[Federal Register Volume 67, Number 232 (Tuesday, December 3, 2002)]
[Notices]
[Pages 71936-71939]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-30621]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-588-846]


Notice of Determination Under Section 129 of the Uruguay Round 
Agreements Act: Antidumping Measures on Certain Hot-Rolled Flat-Rolled 
Carbon-Quality Steel Products from Japan

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.
SUMMARY: Consistent with section 129 of the Uruguay Round Agreements 
Act (URAA), which governs the

[[Page 71937]]

Department's actions following WTO reports, the Department has 
calculated new rates with respect to the antidumping duty investigation 
on hot-rolled flat-rolled carbon-quality steel products (hot-rolled 
steel) from Japan, in order to implement findings of the World Trade 
Organization (WTO) Appellate Body. These new rates will apply to 
unliquidated entries of the subject merchandise that are entered, or 
withdrawn from warehouse, for consumption on or after November 22, 
2002.

EFFECTIVE DATE: November 22, 2002.

FOR FURTHER INFORMATION CONTACT: Mark Hoadley, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, N.W., Washington, D.C. 20230; 
telephone: (202) 482-3148.

SUPPLEMENTARY INFORMATION:

The Applicable Statute

    Unless otherwise indicated, all citations to the statute are 
references to the Tariff Act of 1930, as amended (the Act). In 
addition, unless otherwise indicated, all citations to the Department's 
regulations are references to the provisions codified at 19 CFR Part 
351 (2001). Finally, citation to ``section 129'' refers to section 129 
of the URAA, codified at 19 U.S.C. Sec.  3538.

Background

    On April 28, 1999, the Department of Commerce issued a final 
determination of sales at less than fair value in the antidumping 
investigation on hot-rolled steel from Japan. Notice of Final 
Determination of Sales at Less Than Fair Value: Hot-Rolled Flat-Rolled 
Carbon-Quality Steel Products From Japan, 64 FR 24329 (May 6, 1999) 
(Final Determination). Following an affirmative injury determination 
issued by the United States International Trade Commission, the 
Department issued an antidumping duty order on this product on June 23, 
1999. Antidumping Duty Order; Certain Hot-Rolled Flat-Rolled Carbon-
Quality Steel Products From Japan, 64 FR 34778 (June 29, 1999).
    Subsequently, the Government of Japan requested the establishment 
of a WTO dispute resolution panel (the Panel) to consider, among other 
issues, various aspects of the Department's final determination in this 
case. The Panel circulated its report on February 28, 2001. United 
States Anti-Dumping Measures on Certain Hot-Rolled Steel Products from 
Japan, WT/DS184/R (February 28, 2001).
    The United States and Japan appealed certain findings and 
conclusions in the Panel report. The WTO Appellate Body (the Appellate 
Body) issued its report on July 24, 2001. United States Anti-Dumping 
Measures on Certain Hot-Rolled Steel Products from Japan, WT/DS184/AB/R 
(July 24, 2001). The Appellate Body report and the Panel report, as 
modified by the Appellate Body report, were adopted by the WTO Dispute 
Settlement Body (DSB) on August 23, 2001. United States - Anti-Dumping 
Measures on Certain Hot-Rolled Steel Products from Japan, WT/DS184/8 
(August 23, 2001).
    On September 10, 2001, the United States informed the DSB that it 
would implement the recommendations and rulings of the DSB in a manner 
consistent with its WTO obligations. On November 5, 2002, pursuant to 
section 129(b)(2) of the URAA, the United States Trade Representative 
requested that the Department issue a determination that would render 
the Department's actions in the investigation not inconsistent with the 
findings of the DSB.
    Section 129 of the URAA is the applicable provision governing the 
nature and effect of determinations issued by the Department to 
implement findings by WTO panels and the Appellate Body. Specifically, 
section 129(b)(2) provides that ``{n{time} otwithstanding any provision 
of the Tariff Act of 1930 . . .,'' within 180 days of a written request 
from the U.S. Trade Representative, the Department shall issue a 
determination that would render its actions not inconsistent with an 
adverse finding of a WTO panel or the Appellate Body. 19 U.S.C. Sec.  
3538(b)(2). The Statement of Administrative Action for the URAA (SAA) 
variously refers to such a determination by the Department as a 
``new,'' ``second,'' and ``different'' determination. SAA at 1025, 
1027. This determination is subject to judicial review separate and 
apart from judicial review of the Department's original determination. 
19 U.S.C. Sec.  1516a(a)(2)(B)(vii).
    In addition, section 129(c)(1)(B) of the URAA expressly provides 
that a determination under section 129 applies only with respect to 
unliquidated entries of merchandise entered, or withdrawn from 
warehouse, for consumption on or after the date on which the U.S. Trade 
Representative directs the Department to implement that determination. 
In other words, as the SAA clearly provides, ``such determinations have 
prospective effect only.'' SAA at 1026. Thus, ``relief available under 
subsection 129(c)(1) is distinguishable from relief in an action 
brought before a court or a NAFTA binational panel, where . . . 
retroactive relief may be available.'' Id.
    Accordingly, this new determination, pursuant to section 129 of the 
URAA (Section 129 Determination), does not render moot the federal 
court appeal currently pending with respect to the antidumping duty 
order on hot-rolled steel. As detailed below, the Section 129 
Determination rates will apply only to cash deposits for entries made 
after the effective date, and subsequent assessments on such entries, 
should no administrative review be requested under section 351.213 of 
the Department's regulations.
    On November 8, 2002, the Department issued a draft Section 129 
Determination to the Government of Japan and to the parties to the less 
than fair value investigation segment of the proceeding, soliciting 
comments by November 15, 2002 and rebuttal comments by November 19, 
2002. On November 15, two petitioning parties provided joint comments 
on the draft determination. No other affirmative or rebuttal comments 
were received.

