffield sourced lead billets from Inland; however, by 
late 1993, Inland stopped its external sales of lead billets citing its 
own internal lead billet consumption needs. In June 1995, Inland was 
again in a position to supply lead billets. Sheffield placed orders 
with Inland, but by the fourth quarter of 1995, Inland once again 
stopped selling lead billets. Since 1996, Sheffield has sourced lead 
billets from abroad.

(2) Affiliation

    The second factor to consider under section 781(a)(3) of the Act is 
whether the manufacturer or exporter of the lead billets is affiliated 
with the entity that assembles or completes the merchandise sold in the 
United States from the imported lead billets. In these circumvention 
inquiries, the Department inquired whether affiliation existed between 
the U.S. re-roller and the foreign respondents, pursuant to section 
771(33) of the Act. Based upon our analysis of the information on the 
record, including the questionnaire responses from both the U.S. re-
rollers and the foreign respondents, we find that no affiliation exists 
between the parties. There is no common ownership, direct or indirect, 
between the U.S. re-rollers and the foreign suppliers of lead billets, 
or a joint venture between the companies. Further, there are no facts 
(e.g., close supplier relationship) that suggest control of any of the 
re-rollers by the foreign respondents. In sum, we have found no 
evidence to indicate that the foreign respondents have attempted either 
to purchase or to construct re-rolling facilities in the United States 
which would allow them to import lead billet and process it into hot-
rolled lead bar for their own use.

(3) Whether Imports Have Increased

    The third factor to consider under section 781(a)(3) is whether 
imports of lead billets into the United States have increased after the 
initiation of the hot-rolled lead bar investigations. Therefore, we 
have analyzed the level of imports of lead billets from both Germany 
and the United Kingdom since 1992, the year in which the AD and CVD 
investigations of hot-rolled lead bar were initiated. While we find 
that imports of lead billets have increased from all three foreign 
respondents, there are reasons beyond the initiation of the AD and CVD 
investigations to explain their rise.
    According to some of the U.S. re-rollers, there has been a switch 
from domestically produced lead billets to foreign-sourced lead billets 
because Inland and USS/KOBE have not met the lead billet supply needs 
of the U.S. market. In addition, there were two new entrants to the 
hot-rolled lead bar market after the initiation of the hot-rolled lead 
bar investigations that required supplies of lead billet. Sheffield 
entered into the hot-rolled lead bar market after Bethlehem Steel 
exited the market in 1992. Two years later, Bar Tech entered the hot-
rolled lead bar market after purchasing Bethlehem's rolling facilities. 
Bethlehem Steel, one of the original petitioners in the hot-rolled lead 
bar investigations, produced its own lead billets; however, neither 
Sheffield nor Bar Tech currently have lead billet production and thus, 
must source their lead billets from other outside sources.
    Further, according to the ITC, in the United States almost all 
semifinished steel such as blooms, billets, and slabs are used in 
captive production of finished steel products. Steel processors, such 
as the U.S. re-rollers, are an important outlet for excess semifinished 
steel products manufactured by steel producers. In the relatively 
limited semifinished steel market, the consumer is also likely to be 
the supplier's competitor in sales of finished steel. See USITC 
Publication 2758, Industry & Trade Summary Semifinished Steel (March 
1994) 3, 5, and 11. Because the consumer of a billet is generally a 
competitor of the supplier, the dynamics of supply operate differently 
than for finished steel products. A steelmaker with excess melting 
capacity may have incentive to refrain from selling semifinished steel, 
such as billets.
    It has also been difficult to measure the rise in imports of lead 
billets from Germany and the United Kingdom against import trends from 
other countries. This is because the primary HTS number under which 
lead billets are imported is a basket category which includes other 
imports of semifinished products of iron or nonalloy steel with a 
chemical content of under 0.25 percent carbon. In its application, 
Inland and USS/KOBE provided import data for this HTS category. 
According to these data, imports of semifinished products of iron or 
nonalloy steels from countries not subject to AD or CVD orders 
increased after the initiation of the hot-rolled lead bar 
investigations, and significantly in some cases.

Summary of Statutory Analysis

    As discussed above, in order to make an affirmative determination 
of circumvention, all the elements under sections 781(a)(1) of the Act 
must be satisfied, taking into account the factors under section 
781(a)(2). In addition, section 781(a)(3) of the Act instructs the 
Department to consider, in determining whether to include parts or 
components within the scope of an order, such factors as: pattern of 
trade, affiliation, and whether imports into the United States of such 
parts or components increased after the initiation of the investigation 
which resulted in the issuance of the order. When the criteria

[[Page 40342]]

of section 781(a)(1), taking into account the factors under section 
781(a)(2), are applied to the individual facts, our analysis of whether 
circumvention is occurring is inconclusive. However, when the evidence 
to be considered under section 781(a)(3) of the Act, is incorporated 
into our analysis, we find that all of the evidence, taken as a whole, 
does not lead us to find a basis for including lead billets within the 
scope of the AD and CVD orders on hot-rolled lead bar from Germany and 
the United Kingdom.
    Pursuant to sections 781(a)(1) and (2), we find that the processing 
of lead billets into hot-rolled lead bar is essentially identical for 
all of the U.S. re-rollers involved in these inquiries. A detailed 
description of the re-rolling process is provided above. Though the 
U.S. re-rollers perform only one of the three processes needed to 
produce hot-rolled lead bar, they do perform the final process of 
converting the semifinished steel product into a functional finished 
steel good. Also, because the production process of converting lead 
billets into hot-rolled lead bar is a technically mature process, we 
did not find significant R&D expenditures by the U.S. re-rollers.
    The process of rolling lead billet into hot-rolled lead bar 
requires significant capital investment in rolling machinery and 
equipment, and compliance with a variety of OSHA and environmental 
regulations. Capital equipment and machinery used by the U.S. re-
rollers, once purchased, installed, and operational, represent 
significant fixed plant and equipment which cannot be easily 
disassembled and transported to another location. Investment in re-
rolling facilities requires a long-term investment of capital, long-
term corporate planning, and a long-term business commitment by the 
U.S. re-roller.
    Pursuant to section 781(a)(3), in reaching our determination, we 
took into consideration the factors of pattern of trade, sourcing, 
affiliation, and import trends. The facts concerning pattern of trade, 
sourcing, affiliation, and import trends do not indicate that there is 
circumvention of the hot-rolled lead bar orders. Even if we were to 
conclude that the value of processing performed by the U.S. re-rollers 
in the United States is relatively small, when we examined sections 
781(a)(1) and (2) in conjunction with the factors under section 
781(a)(3), the facts, taken as a whole, do not lead us to find that 
circumvention of the hot-rolled lead bar orders is occurring.
    Throughout the United States, the U.S. re-rollers have extensive 
capital-intensive rolling facilities staffed by skilled workers. As 
previously discussed, the U.S. re-rollers are not affiliated with the 
foreign respondents and their rolling facilities were in existence and 
operational before the initiation of the hot-rolled lead bar 
investigations. Indeed, the petition for the hot-rolled lead bar 
investigations was filed on behalf of two of the five U.S. re-rollers, 
AS&W and Republic. In addition, a third U.S. re-roller, Bar Tech, 
purchased its rolling facilities from Bethlehem Steel, one of the two 
original petitioners in the hot-rolled lead bar investigations.
    Based upon the information on the record, most of the U.S. re-
rollers' investment in rolling facilities in the United States was made 
before the initiation of the AD and CVD investigations of hot-rolled 
lead bar from Germany and the United Kingdom. In addition, some of the 
U.S. re-rollers made large investments in their rolling mills after 
1992, the year in which the investigations on hot-rolled lead bar 
began. Thus, before and after 1992, U.S. re-rollers made large 
investments of capital and resources into their rolling facilities. 
These facts demonstrate that there were substantial production 
facilities for converting lead billets into hot-rolled lead bar before 
the initiation of the hot-rolled lead bar investigations.
    Further, as discussed above, British Steel remains a large exporter 
of hot-rolled lead bar to the United States and its bar market in the 
United States is still much larger than its U.S. lead billet market. 
Thyssen was primarily a lead billet exporter to the United States 
before 1992, the year the hot-rolled lead bar investigations were 
initiated. That did not change after the initiation of the hot-rolled 
lead bar investigations. Saarstahl, which exports a relatively small 
volume of lead billets to the United States, is not a major player in 
the U.S. lead billet market.
    With respect to the U.S. re-rollers, changes in their respective 
sourcing patterns after 1992 appear to be due to changes in the U.S. 
market, independent of the hot-rolled lead bar investigations. U.S. re-
rollers were purchasing lead billets and rolling them into hot-rolled 
lead bar before 1992. For example, Republic began purchasing lead 
billets in the mid-80's from foreign sources. New hot-rolled lead bar 
entrants came into the market after the departure of Bethlehem, causing 
an increase in the demand for lead billets. While Bethlehem was able to 
produce its own lead billets, the two new entrants, Bar Tech and 
Sheffield, have to purchase their lead billets from independent 
sources. In addition, there were also shifts from domestic to foreign 
billet suppliers because the domestic companies producing lead billets 
were only able to meet their own internal consumption needs. As 
discussed above, since 1996, both AS&W and Sheffield have been forced 
to source lead billets from foreign suppliers as a result of the 
termination of their supply arrangements with USS/KOBE and Inland, 
respectively.
    Our analysis demonstrates that the increase in the importation of 
lead billets by the U.S. re-rollers in order to produce hot-rolled lead 
bar was due to many factors above and beyond the imposition of the bar 
orders. As noted above, a number of the U.S. re-rollers were producing 
hot-rolled lead bar from foreign lead billet suppliers prior to the 
orders and continued to produce hot-rolled lead bar after the orders. 
In addition, these unaffiliated U.S. re-rollers invested a substantial 
amount in their rolling facilities both before and after the AD and CVD 
orders to roll both lead and nonlead billets into hot-rolled bar.
    The facts of these inquiries also show that the foreign respondents 
did not change their product lines in the United States as a result of 
the initiation of the hot-rolled lead bar investigations. As noted, 
Thyssen's primary market in the United States has been lead billets 
since the mid-80's. British Steel, which commenced selling lead billets 
in 1994, continues to export a significant amount of hot-rolled lead 
bar to the United States.
    Based upon this analysis under section 781(a) of the Act, we 
determine that circumvention of the AD and CVD orders on hot-rolled 
lead bar is not occurring by reason of imports of lead billets from 
Germany and the United Kingdom.

