[Federal Register Volume 69, Number 152 (Monday, August 9, 2004)]
[Notices]
[Pages 48205-48212]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-18152]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-475-824]


Preliminary Results of Antidumping Duty Administrative Review: 
Stainless Steel Sheet and Strip in Coils From Italy

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

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

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SUMMARY: In response to a request from petitioners and ThyssenKrupp 
Acciai Speciali Terni S.p.A. (TKAST), a producer and exporter of 
subject merchandise, and ThyssenKrupp AST USA, Inc. (TKAST USA), an 
importer of subject merchandise, the U.S. Department of Commerce (the 
Department) is conducting an administrative review of the antidumping 
duty order on stainless steel sheet and strip in coils (SSSS) from 
Italy.\1\ This review covers imports of subject merchandise from TKAST.
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    \1\ Petitioners include: Allegheny Ludlum Corporation, AK Steel 
Corporation, J&L Speciality Steel, Inc., North American Stainless, 
United Steelworkers of America, AFL-CIO/CLC, Butler Armco 
Independent Union, and Zainesville Armco Independent Organization, 
Inc.
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    The Department preliminary determines that SSSS from Italy has been 
sold in the United States at less than normal value during the period 
of review. If these preliminary results are adopted in our final 
results of this administrative review, we will instruct the U.S. 
Customs and Border Protection (CBP) to assess antidumping duties equal 
to the difference between constructed export price and normal value.

EFFECTIVE DATE: August 9, 2004.

FOR FURTHER INFORMATION CONTACT: Angelica Mendoza at (202) 482-3019; 
AD/CVD Operations, Office Six, Import Administration, International 
Trade Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue NW., Washington, DC 20230.

SUPPLEMENTARY INFORMATION:

Background

    On July 2, 2003, the Department published in the Federal Register a 
notice of opportunity to request an administrative review of the 
antidumping duty order on SSSS from Italy. See Antidumping or 
Countervailing Duty Order, Finding, or Suspended Investigation; 
Opportunity to Request Administrative Review, 68 FR 39511. On July 31, 
2003, TKAST and petitioners requested that the Department conduct an 
administrative review of the antidumping duty order. On August 22, 
2003, the Department initiated an administrative review of the 
antidumping duty order on SSSS from Italy with regard to TKAST. See 
Initiation of Antidumping and Countervailing Duty Administrative 
Reviews and Requests for Revocation in Part, 68 FR 50750.
    On September 8, 2003, the Department issued an antidumping duty 
questionnaire to TKAST. On October 3, 2003, TKAST requested that the 
Department waive its filing requirements, and submitted its response to 
Section A of the questionnaire. In response to TKAST's request, on 
October 6, 2003, the Department waived its filing requirements (i.e., 
number of copies to be submitted) for this review.
    On October 30, 2003, TKAST filed its response to Sections B, C, and 
D of the questionnaire. In its Section B response at page B-1, TKAST 
requested that it not be required to report the downstream sales of 
certain affiliated parties. On November 18, 2003, the Department sent 
TKAST a letter in which it allowed TKAST to exclude certain downstream 
sales.
    On December 18, 2003, we received comments from petitioners on 
TKAST's questionnaire responses. On January 12, 2004, the Department 
requested that TKAST respond to Section E of the antidumping duty 
questionnaire dated September 8, 2003. On January 22, 2004, we 
rescinded our request that TKAST respond to Section E of the 
Department's questionnaire.
    The Department issued TKAST a supplemental Section A, B, C, and D 
questionnaire on January 30, 2004. On February 9, 2004, the Department 
extended the deadline for issuing the

[[Page 48206]]

preliminary results of this review by 60 days. See Extension of Time 
Limit of the Preliminary Results of Antidumping Duty Administrative 
Review: Stainless Steel Sheet and Strip in Coils from Italy, 69 FR 3590 
(March 1, 2004).
    On March 1, 2004, TKAST filed its supplemental Section A, B, C, and 
D questionnaire response. We received comments on TKAST's supplemental 
questionnaire response from petitioners on April 2, 2004.
    On May 3, 2004, the Department extended the time limit for the 
preliminary results in this administrative review by an additional 60 
days. See Extension of Time Limit of the Preliminary Results of 
Antidumping Duty Administrative Review: Stainless Steel Sheet and Strip 
in Coils From Italy, 69 FR 25564 (May 7, 2004). On May 25, 2004, the 
Department issued a second supplemental questionnaire to TKAST.
    On June 2, 2004, the Department issued a third supplemental 
questionnaire to TKAST. We issued our verification agenda to TKAST on 
June 3, 2004. On June 4, 2004, TKAST filed its second supplemental 
questionnaire response. We received TKAST's third supplemental 
questionnaire response on June 7, 2004.

