[Federal Register Volume 69, Number 151 (Friday, August 6, 2004)]
[Notices]
[Pages 47905-47911]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-18039]


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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 requests from respondent ThyssenKrupp Mexinox 
S.A. de C.V. (Mexinox S.A.) and Mexinox USA, Inc. (Mexinox USA) 
(collectively, Mexinox) and petitioners,\1\ 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 administrative review covers 
imports of subject merchandise from Mexinox S.A. during the period July 
1, 2002 to June 30, 2003.
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    \1\ Petitioners are Allegheny Ludlum, AK Steel Corporation 
(formerly Armco, Inc.), J&L Specialty Steel, Inc., North American 
Stainless, Butler-Armco Independent Union, Zanesville Armco 
Independent Organization, Inc. and the United Steelworkers of 
America, AFL-CIO/CLC.
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    We preliminarily determine that sales of S4 in coils from Mexico 
have been made below normal value (NV). If these preliminary results 
are adopted in our final results of administrative review, we will 
instruct U.S. Customs and Border Protection (CBP) to assess antidumping 
duties based on the difference between the constructed export price 
(CEP) and 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, (2) a brief summary of the argument, and (3) a table of 
authorities.

EFFECTIVE DATE: August 6, 2004.

FOR FURTHER INFORMATION CONTACT: Deborah Scott or Robert James, AD/CVD 
Operations, Enforcement Office 6, 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:

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 1, 2002, the Department 
published the Antidumping or Countervailing Duty Order, Finding, or 
Suspended Investigation; Opportunity To Request Administrative Review, 
of, inter alia, stainless steel sheet and strip in coils from Mexico 
for the period July 1, 2002 through June 30, 2003 (68 FR 39511).
    In accordance with 19 CFR 351.213(b)(1), Mexinox and petitioners 
requested that we conduct an administrative review. On August 22, 2003, 
we published in the Federal Register a notice of initiation of this 
antidumping duty administrative review covering the period July 1, 
2002, through June 30, 2003. See Initiation of Antidumping and 
Countervailing Duty Administrative Reviews and Request for Revocation 
in Part, 68 FR 50750 (August 22, 2003).
    On September 15, 2003, the Department issued an antidumping duty 
questionnaire to Mexinox. Mexinox submitted its response to section A 
of the questionnaire on October 14, 2003, and its response to sections 
B through E of the questionnaire on November 20, 2003.\2\ On March 1, 
2004, the

[[Page 47906]]

Department issued a supplemental questionnaire for sections A, B, and 
C, to which Mexinox responded on March 30, 2004. On March 29, 2004, the 
Department issued a supplemental questionnaire for section D, as well 
as for sections C and E pertaining to an affiliated U.S. reseller, Ken-
Mac Metals, Inc. (Ken-Mac). Mexinox responded to this supplemental 
questionnaire on April 27, 2004. The Department issued a second 
supplemental questionnaire for sections A through D on June 17, 2004; 
Mexinox submitted its response on July 6, 2004. Finally, on July 13, 
2004, the Department issued a third supplemental questionnaire for 
sections A through E, to which Mexinox responded on July 16, 2004.
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    \2\ Section A of the questionnaire requests general information 
concerning a company's corporate structure and business practices, 
the merchandise under review that it sells, and the manner in which 
it sells that merchandise in all of its markets. Section B requests 
a complete listing of all home market sales, or, if the home market 
is not viable, of sales in the most appropriate third-country market 
(this section is not applicable to respondents in non-market economy 
cases). Section C requests a complete listing of U.S. sales. Section 
D requests information on the cost of production of the foreign like 
product and the constructed value of the merchandise under review. 
Section E requests information on further manufacturing.
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    Because it was not practicable to complete this review within the 
normal time frame, on February 12, 2004, we published in the Federal 
Register our notice of the extension of time limits for this review. 
See Stainless Steel Sheet and Strip in Coils from Mexico; Antidumping 
Duty Administrative Review; Extension of Time Limit, 69 FR 6941 
(February 12, 2004). This extension established the deadline for these 
preliminary results as July 30, 2004.