Analysis of Comments Received

    We invited interested parties to comment on the preliminary 
negative determinations of circumvention of hot-rolled lead and bismuth 
carbon steel products from Germany and the United Kingdom. We received 
case and rebuttal briefs from the foreign respondents, British Steel, 
Saarstahl, Thyssen; two of the U.S. re-rollers, Republic and Sheffield; 
and the petitioners, USS/KOBE and Inland Steel Bar Company. All 
comments and rebuttal arguments properly raised by the parties in their 
briefs to the proceeding are discussed below.

[[Page 40343]]

Comment 1: The Statute Does Not Instruct the Department To Evaluate Why 
Imports Into the United States Have Increased

    The petitioners argue that pursuant to section 781(a)(3)(C) of the 
Act, the Department will consider whether ``the parts or components 
produced in such foreign country have increased after the initiation of 
the investigation which resulted in the issuance of such order or 
finding.'' The petitioners argue that the statute instructs the 
Department to consider whether an increase of the lead billets have 
occurred after the initiation of the original investigation without 
evaluating possible reasons for such an increase before or during the 
investigation period and up to the order date.
    The petitioners assert that the data on the record clearly 
demonstrates that the level of imported lead billets into the U.S. 
market from Germany and the United Kingdom has increased dramatically 
since the investigations of hot-rolled lead bar in 1992, while imports 
of bars and rods subject to the orders have markedly declined.
    The petitioners argue that the Department's reasons for the sharp 
increase of lead billets, as stated in the preliminary determinations, 
including general sourcing patterns in the U.S. semifinished steel 
market, import trends from other countries, and the re-rollers ``short 
supply'' argument, do not hold up to the facts. Moreover, the 
petitioners argue that none of the U.S. re-rollers or foreign 
respondents has alleged that there is a shortage of lead billets in the 
United States. The petitioners argue that none of the alternate 
rationales provided by the Department disproves the fact that the 
imports of lead billets from the United Kingdom and Germany increased 
since the investigation and subsequent orders placed on hot-rolled lead 
bars in 1992 and 1993, respectively.
    The foreign respondents argue that the pattern of trade 
demonstrates that the foreign respondents were selling lead billets to 
the United States before the imposition of the AD and CVD orders on 
hot-rolled lead bar. In addition, the U.S. re-rollers participating in 
these inquiries were in existence before the imposition of the hot-
rolled lead bar orders. Further, the U.S. re-rollers that were in 
existence before the AD and CVD orders on hot-rolled lead and bismuth 
carbon steel products had been purchasing lead billets prior to the AD 
and CVD orders.
    Collectively, the foreign respondents argue that the individual 
patterns of trade for British Steel, Thyssen, and Saarstahl are vastly 
different, and do not demonstrate on their part or the U.S. re-rollers' 
part that circumvention of the orders is occurring. For example, 
British Steel argues that its shipments of hot-rolled lead bar to the 
United States have and continue to exceed its shipments of lead 
billets. Thyssen argues that it was never a significant exporter of 
hot-rolled lead bars to the United States. Rather, Thyssen states that 
it sells significantly greater quantities of lead billets to unrelated 
companies throughout the world, including the United States, than hot-
rolled lead bars. Additionally, Thyssen notes that prior to the certain 
hot-rolled lead and bismuth carbon steel products from Brazil, France, 
Germany and the United Kingdom investigations, it sold lead billets to 
the United States in significantly greater quantities than its sales of 
hot-rolled lead bar. Saarstahl argues that its sales of lead billets to 
the United States have significantly declined since peaking in 1993.
    Both the foreign respondents and U.S. re-rollers argue that, 
because four of the five U.S. re-rollers participating in these 
proceedings either do not currently produce lead billets themselves, or 
can not produce sufficient quantities of lead billets to meet their 
requirements, a reliable source of lead billet supply is necessary. The 
U.S. re-rollers, as well as the foreign respondents, stress that the 
reason for the increase in lead billet imports from Germany and the 
United Kingdom is due to the fact that the domestic lead billet 
industry (i.e., petitioners) is either ``unwilling'' or ``unable'' to 
provide a consistent and reliable supply of lead billets to the U.S. 
re-rollers respective facilities. AS&W, Republic, and Sheffield have 
made repeated assertions that Inland and USS/KOBE do not have the 
capacity to meet their demands or the demands of the domestic lead 
billet merchant market and, therefore, were compelled to source lead 
billets from the foreign respondents because both Inland and USS/KOBE 
refused to sell lead billets on a consistent basis. British Steel notes 
that AS&W approached British Steel as a possible supply source of lead 
billets only after USS/KOBE terminated a supply agreement with AS&W in 
1996.
    Department's Position: Although the pattern of trade is not a 
determining factor, but rather one of several factors which the 
Department considers in evaluating whether circumvention is occurring, 
the Department did consider this to be an important factor in its 
analysis as to whether circumvention of the AD and CVD orders are 
occurring.
    The petitioners have argued that in evaluating the pattern of 
trade, it is sufficient merely to look at the trends of the data 
without further examination of the facts surrounding those trends. For 
example, petitioners contend that we have disregarded the statute by 
going behind the import statistics to consider what they characterize 
as ``short supply'' issues. We disagree with petitioners'' 
interpretation of the statute. The petitioners' argument that the 
Department only examine whether imports have increased would convert 
this criterion into a mechanical approach which we believe is much less 
meaningful than an examination of all the relevant circumstances, 
including the causes behind the import trends. The ``pattern of trade'' 
is more than just bare import statistics alone.
    Therefore, in order to determine whether circumvention of an order 
has occurred, we are directed by the SAA to examine the individual 
facts on a case-by-case basis for each circumvention inquiry. For 
example, if imports of lead billet increased after the order by 10 
percent, while the increase in imports of hot-rolled lead bar was 100 
percent after the imposition of the order, the petitioners' 
interpretation of the statute would require that the Department ignore 
contributing factors and explanations for an increase in the level of 
importations when deciding whether or not circumvention of an order has 
occurred. To adopt this interpretation of the statute would render the 
individual facts of a circumvention inquiry meaningless. In other 
words, the petitioners' suggestion that the Department must only 
consider quantitative changes pursuant to section 781(a)(3)(C) of the 
Act without consideration of the facts of the circumvention inquiry and 
the underlying causes that may have contributed to such changes is 
inappropriate for evaluation of this criterion.
    In analyzing the level of imports of lead billets from both Germany 
and the United Kingdom, respectively, we found that imports of lead 
billets have increased from all three foreign respondents. However, the 
respective increases appear to be the result of causes other than the 
initiation of the hot-rolled lead bar investigations and the subsequent 
orders.
    In evaluating the criterion provided by section 781(a)(3)(C), the 
Department relied, in part, upon the fact that since the mid-1980s 
Thyssen's primary product market in the United States has been lead 
billets, not hot-rolled lead bar. With respect to British Steel, the 
Department found that the pattern of trade did not suggest 
circumvention because British Steel remains a large exporter of hot-
rolled lead bar to the