Appellate Body Findings and Conclusions

    In its report, the Appellate Body found, inter alia, that certain 
aspects of the Department's final determination in the hot-rolled steel 
investigation were inconsistent with the Agreement on Implementation of 
Article VI of the General Agreement on Tariffs and Trade 1994 (the 
Antidumping Agreement).
    1. The Appellate Body's report, at paragraph 240(a), upholds the 
finding, in paragraph 8.1(a) of the Panel Report, that the United 
States acted inconsistently with Article 6.8 and Annex II of the 
Antidumping Agreement in applying ``facts available'' to Nippon Steel 
Corporation (Nippon) and NKK Corporation (NKK) with respect to sales 
affected by their failure to timely provide weight conversion factors. 
The information, which was needed to allow the Department to compare 
steel sold on an actual weight basis with steel sold on a theoretical 
weight basis, was provided by the two companies after the stipulated 
deadline.
    2. The Appellate Body's report, at paragraph 240(b), upholds the 
finding, in paragraph 8.1(a) of the Panel Report, that the United 
States acted inconsistently with Article 6.8 and Annex II of the 
Antidumping Agreement in applying adverse facts available to Kawasaki 
Steel Corporation (Kawasaki).
    3. The Appellate Body's report, at paragraph 240(c), upholds the 
Panel's findings that the United States' application of section 
735(c)(5)(A) of the United States Tariff Act of 1930, as

[[Page 71938]]

amended, to determine the ``all others'' rate in this case, was 
inconsistent with the United States' obligations under Article 9.4 of 
the Antidumping Agreement.
    4. The Appellate Body's report, at paragraph 240(d), upholds the 
finding, in paragraph 8.1(c) of the Panel Report, that the United 
States acted inconsistently with Article 2.1 of the Antidumping 
Agreement by excluding from the calculation of normal value, as outside 
``the ordinary course of trade,'' certain home market sales to parties 
affiliated with an investigated exporter, on the basis of the ``99.5 
percent'' or ``arm's length'' test.

