[Federal Register Volume 66, Number 153 (Wednesday, August 8, 2001)]
[Notices]
[Pages 41523-41530]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-19782]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-201-822]


Stainless Steel Sheet and Strip in Coils from Mexico; Preliminary 
Results of Antidumping Duty Administrative Review

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

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

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SUMMARY: In response to a request by respondent Mexinox S.A. de C.V. 
(Mexinox) and Mexinox USA, Inc. (Mexinox USA) (collectively, Mexinox), 
the Department of Commerce (the Department) is conducting an 
administrative review of the antidumping duty order on stainless steel 
sheet and strip in coils (S4 in coils) from Mexico (A-201-822). This 
review covers one manufacturer/exporter (Mexinox) of the subject 
merchandise to the United States during the period January 4, 1999 to 
June 30, 2000.
    We preliminarily determine that sales of S4 in coils from Mexico 
have been made below the normal value (NV). If these preliminary 
results are adopted in our final results of administrative review, we 
will instruct the U.S. Customs Service to assess antidumping duties 
based on the difference between United States price and the NV. 
Interested parties are invited to comment on these preliminary results. 
Parties who submit argument in these proceedings are requested to 
submit with the argument (1) a statement of the issues and (2) a brief 
summary of the argument.

[[Page 41524]]


EFFECTIVE DATE: August 8, 2001.

FOR FURTHER INFORMATION CONTACT: Deborah Scott or Robert James, AD/CVD 
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-
2657 or (202) 482-0649, respectively.

SUPPLEMENTARY INFORMATION:

Applicable Statute and Regulations:

    Unless otherwise indicated, all citations to the Tariff Act of 
1930, as amended (the Tariff Act) are references to the provisions 
effective January 1, 1995, the effective date of the amendments made to 
the Tariff Act by the Uruguay Rounds Agreements Act. In addition, 
unless otherwise indicated, all citations to the Department's 
regulations are to 19 CFR Part 351 (April 1, 2000).

Background

    On July 27, 1999 the Department published in the Federal Register 
the Notice of Amended Final Determination of Sales at Less Than Fair 
Value and Antidumping Duty Order on stainless steel sheet and strip in 
coils from Mexico (64 FR 40560). On July 20, 2000, the Department 
published the Notice of Opportunity to Request Administrative Review of 
stainless steel sheet and strip in coils from Mexico for the period 
January 4, 1999 through June 30, 2000 (65 FR 45035).
    In accordance with 19 CFR 351.213 (b)(1), the respondent (Mexinox) 
requested that we conduct an administrative review of Mexinox in the A-
201-822 case. On September 6, 2000, we published in the Federal 
Register a notice of initiation of this antidumping duty administrative 
review covering the period January 4, 1999 through June 30, 2000 (65 FR 
53980).
    Because it was not practicable to complete these reviews within the 
normal time frame, on February 15, 2001, we published in the Federal 
Register our notice of the extension of time limits for the A-201-822 
review (66 FR 10483). This extension established the deadline for these 
preliminary results as July 31, 2001.

Scope Inquiry

    In response to the Department's March 23, 2001 supplemental 
questionnaire, on April 20, 2001 Mexinox submitted a database 
containing information regarding downstream sales made by its 
affiliate, Mexinox Trading. (For more information about the 
Department's request, see ``Sales Through Affiliated Resellers'' 
below.) In the accompanying narrative, Mexinox reported that certain of 
the sales made by Mexinox Trading were of quantities less than 20 kgs. 
(53 lbs.). Mexinox described this merchandise as ``small pieces that 
have been crudely cut (with scissors) from a coil on a piece-by-piece 
basis based on length measurements specified by the customer.'' Mexinox 
further stated that ``these materials are more properly considered cut-
to-length sheets than stainless steel sheet and strip in coils. In fact 
they are curled into a circular shape only for the convenience of the 
customer for transportation.'' In the database submitted to the 
Department, Mexinox coded sales of this merchandise both as outside the 
ordinary course of trade and as non-subject. See page 7 of Mexinox's 
April 20, 2001 submission.
    On May 10, 2001, the Department requested further information about 
Mexinox Trading's sales of merchandise of quantities less than 20 kg. 
In its May 25, 2001 response, Mexinox reiterated the description of the 
merchandise made in its April 20, 2001 submission, and added that the 
cut pieces are ``rolled up like a poster and held together with a rope 
or steel band to facilitate transportation.'' See Mexinox's May 25, 
2001 submission at 10. Claiming that the material in question is 
outside the scope of this review, Mexinox formally requested a scope 
ruling from the Department pursuant to section 351.225(c), (f)(6), and 
(k) of the Department's regulations.
    Based on the criteria set forth under section 351.225(k) of the 
Department's regulations, we have determined that materials sold in 
quantities of less than 20 kg are covered by the scope of this review. 
First, the Department's written description of the merchandise under 
review is dispositive. Specifically, the material in question is a 
stainless steel flat-rolled product that is ``rolled up like a poster'' 
(i.e., in coil form), and it meets the width and gauge criteria set 
forth in the scope of this review (i.e., it is greater than 9.5 mm in 
width and less than 4.75 mm in thickness; see Appendix III of the 
Department's September 8, 2000 questionnaire). Therefore, we have 
concluded that this merchandise complies with the scope description set 
out in the investigation of S4 in coils from Mexico. For further 
information, see the Department's Memorandum to the File from Robert 
James, dated July 31, 2001.