[[Page 40344]]

United States and its hot-rolled lead bar market in the United States 
is still much larger than its lead billet market. Further, the 
reduction or elimination of domestic supply by Inland and/or USS/KOBE's 
inability to provide a consistent supply of lead billets to the U.S. 
merchant lead billet market is a contributing cause to the reported 
increase in imported lead billets into the United States. Thus, even 
though the petitioners contend that there is now ``available'' domestic 
capacity to meet the U.S. lead billet merchant market demand, the 
record clearly demonstrates that the petitioners' capacity is not 
necessarily available to U.S. re-rollers as evidenced by the re-
rollers' inability to secure a consistent supply from domestic sources. 
Indeed, Inland has stated publicly that it does not sell lead billets 
to the U.S. lead billet merchant market. See February 17, 1998 Ex Parte 
Memorandum from the Team, through Barbara E. Tillman, to the File.
    We also found during our verification of Republic various 
contractual agreements between Republic and its customers. These 
contracts, also known as a ``frozen practice,'' identify the lead 
billet supplier, specifications and functional requirements of the 
input. Republic has entered into a number of ``frozen practice'' 
arrangements with its customers which require Republic to use specific 
lead billet suppliers in the production of the multiple downstream 
products which are purchased by the automobile industry in the United 
States. In these cases, changes in sourcing lead billets without 
written approval of the customer are subject to refusal. See 
Verification of Republic Engineered Steel's Questionnaire Responses in 
the Anticircumvention Inquiry of the Antidumping and Countervailing 
Duty Orders on Hot-Rolled Lead and Bismuth Carbon Steel Products from 
Germany and the United Kingdom, July 6, 1998 at 4.

Comment 2: The Department Should Compare the Investments in a Re-
rolling Mill to the Investments Required for an Integrated Steel 
Facility

    The petitioners argue that the Department failed to provide a 
proper analysis pursuant to section 781(a)(2) of the Act as to whether 
the process carried on in the United States is ``minor'' or 
``insignificant.'' In particular, the petitioners argue that the 
Department's analysis was deficient with respect to the level of 
investment factor. The petitioners contend that the Department, in 
reaching its preliminary determinations, merely summarized generic hot-
rolling investment information submitted by the U.S. re-rollers and 
concluded that ``[i]nvestment in re-rolling facilities requires a long 
term investment of capital'' and that all of the U.S. re-rollers have 
made ``large investments of capital and resources into their rolling 
facilities'' without providing a proper comparison of what constituted 
a ``long term investment of capital'' and ``large investment of 
capital.'' The petitioners argue that the Department in its final 
determination must compare the level of investment required to produce 
lead billets relative to the investment required to roll lead billet 
into hot-rolled lead bar. The petitioners argue that using a 
comparative analysis would demonstrate that the production of lead 
billets requires ``substantial'' investment in specialized facilities, 
including dedicated equipment, such as bloom casters, lead injection 
equipment, and fume control technology, whereas the level of investment 
dedicated and required to roll lead billets into hot-rolled lead bar at 
the U.S. re-roller facilities would be deemed ``minor'' or 
``insignificant.''
    The petitioners argue that the investment data from the U.S. re-
rollers clearly establishes that the plant and equipment required for 
the production of hot-rolled lead bar represents only a fraction of the 
plant and equipment required for the production of lead billets. 
According to the petitioners, the investment required to construct the 
facilities and purchase capital machinery dedicated and required for 
the production of lead billets vastly exceeds the level of investment 
in the U.S. re-rollers' current facilities and equipment which merely 
roll the lead and/or nonlead billets into hot-rolled bar.
    The petitioners also note that in their application for these 
circumvention inquiries, the petitioners compared the level of 
investment necessary to roll lead billets into hot-roll lead bar with 
that required to produce lead billets, and that this relative 
comparison prompted the Department to initiate these inquiries because 
the level of investment required to roll lead billets at the U.S. re-
roller facilities was ``minor'' in comparison to the production of lead 
billets at the petitioners'' integrated facility.
    Further, the petitioners contend that the Department, in reaching 
its preliminary determination, failed to follow previous 
anticircumvention inquiries where the Department conducted a 
comparative analysis of the level of investment between an industry and 
its individual segments. See Granular Polytetrafluoroethylene Resin 
from Italy; Final Affirmative Determination of Circumvention of 
Antidumping Duty Order, 63 FR 26100 (April 30, 1993)(PTFE), and Brass 
Sheet and Strip from Canada; Final Affirmative Determination of 
Circumvention of Antidumping Duty Order, 58 FR 33610 (June 18, 1993) 
(Brass Sheet and Strip). In PTFE, the petitioners assert, the 
Department made an affirmative finding of circumvention, in part, 
because ``* * * in comparison to the investment required to establish 
an integrated production facility for granular PTFE resin (finished 
product), respondent's investment in the United States is relatively 
minor'' (58 FR at 26103). Petitioners also cite to Brass Sheet and 
Strip, where the Department found that failure to compare the re-
roller's operations to an integrated mill would not ``provide * * *  an 
 accurate representation of the industry as a whole * * *  nor  a 
meaningful evaluation of Great Lakes' operations in particular'' (58 FR 
at 33613).
    The U.S. re-rollers and foreign respondents disagree with the 
petitioners' assertion that the level of investment is ``minor'' and 
that a comparison of an integrated facility to a rolling facility is 
warranted in these inquiries. The U.S. re-rollers and foreign 
respondents argue that the record in these inquiries demonstrates that 
the U.S. re-rollers' absolute level of their investment in their 
respective bar mills is ``significant.'' Both the U.S. re-rollers and 
foreign respondents argue that during the course of these inquiries, 
documentation has been provided and verified confirming that the level 
of investment required to modernize a bar mill facility or to construct 
a new state of the art bar mill facility in the United States 
demonstrated a substantial level of investment in absolute terms. These 
multi-million dollar investments in the United States, the U.S. re-
rollers and foreign respondents argue, do not comport with the type of 
``screwdriver'' operations intended to be captured by the statutory 
anticircumvention provisions.
    Both the U.S. re-rollers and foreign respondents argue that the 
mining, smelting, casting and refining of steel is performed by 
integrated producers, which is just one part of the entire U.S. steel 
making industry, whereas the U.S. re-rollers are a distinct segment of 
the steel making industry. Further, the foreign respondents point out 
that the Department has previously rejected comparisons of a 
petitioner's production activities with those of foreign respondents, 
when separate segments of the industry exist. See, e.g., Portable 
Electric Typewriters from Japan (Brother

[[Page 40345]]

