[Federal Register Volume 66, Number 55 (Wednesday, March 21, 2001)]
[Notices]
[Pages 15834-15837]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-6910]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-580-841]


Structural Steel Beams From Korea: Preliminary Results of Changed 
Circumstances Antidumping Duty Administrative Review

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

ACTION: Notice of preliminary results of changed circumstances 
antidumping duty administrative review.

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SUMMARY: In response to a request by Northwestern Steel & Wire Company, 
Nucor-Yamato Steel Company, and TXI-Chaparral Steel, Inc. 
(``Petitioners''), interested parties in this proceeding and the 
petitioners in the less-than-fair value investigation of structural 
steel beams from Korea, the Department of Commerce (``Department'') is 
conducting a changed circumstances administrative review of the 
antidumping duty order on structural steel beams from Korea to 
determine the successor-in-interest to the merger of two respondent 
companies, Inchon Iron & Steel Co., Ltd. (``Inchon'') and Kangwon 
Industries, Ltd. (``Kangwon''). For the purpose of administering an 
antidumping duty, the Department examined whether the resulting 
company, which operates under the name of Inchon, should be considered 
as the pre-merger Inchon, pre-merger Kangwon or a new entity 
altogether, and whether as such, the post-merger Inchon should be 
assigned the antidumping duty deposit rate of pre-merger Inchon, pre-
merger Kangwon or a new rate. As a result of this review, the 
Department preliminarily finds that Inchon is the successor-in-interest 
to the merger of Inchon and Kangwon as post-merger Inchon operates in a 
manner that is not substantially different from pre-merger Inchon. 
Thus, Inchon should retain the deposit rate assigned by the Department 
in the investigation for all entries of subject merchandise produced or 
exported by the post-merger entity.\1\
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    \1\ For the purpose of this notice, the Department will 
distinguish between pre and post-merger Inchon when necessary. 
References to ``Inchon'' represent both the pre and post-merger 
company.

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EFFECTIVE DATE: March 21, 2001.

FOR FURTHER INFORMATION CONTACT: Stephen Shin or Laurel LaCivita, 
Office of CVD/AD Enforcement Group III, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, NW., Washington, DC 20230; telephone: 
(202) 482-0413 or (202) 482-4243, respectively.

SUPPLEMENTARY INFORMATION:   

The Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute are 
references to the provisions effective January 1, 1995, the effective 
date of the amendments made to the Tariff Act of 1930 (``the Act'') by 
the Uruguay Round Agreements Act (``URAA''). In addition, unless 
otherwise indicated, all citations to the Department's regulations are 
to the regulations as set forth at 19 CFR 351 (2000).

Background

    On August 18, 2000, the Department published in the Federal 
Register an antidumping duty order on structural steel beams from 
Korea. See Structural Steel Beams from Korea: Notice of Antidumping 
Duty Order, 65 FR 50502 (August 18, 2000). In an August 30, 2000 letter 
to the Department, petitioners requested that the Department conduct a 
changed circumstances administrative review pursuant to section 751(b) 
of the Act to determine the successor-in-interest of the merger between 
Inchon and Kangwon, two companies involved in the structural steel 
beams investigation (``Investigation'') from South Korea, and what cash 
deposit rate the post-merger company should be assigned. See Final 
Determination of Sales at Less Than Fair Value: Structural Steel Beams 
from Korea, 65 FR 41437 (July 5, 2000) (as amended 65 FR 50501 (August 
18, 2000)). We published a notice of initiation of a changed 
circumstance review on September 15, 2000 to determine whether the 
post-merger Inchon is the successor company to the merger of Inchon and 
Kangwon. See Initiation of Changed Circumstance Antidumping Duty 
Administrative Review: Structural Steel Beams from Korea, 65 FR 55944 
(September 15, 2000). The Department issued questionnaires on September 
29, 2000 and December 1, 2000 and received responses on November 6, 
2000 and December 15, 2000. As provided in section 782(i) of the Act, 
from January 17-19, 2001, the Department conducted an on-site 
verification of the information on the record. See January 29, 2001 
Verification Report (a public version of which is located in room B-099 
of the main Department of Commerce building).
    The Department is conducting this changed circumstance review in 
accordance with 19 CFR 351.216.