Scope of the Review

    For purposes of this order, the products covered are certain 
stainless steel sheet and strip in coils. Stainless steel is an alloy 
steel containing, by weight, 1.2 percent or less of carbon and 10.5 
percent or more of chromium, with or without other elements. The 
subject sheet and strip is a flat-rolled product in coils that is 
greater than 9.5 mm in width and less than 4.75 mm in thickness, and 
that is annealed or otherwise heat treated and pickled or otherwise 
descaled. The subject sheet and strip may also be further processed 
(e.g., cold-rolled, polished, aluminized, coated, etc.) provided that 
it maintains the specific dimensions of sheet and strip following such 
processing.
    The merchandise subject to this order is classified in the 
Harmonized Tariff Schedule of the United States (HTS) at subheadings: 
7219.13.00.31, 7219.13.00.51, 7219.13.00.71, 7219.13.00.81, 
7219.14.00.30, 7219.14.00.65, 7219.14.00.90, 7219.32.00.05, 
7219.32.00.20, 7219.32.00.25, 7219.32.00.35, 7219.32.00.36, 
7219.32.00.38, 7219.32.00.42, 7219.32.00.44, 7219.33.00.05, 
7219.33.00.20, 7219.33.00.25, 7219.33.00.35, 7219.33.00.36, 
7219.33.00.38, 7219.33.00.42, 7219.33.00.44, 7219.34.00.05, 
7219.34.00.20, 7219.34.00.25, 7219.34.00.30, 7219.34.00.35, 
7219.35.00.05, 7219.35.00.15, 7219.35.00.30, 7219.35.00.35, 
7219.90.00.10, 7219.90.00.20, 7219.90.00.25, 7219.90.00.60, 
7219.90.00.80, 7220.12.10.00, 7220.12.50.00, 7220.20.10.10, 
7220.20.10.15, 7220.20.10.60, 7220.20.10.80, 7220.20.60.05, 
7220.20.60.10, 7220.20.60.15, 7220.20.60.60, 7220.20.60.80, 
7220.20.70.05, 7220.20.70.10, 7220.20.70.15, 7220.20.70.60, 
7220.20.70.80, 7220.20.80.00, 7220.20.90.30, 7220.20.90.60, 
7220.90.00.10, 7220.90.00.15, 7220.90.00.60, and 7220.90.00.80. 
Although the HTS subheadings are provided for convenience and Customs 
purposes, the Department's written description of the merchandise under 
review is dispositive.
    Excluded from the scope of this order are the following: (1) Sheet 
and strip that is not annealed or otherwise heat treated and pickled or 
otherwise descaled; (2) sheet and strip that is cut to length; (3) 
plate (i.e., flat-rolled stainless steel products of a thickness of 
4.75 mm or more); (4) flat wire (i.e., cold-rolled sections, with a 
prepared edge, rectangular in shape, of a width of not more than 9.5 
mm); and (5) razor blade steel. Razor blade steel is a flat-rolled 
product of stainless steel, not further worked than cold-rolled (cold-
reduced), in coils, of a width of not more than 23 mm and a thickness 
of

[[Page 41525]]