Industries, Ltd. and Brother Industries (USA), Inc.); Negative Final 
Determination of Circumvention of Antidumping Order 56 FR 58031 
(November 15, 1991)(PETS). Similarly, the foreign respondents argue 
that the rolling operation of lead billets into lead bar is not the 
kind of secondary operation the Department found in Brass Sheet and 
Strip, but rather, is a substantial operation involving large amounts 
of investment necessary to perform its intended operation (i.e., 
rolling, testing, finishing, etc.).
    Department's Position: In reaching our final determinations, the 
Department evaluated the U.S. re-rollers' level of investment within 
the context of the amount of investment required at a rolling mill for 
the production of hot-rolled lead and nonlead bar. We believe that a 
comparison of the U.S. re-rollers' level of investment with that of an 
integrated steel making facility, as suggested by the petitioners, is 
not called for in these inquiries. First, neither the statute and SAA, 
nor the legislative history contains a requirement that the Department 
make such a comparison.
    Second, it is not necessary or appropriate in this case to 
undertake such an analysis because the activities undertaken by the 
U.S. re-rollers historically represent a pre-existing and distinct 
segment of the leaded steel industry. The investment made by each U.S. 
re-roller in its facilities, as the Department has verified, was 
largely made prior to the orders. Although the actual amount of an 
individual U.S. re-rollers' investment is business proprietary 
information, the data from the U.S. re-rollers reveal that, prior to 
the inquiries in these cases, they made long-term commitments to 
produce hot-rolled bar from leaded and nonleaded billets and, to this 
end, invested a substantial amount of money in plant and equipment. 
Furthermore, according to the ITC, the manufacturing process for the 
leaded steel industry involves mining, melting, casting, rolling, 
testing, and finishing. The ITC notes that operations performed by 
integrated mills include all of the above and, therefore, such 
facilities require more investment in relation to the U.S. re-rollers 
which undertake the end stage, characterized by rolling, testing and 
finishing operations. Thus, a comparison of operations undertaken and 
the investment needed by an integrated mill would not represent an 
appropriate standard in this case and would fail to provide an accurate 
representation of the U.S. re-rollers' level of investment. The 
petitioners' assertion that the U.S. re-rollers' investment in rolling 
mills is small compared to its integrated mills' investment in the 
United States is irrelevant because, here, we are only concerned with 
the investment required at a rolling mill, a separate, recognized 
segment of the steelmaking industry as identified by the ITC.
    Section 781 of the Act was not intended to deter commercial 
investment in the United States or to thwart the legitimate business 
interests of U.S. companies. SAA at 894. In this regard, the record in 
this proceeding establishes that each U.S. re-roller has made 
significant investment in the United States in plant, equipment, and 
the training of employees related to the rolling of leaded billets, and 
they did so largely prior to the antidumping investigations. In view of 
the amount and type of investment by the U.S. re-rollers and the 
existence of these operations prior to the investigations, we do not 
agree that the level of investment in this case plainly supports a 
finding that the processing in the United States is minor or 
insignificant, whether or not the level of investment may be smaller 
than the amount needed for a fully integrated steel mill, as 
petitioners argue. Rather, when all of the facts of this case are 
considered, we find that these investments represent significant 
investments in the re-rolling segment of the U.S. industry.
    Although the petitioners cite to previous circumvention decisions 
where the Department did compare segments of an industry to its whole, 
the Department has also found it unnecessary to make such comparisons 
in other circumvention inquiries. See, e.g., Certain Internal-
Combustion, Industrial Forklift Trucks from Japan; Negative Final 
Determination of Circumvention of Antidumping Duty Order, 55 FR 6028 
(February 21, 1990) (Forklift Trucks). In Forklift Trucks, the 
Department noted that the foreign respondents ``made substantial 
investments in plant and equipment'' (55 FR at 6029), and that the 
``level of production operations is too great to characterize these 
operations as completion or assembly operations established for the 
purpose of evading the antidumping duty order'' (see Certain Internal-
Combustion, Industrial Forklift Trucks from Japan; Preliminary 
Determination of Circumvention of Antidumping Duty Order, 54 FR 50260, 
50263 (December 5, 1989)). In Forklift Trucks the Department determined 
that ``it is not necessary that respondent's investments be comparable 
with those of (petitioners) * * * in order for the Department to decide 
if respondent's facilities are more than mere completion or assembly 
operations' (55 FR at 6029).
    In addition, there are factual differences between these 
circumvention inquiries of the lead bar orders and the two cases cited 
by the petitioners. In PTFE, the inquiry involved whether the Italian 
PTFE manufacturer set up and operated facilities in the United States 
in order to circumvent the PTFE order. The facility was newly 
established and performed only a portion of the manufacturing process 
the company performed in Italy. Thus, in that case, a comparison of the 
Italian manufacturer's operations in the United States with its 
operations in Italy was relevant to the inquiry because the allegation 
of circumvention in PTFE focused on whether the Italian respondent had 
set up a related subsidiary in the United States in order to circumvent 
the order. Given the nature of the allegation, it would have been 
extremely difficult to determine whether the Italian company started 
its U.S. processing in order to circumvent the order on PTFE without 
comparing the nature of its processing facilities in the United States 
with that company's operations in Italy. This fact pattern is not 
present in these circumvention inquiries on lead bar. For one thing, 
the U.S. rerollers are not related to the U.K. and German lead bar 
producers. Moreover, the U.S. rerollers existed at the time that the 
lead bar orders were issued.
    In addition, the fact pattern in Brass Sheet and Strip does not 
support the petitioners' argument that we should compare the 
investments made by the U.S. re-rollers with the investments required 
of an integrated steel manufacturer. In Brass Sheet and Strip, the 
Department compared the processes performed by the importer's facility 
with the operations normally performed by brass mills in the United 
States, because the importer's operations were not part of a separate, 
recognized segment of the brass sheet and strip industry. In Brass 
Sheet and Strip, we found that the importer's small amount of cold-
breakdown rolling was insufficient for us to consider it a fabricator, 
but also that its operations were not comparable to the brass re-
rollers because the re-rollers purchase brass sheet and strip and roll 
it into a different brass sheet and strip product. The purchased 
products already were within the scope of the order, as was the final 
product. In contrast, the importer subject to the circumvention 
inquiry, Great Lakes, purchased brass plate that had been processed to 
the point of being one rolling step short of constituting sheet and 
strip. Because Great Lakes

[[Page 40346]]

performed some processing of the plate, the operations it performed did 
not represent the type of processing that had been performed by a 
separate, recognized segment of the brass sheet and strip industry. 
Prior to Great Lakes, there were no ``re-rollers'' that processed 
plate. Great Lakes' operations, which were established after the order 
was issued, included an operation normally performed by brass mills and 
not by re-rollers. Thus, in Brass Sheet and Strip, we compared the U.S. 
importer's processing to that of the brass mill, where the type of 
processing Great Lakes performed normally took place in that industry. 
Again, the facts which caused us to compare Great Lakes' rolling 
facilities to integrated facilities in Brass Sheet and Strip are not 
present in the hot-rolled lead bar circumvention inquiries. This case 
does not involve a new and different type of processor. The U.S. lead 
bar industry is comprised of both integrated producers and re-rollers. 
This composition of the U.S. lead bar industry existed before the 
initiation of the original AD and CVD investigations of lead bar from 
Germany and the United Kingdom. Because re-rollers are a separate, 
recognized part of the U.S. lead bar industry, there is no need to 
compare their investments and facilities to another segment of the U.S. 
steel industry.

Comment 3: The Department Should Compare the Extent and Nature of Re-
rolling Operations to Those of an Integrated Steel Facility