Period of Review

    The period of review (POR) is July 1, 2002 through June 30, 2003.

Scope of the Order

    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 currently classifiable 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 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 sulfide 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

[[Page 47907]]

available under proprietary trade names such as ``Arnokrome III.'' \3\
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    \3\ ``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.'' \4\
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    \4\ ``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.'' \5\
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    \5\ ``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).\6\ 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.'' \7\
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    \6\ This list of uses is illustrative and provided for 
descriptive purposes only.
    \7\ ``GIN4 Mo,'' ``GIN5'' and ``GIN6'' are the proprietary 
grades of Hitachi Metals America, Ltd.
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Duty Absorption

    On September 22, 2003, petitioners requested that the Department 
determine whether antidumping duties had been absorbed during the POR 
by the respondent. Section 751(a)(4) of the Tariff Act of 1930, as 
amended (the Act) provides for the Department, if requested, to 
determine during an administrative review initiated two or four years 
after the publication of the order, whether antidumping duties have 
been absorbed by a foreign producer or exporter, if the subject 
merchandise is sold in the United States through an affiliated 
importer. Because Mexinox S.A. sold subject merchandise to unaffiliated 
customers in the United States through an importer that is affiliated 
(i.e., Mexinox USA), and because this review was initiated four years 
after the publication of the order, we will make a duty absorption 
determination in this segment of the proceeding within the meaning of 
section 751(a)(4) of the Act.
    In its March 1, 2004 supplemental questionnaire, the Department 
requested evidence from the respondent to demonstrate that unaffiliated 
U.S. purchasers will pay any antidumping duties ultimately assessed on 
entries during this POR. In its March 30, 2004 supplemental 
questionnaire response at page 2, Mexinox stated it ``does not believe 
that there is any basis for concluding that its affiliate Mexinox USA 
has `absorbed' antidumping duties in this review or will do so after 
they are assessed as a result of this review,'' but requested that the 
Department provide clarification regarding the types of documents or 
data that could be submitted as evidence that unaffiliated purchasers 
ultimately will pay the antidumping duties assessed on entries during 
the POR. On July 16, 2004, we issued a clarification letter to Mexinox 
and requested that Mexinox provide any such evidence by July 23, 2004. 
None was provided.
    In determining whether antidumping duties have been absorbed by the 
respondent during the POR we presume that the duties will be absorbed 
for those sales that have been made at less than normal value (NV). 
This presumption can be rebutted with evidence (e.g., an agreement 
between the affiliated importer and unaffiliated purchaser) that the 
unaffiliated purchaser will pay the full duty ultimately assessed on 
the subject merchandise. Given that Mexinox did not provide any 
evidence on the record showing that unaffiliated purchasers will pay 
the full duty ultimately assessed on the subject merchandise, and 
despite its claim that duty absorption did not occur, we preliminarily 
find that antidumping duties have been absorbed by Mexinox S.A. on U.S. 
sales made through its affiliated importer, Mexinox USA.

Sales Made Through Affiliated Resellers

A. U.S. Market

    Mexinox USA, a wholly-owned subsidiary of Mexinox S.A., sold 
subject merchandise in the United States during the POR to unaffiliated 
customers. Mexinox USA also made sales of subject merchandise during 
the POR to an affiliated company, Ken-Mac, which in turn resold the 
subject merchandise to unaffiliated customers in the United States. See 
Mexinox's October 14, 2003 questionnaire response at A-11. Thus, in 
addition to Mexinox USA's sales to unaffiliated customers, we have 
included in our preliminary margin calculation resales of Mexinox 
subject merchandise made through Ken-Mac.