0.266 mm or less, containing, by weight, 12.5 to 14.5 percent chromium, 
and certified at the time of entry to be used in the manufacture of 
razor blades. See Chapter 72 of the HTSUS, ``Additional U.S. Note'' 
1(d).
    In response to comments by interested parties the Department has 
determined that certain specialty stainless steel products are also 
excluded from the scope of this order. These excluded products are 
described below.
    Flapper valve steel is defined as stainless steel strip in coils 
containing, by weight, between 0.37 and 0.43 percent carbon, between 
1.15 and 1.35 percent molybdenum, and between 0.20 and 0.80 percent 
manganese. This steel also contains, by weight, phosphorus of 0.025 
percent or less, silicon of between 0.20 and 0.50 percent, and sulfur 
of 0.020 percent or less. The product is manufactured by means of 
vacuum arc remelting, with inclusion controls for sulphide of no more 
than 0.04 percent and for oxide of no more than 0.05 percent. Flapper 
valve steel has a tensile strength of between 210 and 300 ksi, yield 
strength of between 170 and 270 ksi, plus or minus 8 ksi, and a 
hardness (Hv) of between 460 and 590. Flapper valve steel is most 
commonly used to produce specialty flapper valves for compressors.
    Also excluded is a product referred to as suspension foil, a 
specialty steel product used in the manufacture of suspension 
assemblies for computer disk drives. Suspension foil is described as 
302/304 grade or 202 grade stainless steel of a thickness between 14 
and 127 microns, with a thickness tolerance of plus-or-minus 2.01 
microns, and surface glossiness of 200 to 700 percent Gs. Suspension 
foil must be supplied in coil widths of not more than 407 mm, and with 
a mass of 225 kg or less. Roll marks may only be visible on one side, 
with no scratches of measurable depth. The material must exhibit 
residual stresses of 2 mm maximum deflection, and flatness of 1.6 mm 
over 685 mm length.
    Certain stainless steel foil for automotive catalytic converters is 
also excluded from the scope of this order. This stainless steel strip 
in coils is a specialty foil with a thickness of between 20 and 110 
microns used to produce a metallic substrate with a honeycomb structure 
for use in automotive catalytic converters. The steel contains, by 
weight, carbon of no more than 0.030 percent, silicon of no more than 
1.0 percent, manganese of no more than 1.0 percent, chromium of between 
19 and 22 percent, aluminum of no less than 5.0 percent, phosphorus of 
no more than 0.045 percent, sulfur of no more than 0.03 percent, 
lanthanum of between 0.002 and 0.05 percent, and total rare earth 
elements of more than 0.06 percent, with the balance iron.
    Permanent magnet iron-chromium-cobalt alloy stainless strip is also 
excluded from the scope of this order. This ductile stainless steel 
strip contains, by weight, 26 to 30 percent chromium, and 7 to 10 
percent cobalt, with the remainder of iron, in widths 228.6 mm or less, 
and a thickness between 0.127 and 1.270 mm. It exhibits magnetic 
remanence between 9,000 and 12,000 gauss, and a coercivity of between 
50 and 300 oersteds. This product is most commonly used in electronic 
sensors and is currently available under proprietary trade names such 
as ``Arnokrome III.'' \1\
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    \1\ ``Arnokrome III'' is a trademark of the Arnold Engineering 
Company.
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    Certain electrical resistance alloy steel is also excluded from the 
scope of this order. This product is defined as a non-magnetic 
stainless steel manufactured to American Society of Testing and 
Materials (ASTM) specification B344 and containing, by weight, 36 
percent nickel, 18 percent chromium, and 46 percent iron, and is most 
notable for its resistance to high temperature corrosion. It has a 
melting point of 1390 degrees Celsius and displays a creep rupture 
limit of 4 kilograms per square millimeter at 1000 degrees Celsius. 
This steel is most commonly used in the production of heating ribbons 
for circuit breakers and industrial furnaces, and in rheostats for 
railway locomotives. The product is currently available under 
proprietary trade names such as ``Gilphy 36.'' \2\
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    \2\ ``Gilphy 36'' is a trademark of Imphy, S.A.
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    Certain martensitic precipitation-hardenable stainless steel is 
also excluded from the scope of this order. This high-strength, ductile 
stainless steel product is designated under the Unified Numbering 
System (UNS) as S45500-grade steel, and contains, by weight, 11 to 13 
percent chromium, and 7 to 10 percent nickel. Carbon, manganese, 
silicon and molybdenum each comprise, by weight, 0.05 percent or less, 
with phosphorus and sulfur each comprising, by weight, 0.03 percent or 
less. This steel has copper, niobium, and titanium added to achieve 
aging, and will exhibit yield strengths as high as 1700 Mpa and 
ultimate tensile strengths as high as 1750 Mpa after aging, with 
elongation percentages of 3 percent or less in 50 mm. It is generally 
provided in thicknesses between 0.635 and 0.787 mm, and in widths of 
25.4 mm. This product is most commonly used in the manufacture of 
television tubes and is currently available under proprietary trade 
names such as ``Durphynox 17.'' \3\
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    \3\ ``Durphynox 17'' is a trademark of Imphy, S.A.
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    Finally, three specialty stainless steels typically used in certain 
industrial blades and surgical and medical instruments are also 
excluded from the scope of this order. These include stainless steel 
strip in coils used in the production of textile cutting tools (e.g., 
carpet knives).\4\ This steel is similar to ASTM grade 440F, but 
containing, by weight, 0.5 to 0.7 percent of molybdenum. The steel also 
contains, by weight, carbon of between 1.0 and 1.1 percent, sulfur of 
0.020 percent or less, and includes between 0.20 and 0.30 percent 
copper and between 0.20 and 0.50 percent cobalt. This steel is sold 
under proprietary names such as ``GIN4 Mo.'' The second excluded 
stainless steel strip in coils is similar to AISI 420-J2 and contains, 
by weight, carbon of between 0.62 and 0.70 percent, silicon of between 
0.20 and 0.50 percent, manganese of between 0.45 and 0.80 percent, 
phosphorus of no more than 0.025 percent and sulfur of no more than 
0.020 percent. This steel has a carbide density on average of 100 
carbide particles per square micron. An example of this product is 
``GIN5'' steel. The third specialty steel has a chemical composition 
similar to AISI 420 F, with carbon of between 0.37 and 0.43 percent, 
molybdenum of between 1.15 and 1.35 percent, but lower manganese of 
between 0.20 and 0.80 percent, phosphorus of no more than 0.025 
percent, silicon of between 0.20 and 0.50 percent, and sulfur of no 
more than 0.020 percent. This product is supplied with a hardness of 
more than Hv 500 guaranteed after customer processing, and is supplied 
as, for example, ``GIN6.'' \5\
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    \4\ This list of uses is illustrative and provided for 
descriptive purposes only.
    \5\ ``GIN4 Mo,'' ``GIN5'' and ``GIN6'' are the proprietary 
grades of Hitachi Metals America, Ltd.
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Verification

    As provided in section 782(i) of the Tariff Act, we verified 
information provided by Mexinox using standard verification procedures 
such as the examination of relevant sales and financial records, and 
selection of original documentation containing relevant information. 
Our verification results are outlined in the public versions of the 
verification reports, which we will place on file in Room B-099 of the 
main Commerce building.