    The petitioners argue that using a comparative analysis between the 
nature and extent of a U.S. re-roller's processing and that of an 
integrated facility would demonstrate that the quality, inherent 
characteristics and machinability of the final product are imparted at 
the steps taken in the casting stage of an integrated producer and that 
the rolling of lead billets into hot-rolled lead bar is merely a 
shaping and sizing process which does not add to the value because the 
fundamental chemical properties are imparted in the production of the 
semifinished leaded steel. The petitioners contend that the production 
of the semifinished lead billet is substantial in terms of equipment 
required (i.e., specialized facilities, including dedicated equipment, 
such as bloom casters, lead injection equipment, and fume control 
technology) and that the conversion of the semifinished steel into hot-
rolled bar is ``minor.''
    Further, the petitioners argue that the Department has failed to 
follow previous anticircumvention precedent where the Department made a 
comparison of a segment of an industry to the entire industry as a 
whole. The petitioners argue that, in Brass Sheet and Strip, the 
Department evaluated a similar industry via a relative comparison, and 
that this comparison rendered an affirmative determination of 
circumvention. In Brass Sheet and Strip, the Department considered that 
the nature of the production process indicated that U.S. value added 
was ``small'' because melting and casting operations performed in 
integrated brass mills were the ``primary operations for production of 
brass sheet and strip; whereas rolling operations add only the last 
fraction of value.'' The petitioners contend that the U.S. re-rollers, 
in the instant proceeding, perform the last of three stages in the 
manufacturing process for hot-rolled leaded bar and that this process 
is similar to the finishing processes of brass plate in Brass Sheet and 
Strip, where the rolling of brass plate into brass sheet entailed only 
one process for turning a semifinished product into a single finished 
product.
    Similarly, the petitioners assert that in PTFE the Department 
compared the respondent's integrated facility in Italy with its 
affiliated U.S. production facility. The petitioners point out that in 
PTFE the Department concluded that the ``post-treatment processes are 
not complex relative to the processes required to produce PTFE wet raw 
polymer, and do not fundamentally alter the nature of the product'' (58 
FR at 26102). The petitioners argue that as in the instant proceedings, 
the inherent characteristics of the lead billet are imparted at the 
melting stage, not the rolling stage and that the rolling stage should 
be considered similar to post treatment.
    The foreign respondents refute the petitioners' allegations that 
the nature and extent of processing lead billets into hot-rolled lead 
bar is ``minor.'' In particular, Thyssen points out that Inland argued 
to the ITC in the original lead bar investigations, that:

[t]he rolling practice of injected steels is also unique and with it 
come additional production costs * * * must be heated up to an hour 
longer than SBQ (special bar quality) carbon steels to achieve the 
proper rolling temperature; therefore adding extra heating cost * * 
* [t]here is substantially more time involved in producing a lead or 
bismuth product and therefore it becomes a more costly process.

(See Thyssen's July 21, 1997 submission.) Further, the foreign 
respondents and U.S. re-rollers contend that the Department has the 
discretion to engage in a comparative analysis, and that the use of a 
comparative analysis would be nonsensical in the steel industry 
context, because the integrated facility produces a full range of 
products with a different cost structure, different production volumes 
and various product mixes than that of a rolling mill. The foreign 
respondents argue that under the petitioners' hypothesis, any 
production process that takes place after the casting of the 
semifinished steel may be characterized as ``minor or insignificant'' 
by comparison, even though the further processing is very significant 
in absolute terms. The U.S. re-rollers contend that an examination of 
their descriptions of the production process reveal that the processing 
of lead billet into hot-rolled lead bar that they perform in the United 
States is substantial. According to the U.S. re-rollers, the operations 
performed at their respective U.S. facilities require sophisticated and 
complex machinery in order to adhere to strict environmental and 
process quality controls.
    The foreign respondents also refute the petitioners' assertions 
that the machinery at the melting and casting stages at an integrated 
facility is dedicated solely to the production of lead billets. The 
foreign respondents argue that neither an integrated facility's nor the 
U.S. re-rollers' equipment is used solely for the production of either 
leaded and nonleaded steel products, but rather a product mix involving 
chemistries for both leaded and nonleaded products. The foreign 
respondents argue that the smelting and casting equipment at the 
integrated facility (i.e., furnace and tundish) can be used to produce 
both leaded and nonleaded steel products.
    Both the foreign respondents and U.S. re-rollers argue that, given 
the nature of the U.S. re-rollers operations, the fact that they do not 
add any materials to the imported lead billet is irrelevant because 
there is virtually no market for lead billet other than re-roller 
facilities. The U.S. re-rollers state that they must substantially 
transform the lead billet into a hot-rolled lead bar in order to 
produce a saleable product. Foreign respondents stress that a lead 
billet is a semifinished product that is used by the U.S. re-rollers to 
produce other semifinished products (e.g., hot-rolled lead bar) and 
finished products, (i.e., cold-finished lead bar).
    Department's Position: The petitioners' main argument that the 
Department should compare a re-rolling facility to an integrated steel 
facility in determining whether the re-rolling operations in the United 
States are ``minor'' or ``insignificant'' and their citations to Brass 
Sheet and Strip and

[[Page 40347]]

PTFE have been addressed in the ``Department's Position'' to ``Comment 
2.'' The issue present in these circumvention inquiries is not whether 
the production of steel is more complex than the re-rolling and 
completion of a semifinished steel product but whether the rolling of 
lead billets into hot-rolled lead bar is a ``minor'' or 
``insignificant'' process being used to circumvent the AD and CVD 
orders on hot-rolled lead bar from Germany and the United Kingdom. For 
the reasons stated earlier in our response to ``Comment 2,'' we did not 
compare the operations of the U.S. re-rollers to the production of 
steel by integrated steel producers.
    In our analysis of the process used by the U.S. re-rollers' 
operations, the Department thoroughly considered many factors, 
including the square footage of building space dedicated to hot-
rolling, the number of employees involved in hot-rolling, and the 
capital equipment used in the production of hot-rolled lead bar, as 
well as the ITC's description of the re-rolling process carried on by 
the U.S. industry. On the basis of this analysis, the Department 
concluded in the preliminary determinations that throughout the United 
States, the U.S. re-rollers have extensive capital-intensive rolling 
facilities staffed by skilled workers which are used to transform lead 
billet into hot-rolled lead bar.
    In making our final determinations, we again reviewed the records 
in these inquiries. During verification, the Department toured AS&W's 
rolling facilities and Republic's meltshop and rolling facilities. We 
reviewed the production processes and facilities with respect to the 
manufacture of lead billets and the subsequent rolling of the lead 
billet into hot-rolled lead bar. While touring Republic's meltshop, we 
verified that Republic employs workers responsible for teeming, 
controlling, and inoculating the molten steel with lead wire. See 
Republic's Verification Report at 7. In addition, during our tour of 
AS&W's bar mill facility, company officials stated that while AS&W 
``does not have machinery dedicated exclusively for the purpose of 
rolling leaded steel products, the bar mill was designed specifically 
to roll high quality lead and alloy products.'' Further, AS&W provided 
documentation which showed that in comparison to its rod mill, its bar 
mill rolls at very high tolerances, and as such, normally will roll 
lead billets as opposed to nonlead billets into hot-rolled products. 
See AS&W Verification Report at 6. Both plant tours demonstrated that 
the production processes at the U.S. re-roller facilities require 
stringent quality control, strict adherence to OSHA and environmental 
regulations, and special training for employees.
    Thus, we disagree with the petitioners that the production of hot-
rolled lead bar from lead billets is similar to the process examined in 
Brass Sheet and Strip. Based on our analysis of the re-rollers 
production process, we found the transformation of lead billet into 
lead bar to be a more substantial undertaking than the process used in 
Brass Sheet and Strip. For example, Great Lakes did not perform hot-
breakdown rolling, but merely a small amount of cold-breakdown rolling; 
whereas, the re-rollers in these inquiries perform hot-breakdown 
rolling before the lead billet can be transformed into a lead bar. 
Next, the Department found in Brass Sheet and Strip that the rerolling 
operations that Great Lakes performed, which included all of the 
processes that rerollers perform, with one additional step, namely that 
of cold-breakdown rolling, ``add only the last fraction of value'' 
because Great Lakes'' fabrication process turned a semifinished product 
(brass plate), a product which was merely one rolling step short of 
constituting a single finished product (brass sheet and strip). In 
contrast, the production of lead bar from lead billets is a more 
involved multi-process operation as we found on verification and as 
described in the ITC's report. See Statutory Analysis Section of this 
notice for a discussion of the production processes.
    In Forklift Trucks, the Department examined all of the facts and 
circumstances surrounding the respondent's domestic assembly operations 
and noted that all foreign respondents ``made substantial investments 
in plant and equipment,'' and that the ``level of production operations 
is too great to characterize these operations as completion or assembly 
operations established for the purpose of evading the antidumping 
order.'' Specifically, the Department discussed the manner in which it 
analyzed the processing operations performed in the following manner:

    We examined the nature of foreign respondents' U.S. production 
facilities in order to determine whether such facilities were 
similar to the examples of circumvention cited in the legislative 
history. Since a major goal of the circumvention provision is to 
prevent evasion of an antidumping duty order through ``slight 
changes'' in the method of production or shipment * * * examination 
of foreign respondents' U.S. production processes is an important 
part of our analysis.