B. Home Market

    Mexinox Trading, S.A. de C.V. (Mexinox Trading), a wholly-owned 
subsidiary of Mexinox S.A., sells both the foreign like product and 
other merchandise in the home market. Mexinox reported that sales 
through

[[Page 47908]]

Mexinox Trading during the POR represented less than five percent of 
Mexinox's total sales of the foreign like product in the home market. 
See, e.g., Mexinox's October 14, 2003 questionnaire response at A-4 and 
its July 6, 2004 supplemental questionnaire response at Attachment B-
43. Because Mexinox Trading's sales of the foreign like product were 
less than five percent of home market sales of the foreign like 
product, in accordance with 19 CFR 351.403(d), we did not require 
Mexinox to report downstream sales by Mexinox Trading to the first 
unaffiliated customer. This treatment is consistent with that employed 
in past administrative reviews of S4 in coils from Mexico. See, e.g., 
Stainless Steel Sheet and Strip in Coils from Mexico; Final Results of 
Antidumping Duty Administrative Review, 69 FR 6259 (February 10, 2004) 
(S4 in Coils from Mexico 2001-2002 Final Results).

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 CEP to NV, as 
described in the ``Constructed Export Price'' and ``Normal Value'' 
sections of this notice, below. In accordance with section 777A(d)(2) 
of the Act, we compared individual 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. See 19 CFR 
351.401(i). Mexinox stated 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 date of shipment and invoicing, 
these terms were subject to change. See, e.g., Mexinox's October 14, 
2003 questionnaire response at A-39 and A-44. In our March 1, 2004 
supplemental questionnaire, we requested that Mexinox provide 
additional information concerning the nature and frequency of price and 
quantity changes occurring between the date of the sales order and date 
of invoice. In response, Mexinox provided analyses for its U.S. and 
home market sales showing how often changes in price and quantity 
occurred between order date and invoice date. See Mexinox's March 30, 
2004 supplemental questionnaire response at Attachment A-22. Based on 
our analysis of the information submitted by Mexinox, we have 
preliminarily determined the date of invoice is the appropriate date of 
sale because record evidence indicates that in a number of instances 
the price and quantity changed between the date of the order acceptance 
and the date of invoice. Therefore, we find Mexinox's claim that price 
and quantity terms are subject to negotiation until the date of invoice 
is substantiated. Our use of invoice date as the date of sale is 
consistent with past administrative reviews of S4 in coils from Mexico. 
See, e.g., S4 in Coils from Mexico 2001-2002 Final Results.

Product Comparisons

    In accordance with section 771(16) of the Act, we considered all 
products produced by Mexinox S.A. 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. We relied on nine 
characteristics to match U.S. sales of subject merchandise to 
comparison sales of the foreign like product (listed in order of 
preference): (1) Grade; (2) cold/hot rolled; (3) gauge; (4) surface 
finish; (5) metallic coating; (6) non-metallic coating; (7) width; (8) 
temper; and (9) edge trim. 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 September 15, 2003, questionnaire.

Level of Trade

    In accordance with section 773(a)(1)(B)(i) of the Act, to the 
extent practicable, we determine NV based on sales in the comparison 
market at the same level of trade (LOT) as the 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 constructed value (CV), that of the 
sales from which we derive selling, general, and administrative (SG&A) 
expenses and profit. 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 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 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 Act (i.e., the CEP offset provision).
    In the Department's September 15, 2003 questionnaire, 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) Direct shipments 
(i.e., products manufactured to order) and (2) sales through inventory. 
See, e.g., Mexinox's October 14, 2003 questionnaire response at A-25. 
Within both channels of distribution, Mexinox S.A. made sales to both 
retailers and end users. For both channels of distribution, Mexinox 
S.A. performed similar selling functions such as pre-sale technical 
assistance, inventory maintenance, freight and delivery arrangements, 
and after-sales warranty services. See, e.g., Mexinox's March 30, 2004 
supplemental questionnaire response at Attachment A-21-A. Because 
channels of distribution do not qualify as separate LOTs when the 
selling functions performed are sufficiently similar, we determined one 
LOT exists for Mexinox's home market sales. See, e.g., Certain 
Stainless Steel Butt-Weld Pipe Fittings from Taiwan: Final Results and 
Final Rescission in Part of Antidumping Duty Administrative Review, 67 
FR 78417 (December 24, 2002).
    For the U.S. market, Mexinox reported one LOT, the CEP LOT. Sales 
made through this LOT consisted of merchandise produced to order that 
was sold directly to unaffiliated U.S. customers (``direct 
shipments''), sales made from the stock of finished goods held at the 
Mexican factory in San Luis Potosi to unaffiliated U.S. customers 
(``SLP stock sales''), and sales made through Mexinox USA's inventory. 
Sales made through this LOT also included CEP sales made through 
Mexinox USA's affiliated reseller, Ken-Mac. See, e.g., Mexinox's 
October 14, 2003 questionnaire response at A-26 to A-27. When we 
compared CEP sales (after deductions made pursuant to section 772(d) of 
the Act) to home market sales, we determined there were fewer customer 
sales contacts, technical services, inventory maintenance, and warranty 
services performed for CEP sales. See, e.g., id. at A-35 to A-36 and 
Attachments A-4-B and A-4-C and