[[Page 41526]]

Sales Made Through Affiliated Resellers

A. U.S. Market

    As noted in Mexinox's October 6, 2000 questionnaire response at 11 
and 12, both Ken-Mac Metals Inc. (Ken-Mac) and Copper and Brass Sales, 
Inc. (CBS) are affiliated resellers that sold subject merchandise in 
the United States during the POR. Thus, we have included in our 
preliminary margin calculation resales of Mexinox subject merchandise 
made through Ken-Mac and CBS.

B. Home Market

    Mexinox Trading, S.A. de C.V. (Mexinox Trading) is a wholly-owned 
subsidiary of Mexinox which sells both subject and non-subject 
merchandise in the home market. In its October 6, 2000 questionnaire 
response, Mexinox reported that sales through Mexinox Trading 
represented less than five percent of Mexinox's total sales of subject 
merchandise in the home market. Because Mexinox Trading's sales of 
subject merchandise were less than five percent of home market subject 
merchandise sales, and because Mexinox reported that these sales passed 
the Department's arm's-length test, pursuant to section 351.403 (c) and 
(d) of the Department's regulations, we permitted Mexinox to report its 
sales to Mexinox Trading rather than require it to report downstream 
sales to the first unaffiliated customer.
    In several letters to the Department, the petitioner alleged that 
the record contained insufficient information about the role of Mexinox 
Trading in Mexinox's home market transactions, and therefore urged the 
Department to collect information regarding downstream sales made by 
Mexinox Trading. On March 23, 2001, the Department requested that 
Mexinox report all sales of the foreign like product by Mexinox Trading 
to the first unaffiliated customer in a separate database, and asked 
Mexinox to provide more information about Mexinox Trading's operations. 
The Department did not make a determination at that time as to whether 
it would use the sales from Mexinox Trading to the first unaffiliated 
customer in calculating normal value. Instead, as the Department 
indicated in a separate memorandum, it might include those sales in 
calculating normal value if it made a determination that Mexinox and 
Mexinox Trading were functioning as a single entity. See the Memorandum 
from Deborah Scott to Richard Weible, dated March 23, 2001.
    Based on the additional information provided by Mexinox as well as 
our findings at verification, we find that Mexinox and Mexinox Trading 
are functioning as separate and distinct entities. Therefore, for this 
preliminary determination, we find no reason to use the downstream 
sales through Mexinox Trading in calculating normal value. Rather, 
pursuant to section 351.403 (c) and (d) of the Department's 
regulations, we have used the sales from Mexinox to Mexinox Trading, 
since they constitute less than five percent of sales of the foreign 
like product in the home market, and because those sales pass the 
arm's-length test.

Fair Value Comparisons

    To determine whether sales of S4 in coils from Mexico to the United 
States were made at less than fair value, we compared the export price 
(EP) or constructed export price (CEP) to the normal value (NV), as 
described in the ``Export Price and Constructed Export Price'' and 
``Normal Value'' sections of this notice, below. In accordance with 
section 777A(d)(2) of the Tariff Act, we compared individual EPs and 
CEPs to monthly weighted-average NVs.

Transactions Reviewed

    For its home market and U.S. sales, Mexinox reported the date of 
invoice as the date of sale, in keeping with the Department's stated 
preference for using the invoice date as the date of sale (section 19 
CFR 351.401(i)). Mexinox stated that the invoice date represented the 
date when the essential terms of sales, i.e., price and quantity, are 
definitively set, and that up to the time of shipment and invoicing, 
these terms were subject to change. Because petitioners alleged that 
Mexinox did not provide adequate support for its claim that price and 
quantity may change at any time between the final order acceptance date 
(confirmation date) and the final invoice date, the Department 
requested that Mexinox provide additional information concerning the 
nature and frequency of price and quantity changes occurring between 
the date of order and date of invoice. Mexinox responded to our request 
on December 22, 2000 and provided a final revised version of its 
analysis on April 20, 2001. In addition, for purposes of completeness, 
Mexinox voluntarily revised its home market and U.S. databases in order 
to include sales transactions having order dates within the POR 
(regardless of sale date). Based on our analysis of the information 
submitted by Mexinox, we have preliminarily determined that the date of 
invoice is the appropriate indicator of the actual date of sale because 
record evidence indicates that in a substantial number of instances the 
price and quantity changed between the date of the order acceptance and 
the date of invoice. Therefore, we find that Mexinox's claim that price 
and quantity terms are subject to negotiation until the date of invoice 
is substantiated.

Product Comparisons

    In accordance with section 771(16) of the Tariff Act, we considered 
all products produced by the respondent covered by the description in 
the ``Scope of the Review'' section, above, and sold in the home market 
during the POR, to be foreign like products for purposes of determining 
appropriate product comparisons to U.S. sales. Where there were no 
sales of identical merchandise in the home market to compare to U.S. 
sales, we compared U.S. sales to the next most similar foreign like 
product on the basis of the characteristics and reporting instructions 
listed in the Department's questionnaire.

