[Federal Register Volume 71, Number 119 (Wednesday, June 21, 2006)]
[Notices]
[Pages 35618-35624]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-9768]


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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. This administrative review covers imports of 
subject merchandise from Mexinox S.A. during the period July 1, 2004, 
to June 30, 2005.
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    \1\ Petitioners are Allegheny Ludlum Corporation, North American 
Stainless, United Auto Workers Local 3303, 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 United States 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: June 21, 2006.

FOR FURTHER INFORMATION CONTACT: Maryanne Burke or Robert James, AD/CVD 
Operations, Enforcement Office 7, Import Administration, International 
Trade Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW, Washington, DC 20230; telephone: (202) 482-
5604 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; Stainless Steel Sheet and Strip in 
Coils from Mexico, 64 FR 40560 (July 27, 1999). On July 1, 2005, the 
Department published a notice entitled Antidumping or Countervailing 
Duty Order, Finding, or Suspended Investigation; Opportunity To Request 
Administrative Review, covering inter alia, S4 in coils from Mexico for 
the period July 1, 2004, through June 30, 2005, 70 FR 38099 (July 1, 
2005).
    In accordance with 19 CFR 351.213(b)(1), Mexinox and petitioners 
requested that we conduct an administrative review. On August 29, 2005, 
we published in the Federal Register a notice of initiation of this 
antidumping duty administrative review covering the period July 1, 
2004, through June 30, 2005. See Initiation of Antidumping and 
Countervailing Duty Administrative Reviews and Requests for Revocation 
in Part, 70 FR 51009 (August 29, 2005).
    On September 7, 2005, the Department issued an antidumping duty 
questionnaire to Mexinox. Mexinox submitted its response to section A 
of the questionnaire on September 29, 2005, and its response to 
sections B through E of the questionnaire on November 8, 2005. On 
January 27, 2006, the Department issued its first supplemental 
questionnaire\2\ for sections A through C, as well as for section E, 
which pertains to an affiliated U.S. reseller, Ken-Mac Metals, Inc. 
(Ken-Mac). Mexinox responded to this first supplemental questionnaire 
on March 8, 2006. The Department also issued a supplemental 
questionnaire for section D on February 16, 2006, to which Mexinox 
submitted its response on March 21, 2006. On May 4, 2006, the 
Department issued a second supplemental questionnaire for sections A 
through C, and Mexinox filed its response on May 23, 2006.
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    \2\ On February 6, 2006, the Department issued a revised version 
of the January 27, 2006, supplemental questionnaire correcting 
specific invoice numbers with respect to certain questions.
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    Because it was not practicable to complete this review within the 
normal time frame, on March 10, 2006, we published in the Federal 
Register our notice of the extension of time limits for this review. 
Stainless Steel Sheet and Strip in Coils from Mexico; Extension of Time 
Limit for Preliminary Results of Antidumping Duty Administrative 
Review, 71 FR 12343 (March 10, 2006). This extension established the 
deadline for these preliminary results as June 14, 2006.

Period of Review

    The period of review (POR) is July 1, 2004, through June 30, 2005.

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

[[Page 35619]]

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 (HTSUS) 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 HTSUS 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 sulphide of no more 
than 0.04 percent and for oxide of no more than 0.05 percent. Flapper 
valve steel has a tensile strength of between 210 and 300 ksi, yield 
strength of between 170 and 270 ksi, plus or minus 8 ksi, and a 
hardness (Hv) of between 460 and 590. Flapper valve steel is most 
commonly used to produce specialty flapper valves for compressors.
    Also excluded is a product referred to as suspension foil, a 
specialty steel product used in the manufacture of suspension 
assemblies for computer disk drives. Suspension foil is described as 
302/304 grade or 202 grade stainless steel of a thickness between 14 
and 127 microns, with a thickness tolerance of plus-or-minus 2.01 
microns, and surface glossiness of 200 to 700 percent Gs. Suspension 
foil must be supplied in coil widths of not more than 407 mm, and with 
a mass of 225 kg or less. Roll marks may only be visible on one side, 
with no scratches of measurable depth. The material must exhibit 
residual stresses of 2 mm maximum deflection, and flatness of 1.6 mm 
over 685 mm length.
    Certain stainless steel foil for automotive catalytic converters is 
also excluded from the scope of this order. This stainless steel strip 
in coils is a specialty foil with a thickness of between 20 and 110 
microns used to produce a metallic substrate with a honeycomb structure 
for use in automotive catalytic converters. The steel contains, by 
weight, carbon of no more than 0.030 percent, silicon of no more than 
1.0 percent, manganese of no more than 1.0 percent, chromium of between 
19 and 22 percent, aluminum of no less than 5.0 percent, phosphorus of 
no more than 0.045 percent, sulfur of no more than 0.03 percent, 
lanthanum of between 0.002 and 0.05 percent, and total rare earth 
elements of more than 0.06 percent, with the balance iron.
    Permanent magnet iron-chromium-cobalt alloy stainless strip is also 
excluded from the scope of this order. This ductile stainless steel 
strip contains, by weight, 26 to 30 percent chromium, and 7 to 10 
percent cobalt, with the remainder of iron, in widths 228.6 mm or less, 
and a thickness between 0.127 and 1.270 mm. It exhibits magnetic 
remanence between 9,000 and 12,000 gauss, and a coercivity of between 
50 and 300 oersteds. This product is most commonly used in electronic 
sensors and is currently available under proprietary trade names such 
as ``Arnokrome III.''\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