Period of Review

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

Verification

    As provided in section 782(i) of the Act, the Department conducted 
a sales and cost verification of the information provided by TKAST from 
June 14, 2004, through June 17, 2004, using standard verification 
procedures, including an examination of relevant sales, cost, and 
financial records, and a selection of relevant original documentation. 
Our verification results are outlined in the Memorandum to the File 
through Abdelali Elouaradia, Program Manager, Office 6, AD/CVD 
Operations, Verification of Home Market Sales and Cost Questionnaire 
Responses Submitted by ThyssenKrupp Acciai Speciali Terni S.p.A., dated 
July 9, 2004 (Sales and Cost Verification Report).
    Where necessary, we adjusted TKAST's reported home market, 
downstream, and U.S. sales databases to account for pre-verification 
corrections and findings. See Sales and Cost Verification Report at 1-
3. See also Memorandum to the File through Abdelali Elouaradia, Program 
Manager, Office 6, AD/CVD Operations, Analysis Memorandum for the 
Preliminary Results, dated July 29, 2004 (Prelim Analysis Memo). Public 
versions of the verification report and analysis memorandum are on file 
in the Central Records Unit (CRU), room B-099 of the Herbert C. Hoover 
Department of Commerce building, 1401 Constitution Avenue, NW., 
Washington, DC.

Scope of the Review

    For purposes of this review, 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 review is currently classifiable in 
the Harmonized Tariff Schedule of the United States (HTS) at 
subheadings: 7219.13.0031, 7219.13.0051, 7219.13.0071, 7219.1300.81,\2\ 
7219.14.0030, 7219.14.0065, 7219.14.0090, 7219.32.0005, 7219.32.0020, 
7219.32.0025, 7219.32.0035, 7219.32.0036, 7219.32.0038, 7219.32.0042, 
7219.32.0044, 7219.33.0005, 7219.33.0020, 7219.33.0025, 7219.33.0035, 
7219.33.0036, 7219.33.0038, 7219.33.0042, 7219.33.0044, 7219.34.0005, 
7219.34.0020, 7219.34.0025, 7219.34.0030, 7219.34.0035, 7219.35.0005, 
7219.35.0015, 7219.35.0030, 7219.35.0035, 7219.90.0010, 7219.90.0020, 
7219.90.0025, 7219.90.0060, 7219.90.0080, 7220.12.1000, 7220.12.5000, 
7220.20.1010, 7220.20.1015, 7220.20.1060, 7220.20.1080, 7220.20.6005, 
7220.20.6010, 7220.20.6015, 7220.20.6060, 7220.20.6080, 7220.20.7005, 
7220.20.7010, 7220.20.7015, 7220.20.7060, 7220.20.7080, 7220.20.8000, 
7220.20.9030, 7220.20.9060, 7220.90.0010, 7220.90.0015, 7220.90.0060, 
and 7220.90.0080. Although the HTS subheadings are provided for 
convenience and CBP purposes, the Department's written description of 
the merchandise under review is dispositive.
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    \2\ Due to changes to the HTS numbers in 2001, 7219.13.0030, 
7219.13.0050, 7219.13.0070, and 7219.13.0080 are now 7219.13.0031, 
7219.13.0051, 7219.13.0071, and 7219.13.0081, respectively.
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    Excluded from the scope of this review 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 HTS, ``Additional 
U.S. Note'' 1(d).
    Flapper valve steel is also excluded from the scope of this review. 
This product 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 in 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 review. This stainless steel strip 
in coils is a

[[Page 48207]]

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 
less than 0.002 or greater than 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 review. 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.''\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 review. 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 review. 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, also excluded from the scope of this review are three 
specialty stainless steels typically used in certain industrial blades 
and surgical and medical instruments. 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 American Iron and Steel 
Institute (AISI) grade 420 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.''\7\ 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 100 square 
microns. An example of this product is ``GIN5'' \8\ 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.''\9\
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    \6\ This list of uses is illustrative and provided for 
descriptive purposes only.
    \7\ ``GIN4 Mo'' is the proprietary grade of Hitachi Metals 
America, Ltd.
    \8\ ``GIN5'' is the proprietary grade of Hitachi Metals America, 
Ltd.
    \9\ ``GIN6'' is the proprietary grade of Hitachi Metals America, 
Ltd.
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Product Comparisons

    In accordance with section 771(16) of the Act, we considered all 
products covered by the ``Scope of the Review'' section above, which 
were produced and sold by TKAST in the home market during the POR, to 
be foreign like product for the purpose of determining appropriate 
product comparisons to U.S. sales of SSSS. 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) hot/cold 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 most similar foreign like product on the basis of the 
characteristics and reporting instructions listed in the Department's 
questionnaire. See Appendix V of the Department's antidumping duty 
questionnaire to TKAST dated September 8, 2003.