Level of Trade

    In accordance with section 773(a)(1)(B)(i) of the Tariff Act, to 
the extent practicable, we determine NV based on sales in the 
comparison market at the same level of trade (LOT) as the EP or CEP 
transaction. The NV LOT is that of the starting price of the comparison 
sales in the home market or, when NV is based on CV, that of the sales 
from which we derive selling, general, and administrative (SG&A) 
expenses and profit. For EP the LOT is also the level of the starting 
price sale, which is usually from the exporter to the importer. For CEP 
it is the level of the constructed sale from the exporter to the 
importer.
    To determine whether NV sales are at a different LOT than EP or CEP 
sales, we examine stages in the marketing process and selling functions 
along the chain of distribution between the producer and the 
unaffiliated customer. If the comparison market sales are at a 
different LOT, and the difference affects price comparability, as 
manifested in a pattern of consistent price differences between the 
sales on which NV is based and comparison market sales at the LOT of 
the export transaction, we make a LOT adjustment under section 
773(a)(7)(A) of the Tariff Act. Finally, for CEP sales, if the NV level 
is more remote from the factory than the CEP level and there is no 
basis for determining whether the differences in the levels between NV 
and CEP sales affect price comparability, we adjust NV under section 
773(A)(7)(B) of the Tariff Act (the CEP offset provision).

[[Page 41527]]

    We asked Mexinox to identify the specific differences and 
similarities in selling functions and support services between all 
phases of marketing in the home market and the United States. Mexinox 
identified two channels of distribution in the home market: (1) 
retailers and (2) end-users. For both channels, Mexinox performs 
similar selling functions such as pre-sale technical assistance and 
after-sales warranty services. See, e.g., Attachment A-34 of Mexinox's 
April 16, 2001 submission. Because channels of distribution do not 
qualify as separate LOTs when the selling functions performed for each 
customer class are sufficiently similar, we determined that there 
exists one LOT for Mexinox's home market sales. See Certain Stainless 
Steel Wire Rods from France: Final Results of Antidumping Duty 
Administrative Review, 63 FR 30185, 30190 (June 3, 1998).
    For the U.S. market Mexinox reported two LOTs: (1) EP sales 
consisting, in some cases, of sales made directly to unaffiliated U.S. 
customers, and in other cases of sales made from the stock of finished 
goods held at the Mexican factory in San Luis Potosi (SLP Stock sales) 
to unaffiliated U.S. customers; and (2) CEP sales made through Mexinox 
USA's Brownsville warehouse to service centers and end users. The 
Department examined the selling functions performed by Mexinox for both 
EP and CEP sales (after deductions made pursuant to section 772(d) of 
the Tariff Act). These selling functions included customer sales 
contacts (i.e., visiting current or potential customers and promotion 
of new products), technical services, and inventory maintenance. We 
found that Mexinox provided a qualitatively different degree of these 
services on EP sales than it did on CEP sales, and that the selling 
functions were sufficiently different to warrant a determination that 
two separate LOTs exist in the United States.
    When we compared EP sales to home market sales, we determined that 
both sales were made at the same LOT. For both EP and home market 
transactions, Mexinox sold directly to the customer, and provided 
similar levels of customer sales contacts, technical services, and 
inventory maintenance. For CEP sales (as adjusted), Mexinox performed 
fewer customer sales contacts, technical services, inventory 
maintenance, and warranty services. In addition, the differences in 
selling functions performed for home market and CEP transactions 
indicate that home market sales involved a more advanced stage of 
distribution than CEP sales. In the home market, Mexinox provides 
marketing further down the chain of distribution by providing certain 
downstream selling functions that are normally performed by service 
centers in the U.S. market (e.g., technical advice, credit and 
collection, etc.).
    Based on the above analysis, we determined that CEP and the 
starting price of home market sales represent different stages in the 
marketing process, and are thus at different LOTs. Therefore, when we 
compared CEP sales to home market sales, we examined whether a level-
of-trade adjustment may be appropriate. In this case, Mexinox sold at 
one LOT in the home market; therefore, there is no basis upon which to 
determine whether there is a pattern of consistent price differences 
between levels of trade. Further, we do not have the information which 
would allow us to examine pricing patterns of Mexinox's sales of other 
similar products, and there are no other respondents or other record 
evidence on which such an analysis could be based.
    Because the data available do not provide an appropriate basis for 
making a LOT adjustment and the level of trade in Mexico for Mexinox is 
at a more advanced stage than the level of trade of the CEP sales, a 
CEP offset is appropriate in accordance with section 773(a)(7)(B) of 
the Tariff Act, as claimed by Mexinox. We based the CEP offset amount 
on the amount of home market indirect selling expenses, and limited the 
deduction for home market indirect selling expenses to the amount of 
indirect selling expenses deducted from CEP in accordance with section 
772(d)(1)(D) of the Tariff Act. We applied the CEP offset to NV, 
whether based on home market prices or CV.
    In addition to the three U.S. channels of distribution discussed 
above (direct sales, SLP stock sales, and sales through Mexinox's 
affiliate, Mexinox USA), Mexinox reported U.S. sales through two other 
channels of distribution: CEP sales through Ken-Mac and CEP sales 
through CBS (see the section on ``Affiliation'' above). In all cases, 
CBS resold subject merchandise from inventory which it purchased from 
Ken-Mac. For purposes of this preliminary determination, we treated 
both of these channels of distribution as equivalent to the CEP level 
of trade as described above.