[[Page 47909]]

Mexinox's March 30, 2004 supplemental questionnaire response at 
Attachment A-21-A. In addition, the differences in selling functions 
performed for home market and CEP transactions indicate home market 
sales involved a more advanced stage of distribution than CEP sales. 
See id. In the home market, Mexinox S.A. 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.). See id.
    Based on our analysis of the selling functions performed for the 
CEP LOT and the home market LOT, we determined the 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 LOT adjustment 
may be appropriate. In this case, Mexinox sold at one LOT in the home 
market; thus, there is no basis upon which to determine whether there 
is a pattern of consistent price differences between LOTs. 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 LOT of home market sales is at a more 
advanced stage than the LOT of the CEP sales, a CEP offset is 
appropriate in accordance with section 773(a)(7)(B) of the Act, as 
claimed by Mexinox. We based the amount of the CEP offset 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 Act. We applied the CEP offset to NV, whether based on home market 
prices or CV.

Constructed Export Price

    We calculated CEP in accordance with section 772(b) of the 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 
billing adjustments, discounts and rebates, and commissions, where 
applicable. We also made deductions for movement expenses in accordance 
with section 772(c)(2)(A) of the Act; these included, where 
appropriate: foreign inland freight, foreign brokerage and handling, 
inland insurance, ocean freight,\8\ U.S. customs duties, U.S. inland 
freight, U.S. brokerage, and U.S. warehousing expenses. As further 
directed by section 772(d)(1) of the Act, we deducted those selling 
expenses associated with economic activities occurring in the United 
States, including direct selling expenses (i.e., credit costs, warranty 
expenses, and another expense not subject to public disclosure), 
inventory carrying costs, and other indirect selling expenses. We also 
made an adjustment for profit in accordance with section 772(d)(3) of 
the Act, and added duty drawback to the starting price in accordance 
with section 772(c)(1)(B) of the Act. For those sales in which the 
material was sent to an unaffiliated U.S. processor to be further 
processed, we made an adjustment based on the transaction-specific 
further-processing amounts reported by Mexinox. In addition, the U.S. 
affiliated reseller Ken-Mac 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 Act. In 
calculating the cost of further manufacturing for Ken-Mac, we relied 
upon the further manufacturing information provided by Mexinox.
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    \8\ This expense was incurred on sales to Puerto Rico.
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Normal Value

A. Selection of Comparison Market

    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 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 the home market was 
viable. See, e.g., Mexinox's April 27, 2004 supplemental questionnaire 
response at Attachment A-28 (quantity and value chart).

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

    Sales to affiliated customers in the home market not made at arm's-
length prices are excluded from our analysis because we consider them 
to be outside the ordinary course of trade. See 19 CFR 351.102(b). To 
test whether the sales to affiliates were made at arm's-length prices, 
we compared on a model-specific basis the starting prices of sales to 
affiliated and unaffiliated customers net of all direct selling 
expenses, discounts and rebates, movement charges, and packing. Where 
prices to the affiliated party were, on average, within a range of 98 
to 102 percent of the price of identical or comparable merchandise to 
the unaffiliated parties, we determined that the sales made to the 
affiliated party were at arm's length. See Antidumping Proceedings: 
Affiliated Party Sales in the Ordinary Course of Trade, 67 FR 69186, 
69194 (November 15, 2002). In accordance with the Department's 
practice, we only included in our margin analysis those sales to 
affiliated parties that were made at arm's length.