[[Page 35620]]

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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Sales Made Through Affiliated Resellers

A. U.S. Market

    Mexinox USA, a wholly-owned subsidiary of Mexinox S.A., which in 
turn is a subsidiary of ThyssenKrupp AG, sold subject merchandise in 
the United States during the POR to unaffiliated customers. Mexinox USA 
also made sales of subject merchandise to an affiliated company, Ken-
Mac, located in the United States. Ken-Mac is an operating division of 
ThyssenKrupp Materials Inc., which is a subsidiary of ThyssenKrupp USA, 
Inc. (TKUSA), the primary holding company for ThyssenKrupp AG in the 
U.S. market. Ken-Mac purchased subject merchandise from Mexinox USA and 
further manufactured and/or resold the subject merchandise to 
unaffiliated customers in the United States. See Mexinox's September 
29, 2005, questionnaire response at A-10, A-18 and A-38 through A-39. 
For purposes of this review, we have included both Mexinox USA's and 
Ken-Mac's sales of subject merchandise to unaffiliated customers in the 
United States in our margin calculation.

B. Home Market

    Mexinox Trading, S.A. de C.V. (Mexinox Trading), a wholly-owned 
subsidiary of Mexinox S.A., resold the foreign like product as well as 
other merchandise in the home market. Mexinox S.A.'s sales to Mexinox 
Trading represented a small portion of Mexinox S.A.'s total sales of 
the foreign like product in the home market and constituted less than 
five percent of all home market sales. See, e.g., Mexinox's September 
29, 2005, questionnaire response at A-3 to A-4 and its March 8, 2006, 
supplemental questionnaire response at Attachment A-12 (quantity and 
value chart). Because sales to Mexinox Trading of the foreign like 
product were below the five percent threshold established under 19 CFR 
351.403(d), we did not require Mexinox S.A. to report Mexinox Trading's 
downstream sales to its first unaffiliated customer. This is consistent 
to date with our practice and the methodology we have 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, 70 FR 73444 (December 12, 2005) 
and accompanying Issues and Decisions Memorandum at Comment 2 (2003-
2004 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 CEP sales made in 
the United States by Mexinox USA to unaffiliated purchasers, 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 Tariff Act of 1930, as amended (the Tariff Act), we compared 
individual CEPs to monthly weighted-average NVs.

Product Comparisons

    In accordance with section 771(16) of the Tariff 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 
priority): (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 7, 2005, questionnaire.

Level of Trade

    In accordance with section 773(a)(1)(B) of the Tariff Act, to the 
extent practicable, we base NV on sales made in the comparison market 
at the same level of trade (LOT) as the export transaction. The NV LOT 
is defined as the starting-price sales in the home market or, when NV 
is based on constructed value (CV), as the sales from which selling, 
general, and administrative (SG&A) expenses and profit are derived. 
With respect to CEP transactions in the U.S. market, the CEP LOT is 
defined as the level of the constructed sale from the exporter to the 
importer. See section 773(a)(7)(A) of the Tariff Act.
    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. See 19 CFR 351.412(c)(2). If the comparison-
market sales are at a different LOT, and the difference affects price 
comparability, as manifested in a pattern of consistent price 
differences between the sales on which NV is based and comparison-
market sales at the LOT of the export transaction, we make a LOT 
adjustment under section 773(a)(7)(A) of the Tariff Act. 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 Tariff Act (the CEP offset provision). See, 
e.g., Final Determination of Sales at Less Than Fair Value: Greenhouse 
Tomatoes From Canada, 67 FR 8781 (February 26, 2002) and accompanying 
Issues and Decisions Memorandum at Comment 8; see also Certain Hot-
Rolled Flat-Rolled Carbon Quality Steel Products from Brazil; 
Preliminary Results of Antidumping Duty Administrative Review, 70 FR 
17406, 17410 (April 6, 2005); unchanged in Notice of Final Results of 
Antidumping Duty Administrative Review of Certain Hot-