Export Price and Constructed Export Price

    Mexinox reported some of its sales of subject merchandise sold to 
unaffiliated U.S. customers through its affiliated company, Mexinox 
USA, as EP transactions. For EP sales, the price terms were set by 
management in Mexico before importation into the United States, and the 
products were shipped directly to the customer through Mexinox USA 
without being introduced into U.S. inventory. Furthermore, we reviewed 
the information Mexinox submitted about the sales process for these 
sales and determined that the role Mexico USA played was ancillary at 
most. Mexinox reported as CEP transactions its sales of subject 
merchandise sold to Mexinox USA for its own account. Mexinox USA then 
resold the subject merchandise after importation to unaffiliated 
customers in the United States.
    We calculated EP in accordance with section 772(a) of the Tariff 
Act for those sales where the merchandise was sold to the first 
unaffiliated purchaser in the United States prior to importation and 
CEP methodology was not otherwise warranted, based on the facts of 
record. We based EP on packed prices to unaffiliated purchasers in the 
United States. We made deductions for discounts, rebates, and debit/
credit notes. We also made adjustments for movement expenses in 
accordance with section 772(c)(2)(A) of the Tariff Act; these included, 
where appropriate, foreign inland freight, foreign brokerage and 
handling, foreign inland insurance, U.S. inland freight, U.S. brokerage 
and handling, U.S. customs duty, and U.S. warehousing. We also added 
duty drawback to the starting price, in accordance with section 
772(c)(1)(B) of the Tariff Act.
    We calculated CEP in accordance with section 772(b) of the Tariff 
Act for those sales to the first unaffiliated purchaser that took place 
after importation into the United States. We based CEP on packed prices 
to unaffiliated purchasers in the United States. We made adjustments 
for discounts, rebates, and debit/credit notes where applicable. We 
also made deductions for movement expenses in accordance with section 
772(c)(2)(A) of the Tariff Act; these included, where appropriate, U.S. 
customs duties, U.S. inland freight, foreign brokerage and handling, 
and foreign inland insurance. In accordance with section 772(d)(1) of 
the Tariff Act, we deducted those selling expenses associated with 
economic activities occurring in the United States, including direct 
selling expenses (credit costs and warranty expenses), inventory 
carrying costs, and other indirect selling expenses. We also made an 
adjustment for profit in accordance with section 772(d)(3) of the 
Tariff Act, and added duty drawback to the starting price in accordance 
with section 772(c)(1)(B) of the Tariff Act. For those sales in which 
material was sent to an unaffiliated U.S.

[[Page 41528]]

processor to be further processed, we made an adjustment based on the 
transaction-specific further-processing amounts reported by Mexinox. In 
addition, the entities Ken-Mac and CBS performed some further 
manufacturing of some of Mexinox's U.S. sales. For these sales, we 
deducted the cost of further processing in accordance with 772(d)(2) of 
the Tariff Act. In calculating the cost of further manufacturing for 
Ken-Mac and CBS, we relied upon the further manufacturing information 
provided by Mexinox.

Facts Available

    In accordance with section 776(a)(1) of the Tariff Act, in these 
preliminary results we find it necessary to use partial facts available 
in those instances where the respondent did not provide us with certain 
information necessary to conduct our analysis. In a small number of 
cases, Mexinox's affiliated U.S. reseller, Ken-Mac, was unable to 
confirm the origin of the subject merchandise it sold during the POR. 
Therefore, Mexinox provided data about these particular resales through 
Ken-Mac in a separate database. At page KM-3 of its March 5, 2001 
submission, Mexinox reported that it allocated these sales of 
``unattributable'' merchandise ``amongst the potential suppliers of the 
material based on relative percentage, by volume, of stainless steel 
and strip purchased during the POR by Ken-Mac from each supplier.'' In 
addition to Mexinox, ``potential suppliers'' of this merchandise 
include, among others, Krupp Thyssen Nirosta GmbH (KTN), a producer 
which is subject to the companion antidumping duty administrative 
review covering S4 in coils from Germany. At our sales verification of 
Ken-Mac, we thoroughly reviewed this issue and determined that Ken-Mac 
had acted to the best of its ability in attemping to trace the origin 
of the subject merchandise that it sold during the POR.
    Because of the unknown origin of certain of Ken-Mac's resales of 
subject merchandise, Mexinox has, in effect, not provided all the 
information necessary to complete our analysis. Therefore, we have 
preliminarily determined that, pursuant to section 776(a) of the Tariff 
Act, it is appropriate to use the facts otherwise available in 
calculating a margin on these sales. Section 776(a) of the Tariff Act 
provides that the Department will, subject to section 782(d), use the 
facts otherwise available in reaching a determination if ``necessary 
information is not available on the record.'' Therefore, for these 
preliminary results, we have calculated a margin on Ken-Mac's 
``unattributable'' resales by applying the overall margin calculated on 
all other sales/resales of subject merchandise to the weighted-average 
price of these ``unattributable'' sales. We then weighted the result 
using a portion of the ``unattributable'' database representing the 
ratio of Ken-Mac's purchases of stainless steel from Mexinox to 
stainless steel purchases from all vendors.

Normal Value

A. Selection of Comparison Market

    In order to determine whether there is a sufficient volume of sales 
in the home market to serve as a viable basis for calculating NV (i.e., 
the aggregate volume of home market sales of the foreign like product 
is greater than five percent of the aggregate volume of U.S. sales), we 
compared the respondent's volume of home market sales of the foreign 
like product to the volume of U.S. sales of the subject merchandise, in 
accordance with section 773(a)(1)(B) of the Tariff Act. Because the 
respondent's aggregate volume of home market sales of the foreign like 
product was greater than five percent of its aggregate volume of U.S. 
sales for the subject merchandise, we determined that the home market 
was viable.