C. Cost of Production Analysis

    Because we disregarded sales of certain products made at prices 
below the cost of production (COP) in the most recently completed 
review of S4 in coils from Mexico (see S4 in Coils from Mexico 2000-
2001 Final Results), 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 
Act. Therefore, pursuant to section 773(b)(1) of the Act, we initiated 
a COP investigation of sales by Mexinox.
    To calculate COP, in accordance with sections 773(f)(2) and (3) of 
the Act, we adjusted Mexinox's reported raw material costs (major input 
rule). See the Department's Preliminary Analysis Memorandum from 
Deborah Scott to the File dated July 30, 2004 (Preliminary Analysis 
Memorandum) for more information regarding this adjustment. We also 
recalculated Mexinox's general and administrative (G&A) and interest 
expenses as described in the Preliminary Analysis Memorandum. We added 
the revised material costs to the respondent's reported cost of 
fabrication for the foreign like product, plus amounts for SG&A and 
packing costs, in accordance with section 773(b)(3) of the Act. We then 
computed weighted-average COPs during the POR, and compared the 
weighted-average COP figures to home market sales prices of the foreign 
like product as required under section 773(b) of the Act, to determine 
whether these sales had been made at prices below the COP. On a

[[Page 47910]]

product-specific basis, we compared the COP to the home market prices 
net of billing adjustments, discounts and rebates, and any applicable 
movement charges.
    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 Act, whether, within an extended period of 
time, such sales were made in substantial quantities; and 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 
less than 20 percent of the respondent's home market sales of a given 
model (i.e., CONNUM) were at prices below the COP, we did not disregard 
any below-cost sales of that model because we determined that the 
below-cost sales were not made within an extended period of time and in 
``substantial quantities.'' Where 20 percent or more of the 
respondent's home market sales of a given model were at prices less 
than the COP, we disregarded the below-cost sales because: (1) They 
were made within an extended period of time in ``substantial 
quantities,'' in accordance with sections 773(b)(2)(B) and (C) of the 
Act, and (2) based on our comparison of prices to the weighted-average 
COPs for the POR, they were at prices which would not permit the 
recovery of all costs within a reasonable period of time, in accordance 
with section 773(b)(2)(D) of the Act.
    Our cost test for Mexinox revealed that for home market sales of 
certain models, less than 20 percent of the sales of those models were 
at prices below the COP. We therefore retained all such sales in our 
analysis and used them as the basis for determining NV. Our cost test 
also indicated that for certain models, more than 20 percent of the 
home market sales of those models were sold at prices below the COP 
within an extended period of time and were at prices which would not 
permit the recovery of all costs within a reasonable period of time. 
Thus, in accordance with section 773(b)(1) of the Act, we excluded 
these below-cost sales from our analysis and used the remaining above-
cost sales as the basis for determining NV.

D. Constructed Value

    In accordance with section 773(e) of the Act, we calculated CV 
based on the sum of Mexinox's material and fabrication costs, SG&A 
expenses, profit, and U.S. packing costs. We calculated the COP 
component of CV as described above in the ``Cost of Production 
Analysis'' section of this notice. In accordance with section 
773(e)(2)(A) of the 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.

E. Price-to-Price Comparisons

    We calculated NV based on prices to unaffiliated customers or 
prices to affiliated customers we determined to be at arm's length. We 
made adjustments for billing adjustments, discounts, and interest 
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 Act. In addition, we made adjustments 
for differences in cost attributable to differences in physical 
characteristics of the merchandise (i.e., difmer) pursuant to section 
773(a)(6)(C)(ii) of the 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 Act and 19 CFR 351.410. We made COS 
adjustments for imputed credit expenses and warranty expenses. As noted 
in the ``Level of Trade'' section of this notice, we also made an 
adjustment for the CEP offset in accordance with section 773(a)(7)(B) 
of the 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 Act.

F. Price-to-CV Comparisons

    In accordance with section 773(a)(4) of the 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 Act.