[[Page 35621]]

Rolled Flat-Rolled Carbon Quality Steel Products from Brazil, 70 FR 
58683 (October 7, 2005). For 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 Tariff Act. See Micron 
Technology, Inc. v. United States, 243 F.3d 1301, 1314-1315 (Fed. Cir. 
2001). We expect that if the claimed LOTs are the same, the functions 
and activities of the seller should be similar. Conversely, if a party 
claims that the 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) and accompanying 
Issues and Decisions Memorandum at Comment 6 .
    We obtained information from Mexinox regarding the marketing stages 
involved in making its reported foreign market and U.S. sales to both 
affiliated and unaffiliated customers. Mexinox provided a description 
of all selling activities performed, along with a flowchart and tables 
comparing the levels of trade among each channel of distribution and 
customer category for both markets. See Mexinox's September 29, 2005, 
questionnaire response at A-30 through A-35 and Attachments A-4-A 
through A-4-C; see also Mexinox's March 8, 2006, supplemental 
questionnaire response at Attachment A-18. Mexinox sold S4 in coils to 
end-users and retailers/distributors in the home market and to end-
users and distributors/service centers in the United States.
    For the home market, Mexinox identified two channels of 
distribution described as follows: (1) Direct shipments (i.e., products 
produced to order) and (2) sales from inventory. Within each of these 
two channels of distribution, Mexinox S.A. made sales to affiliated and 
unaffiliated distributors/retailers and end-users. See Mexinox's 
September 29, 2005, questionnaire response at A-3 and A-22 through A-
23. We reviewed the performance intensity of all selling functions with 
respect to channel of distribution and customer category. In certain 
activities, such as pre-sale technical assistance, processing of 
customer orders, sample analysis, prototypes and trial lots, freight 
and delivery, price negotiation/customer communications, sales calls 
and visits and warranty services, the level of performance for both 
direct shipments and sales through inventory was identical across all 
types of customers. Only a few functions exhibited differences, 
including inventory maintenance/just-in-time performance, further 
processing, credit collection, low volume orders and shipment of small 
packages. See Mexinox's March 8, 2006, supplemental questionnaire 
response at Attachment A-18. In regards to Mexinox S.A.'s affiliated 
home market reseller, Mexinox Trading, only credit collection differed 
in comparison to Mexinox S.A.'s performance to unaffiliated 
distributors/retailers. While we find differences in the levels of 
intensity performed for some of these functions, such differences are 
minor and do not establish distinct, multiple levels of trade in 
Mexico. Based on our analysis of all of Mexinox S.A.'s home market 
selling functions, we find all home market sales were made at the same 
LOT, the NV LOT.
    We then compared the NV LOT, based on the selling activities 
associated with the transactions between Mexinox S.A. and its 
unaffiliated customers in the home market, to the CEP LOT, which is 
based on the selling activities associated with the transaction between 
Mexinox S.A. and its affiliated importer, Mexinox USA. Our analysis 
indicates the selling functions performed for home market customers are 
either performed at a higher degree of intensity or are greater in 
number than the selling functions performed for Mexinox USA. For 
example, in comparing Mexinox's selling activities, we find there are 
more functions performed in the home market which are not a part of CEP 
transactions (e.g., pre-sale technical assistance, sample analysis, 
prototypes and trial lots, price negotiation/customer communications, 
inventory maintenance, just-in-time performance, sales calls and 
visits, and warranty services). For selling activities performed for 
both home market sales and CEP sales (e.g., processing customer orders, 
freight and delivery arrangements), we find Mexinox S.A. actually 
performed each activity at a higher level of intensity in the home 
market. We note that CEP sales from Mexinox S.A. to Mexinox USA 
generally occur at the beginning of the distribution chain, 
representing essentially a logistical transfer of inventory that 
resembles ex-factory sales. In contrast, all sales in the home market 
occur closer to the end of the distribution chain and involve smaller 
volumes and more customer interaction which, in turn, require the 
performance of more selling functions. See Mexinox's September 29, 
2005, questionnaire response at A-31 through A-35 and Attachments A-4-A 
through A-4-C; see also Mexinox's March 8, 2006, supplemental 
questionnaire response at Attachment A-18. Based on the foregoing, we 
conclude that the NV LOT is at a more advanced stage than the CEP LOT.
    Because we found the home market and U.S. sales were made at 
different LOTs, we examined whether a LOT adjustment or a CEP offset 
may be appropriate in this review. As we found only one LOT in the home 
market, it was not possible to make a LOT adjustment to home market 
sales, because such an adjustment is dependent on our ability to 
identify a pattern of consistent price differences between the home 
market sales on which NV is based and home market sales at the LOT of 
the export transaction. See 19 CFR 351.412(d)(1)(ii). Furthermore, we 
have no other information that provides an appropriate basis for 
determining a LOT adjustment. Because the data available do not form an 
appropriate basis for making a LOT adjustment, and because the NV LOT 
is at a more advanced stage of distribution than the CEP LOT, we have 
made a CEP offset to NV in accordance with section 773(a)(7)(B) of the 
Tariff Act.