B. Affiliated-Party Transactions and Arm's-Length Test

    Sales to affiliated customers in the home market not made at arm's-
length prices were excluded from our analysis because we considered 
them to be outside the ordinary course of trade. See 19 CFR 351.102(b). 
To test whether these sales were made at arm's-length prices, we 
compared on a model-specific basis the starting prices of sales to 
affiliated and unaffiliated customers minus all movement charges, 
direct selling expenses, and packing. Where, for the tested models of 
subject merchandise, prices to the affiliated party were on average 
99.5 percent or more of the price to the unaffiliated parties, we 
determined that sales made to the affiliated party were at arm's 
length. See 19 CFR 351.403(c). In instances where no price ratio could 
be calculated for an affiliated customer because identical merchandise 
was not sold to unaffiliated customers, we were unable to determine 
that these sales were made at arm's-length prices and, therefore, 
excluded them from our margin calculation. See, e.g., Notice of 
Preliminary Determination of Sales at Less Than Fair Value and 
Postponement of Final Determination: Emulsion Styrene-Butadiene Rubber 
from Brazil, 63 FR 59509 (Nov. 8, 1998), citing to Final Determination 
of Sales at Less Than Fair Value: Certain Cold-Rolled Carbon Steel Flat 
Products from Argentina, 58 FR 37062 (July 9, 1993). Where the 
exclusion of such sales eliminated all sales of the most appropriate 
comparison product, we made a comparison to the next most similar 
model.

C. Cost of Production Analysis

    Because we disregarded sales of certain products made at prices 
below the cost of production (COP) in our investigation of S4 in coils 
from Mexico (see Notice of Final Determination of Sales at Less Than 
Fair Value: Stainless Steel Sheet and Strip in Coils From Mexico, 64 FR 
30790 (June 8, 1999), we have reasonable grounds to believe or suspect 
that sales of the foreign like product under consideration for the 
determination of NV in this review for Mexinox may have been made at 
prices below the COP, as provided by section 773(b)(2)(A)(ii) of the 
Tariff Act. Therefore, pursuant to section 773(b)(1) of the Tariff Act, 
we initiated a COP investigation of sales by Mexinox.
    We calculated the COP based on the sum of the respondent's cost of 
materials and fabrication for the foreign like product, plus amounts 
for SG&A and packing costs, in accordance with section 773(b)(3) of the 
Tariff Act.
    We used the respondent's reported COP amounts to compute weighted-
average COPs during the POR. We compared the weighted-average COP 
figures to home market sales prices of the foreign like product as 
required under section 773(b) of the Tariff Act, in order to determine 
whether these sales had been made at prices below COP. On a product-
specific basis, we compared the COP to the home market prices, less any 
applicable movement charges and discounts.
    In determining whether to disregard home market sales made at 
prices below the COP, we examined, in accordance with sections 
773(b)(1)(A) and (B) of the Tariff Act: (1) whether within an extended 
period of time, such sales were made in substantial quantities; and (2) 
whether such sales were made at prices which permitted the recovery of 
all costs within a reasonable period of time in the normal course of 
trade.
    Where twenty percent or more of the respondent's sales of a given 
product were at prices below the COP, we found that sales of that model 
were made in ``substantial quantities'' within an extended period of 
time, in accordance with sections 773(b)(2) (B) and (C) of the Tariff 
Act. Based on our comparison of prices to the weighted-average per-unit 
cost of production for the POR, we determined whether the below-cost

[[Page 41529]]

prices were such as to provide for recovery of costs within a 
reasonable period of time, in accordance with section 773(b)(2)(D) of 
the Tariff Act.
    Our cost test for Mexinox revealed that less than twenty percent of 
Mexinox's home market sales of certain products were at prices below 
Mexinox's COP. We therefore concluded that for such products, Mexinox 
had not made below-cost sales in substantial quantities. See section 
773 (b)(2)(C)(i) of the Tariff Act. We therefore retained all such 
sales in our analysis. For other products, more than twenty percent of 
Mexinox's sales were at below-cost prices. In such cases we disregarded 
the below-cost sales, while retaining the above-cost sales for our 
analysis. See Preliminary Results Analysis Memorandum dated July 31, 
2001, a public version of which is on file in room B-009 of the main 
Commerce building. We relied on the respondent's COP and CV amounts as 
reported.

D. Constructed Value

    In accordance with section 773(e) of the Tariff Act, we calculated 
CV based on the sum of the respondent's cost of materials, fabrication, 
SG&A expenses, profit, and U.S. packing costs. In accordance with 
section 773(e)(2)(A) of the Tariff Act, we based SG&A expenses and 
profit on the amounts incurred and realized by the respondent in 
connection with the production and sale of the foreign like product in 
the ordinary course of trade, for consumption in the foreign country. 
We deducted from CV the weighted-average home market direct selling 
expenses incurred on sales made in the ordinary course of trade.