Scope of Review

    The products covered by this review are doubly-symmetric shapes, 
whether hot- or cold-rolled, drawn, extruded, formed or finished, 
having at least one dimension of at least 80 mm (3.2 inches or more), 
whether of carbon or alloy (other than stainless) steel, and whether or 
not drilled, punched, notched, painted, coated or clad. These products 
include, but are not limited to, wide-flange beams (``W'' shapes), 
bearing piles (``HP'' shapes), standard beams (``S'' or ``I'' shapes), 
and M-shapes.
    All products that meet the physical and metallurgical descriptions 
provided above are within the scope of this investigation unless 
otherwise excluded. The following products are outside and/or 
specifically excluded from the scope of this investigation: structural 
steel beams greater than 400 pounds per linear foot or with a web or 
section height (also known as depth) over 40 inches.
    The merchandise subject to this investigation is classified in the 
Harmonized Tariff Schedule of the United States (``HTSUS'') at 
subheadings: 7216.32.0000, 7216.33.0030, 7216.33.0060, 7216.33.0090, 
7216.50.0000, 7216.61.0000, 7216.69.0000,

[[Page 15835]]

7216.91.0000, 7216.99.0000, 7228.70.3040, 7228.70.6000. Although the 
HTSUS subheadings are provided for convenience and Customs purposes, 
the written description of the merchandise under investigation is 
dispositive.

Successorship

    Inchon and Kangwon began informal discussions of merging their two 
operations in July of 1999. Shareholders of both Inchon and Kangwon 
approved the merger respectively on January 7, 2000 and December 14, 
1999. On March 15, 2000, Inchon and Kangwon finalized the merger of 
their two companies, effective on that date. According to the terms of 
the merger, Inchon acquired all of Kangwon's assets and liabilities, 
and production would continue under Inchon's name. Furthermore, Kangwon 
ceased to exist as a corporate entity as a result of the merger. Though 
the Department sought and received information concerning the merger 
during the course of investigation, Inchon and Kangwon did not initiate 
discussions of, nor complete, the merger until after the period of 
investigation.
    In making a successor-in-interest determination, the Department 
examines several factors including, but not limited to, the following 
changes: (1) Management; (2) production facilities; (3) supplier 
relationships; and (4) customer base. See, e.g., Brass Sheet and Strip 
from Canada; Final Results of Antidumping Duty Administrative Review 
(``Canadian Brass'') 57 FR 20460 (May 13, 1992); Steel Wire Strand for 
Prestressed Concrete from Japan, Final Results of Changed Circumstances 
Antidumping Duty Administrative Review, 55 FR 28796 (July 13, 1990); 
and Industrial Phosphorous From Israel; Final Results of Antidumping 
Duty Changed Circumstances Review, 59 FR 6944 (February 14, 1994). 
While no one or several of these factors will necessarily provide a 
dispositive indication to succession, the Department will generally 
consider one company to be a successor if its resulting operation is 
essentially the same as that of its predecessor. See Canadian Brass at 
20461. Thus, if the evidence demonstrates that, with respect to the 
production and sale of the subject merchandise, the new company 
operates as the same business entity, the Department will assign the 
new company the cash deposit rate of its predecessor.
    On the basis of the record developed in this proceeding, as 
demonstrated by the following factors, we preliminarily determine that 
Inchon is the successor-in-interest to the merger of Inchon and Kangwon 
as post-merger Inchon operates in a manner that is not substantially 
different from pre-merger Inchon.

Management and Corporate Structure

    In analyzing this criterion, the Department has focused on three 
aspects: management, the post-merger company's board of directors 
(BOD), and the post-merger company's corporate structure.

Management

    In reporting managerial changes since the merger to the Department, 
Inchon has concentrated on what it classifies as upper-level management 
personnel, which includes presidents, vice-presidents, executive 
directors, and directors. Additionally, the Department has obtained 
information regarding other lower-level management changes since the 
merger (i.e. the positions of general managers, assistant general 
managers, senior managers, and managers). Next, the Department analyzed 
information concerning Inchon's pre and post-merger Board of Directors 
(``BOD''). Finally, the Department examined whether the corporate 
structure has changed and which level(s) of management is most 
responsible for determining policies prevalent to the operation of the 
company.
    With regard to lower-level management positions (those below that 
of director), there has been greater retention of management personnel 
formerly employed by Kangwon, and correspondingly, at these lower 
levels of management, the post-merger scheme is more reflective of a 
mixture of the former Inchon and Kangwon. An examination of the record 
reveals that, with respect to the upper-level management, as defined by 
Inchon, these positions are predominantly occupied by the same persons 
who had occupied these positions prior to the merger. Hence, the 
overall upper-level management scheme is reflective of the pre-merger 
Inchon. Because the exact figures are proprietary in nature, please see 
the proprietary version of the Decision Memorandum to Bernard T. 
Carreau from Edward Yang, Preliminary Determination of Changed 
Circumstances Antidumping Duty Administrative Review: Structural Steel 
Beams from South Korea (``Decision Memo''), pp. 2-4, March 14, 2001, 
for further details.
    The Department has also examined the constitution of Inchon's board 
of directors. We note that Inchon's BOD has in fact undergone 
significant change solely because of the merger. As a result of the 
merger, Inchon's asset value rose to a level that legally required an 
expansion of the BOD. Prior to the consummation of the merger, Kangwon 
converted the debt owed to creditor banks into outstanding shares of 
Kangwon. This stake in Kangwon resulted in a certain percentage of 
ownership of Inchon by Kangwon's creditor banks as a result of the 
merger agreement, and consequently resulted in the appointment to the 
BOD of representatives of the creditor banks. See Decision Memo at page 
4. Evidence on the record also reveals that the BOD consists of two 
general groups of directors: active and non-active. In this regard, the 
current president and chairman of the company are both active members 
of the BOD, and both were employed by Inchon prior to the merger. See 
Decision Memo at pp. 4-5.