Constructed Export Price

    In accordance with section 772(b) of the Act, the constructed 
export price (CEP) is the price at which the subject merchandise is 
first sold (or agreed to be sold) in the United States before or after 
the date of importation by or for the account of the producer or 
exporter of such merchandise, or by a seller affiliated with the 
producer or exporter, to a purchaser not affiliated with the producer 
or exporter.
    As stated at 19 CFR 351.401(i), the Department will use the 
respondent's invoice date as the date of sale unless another date 
better reflects the date upon which the exporter or producer 
establishes the essential terms of sale. TKAST reported the invoice 
date as the date of sale for both the U.S. market and the home market 
because the date of invoice reflects the date on which the material 
terms of sale were finalized. We used invoice date as the date of sale 
in the investigation and prior reviews. See Final Determination of 
Sales at Less Than Fair Value: Stainless Steel Sheet and Strip in Coils 
from Italy, 64 FR 30750 (June 8, 1999) (LTFV Investigation) and Final 
Results of Antidumping Duty Administrative Review ('01-'02): Stainless 
Steel Sheet and Strip in Coils from Italy, 68 FR 69382 (December 12, 
2003).
    For purposes of this review, TKAST classified all of its export 
sales of SSSS to the United States as CEP sales. During the POR, TKAST 
made sales to the United States through its U.S. affiliate,

[[Page 48208]]

TKAST USA. See TKAST's Section A questionnaire response dated October 
3, 2003 at A-31. Based on record information, we preliminarily find 
that all of TKAST's U.S. sales are appropriately classified as CEP 
sales. In particular, TKAST reported that it sold the subject 
merchandise in the United States through two channels (i.e., channel 
one and channel two).
    With respect to channel one sales, TKAST reported that these sales 
are shipped directly from the factory in Italy to the U.S. customer. 
However, TKAST's U.S.-based affiliated reseller (TKAST USA) serves as 
the principal point of contact for the U.S. customer. For channel one 
sales, customers place their orders with TKAST USA and in turn, TKAST 
USA places the order with TKAST. Upon confirmation from TKAST, TKAST 
USA issues a separate invoice to the U.S. customer. TKAST USA is solely 
responsible for collecting payment from the U.S. customer, and 
separately responsible for paying TKAST for the merchandise.
    Channel two sales are made from the inventory of TKAST USA. 
Accordingly, the Department preliminarily determines that TKAST's 
channel one and two sales were made ``in the United States'' within the 
meaning of section 772(b) of the Act, and therefore, should be treated 
as CEP transactions, consistent with AK Steel Corp. v. United States, 
226 F.3d 1361, 1374 (Fed. Cir. 2000).
    We calculated CEP in accordance with section 772(c) of the Act. We 
based CEP on the packed prices to the unaffiliated purchasers in the 
United States. We made adjustments to the starting price (gross unit 
price) for billing adjustments, early payment discounts, alloy 
surcharges, skid surcharges, and freight revenue, where applicable. In 
accordance with section 772(c)(2)(A) of the Act, we deducted the 
following movement expenses, where appropriate, from the starting 
price: foreign inland freight from the plant to port of exit, 
international freight, U.S. inland freight from warehouse to the 
unaffiliated U.S. customer, other U.S. transportation expenses, and 
U.S. Customs duties. See also 19 CFR 351.401(e). In addition, because 
TKAST reported CEP sales, pursuant to section 772(d)(1) of the Act, we 
deducted from the starting price selling expenses associated with 
economic activities that occurred in the United States during the POR, 
including direct U.S. selling expenses (i.e., credit and warranty 
expenses), U.S. inventory carrying costs, and indirect selling expenses 
incurred in the United States (including technical service expenses).

Normal Value

    After testing home market viability, as discussed below, we 
calculated normal value (NV) as noted in the ``Price-to-Price 
Comparisons'' section of this notice.