Implementation

    The Department is implementing the recommendations and rulings of 
the DSB as follows:
1. All three investigated companies (Kawasaki, NKK, and Nippon) made 
home market sales through affiliates. In order to determine which of 
these related party sales may have been made at arm's length and thus 
may be considered for use in calculating normal value, the Department 
applied a new arm's length methodology. See Antidumping Proceedings: 
Affiliated Party Sales in the Ordinary Course of Trade, 67 FR 69186 
(November 15, 2002). Specifically, under the new methodology, for sales 
by the exporter or producer to an affiliate to be included in the 
normal value calculation, those sales prices must fall, on average, 
within a defined range, or band, around sales prices of the same or 
comparable merchandise sold by that exporter or producer to all 
unaffiliated customers. The band established for this test provides 
that the overall ratio calculated for an affiliate be between 98 
percent and 102 percent, inclusive, of prices to unaffiliated customers 
in order for sales to that affiliate to be considered ``in the ordinary 
course of trade'' and used in the normal value calculation. This new 
test is consistent with the view, expressed by the Appellate Body at 
paragraph 148 of its report, that rules aimed at preventing the 
distortion of normal value through sales between affiliates should 
reflect, ``even-handedly,'' that ``both high and low-priced sales 
between affiliates might not be 'in the ordinary course of trade.''' 
Additionally, under the new methodology, the Department will compare 
sales to affiliates with sales to unaffiliated parties of the most 
similar merchandise, when sales of identical merchandise to 
unaffiliated parties are unavailable.
    In comparing merchandise sold in the United States with merchandise 
sold in the home market, the Department makes an adjustment, where 
appropriate, to normal value for differences in physical 
characteristics. This adjustment normally is based on differences in 
the variable costs of manufacturing attributable to the physical 
differences between the products. While product characteristics differ 
from case to case, the Department generally does not compare a 
comparison market product to a given product sold in the United States 
if the difference in variable manufacturing costs of the two products 
is greater than 20 percent. Under the new arm's length methodology, the 
Department has applied a comparable adjustment to prices of similar 
merchandise sold to unaffiliated customers.
    As a result of the application of this new methodology, the home 
market sales used to calculate normal value changed somewhat, in this 
Section 129 Determination, for each of the three companies examined 
during the investigation.
2. In the Final Determination, the Department applied adverse facts 
available to sales of Nippon and NKK that were affected by the absence 
of weight conversion factors on the record. Commerce has placed the 
weight conversion factor data submitted by Nippon and NKK on the record 
of this Section 129 Determination, and has used these factors in 
calculating the margins for affected sales, rather than using facts 
available margins for those sales. Refer to the proprietary Memorandum 
to the File from Mark Hoadley through Sally Gannon, Analysis of Nippon 
Steel Corp., dated November 12, 2002, and the proprietary Memorandum to 
the File from Mark Hoadley through Sally Gannon, Analysis of NKK Corp., 
dated November 12, 2002, for the conversion factors used.
3. In the Final Determination, the Department used adverse facts 
available to determine the margin for U.S. sales made by Kawasaki 
through its affiliate California Steel Industries (CSI), because 
Kawasaki did not provide requested information with respect to these 
sales. The Department stated in the Final Determination that, in not 
providing these data, Kawasaki had failed to cooperate by not acting to 
the best of its ability to obtain the CSI data, and, thus, that the use 
of an adverse inference was warranted in selecting facts available for 
the CSI sales. However, the Appellate Body report stated that the 
Department's determination that Kawasaki had not cooperated was 
inconsistent with Article 6.8 and Annex II of the Antidumping 
Agreement. Therefore, under the circumstances in this case, in 
selecting the facts available for the missing sales made through CSI, 
the Department has, in this Section 129 Determination, applied neutral 
facts available to these sales. Specifically, the Department has 
applied the weighted-average margin calculated for sales to all 
customers other than CSI.
4. Using the new rates for examined respondents, the Department also 
recalculated the ``all others'' rate. The Appellate Body's report, at 
paragraph 129, stated:
    [S]ection 735(c)(5)(A) of the United States Tariff Act of 1930, as 
amended, requires the inclusion of margins established, in part, on the 
basis of facts available, in the calculation of the 'all others' rate, 
and to the extent that this results in an 'all others' rate in excess 
of the maximum allowable rate under Article 9.4, we uphold the Panel's 
finding that section 735(c)(5)(A) of the United States Tariff Act of 
1930, as amended, is inconsistent with Article 9.4 of the Anti-Dumping 
Agreement.
    As required by section 735(c)(5) of the Act, the Department has 
calculated the ``all others'' rate for this Section 129 Determination 
as the amount equal to the weighted average of the estimated margins 
established for the exporters and producers individually investigated, 
excluding any zero and de minimis margins, and any margins determined 
entirely on the basis of the facts available. In this Section 129 
Determination, none of the exporters and producers individually 
examined had a rate which was zero, de minimis, or determined entirely 
on the basis of the facts available. Therefore, the ``all others'' rate 
for this Section 129 Determination is the weighted average of the 
recalculated company-specific rates for Nippon, NKK, and Kawasaki, the 
three individually examined producers and exporters. This rate is 22.92 
percent.
    Article 9.4 of the Antidumping Agreement requires that, when the 
authorities have limited their examination of the known exporters or 
producers in accordance with Article 6.10, any antidumping duty applied 
to imports from exporters or producers not included in the examination 
shall not exceed the weighted average margin of dumping established 
with respect to the selected exporters or producers. Article 9.4 
further provides that, for purposes of that calculation, the 
authorities shall disregard any zero and de minimis margins and 
``margins established under the circumstances referred to in paragraph 
8 of Article 6.''