Corporate Structure

    According to Inchon, all lower-level managers at Inchon make 
recommendations relating to the firing of employees and possess budget 
allocation authority. In terms of sales policies regarding customers 
and supplier policies, lower-level management personnel often prepare 
policy recommendations which must subsequently be reviewed and approved 
by upper-level management personnel (director level or higher). See 
January 29, 2001 Verification Report at 6 and 16. Thus, though lower-
level management personnel possess some responsibility (i.e. allocation 
of budget and promotional recommendations) after the merger, policies 
which would significantly alter the pricing and production practices of 
Inchon would not be decided by management personnel below the position 
of director, but by the upper-level management hierarchy reported by 
Inchon throughout this review.
    After the merger, Inchon reorganized to assimilate the Pohang 
facility within the company's corporate structure. Because the exact 
nature of this reorganization is proprietary and therefore cannot be 
discussed here, see Decision Memo at pp. 3-4. We note that these 
changes have primarily dealt with the addition of personnel, and not a 
shift of responsibility in Inchon's managerial hierarchy. Certainly, 
the acquisition of an entirely new production facility must 
necessitate, and did in fact necessitate, an internal reorganization. 
However, the cumulative effect of this reorganization appears to have 
been primarily to incorporate the operations of the Pohang production 
facility and sales of merchandise produced at that facility. Thus, 
while Inchon employs a number

[[Page 15836]]

of former Kangwon lower-level management personnel, their 
responsibilities appear to be primarily devoted to the operational 
activities associated with the Pohang facility, and there is no 
indication that these lower-level managers possess significant 
policymaking responsibilities with regard to the operation of Inchon as 
a whole.
    In determining Inchon's corporate structure, we have examined 
whether changes to the BOD have substantially altered the BOD's role 
within the company. In the case at hand, the BOD's role concerns the 
formulation of company strategy and the supervision of management. See 
January 29, 2001 Verification Report at 6. The evidence on the record 
indicates that the BOD primarily exercises this role by electing the 
president and the chairman of the company, both of whom are directly 
involved in the everyday operations of the company. Indeed, the BOD 
resulting from the merger has exercised this voting power twice. 
However, it is worth noting that the current president and chairman of 
the company were with Inchon prior to the merger, and in fact, evidence 
on the record supports the fact that certain policies, such as sales 
and supplier policies, have not changed from those applied by Inchon 
prior to the merger (see discussion below in ``Suppliers'' and 
``Customers''). Therefore, there is little evidence on the record which 
indicates that the BOD role within Inchon has changed significantly 
since the merger.
    Based on the above reasons, the Department concludes that post-
merger Inchon's management remains similar to Inchon's management and 
corporate structure prior to the merger and did not substantially 
change as the result of the merger. See Decision Memo at 5.

Production Facilities

    Next, under the Canadian Brass analysis, we examined Inchon's 
production facility. The acquisition of the Pohang facility represents 
the major asset gained by Inchon through the merger. The record of this 
review indicates that through the Pohang facility, Inchon gained the 
ability to produce a new type of subject merchandise which Inchon could 
not produce prior to the merger. Though Inchon did gain the ability to 
produce a new product, this product does not comprise a large 
percentage of the company's total production quantity and value. 
Moreover, Inchon's production process largely remains similar to that 
prior to the merger. See Decision Memo at page 4. See Certain Stainless 
Steel Pipe from Korea; Final Results of Antidumping Duty Changed 
Circumstances Review, 63 FR 16979, 16981 (April 7, 1998), where the 
Department determined that the acquisition of a new production facility 
could not, by itself, provide a reasonable basis for the Department to 
determine whether a company is a different business entity.
    Based upon the reasons aforementioned, the Department concludes 
that Inchon's production facilities did not substantially change as a 
result of the merger.