1. Home Market Viability

    In accordance with section 773(a)(1)(C) of the Act, to determine 
whether there was 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 or 
equal to five percent of the aggregate volume of U.S. sales), we 
compared TKAST's volume of home market sales of the foreign like 
product to the volume of its U.S. sales of the subject merchandise. 
Pursuant to section 773(a)(1)(B) of the Act and section 351.404(b) of 
the Department's regulations, because TKAST'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 
determine that sales in the home market provide a viable basis for 
calculating NV. Moreover, there is no evidence on the record supporting 
a particular market situation in the exporting company's country that 
would not permit a proper comparison of home market and U.S. prices. 
Therefore, we based NV on home market sales in the usual commercial 
quantities and in the ordinary course of trade.
    Therefore, we used as NV the prices at which the foreign like 
product was first sold for consumption in Italy, in the usual 
commercial quantities, in the ordinary course of trade and, to the 
extent possible, at the same level of trade (LOT) as the CEP sales, as 
appropriate.

2. Arm's-Length Test

    TKAST reported that during the POR, it made sales in the home 
market to affiliated and unaffiliated end users and distributors/
retailers. If any sales to affiliated customers in the home market were 
not made at arm's-length prices, we excluded them from our analysis as 
we consider such sales to be outside the ordinary course of trade. See 
19 CFR 351.102(b). To test whether 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 discounts and rebates, movement expenses, direct selling 
expenses, and home market packing. In accordance with the Department's 
current practice, if the prices charged to an affiliated party were, on 
average, between 98 and 102 percent of the prices charged to 
unaffiliated parties for merchandise identical or most similar to that 
sold to the affiliated party, we consider the sales to be at arm's-
length prices. See 19 CFR 351.403(c). Conversely, where the affiliated 
party did not pass the arm's-length test, all sales to that affiliated 
party have been excluded from the NV calculation. See Antidumping 
Proceedings: Affiliated Party Sales in the Ordinary Course of Trade, 67 
FR 69186 (November 15, 2002) (Modification to Affiliated Party Sales).
    While TKAST made sales to affiliated parties in the home market 
during the POR, the Department determined that TKAST only needed to 
report certain affiliated customers' downstream sales. See the 
``Background'' section above. In its March 1, 2004 and June 7, 2004, 
supplemental questionnaire responses, TKAST explained that it was 
unable to compel certain affiliates to report their downstream sales to 
the Department. Pursuant to the Department's current practice, because 
we find that TKAST has cooperated to the best of its ability and was 
unable to obtain downstream sales from the affiliated parties as 
requested by the Department, we will not use adverse facts available 
for those sales. See Modification to Affiliated Party Sales at 69188. 
For downstream sales by affiliated parties reported by TKAST where the 
sale between TKAST and the affiliate failed the arm's-length test, we 
included the downstream sale in our calculation of NV. See TKAST's 
March 1, 2004, supplemental questionnaire response for its reporting of 
certain downstream sales.

3. Cost of Production

    In the most recently completed segment, the Department determined 
that TKAST made sales in the home market at prices below its cost of 
production (COP) and, therefore, excluded such sales from its 
calculation of NV. See Final Results of Antidumping Duty Administrative 
Review '01-'02: Stainless Steel Sheet and Strip in Coils from Italy, 68 
FR 69382 (December 12, 2003). Therefore, the Department has reasonable 
grounds to believe or suspect, pursuant to section 773(b)(2)(A)(ii) of 
the Act, that TKAST made sales in the home market at prices below the 
COP for this POR. As a result, in accordance with section 773(b)(1) of 
the Act, we examined whether TKAST's sales in the home market were made 
at prices below the COP.

[[Page 48209]]