55 FR at 6030. Forklift Trucks is instructive for these final 
determinations because the record in these proceedings demonstrates 
that the operations which the U.S. re-rollers undertake in order to 
produce hot-rolled lead bar from lead billets do not involve evasion of 
the orders through ``slight changes.''

Comment 4: Valued-Added Calculated for U.S. Re-Rolling Process is 
``Minor''

    The petitioners contend that a comparison of the ranged value-added 
data in these inquiries to that found in Brass Sheet and Strip should 
have led the Department to conclude that the amount of value added by 
the U.S. re-rollers in rolling lead billet into hot-rolled lead bar is 
``minor'' or ``insignificant.'' In support of their argument, the 
petitioners provided the Department with a weighted-average calculation 
of the value-added by the re-rollers which indicated that the value 
added in the instant inquiries is ``similar in amount'' to the value-
added calculated in Brass Sheet and Strip. Given this similarity, the 
petitioners argue that the weight-averaged value-added calculation is 
within the range that the Department previously determined to be 
``small'' under the pre-URAA statute.
    Foreign respondents argue that the value-added that the Department 
calculated in its preliminary determinations is not ``small.'' They 
argue that the Department can determine whether the value-added in a 
circumvention inquiry is ``significant'' on a case-by-case basis.
    Department's Position: The legislative history to section 781(a) 
establishes that Congress intended the Department to make 
determinations regarding circumvention on a case-by-case basis in 
recognition that the facts of individual cases and the nature of 
specific industries vary widely. In particular, Congress directed the 
Department to focus more on the nature of the production process and 
less on the difference in value between the subject merchandise and the 
imported parts or components. (See S. Rep. No. 103-412, 81-82 (1994)). 
Thus, we believe that any attempt to establish a numerical standard 
would be contrary to the intentions of Congress.
    The Department's determination that the U.S. value-added in Brass 
Sheet and Strip was ``small'' is irrelevant to the present proceedings 
because that decision concerns the unique nature and extent of 
fabrication undertaken by a U.S. importer in an entirely different 
industry with different production processes. In addition, that case 
was decided before 1995, i.e., before the changes made in section 781 
of the Act

[[Page 40348]]

by the URAA were effective. The URAA, which became effective on January 
1, 1995, redirected the focus of an circumvention inquiry away from a 
numerical calculation of value-added towards a more qualitative focus 
on the nature of the production process. Under the URAA, which provides 
the current statutory language for section 781 of the Act, the 
numerical calculation of value-added is just one of five factors the 
Department is to examine in our determination of whether the processing 
undertaken in the United States is minor or insignificant.
    We also note, in conclusion, that in Brass Sheet and Strip, which 
is cited by the petitioners in support of their argument, the 
Department explicitly stated in the ``Affirmative Final Determination 
of Circumvention'' section of that final determination ``that our 
analysis of the difference in value and resulting determination of 
`small' in this case are not necessarily synonymous with such 
determinations that the Department will formulate in future anti-
circumvention inquiries since Congress has directed us to make 
determinations regarding the difference in value on a case-by-case 
basis.''

Comment 5: The Department's Preliminary Determination of No 
Circumvention Conflicts With Prior Case Precedent

    The petitioners argue that the Department's preliminary 
determinations are incompatible with its previous finding of 
circumvention in Brass Sheet and Strip, which involved similar fact 
patterns (i.e., value-added calculations, capital-intensive industries, 
production processes, etc.).
    In their case briefs, the petitioners provide the Department with a 
calculated weighted-average amount of the value-added in the instant 
inquiries and argue that this weighted-average amount is ``similar'' to 
the value-added of 15% determined in Brass Sheet and Strip, where the 
Department found circumvention. The petitioners also contend that in 
Brass Sheet and Strip the Department determined that the re-rolling of 
brass plate into brass sheet and strip neither adds additional 
materials nor imparts essentially physical characteristics to the 
rerolled brass plate but rather ``adds only the last fraction of 
value'' by shaping and sizing the brass plate. The petitioners argue 
that the Department in Brass Sheet and Strip considered that the nature 
of the production process was indicative that the U.S. value-added was 
``small,'' since melting and casting operations performed in integrated 
brass mills were the ``primary operations for production of brass sheet 
and strip; whereas re-rolling operations add only the last fraction of 
value * * *'' (58 FR at 33614).
    The foreign respondents argue that the brass sheet and strip 
industry (i.e., producers and fabricators and its subgroup, secondary 
mills) and the hot-rolled lead bar industry are vastly different. They 
contend that in Brass Sheet and Strip, the brass plate was merely 
``finished'' into brass sheet and strip. On the other hand, the U.S. 
re-rollers and foreign respondents argue that the production of hot-
rolled lead bar from lead billets is much more involved than merely 
``finishing'' the lead billet into hot-rolled bar. They assert that the 
record clearly demonstrates that the production of lead billets into 
hot-rolled lead bar involves more steps (i.e., hot-rolling, testing, 
and finishing) than the mere conversion of brass sheet and strip from 
brass plate (i.e., finishing). In addition, the foreign respondents and 
U.S. re-rollers argue that the majority of hot-rolled lead bar sold in 
the merchant market is still an intermediate good that must undergo 
further processing (i.e., cold finishing, forming, and testing) before 
it can be considered a finished good. On the other hand, foreign 
respondents argue, brass sheet and/or strip are themselves finished 
goods.
    Department's Position: We agree with the foreign respondents and 
U.S. re-rollers that the fact pattern of these inquiries is different 
from Brass Sheet and Strip. As we have previously noted, the Department 
must determine whether or not circumvention of an order has occurred 
based upon the nature of the specific circumvention inquiry and the 
facts surrounding that circumvention inquiry. Thus, the facts which are 
present in the instant circumvention inquiries and the nature of the 
circumvention allegations differ from the facts which were present in 
Brass Sheet and Strip. A review of Brass Sheet and Strip and a review 
of the allegations and the facts surrounding these lead bar 
circumvention inquiries reveal that the petitioners' reliance on Brass 
Sheet and Strip to support their argument that the Department has erred 
in finding no circumvention of the lead bar orders is misplaced.
    In order to determine whether the value added by Great Lakes, a 
secondary mill, specifically a brass plate re-roller, in Brass Sheet 
and Strip was ``small,'' the Department examined the operations of 
Great Lakes' re-rolling of brass plate into brass sheet and strip. We 
compared Great Lakes' operations to the operations performed by 
fabricators in the U.S. brass sheet and strip industry, otherwise known 
as brass mills, which perform fabrication processes such as casting, 
melting and some re-rolling. Since Great Lakes re-rolled thicker brass 
plate, while secondary mills normally re-roll the thinner gauge brass 
sheet and strip, the Department determined that a comparison of the 
Great Lakes' operations to the operations normally performed by a brass 
mill was warranted, and upon examination, determined that the value 
added by Great Lakes indicated that the processing performed was minor. 
This decision was essentially based upon the fact that Great Lakes was 
founded in 1990, more than three years after the issuance of the 
antidumping order and the fact that, at the time of the original 
investigation, brass plate re-rollers were not considered a separate 
and recognized segment of the U.S. brass sheet and strip industry 
because the established re-rollers began the re-rolling process with 
brass sheet and strip, which itself was already within the scope of the 
investigation and subsequent order. See the ``Department's Position'' 
to ``Comment 2'' in Brass Sheet and Strip. In other words, because 
there was no brass plate re-roller industry segment with which to 
compare Great Lakes' activities during the POI, the Department compared 
Great Lakes' operations to that of a fabricator.
    As we stated in Brass Sheet and Strip, the U.S. importer, Great 
Lakes, imported brass plate, a product which was one rolling step short 
of constituting sheet and strip prior to importation. In the brass 
sheet and strip industry, the primary fabrication process is hot-
breakdown rolling, whereby brass ingots are heated, rolled, and coiled, 
then further reduced through cold-breakdown rolling. The relatively 
small amount of Great Lakes' cold-breakdown rolling was insufficient to 
consider Great Lakes a fabricator; however, since Great Lakes re-rolled 
brass plate, not the thinner brass sheet and strip re-rolled by the 
recognized secondary brass sheet and strip mills, the Department 
compared Great Lakes operations to the operations of brass fabricators 
and concluded that the re-rolling of brass plate into brass sheet and 
strip relative to a fabricator's processes was ``small.'' The 
petitioners' arguments that we should compare the hot rolling process 
in these inquiries to the process of an integrated steel facility 
because such a comparison was conducted in Brass Sheet and Strip is 
misplaced, because the rolling mills which subsequently roll lead 
billets into hot-rolled lead bar predate the order and have always been