Facts Available

    In accordance with section 776(a)(1) of the Act, for these 
preliminary results we find it necessary to use partial facts available 
in those instances where the respondent did not provide certain 
information necessary to conduct our analysis.
    In our September 15, 2003 questionnaire at G-6, we requested that 
Mexinox provide sales and cost data for all affiliates involved with 
the production or sale of the merchandise under review during the POR 
in both the home and U.S. markets. In its October 14, 2003 
questionnaire response at A-2, Mexinox indicated its affiliated 
reseller, Ken-Mac, sold subject merchandise in the United States during 
the POR. In its November 20, 2003 submission, Mexinox provided data 
related to Ken-Mac's resales of subject merchandise to unaffiliated 
customers in the United States. At pages 37-38 of its April 27, 2004 
supplemental questionnaire response, Mexinox indicated Ken-Mac was 
unable to confirm the origin of some of the stainless steel material it 
sold during the POR. Therefore, Mexinox reported data on these 
particular resales through Ken-Mac in a separate database. See id. at 
Attachment KMC-13. 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.
    Since Mexinox has not provided all of the information necessary to 
perform our analysis, we have preliminarily determined that, pursuant 
to section 776(a)(1) of the Act, it is appropriate to use the facts 
otherwise available in calculating a margin on Ken-Mac's 
``unattributable'' sales. Section 776(a)(1) of the Act provides that 
the Department will, subject to section 782(d) of the Act, use the 
facts otherwise available in reaching a determination if ``necessary 
information is not available on the record.'' Hence, 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 Ken-Mac's ``unattributable'' sales. This methodology is 
consistent with that employed in past administrative reviews of S4 in 
coils from Mexico. See, e.g., Stainless Steel Sheet and Strip in Coils 
from Mexico; Final Results of Antidumping Duty Administrative Review, 
68 FR 6889 (February 11, 2003), as amended, Notice of Amended Final 
Results of Antidumping Duty Administrative Review: Stainless Steel 
Sheet and Strip in Coils from Mexico, 68 FR 13686 (March 20, 2003) (S4 
in Coils from Mexico 2000-2001 Final Results). However, prior to 
applying the overall margin calculated on other sales/resales of 
subject merchandise to Ken-Mac's ``unattributable'' sales, we 
determined, based on the relative percentage (by volume) of subject 
stainless steel merchandise that Ken-Mac purchased during the POR from 
Mexinox and other vendors,\9\ the quantity of each ``unatttributable'' 
transaction that could be allocated reasonably to subject stainless 
steel merchandise purchased

[[Page 47911]]

from Mexinox. We note that for these preliminary results we have not 
used an adverse inference, as provided under section 776(b) of the Act, 
to calculate a margin on Ken-Mac's ``unattributable'' sales.
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    \9\ Mexinox provided this information in its April 27, 2004 
supplemental questionnaire response at Attachment KMC-14.
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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 
Act.

Preliminary Results of Review

    As a result of our review we preliminarily determine the following 
weighted-average dumping margin exists for the period July 1, 2002 
through June 30, 2003:

------------------------------------------------------------------------
                                                               Weighted
                                                                average
                    Manufacturer/exporter                       margin
                                                               (percent)
------------------------------------------------------------------------
ThyssenKrupp Mexinox S.A. de C.V............................        5.97
------------------------------------------------------------------------

    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 19 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 case briefs, rebuttal briefs, 
and written comments would provide the Department with an additional 
copy of the public version of any such argument on diskette. The 
Department will issue final results of this administrative review, 
including the results of our analysis of the issues in any such case 
briefs, rebuttal briefs, and written comments or at a hearing, within 
120 days of publication of these preliminary results.
    Upon completion of this administrative review, the Department shall 
determine, and CBP 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 CBP 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 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 
less-than-fair-value (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, or the LTFV investigation 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 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 Act.

    Dated: July 29, 2004.
Jeffrey A. May,
Acting Assistant Secretary for Import Administration.
[FR Doc. 04-18039 Filed 8-5-04; 8:45 am]
BILLING CODE 3510-DS-P