Suppliers

    Under the Canadian Brass analysis, the Department next examined 
changes to Inchon's supplier base. Prior to the merger, Inchon engaged 
in a specific supply policy that was qualitatively different from the 
policy Kangwon employed. Because the exact nature of these supply 
policies is proprietary and therefore cannot be discussed here, see 
Decision Memo at page 5. The Department notes that Inchon's ``upper-
management'' structure reaffirmed the company's pre-merger supplier 
policies as the guideline for post-merger operation. See Decision Memo 
at page 5. An examination of a combined list of Inchon's and Kangwon's 
suppliers reflects that post-merger Inchon has not done business with a 
number of Kangwon's former suppliers. Post-merger Inchon has done 
business with largely the same supplier base as prior to the merger, as 
well as some new suppliers (i.e. suppliers from who neither Inchon nor 
Kangwon purchased) See Decision Memo at pp. 5-6.
    Therefore, we believe that the facts indicate that Inchon has 
retained its pre-merger supply policy, and to a significant degree has 
both retained its existing suppliers and has discontinued business with 
suppliers of the former Kangwon.

Customers

    Lastly, under the Canadian Brass analysis, the Department examined 
changes to Inchon's customer base. A review of Inchon's customer lists 
from before and after the merger reflects an expanded customer base. 
Since the merger, Inchon gained a number of former Kangwon customers 
and customers to whom neither Inchon nor Kangwon sold prior to the 
merger. Post-merger Inchon's sales to former Kangwon customers, 
however, do not constitute a share of business commensurate with the 
volume and value of sales made by Kangwon to these customers. Instead, 
the Department notes that post-merger Inchon's core customer group 
continues to be companies to whom Inchon sold prior to the merger. See 
Decision Memo at page 6.
    The record evidence also indicates that Inchon and Kangwon had 
different sales policies in regards to conditions such as payment 
terms, payment guarantees, and credit policies. After the merger, 
Inchon's upper-level management has reaffirmed the pre-merger sales 
policy as the effective policy of the post-merger company. As a result 
of these sales policies, a number of former Kangwon customers did not 
do business with post-merger Inchon. Significantly, evidence on the 
record reveals that the former Kangwon customers to whom Inchon did 
sell after the merger had to conform to pre-merger Inchon's sales 
policy. See Decision Memo at page 7.
    Therefore, the Department concludes that the record indicates that 
post-merger Inchon sells under the same sales policy and predominantly 
to the same customer base as prior to the merger. Moreover, to the 
extent that customers solely doing business with Kangwon prior to the 
merger wished to do business with post-merger Inchon, the record is 
clear that these customers have been required to accept Inchon's sales 
terms, and were not allowed to continue conducting business at the 
sales terms they had formerly been offered.

Preliminary Results of Changed Circumstances Antidumping Duty 
Administrative Review

    Based on the above findings, the Department preliminarily 
determines post-merger Inchon is the successor to the merger of Inchon 
and Kangwon, and thus, if the Department upholds this determination in 
the final results, post-merger Inchon will retain the antidumping duty 
deposit rate assigned to Inchon by the Department in the investigation, 
which is 25.31 percent. While post-merger Inchon employs many former 
Kangwon employees and lower-level management personnel, post-merger 
Inchon's decision-making hierarchy largely remains unchanged in terms 
of corporate structure and personnel; the acquisition of the Pohang 
facility did not significantly expand Inchon's product range; and post-
merger Inchon continues to operate with a similar supplier and customer 
base, and under the same sales and supply policies, as prior to the 
merger.

Public Comment

    Pursuant to 19 CFR 351.310 and the Department's January 10, 2001 
scheduling letter, any interested party may request a hearing within 10 
days of

[[Page 15837]]

publication of this notice. Case briefs and/or written comments from 
interested parties may be submitted no later than 21 days after the 
date of publication of this notice. Rebuttal briefs and rebuttals to 
written comments, limited to the issues raised in those case briefs or 
comments, may be filed no later than 28 days after the publication of 
this notice. All written comments must be submitted in accordance with 
19 CFR 353.31(e) and must be served on all interested parties on the 
Department's service list in accordance with 19 CFR 353.31(g). Any 
hearing, if requested, will be held no later than 30 days after the 
date of publication of this notice, or the first working day 
thereafter. Persons interested in attending the hearing should contact 
the Department for the date and time of the hearing. The Department 
will publish in the Federal Register a notice of final results of this 
changed circumstances antidumping duty administrative review, including 
the results of its analysis of any issues raised in any written 
comments.
    This notice is in accordance with sections 751(b)(1) and (d) and 
777(i) of the Act and 19 CFR 351.216.
    Effective January 20, 2001, Bernard T. Carreau is fulfilling the 
duties of Assistant Secretary for Import Administration.

    Dated: March 13, 2001.
Bernard T. Carreau,
Deputy Assistant Secretary, Import Administration.
[FR Doc. 01-6910 Filed 3-20-01; 8:45 am]
BILLING CODE 3510-DS-P