[[Page 40349]]

considered a distinct part of the industry. In contrast, brass plate 
re-rollers were not considered a separate and recognized segment of the 
brass sheet and strip industry but one created by a foreign exporter in 
an attempt to evade the order on brass sheet and strip.
    Since the date of the determination of circumvention in Brass Sheet 
and Strip, there were also changes in the statute relating to the 
determination of the amount of value added in the United States and the 
place that this has in the Department's analysis. Whereas under the 
statute applicable in Brass Sheet and Strip a determination of 
circumvention required a finding that the value added to the imported 
parts or components was ``small,'' under the current statute the amount 
of value added is but one factor to be considered in determining 
whether the processing or assembly in the United States is ``minor or 
insignificant.'' Accordingly, whether or not the value added is a 
``small proportion,'' we must consider other factors in determining 
whether the processing is ``minor or insignificant.'' Thus, while case 
precedent prior to the enactment of the URAA, which became effective 
January 1, 1995, can provide useful guidance to the Department in post-
URAA circumvention inquiries, certain changes in the Act expanded the 
factors to be considered by the Department in determining whether 
circumvention of an order has occurred.
    For example, in Brass Sheet and Strip, our circumvention 
determination did not address level of investment. With the changes to 
the Act under the URAA, the Department must consider the level of 
investment by the U.S. re-rollers in determining whether the processing 
in the United States is minor or insignificant. As stated earlier, some 
of the U.S. re-rollers have invested over 100 million dollars in their 
rolling facilities. These facts must be considered by the Department in 
reaching determinations in these hot-rolled lead bar inquiries, while 
these factors were not addressed in Brass Sheet and Strip.
    In both these hot-rolled lead bar circumvention inquiries and in 
Brass Sheet and Strip, the Department did examine patterns of trade to 
determine whether there were increases in imports of the alleged 
circumventing product. In Brass Sheet and Strip, the facilities of 
Great Lakes, an affiliated importer, were introduced into production in 
1990, more than three years after issuance of the antidumping duty 
order, and imports of Canadian brass plate increased ten-fold from 1990 
to 1991 (58 FR at 33610, 33615). This massive increase in imports of 
brass plate following the establishment of this facility contrasts 
markedly with the fact pattern in these hot-rolled lead bar inquiries, 
where there was no dramatic increase in the importation of lead billets 
connected with the establishment of an affiliated rolling mill in the 
United States before and after the issuance of these orders (see the 
``Department's Position'' to ``Comment 1,'' above). In these inquiries, 
while there was some increase in imports of lead billets, the product 
alleged to be circumventing the respective orders, after the initiation 
of these investigations, the circumstances were quite different. In 
particular, the U.S. re-rolling facilities existed prior these 
investigations, the re-rollers that imported the lead billets are not 
affiliated with any foreign producer or exporter of the lead billets, 
and at least one of these re-rollers imported lead billets before the 
initiation of the investigations. Thus, this pattern of trade in these 
inquiries is different from the pattern of trade in Brass Sheet and 
Strip.
    In addition, the history and nature of the production process at 
issue in Brass Sheet and Strip bears no relationship to the history and 
nature of the processing performed by the U.S. re-rollers in these 
inquiries. In Brass Sheet and Strip the type of processing performed by 
the U.S. importer was not in existence at the time of the original AD 
investigation. Indeed, the U.S. importer and brass finisher in Brass 
Sheet and Strip was not established, and did not begin operations, 
until more than three years after the issuance of the antidumping order 
on brass sheet and strip. This contrasts with the facts in these lead 
bar circumvention inquiries, where most of the U.S. re-rollers were in 
existence, importing lead billets and processing them into lead bar, 
before the AD and CVD petitions on lead bar were filed with the 
Department.
    In conclusion, the facts in Brass Sheet and Strip which caused the 
Department to find circumvention in that inquiry are not present in the 
circumvention inquiries on lead bar. Based on the facts present in 
these inquiries and the current statute, we find that circumvention of 
the lead bar orders is not occurring. Additional information with 
respect to the petitioners' comment regarding the similar value-added 
found in our preliminary determinations and the value-added determined 
in Brass Sheet and Strip can be found in our position in ``Comment 4.''

Comment 6: Most of the Merchandise Sold in the United States is a 
Different Class or Kind From That Under the AD and CVD Orders

    The foreign respondents argue that the vast majority of the 
merchandise sold in the United States from the purchase of lead billets 
is not the same class or kind of merchandise that is subject to the 
leaded bar order. They state that the majority of the imported lead 
billet further processed into hot rolled bar is subsequently cold 
finished by the U.S. re-roller before it is sold to unaffiliated 
customers or is sold to cold drawers. Thus, much of the merchandise 
sold in the United States, i.e., cold finished leaded bar, is not the 
same class or kind of merchandise subject to the orders. Foreign 
respondents argue that in recognition of the fact that the 
circumvention provision only applies to component materials used to 
produce subject merchandise sold in the United States, the Department 
has previously excluded from its circumvention findings component 
materials used to produce nonsubject merchandise. The foreign 
respondents argue that in Brass Sheet and Strip, the Department 
excluded from its final affirmative determination brass plate used to 
produce products sold as something other than brass sheet and strip. 
Further, Republic has stated that if the Department issues an 
affirmative final determination, at the very least, the Department 
would need to adopt an importer/exporter certificate program so that 
lead billets purchased by Republic for conversion to cold-finished bars 
are excluded from the scope of the hot-rolled lead bar orders.
    The petitioners argue that the foreign respondents' argument 
ignores the fact that hot-rolled lead bar has been historically sold to 
unaffiliated and affiliated cold finishers for further processing and 
suggests that sales of merchandise for further manufacturing are not 
``sales'' within the meaning of the statute. This would be inconsistent 
with the Department's previous precedent in circumvention cases such as 
Brass Sheet and Strip and PTFE. In both of those cases, the Department 
found that products sold in the United States were of the same class or 
kind as the merchandise subject to unfair trade orders even though the 
items that were produced from parts or components were subject to 
further processing before reaching the ultimate consumer.
    Department's Position: Because the Department has determined that 
imports of lead billets from Germany and the United Kingdom are not 
circumventing the respective AD and CVD orders on

[[Page 40350]]

hot-rolled lead bar, we are addressing arguments concerning the 
coverage of a circumvention finding.