A. Calculation of the COP
    We compared sales of the foreign like product in the home market 
with model-specific COP figures for the POR. In accordance with section 
773(b)(3) of the Act, we calculated COP based on the sum of the costs 
of materials and fabrication employed in producing the foreign like 
product, plus selling, general and administrative (SG&A) expenses and 
all costs and expenses incidental to placing the foreign like product 
in packed condition and ready for shipment. In our sales-below-cost 
analysis, we relied on home market sales and COP information provided 
by TKAST in its questionnaire responses and verification findings.
    At verification, we discovered that TKAST had terminated its old 
accounting system (i.e., BULL system) at the end of fiscal year 2003. 
TKAST explained that the information detailing how it derived the total 
standard costs reported for each phase of production for each grade of 
SSSS was only recorded in the BULL system. See Sales and Cost 
Verification Report at 27. Therefore, we were unable to substantiate 
how TKAST allocated its standard material and processing costs by grade 
produced and sold during the POR.\10\ Because the Department was unable 
to verify this information, we cannot rely on TKAST's reported standard 
costs and, in effect, its reported total cost of manufacturing for each 
control number.
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    \10\ We note that during verification TKAST was able to locate 
supporting records from the BULL system to substantiate its reported 
standard costs for one grade of merchandise produced and sold during 
the POR. See Sales and Cost Verification Report at 28.
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    Because we were unable to fully verify the standard cost component 
used by TKAST to calculate total cost of manufacturing by grade, we 
find it necessary, under section 776(a)(2) of the Act, to use facts 
otherwise available as the basis for the preliminary results of review 
for TKAST. See Sales and Cost Verification Report at 27.
    According to section 776(b) of the Act, if the Department finds 
that an interested party ``has failed to cooperate by not acting to the 
best of its ability to comply with a request for information,'' the 
Department may use information that is adverse to the interests of the 
party as facts otherwise available. Adverse inferences are appropriate 
``to ensure that the party does not obtain a more favorable result by 
failing to cooperate than if it had cooperated fully.'' See Statement 
of Administrative Action (SAA) accompanying the URAA, H. Doc. No. 316, 
103d Cong., 2d Session at 870 (1994). Furthermore, ``an affirmative 
finding of bad faith on the part of the respondent is not required 
before the Department may make an adverse inference.'' See Nippon Steel 
Corporation v. United States, 337 F. 3d 1373, 2003 Fed. Cir. (Nippon 
Steel) (``Compliance with the `best of its ability' standard is 
determined by assessing whether respondent has put forth its maximum 
effort to provide Commerce with full and complete answers to all 
inquiries * * *'').
    In addition, pursuant to section 776(b) of the Act, we find that 
TKAST failed to cooperate by not acting to the best of its ability to 
comply with a request for information. In particular, as one of the 
requesting parties, well-versed in the Department's antidumping duty 
procedures, TKAST has an obligation to maintain company records that 
contain the relevant information it relied upon when responding to our 
questionnaire responses, which is necessary for verification thereof 
and which may be used in our analysis. In Nippon Steel, the Federal 
Circuit stated that, ``{w{time} hile the standard does not require 
perfection and recognizes that mistakes sometimes occur, it does not 
condone inattentiveness, carelessness, or inadequate record keeping.'' 
See Nippon Steel at 1382.
    As explained above, TKAST did not cooperate to the best of its 
ability when it failed to properly maintain records and provide the 
Department with standard cost records used during the POR, and 
therefore, we find it appropriate to use an inference that is adverse 
to the interests of TKAST in selecting from among the facts otherwise 
available. By doing so, we ensure that TKAST will not obtain a more 
favorable result by failing to cooperate than had it cooperated fully 
in this review.
    An adverse inference may include reliance on information derived 
from the petition, the final determination in the investigation, any 
previous review, or any other information placed on the record. See 
section 776(b) of the Act. Accordingly, for purposes of these 
preliminary results, as facts otherwise available, we used TKAST's 
costs to calculate the average total cost of manufacturing (TCOMH) and 
variable cost of manufacturing (VCOMH), weighted by production quantity 
on a grade-specific basis. Where the reported total cost of 
manufacturing (TOTCOM) for the control number (CONNUM) was higher than 
the weighted-average TCOMH for that CONNUM's grade, we relied upon the 
CONNUM-specific data for TOTCOM and VCOMH. Otherwise, we used the 
weighted-average TCOMH by grade in our calculation of TOTCOM and VCOMH. 
See Prelim Analysis Memo for programming details.
B. Test of Home Market Prices
    We compared TKAST's weighted-average COPs to its home market sales 
of the foreign like product, as required under section 773(b) of the 
Act, in order to determine whether these sales had been made at prices 
below COP. In determining whether to disregard home market sales made 
at prices below the COP, we examined whether such sales were made (1) 
in substantial quantities within an extended period of time, and (2) at 
prices which permitted the recovery of all costs within a reasonable 
period of time in the normal course of trade, in accordance with 
sections 773(b)(1)(A) and (B) of the Act. On a product-specific basis, 
we compared the COP to home market prices, less any applicable 
discounts, movement charges, and direct and indirect selling expenses.
    As stated in the ``Background'' section above, TKAST reported 
downstream sales data with respect to two affiliated resellers. See 
TKAST's March 1, 2004 and June 4, 2004, supplemental questionnaire 
responses. In reviewing TKAST's cost database, the Department 
discovered that TKAST did not provide the costs of manufacturing 
associated with the downstream sales of subject merchandise. Section 
776(a)(1) of the Act provides that the Department may use facts 
otherwise available if necessary information is not available on the 
record. Because the cost information necessary to properly perform our 
cost test with respect to these sales is not on the record of this 
review, we must rely on facts otherwise available. Therefore, for the 
purposes of our cost test, we are preliminarily applying the weighted-
average total cost of manufacturing, as neutral facts available, to 
downstream sales with no reported cost information in accordance with 
section 776(a)(1). See Prelim Analysis Memo for programming details.
C. Results of the COP Test
    Pursuant to section 773(b)(2)(C) of the Act, where less than 20 
percent of the respondent's sales of a given product were at prices 
less than COP, we did not disregard any below-cost sales of that 
product because the below-cost sales were not made in substantial 
quantities within an extended period of time. Where 20 percent or more 
of the respondent's sales of a given product were at prices less than 
COP, we determined that the below-cost sales were made in substantial 
quantities