[[Page 71939]]

    The ``all others'' rate in this Section 129 Determination conforms 
to the requirements of Article 9.4 because the new ``all others'' rate 
of 22.92 percent does not exceed the rate of 25.95 percent, which is 
the weighted average of the company-specific rates for NKK and 
Kawasaki, the rates which are based solely on the data provided by 
those respondents for the purposes requested. Therefore, this weighted 
average is made up of margins that are not ``established under the 
circumstances referred to in paragraph 8 of Article 6.'' The new rate 
for Nippon, in contrast, is based in part on the application of a 
facts-available ``plug'' to U.S. sales matched to home market products 
(``CONNUMs'') for which Nippon failed to report product-specific costs. 
For those sales, the Department used the highest margin calculated for 
other sales, and averaged those margins into the overall margin for 
Nippon, thereby changing that margin. 64 FR 24329, 24348 (May 6, 1999). 
This methodology was not contested before either the WTO Panel or the 
Appellate Body. In contrast, Kawasaki's margin was calculated solely on 
the basis of the information Kawasaki provided with respect to the non-
CSI sales, and was not altered by any use of facts available. Thus, 
Kawasaki's overall margin was not ``established under the circumstances 
referred to in paragraph 8 of Article 6.''

Comment 1

    Two petitioning steel companies stated that the Department's draft 
Section 129 Determination adequately implemented the findings of the 
Appellate Body, but that it was ambiguous as to the nature and effect 
of that determination. They urged the Department to make clear that it 
is a new and different determination, rather than an amendment to the 
original determination in the investigation, and that it has 
prospective effect only. They also asked that the Department address 
the proper assessment rates for entries made prior to the date of 
implementation of the Section 129 Determination.

Department Position

    We agree with petitioners' first argument, and have clarified, in 
this notice, the nature and effect of this Section 129 Determination. 
We do not agree, however, that a section 129 Determination should 
necessarily include a discussion of the proper assessment rates for 
entries made prior to the effective date of that determination, i.e., 
entries to which that determination expressly does not apply. Under 
U.S. law, such prior entries, if reviewed, are governed by the results 
of the relevant review. Section 751(a)(1) and (a)(2)(C) of the Act. If 
such prior entries are not reviewed, they are liquidated as entered. 19 
CFR Sec.  351.212(c).

Section 129 Determination Margins

    As a result of the changes to the calculations, we determine that 
the following Section 129 Determination margins exist:

Kawasaki............................................              40.26%
NKK.................................................              17.70%
Nippon..............................................              18.37%
All Others..........................................              22.92%
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Continuation of Suspension of Liquidation

    In accordance with section 129(c)(1)(B) of the URAA, we will 
instruct the U.S. Customs Service (Customs) to continue to suspend 
liquidation of all imports of hot-rolled steel from Japan that are 
entered, or withdrawn from warehouse, for consumption on or after 
November 22, 2002, the date on which the Trade Representative directed 
the Department under subsection (b)(4) of that section to implement 
this Section 129 Determination. Customs shall continue to require a 
cash deposit equal to the estimated amount by which the normal value 
exceeds the U.S. price. The suspension of liquidation instructions will 
remain in effect until further notice.
    Because we completed an administrative review of Kawasaki 
subsequent to the issuance of the order in this proceeding, we will not 
issue a new cash deposit rate for Kawasaki pursuant to this Section 129 
Determination. We have not conducted reviews of Nippon and NKK, 
however. Thus, we will instruct Customs to revise the cash deposit 
rates for these two firms with respect to subject merchandise entered, 
or withdrawn from warehouse, for consumption on or after November 22, 
2002. The Section 129 Determination ``all others'' rate will be the new 
cash deposit rate for all exporters of subject merchandise other than 
Nippon, NKK and Kawasaki, with respect to entries of subject 
merchandise entered, or withdrawn from warehouse, for consumption on or 
after November 22, 2002.
    This Section 129 Determination is issued and published in 
accordance with section 129(c)(2)(A) of the URAA.

    Dated: November 22, 2002.
Faryar Shirzad,
Assistant Secretary for Import Administration.
[FR Doc. 02-30621 Filed 12-2-02; 8:45 am]
BILLING CODE 3510-DS-S