Comment 7: Lead Billets Are Not Parts or Components

    The foreign respondents argue that the anticircumvention statute 
requires that the merchandise sold in the United States be completed or 
assembled in the United States from parts or components from the 
country subject to the orders. The foreign respondents assert that the 
Department's preliminary determinations merely stated that all of the 
U.S. re-rollers purchased lead billet from one or more of the foreign 
respondents and that the re-rollers ``use the lead billet to produce 
hot-rolled lead bar in the United States.'' They argue that the use of 
a lead billet in the production of hot-rolled lead bar in the United 
States does not establish a finding that the process of rolling lead 
billets into hot-rolled lead bar constitutes ``completion.'' The 
foreign respondents further argue that the petitioners recognized in 
their methodological comments that lead billets are a complete product 
upon importation when the petitioners described the hot-rolling of lead 
billets into bars as a ``conversion'' process, rather than a process of 
completion.
    Further, the foreign respondents argue that broadening the scope of 
an order beyond the like product examined in the ITC's injury 
determination in the original AD and CVD investigations is inconsistent 
with the anticircumvention statute. The foreign respondents assert that 
lead billets and hot-rolled lead bar constitute separate and distinct 
like products produced by separate and distinct domestic industries, as 
determined by both the ITC and the Department in the initial 
investigations. They also argue that because the petitioners in the 
initial hot-rolled lead bar investigations made the strategic decision 
to limit their petition to hot-rolled lead bar (rather than including 
lead billets within its scope), the Department must now conclude, as a 
matter of law, that circumvention does not exist.
    The petitioners argue the anticircumvention statute does not 
require a finding that the parts or components fall within the same 
like product category as the finished product and certainly does not 
require a separate finding that the products subject to an 
anticircumvention inquiry must fall within the ITC's prior like product 
and injury determinations. The petitioners also note that in previous 
anticircumvention inquiries, Steel Wire Rope from Mexico and Brass 
Sheet and Strip, the Department correctly included merchandise in the 
scope of antidumping order that had previously been excluded from the 
ITC's like product and injury determinations.
    The petitioners note that the Department stated in its notice of 
initiation of these inquiries that this investigation is analogous to 
the anticircumvention inquiry in Steel Wire Rope from Mexico, where the 
Department made an affirmative finding of circumvention and expanded 
the scope of an order to include a component that the petitioners had 
expressly excluded from the original investigation. Even though the 
expressly excluded merchandise was not part of the ITC's like product 
determination or injury determination, the petitioners argue in the 
instant case that the Department should follow the plain meaning of the 
statute (i.e., that the anticircumvention statute permitted expansion 
of the scope beyond the original like product) and make an affirmative 
finding. The petitioners note that in Brass Sheet and Strip the 
Department included brass plate within the order on brass sheet and 
strip even though the brass plate was not included within the scope of 
the original investigation.
    Department's Position: We disagree with the respondents' first 
argument that a so-called ``completed'' product cannot be a ``part or 
component'' of lead bar for purposes of section 781(a) of the Act. 
Indeed, it is difficult to imagine that many ``parts and components'' 
used to produce or assemble subject merchandise could not be considered 
``complete'' in and of themselves. For example, an engine is a 
``completed'' product, but it can still be imported in the United 
States and ``assembled'' into a forklift truck. Accordingly, the 
engine, although a completed product, can still be a part or component 
of another item. Thus, whether a part or component is or is not 
characterized as ``completed'' is irrelevant to the circumvention 
section of the statute. The question is whether that item becomes part 
of the product sold in the United States that is of the same class or 
kind of merchandise subject to an order.
    Because the Department has determined that imports of lead billets 
from Germany and the United Kingdom are not circumventing the 
respective AD and CVD orders on hot-rolled lead bar, we are not 
addressing the arguments concerning the ITC's injury determination.

Comment 8: Because There Is Minimal R&D in the Re-rolling Process, the 
Re-rolling Process Must Be Minor or Insignificant

    The petitioners contend that the Department's findings on the lack 
of R&D in the U.S. re-rollers' facilities are consistent with the 
petition, where the petitioners demonstrated that R&D expenditures are 
typically concentrated in the relatively more complex melt shop 
facility and that the Department's finding that ``R&D into the process 
of rolling bar is not a significant factor in this industry'' 
demonstrates that foreign producers can easily shift from selling bars 
and rod to selling billets, and, thus, circumvent the order. Therefore, 
the petitioners argue that the Department's finding that little, if 
any, R&D is evident at the rolling stage means that the production 
process is ``minor'' or ``insignificant.''
    The foreign respondents agree in part with the petitioners that the 
amount of R&D expenditures related to the rolling of lead billets into 
hot-rolled bar is minimal. However, they argue that, because the 
production of leaded steels is technically a mature process, the 
Department properly gave little weight to the level of R&D in the 
United States in determining whether the conversion of leaded billet 
into hot-rolled lead bar is ``minor'' or ``insignificant.'' Further, 
the foreign respondents argue that the anticircumvention statute does 
not require an analysis of R&D when the Department finds that it is not 
a meaningful factor with respect to the industry and merchandise under 
review.
    Department's Position: We disagree with the petitioners that a lack 
of R&D in the production of hot-rolled lead bar means that the foreign 
respondents can readily shift from the sale of hot-rolled lead bars to 
the sale of lead billets in circumvention of the orders. While R&D may 
be a significant factor in some industries, it is not in others. 
Further, the significance of its presence or absence depends on the 
industry and product under investigation. For example, changes in 
technology occur very rapidly in the electronics industry. This 
requires significant amounts for R&D. Thus, R&D might be a significant 
factor in a circumvention inquiry of that industry. In other 
industries, such as this one R&D is not a significant factor because of 
the maturity of the production process. However, a lack of R&D does not 
necessarily mean that circumvention is more easily accomplished. Where 
R&D is almost non-existent in the industry in general, whether that 
industry is located in the

[[Page 40351]]

respondent's country or in the United States, the absence of such 
expenditures does not automatically equate with ease of circumvention. 
As we have explained above, the re-rolling of lead billet into lead bar 
is not accomplished in temporary, transitory facilities. The lack of 
R&D in this industry does not change that fact. Accordingly, the 
Department gave little weight to R&D as an informative factor in its 
determination as to whether the lead bar orders were being 
circumvented.

Comment 9: The Department Placed Too Much Emphasis on the Fact that the 
U.S. Re-rollers and Foreign Manufacturers are Unaffiliated

    The petitioners argue that the Department has placed greater weight 
on the fact that the respondents and the U.S. re-rollers are 
unaffiliated than contemplated by the statute or previous circumvention 
decisions. Specifically, the petitioners cite to the Department's 
observation in the preliminary determination that ``these unaffiliated 
re-rollers invested a substantial amount in their re-rolling facilities 
both before and after the AD and CVD orders to roll both lead and 
nonlead billets into hot-rolled bar.'' 63 FR at 24162. They also note 
that affiliation is not necessary in order for the Department to make 
an affirmative finding of circumvention.
    The foreign respondents argue that while the absence of affiliation 
does not mandate a negative determination, the arm's length nature of 
the business relationships between the foreign respondents and the U.S. 
re-rollers cannot be ignored in the Department's analysis.
    Department's Position: The second factor the Department is required 
to consider under section 781(a)(3) of the Act is whether the 
manufacturer or exporter of the parts or components (in this instance, 
the foreign respondents which produce and export the lead billets) is 
affiliated with the persons which assemble or complete the merchandise 
in the United States (here, the U.S. re-rollers). In its preliminary 
determination, the Department set out the facts which lead it to find 
that no affiliation of any kind existed between the foreign respondents 
and the U.S. re-rollers.
    Neither the statute, the SAA, nor the relevant legislative history 
provide any guidance as to how the Department is to consider this 
particular factor. Accordingly, the Department may reasonably determine 
how to evaluate that factor on a case-by-case basis in light of the 
pertinent facts particular to a specific circumvention inquiry. We 
agree with the petitioners that, as a general proposition, affiliation 
is not necessary for a finding of circumvention. However, a finding of 
no affiliation cannot be dismissed as having no relevance to the 
Department's determination, particularly when the statute mandates that 
this factor be considered. Thus, we disagree with the petitioners that 
we have elevated affiliation beyond that contemplated by the statute or 
previous circumvention determinations. Indeed, in several prior 
circumvention determinations, the Department has explicitly stated that 
we consider circumvention to be more likely when the manufacturer/
exporter of the parts and components is related to the party completing 
or assembling merchandise in the United States using the imported 
components. See, e.g., PTFE and Brass Sheet and Strip.
    In these circumvention inquiries, we found that the U.S. re-rollers 
acted on behalf of their respective commercial interests, independently 
of the foreign respondents' interests. The lack of any affiliation 
between the foreign respondents and the U.S. re-rollers was a 
contributing factor in the U.S. re-rollers' decisions on how best to 
protect and advance their own economic interests given, in particular, 
the sourcing problems for domestic leaded billet they encountered in 
the market place. However, as we explained in the preliminary 
determination and in this final determination, as well, affiliation is 
only one of several factors the Department considered in reaching a 
determination that circumvention does not exist.

Conclusion

    Based on the analysis under section 781(a) of the Act, detailed 
above, we determine that circumvention of the AD and CVD orders on hot-
rolled lead bar is not occurring by reason of imports of lead billets 
from Germany and the United Kingdom.
    These negative final circumvention determinations and notice are in 
accordance with section 781(a) of the Act and 19 C.F.R. 353.29(e) and 
19 C.F.R. 355.29(e).

    Dated: July 20, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-19019 Filed 7-23-99; 8:45 am]
BILLING CODE 3510-DS-P