[[Page 48210]]

within an extended period of time, in accordance with sections 
773(b)(2)(A) and (C) of the Act. Because we compared prices to POR-
average costs, we determined that the below-cost prices did not permit 
the recovery of costs within a reasonable period of time, in accordance 
with section 773(b)(1)(B) of the Act. Therefore, we disregarded the 
below-cost sales and used the remaining sales, if any, as the basis for 
NV, in accordance with section 773(b)(1) of the Act. See Prelim 
Analysis Memo for programming details.

Price-to-Price Comparisons

    For those sales at prices above COP, we based NV on home market 
prices to affiliated (when made at prices determined to be arm's-
length) or unaffiliated parties, in accordance with section 351.403 of 
the Department's regulations. Home market starting prices were based on 
packed prices to affiliated or unaffiliated purchasers in the home 
market net of discounts. We made adjustments, where applicable, for 
packing and movement expenses, in accordance with sections 773(a)(6)(A) 
and (B) of the Act. We also made adjustments for differences in costs 
attributable to differences in physical characteristics of the 
merchandise pursuant to section 773(a)(6)(C)(ii) of the Act. For 
comparison to CEP, we deducted home market direct selling expenses 
pursuant to section 773(a)(6)(C)(iii) of the Act and section 351.410(c) 
of the Department's regulations.
    Because we were unable to fully verify the packing expenses TKAST 
reported it incurred on subject merchandise sold in the United States 
and Italy, we find it necessary, under section 776(a)(2) of the Act, to 
use facts otherwise available as the basis for the preliminary results 
of review for TKAST. See Sales and Cost Verification Report at 34-35.
    Moreover, pursuant to section 776(b) of the Act, we find that TKAST 
failed to cooperate by not acting to the best of its ability to comply 
with a request for information. Prior to verification, the Department 
requested to review how TKAST derived its reported packing expenses. 
See the Department's Letter to TKAST dated June 3, 2004 at 9. However, 
TKAST was unable to meet the Department's request at verification. In 
particular, as noted above, we were unable to fully verify the packing 
information presented to Department officials at verification and 
provided for the record of this review. Moreover, after the errors were 
pointed out to TKAST at verification, TKAST did not provide the 
Department with the necessary information to adjust the incorrectly 
reported packing expenses, and thereby did not put forth its maximum 
effort to our verification inquiries. Although TKAST is familiar with 
our antidumping duty procedures, TKAST did not take reasonable steps to 
clarify this error and offer any explanation for the discrepancies to 
Department officials at verification. Therefore, TKAST did not act to 
the best of its ability in providing the Department with accurate and 
verifiable packing expenses. Because we cannot rely on TKAST's reported 
packing expenses and do not have information necessary to correct for 
the discrepancies found at verification, we find it appropriate to use 
an inference that is adverse to the interests of TKAST in selecting 
from among the facts otherwise available. By doing so, we ensure that 
TKAST will not obtain a more favorable result by failing to cooperate 
than had it cooperated fully in this review.
    As stated above, an adverse inference may include reliance on 
information derived from the petition, the final determination in the 
investigation, any previous review, or any other information placed on 
the record. See section 776(b) of the Act. For purposes of these 
preliminary results, as facts otherwise available, we applied the 
lowest reported packing expense in our calculation of NV and the 
highest reported packing expense in our calculation of CEP. See Prelim 
Analysis Memo for programming details.