E. Price-to-Price Comparisons

    We calculated NV based on prices to unaffiliated customers or 
prices to affiliated customers that we determined to be at arm's 
length. We made adjustments for debit/credit notes, interest revenue, 
discounts, rebates, insurance revenue, and freight revenue, where 
appropriate. We made deductions, where appropriate, for foreign inland 
freight, insurance, handling, and warehousing, pursuant to section 
773(a)(6)(B) of the Tariff Act. In addition, we made adjustments for 
differences in cost attributable to differences in physical 
characteristics of the merchandise pursuant to section 773(a)(6)(C)(ii) 
of the Tariff Act and 19 CFR 351.411, as well as for differences in 
circumstances of sale (COS) in accordance with section 
773(a)(6)(C)(iii) of the Tariff Act and 19 CFR 351.410. We made COS 
adjustments for imputed credit expenses and warranty expenses. We also 
made an adjustment, where appropriate, for the CEP offset in accordance 
with section 773(a)(7)(B) of the Tariff Act. Finally, we deducted home 
market packing costs and added U.S. packing costs in accordance with 
sections 773(a)(6)(A) and (B) of the Tariff Act.

F. Price-to-CV Comparisons

    In accordance with section 773(a)(4) of the Tariff Act, we based NV 
on CV if we were unable to find a home market match of such or similar 
merchandise. Where appropriate, we made adjustments to CV in accordance 
with section 773(a)(8) of the Tariff Act. For comparisons to EP, we 
made COS adjustments by deducting home market direct selling expenses 
and adding U.S. direct selling expenses. Where we compared CV to CEP, 
we deducted from CV the weighted-average home market direct selling 
expenses. We also made an adjustment, where appropriate, for the CEP 
offset in accordance with section 773(a)(7)(B) of the Tariff Act.

Currency Conversion

    We made currency conversions into U.S. dollars based on the 
exchange rates in effect on the dates of the U.S. sales, as certified 
by the Federal Reserve Bank, in accordance with section 773A(a) of the 
Tariff Act.

Preliminary Results of Review

    As a result of our review we preliminarily determine the following 
weighted-average dumping margin exists for the period January 4, 1999 
through June 30, 2000:
    Manufacturer/Exporter: Mexinox.
    Weighted Average Margin (percentage): 4.03.
    The Department will disclose calculations performed within five 
days of the date of publication of this notice in accordance with 19 
CFR 351.224(b). An interested party may request a hearing within thirty 
days of publication. See CFR 351.310(c). Any hearing, if requested, 
will be held 37 days after the date of publication, or the first 
business day thereafter, unless the Department alters the date per 19 
CFR 351.310(d). Interested parties may submit case briefs or written 
comments no later than 30 days after the date of publication of these 
preliminary results of review. Rebuttal briefs and rebuttals to written 
comments, limited to issues raised in the case briefs and comments, may 
be filed no later than 35 days after the date of publication of this 
notice. Parties who submit argument in these proceedings are requested 
to submit with the argument (1) a statement of the issue, (2) a brief 
summary of the argument and (3) a table of authorities. Further, we 
would appreciate it if parties submitting written comments would 
provide the Department with an additional copy of the public version of 
any such comments on diskette. The Department will issue final results 
of this administrative review, including the results of our analysis of 
the issues in any such written comments or at a hearing, within 120 
days of publication of these preliminary results.
    The Department shall determine, and the U.S. Customs Service shall 
assess, antidumping duties on all appropriate entries. In accordance 
with 19 CFR 351.212(b)(1), we will calculate importer-specific ad 
valorem assessment rates for the merchandise based on the ratio of the 
total amount of antidumping duties calculated for the examined sales 
made during the POR to the total customs value of the sales used to 
calculate those duties. This rate will be assessed uniformly on all 
entries of that particular importer made during the POR. The Department 
will issue appropriate appraisement instructions directly to the 
Customs Service upon completion of the review.
    Furthermore, the following deposit requirements will be effective 
upon completion of the final results of this administrative review for 
all shipments of S4 in coils from Mexico entered, or withdrawn from 
warehouse, for consumption on or after the publication date of the 
final results of this administrative review, as provided by section 
751(a)(1) of the Tariff Act:
    (1) The cash deposit rate for Mexinox will be the rate established 
in the final results of review;
    (2) If the exporter is not a firm covered in this review or the 
LTFV investigation, but the manufacturer is, the cash deposit rate will 
be the rate established for the most recent period for the manufacturer 
of the merchandise; and
    (3) If neither the exporter nor the manufacturer is a firm covered 
in this or any previous review conducted by the Department, the cash 
deposit rate will be the all others rate from the investigation (30.85 
percent; see Notice of Amended Final Determination of Sales at Less 
Than Fair Value and Antidumping Duty Order; Stainless Steel Sheet and 
Strip in Coils from Mexico, 64 FR 40560, 40562 (July 27, 1999)).
    This notice also serves as a preliminary reminder to importers of 
their responsibility under 19 CFR 351.402(f) to file a certificate 
regarding the reimbursement of antidumping duties prior to liquidation 
of the relevant entries during this review

[[Page 41530]]

period. Failure to comply with this requirement could result in the 
Secretary's presumption that reimbursement of antidumping duties 
occurred and the subsequent assessment of double antidumping duties.
    We are issuing and publishing this notice in accordance with 
sections 751(a)(1) and 777(i)(1) of the Tariff Act.

    Dated: July 31, 2001.
Faryar Shirzad,
Assistant Secretary for Import Administration.
[FR Doc. 01-19782 Filed 8-7-01; 8:45 am]
BILLING CODE 3510-DS-P