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 EP or CEP transaction. 
See also 19 CFR 351.412. The NV LOT is the level of the starting-price 
sales in the comparison market or, when NV is based on CV, the level of 
the sales from which we derive SG&A expenses and profit. For EP sales, 
the U.S. LOT is also the level of the starting-price sale, which is 
usually from the exporter to the importer. For CEP sales, the U.S. LOT 
is the level of the constructed sale from the exporter to the 
affiliated importer. See 19 CFR 351.412(c)(1). As noted in the 
``Constructed Export Price'' section above, we preliminarily find that 
all of TKAST's U.S. sales are appropriately classified as CEP sales.
    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 than CEP sales, 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. 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 difference in the levels 
between NV and CEP affects price comparability, we adjust NV under 
section 773(a)(7)(B) of the Act (the CEP offset provision). See Final 
Determination of Sales at Less Than Fair Value: Greenhouse Tomatoes 
from Canada, 67 FR 8781 (February 26, 2002); see also Final 
Determination of Sales at Less Than Fair Value: Certain Cut-to-Length 
Carbon Steel Plate from South Africa, 62 FR 61731, 61732 (November 19, 
1997).
    For the CEP sales, we consider only the selling activities 
reflected in the price after the deduction of expenses and CEP profit 
under section 772(d) of the Act. See Micron Technology Inc. v. United 
States, 243 F.3d 1301, 1314-1315 (Fed. Cir. 2001). We expect that, if 
claimed LOTs are the same, the functions and activities of the seller 
should be similar. Conversely, if a party claims that LOTs are 
different for different groups of sales, the functions and activities 
of the seller should be dissimilar. See Porcelain-on-Steel Cookware 
from Mexico: Final Results of Administrative Review, 65 FR 30068 (May 
10, 2000).
    In the current review, TKAST requested a CEP offset. To determine 
whether a CEP offset was necessary, in accordance with the principles 
discussed above, we examined information regarding the distribution 
systems in both the Italian and U.S. markets, including the selling 
functions, classes of customer, and selling expenses.
    TKAST reported one LOT in the home market, with two channels of 
distribution: (1) Direct factory sales to end-users, manufacturers, 
service centers and distributors; and (2) warehouse sales to end-users, 
service centers and distributors. TKAST performed the same selling 
functions for sales in both home market channels of distribution, 
including production guidance, price negotiations, sales calls and 
services, arranging for freight and delivery, technical assistance and 
general selling activities. See TKAST's October 3, 2003 Section A 
questionnaire response.

[[Page 48211]]

    The only differences are that for warehouse sales, TKAST initiates 
the sale (whereas direct sales are initiated by either party), and 
conducts inventory maintenance, and the amount of warranty services on 
warehouse sales is usually low because these sales are not made to 
order. See Sales and Cost Verification Report at 12. Accordingly, 
because these selling functions are substantially similar for both 
channels of distribution, we preliminarily determine that there is one 
LOT in the home market.
    TKAST reported two channels of distribution for the U.S. market: 
(1) Direct factory sales through TKAST USA to end-users and service 
centers; and (2) warehouse sales from the inventory of TKAST USA to 
end-users and service centers. We reviewed the selling functions and 
services performed by TKAST in the U.S. market, as described by TKAST 
in its October 3, 2004, section A questionnaire response. We have 
determined that the selling functions for the two U.S. channels of 
distribution are similar because TKAST provides almost no selling 
functions to either U.S. channel of distribution. TKAST reported that 
the only services it provided for the CEP sales were very limited 
freight and delivery arrangements and very limited warranty services. 
See TKAST's October 3, 2003 Section A questionnaire response at pages 
A-27 to A-29 and TKAST's March 1, 2004 first supplemental questionnaire 
response at Exhibit A-43. Accordingly, because these selling functions 
are substantially similar for the two channels of distribution, we 
preliminarily determine that there is one LOT in the U.S. market.
    In order to determine whether NV was established at a different LOT 
than CEP sales, we examined stages in the marketing process and selling 
functions along the chains of distribution between TKAST and its home 
market customers. We compared the selling functions performed for home 
market sales with those performed with respect to the CEP transaction, 
after deductions for economic activities occurring in the United 
States, pursuant to section 772(d) of the Act, to determine if the home 
market levels of trade constituted more advanced stages of distribution 
than the CEP level of trade. See TKAST's October 3, 2003 Section A 
questionnaire response at pages A-27 to A-29 and TKAST's March 1, 2004 
first supplemental questionnaire response at Exhibit A-43. TKAST 
reported that it provided virtually no selling functions for the CEP 
level of trade and that, therefore, the home market level of trade is 
more advanced than the CEP level of trade. To determine whether a CEP 
offset was necessary, in accordance with the principles discussed 
above, we examined information regarding the distribution systems in 
both the Italian and U.S. markets, including the selling functions, 
classes of customer, and selling expenses.
    Based on our analysis of the channels of distribution and selling 
functions performed for sales in the home market and CEP sales in the 
U.S. market, we preliminarily find that the home market LOT is at a 
more advanced stage of distribution when compared to TKAST's CEP sales 
because TKAST provides many more selling functions in the home market 
(i.e., production guidance, price negotiations, sales calls and 
services, arranging for freight and delivery, technical assistance and 
general selling activities) as compared to selling functions performed 
for its CEP sales (i.e., very limited freight and delivery arrangements 
and very limited warranty services). We were unable to quantify the LOT 
adjustment in accordance with section 773(a)(7)(A) of the Act, as we 
found that the LOT in the home market did not match the LOT of the CEP 
transactions and there was only one LOT in the home market and no other 
basis on which to determine a LOT adjustment. Accordingly, we did not 
calculate a LOT adjustment. Instead, we applied a CEP offset to NV for 
CEP comparisons.
    To calculate the CEP offset, we deducted the home market indirect 
selling expenses from NV for home market sales that were compared to 
U.S. CEP sales. As such, we limited the home market indirect selling 
expense deduction by the amount of the indirect selling expenses 
deducted in calculating the CEP as required under section 772(d)(1)(D) 
of the Act.

Currency Conversion

    We made currency conversions pursuant to section 351.415 of the 
Department's regulations at the rates certified by the Federal Reserve 
Bank.

Preliminary Results of Review

    As a result of our review, we preliminarily determine that the 
following weighted-average dumping margin exists for the POR:

------------------------------------------------------------------------
                                                             Weighted-
      Manufacturer/exporter                 POR           average margin
                                                             (percent)
------------------------------------------------------------------------
ThyssenKrupp Acciai Speciali          07/01/02-06/30/03             3.99
 Terni S.p.A.....................
------------------------------------------------------------------------

    In accordance with 19 CFR 351.224(b), the Department will disclose 
to the parties to this proceeding the calculations performed in 
connection with these preliminary results within five days of the date 
of publication of this notice.
    Pursuant to 19 CFR 351.309, interested parties may submit written 
comments and/or case briefs on these preliminary results. Comments and 
case briefs must be submitted no later than thirty days after the date 
of publication of this notice. Rebuttal comments and briefs must be 
limited to issues raised in the case briefs and comments, and must be 
submitted no later than five days after the time limit for filing case 
briefs and comments. Parties submitting arguments in this proceeding 
are requested to submit with the argument: (1) a statement of the 
issue, and (2) a brief summary of the argument. Case and rebuttal 
briefs and comments must be served on interested parties in accordance 
with section 351.303(f) of the Department's regulations.
    Also, pursuant to section 351.310(c) of the Department's 
regulations, within thirty days of the date of publication of this 
notice, an interested party may request a public hearing on the 
arguments to be raised in the case and rebuttal briefs and comments. 
Unless otherwise specified, the hearing, if requested, will be held two 
days after the date for submission of rebuttal briefs, or the first 
working day thereafter. The Department will issue the final results of 
this administrative review, including the results of its analysis of 
issues raised in any case and rebuttal briefs and comments, within 120 
days of publication of these preliminary results.

Assessment Rates

    Upon completion of this administrative review, the Department will 
determine, and CBP shall assess, antidumping duties on all appropriate 
entries. In accordance with 19 CFR 351.212(b)(1), we have calculated an 
importer-specific ad valorem rate for

[[Page 48212]]

merchandise subject to this review. The Department will issue 
appropriate assessment instructions directly to CBP within 15 days of 
publication of the final results of review. If these preliminary 
results are adopted in the final results of review, we will direct CBP 
to assess the resulting assessment rates (ad valorem) against the 
entered customs values for the subject merchandise on each of the 
importer's entries during the review period.

Cash Deposit

    The following cash deposit requirements will be effective upon 
publication of the final results of this administrative review for all 
shipments of the subject merchandise 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 the company listed 
above will be the rate established in the final results of this 
administrative review (except that no deposit will be required if the 
rate is zero or de minimis, i.e., less than 0.5 percent); (2) for 
previously investigated companies not listed above, the cash deposit 
rate will continue to be the company-specific rate published for the 
most recent period; (3) if the exporter is not a firm covered in this 
review, a prior review, or the original 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 (4) 
if neither the exporter nor the manufacturer is a firm covered in this 
review, a prior review, or the original LTFV investigation, the cash 
deposit rate will continue to be the ``all others'' rate of 11.23 
percent, which is the rate established in the LTFV investigation. See 
Amended Final Determination of Sales at Less Than Fair Value and 
Antidumping Duty Order; Stainless Steel Sheet and Strip in Coils From 
Italy, 64 FR 40567 (July 27, 1999). These deposit requirements, when 
imposed, shall remain in effect until publication of the final results 
of the next administrative review.

Notification to Interested Parties

    This notice also serves as a preliminary reminder to importers of 
their responsibility under 19 CFR 351.402(f)(2) to file a certificate 
regarding the reimbursement of antidumping duties prior to liquidation 
of the relevant entries during this administrative 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.
    These preliminary results are issued and published 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. 04-18152 Filed 8-6-04; 8:45 am]
BILLING CODE 3510-DS-P