Constructed Export Price

    Mexinox indicated it made CEP sales through its U.S. affiliate, 
Mexinox USA, through the following four channels of distribution: (1) 
Direct shipments to unaffiliated customers; (2) stock sales from the 
San Luis Potosi (SLP) factory; (3) sales to unaffiliated customers 
through Mexinox USA's inventory/warehouses; and (4) sales through Ken-
Mac. See Mexinox's September 29, 2005, questionnaire response at A-23 
through A-25. Ken-Mac is an affiliated service center located in the 
United States which purchases S4 in coils produced by Mexinox S.A. and 
then resells the merchandise (after, in some instances, further 
manufacturing) to unaffiliated U.S. customers.
    In accordance with section 772(b) of the Tariff Act, 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. We find Mexinox properly 
classified all of its U.S. sales of subject merchandise as CEP 
transactions because such sales were made in the United States by 
Mexinox S.A.'s affiliate, Mexinox USA, to unaffiliated purchasers. We 
based CEP on packed prices to unaffiliated purchasers in the United 
States sold by Mexinox USA or its affiliated processor

[[Page 35622]]

Ken Mac. 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 Tariff 
Act. These expenses included, where appropriate: foreign inland 
freight, foreign brokerage and handling, inland insurance, U.S. customs 
duties, U.S. inland freight, U.S. brokerage, and U.S. warehousing 
expenses. As directed by section 772(d)(1) of the Tariff Act, we 
deducted those selling expenses associated with economic activities 
occurring in the United States, including direct selling expenses 
(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 Tariff Act. We used the adjustments as 
reported by Mexinox, with the exception of the U.S. indirect selling 
expense ratio which we recalculated. See Analysis of Data Submitted by 
ThyssenKrupp Mexinox S.A. de C.V. for the Preliminary Results of the 
Antidumping Duty Administrative Review of S4 in Coils from Mexico 
(Preliminary Analysis Memorandum) from Maryanne Burke to the File dated 
June 14, 2006.
    For sales in which the material was sent to an unaffiliated U.S. 
processor, we made an adjustment based on the transaction-specific 
further-processing expenses incurred by Mexinox USA. In addition, the 
U.S. affiliated reseller Ken-Mac performed some further manufacturing 
for its sales to unaffiliated U.S. customers. For these sales, we 
deducted the cost of further processing in accordance with section 
772(d)(2) of the Tariff Act. In calculating the cost of further 
manufacturing for Ken-Mac, we relied upon Ken-Mac's reported cost of 
further manufacturing materials, labor and overhead. We also included 
amounts for further manufacturing general and administrative expenses 
(G&A), as reported in the March 21, 2006, supplemental section D 
questionnaire response, and revised financial expense ratio (INTEX). 
See the Department's Cost of Production and Constructed Value 
Calculation Adjustments for the Preliminary Results - ThyssenKrupp 
Mexinox S.A. de C.V. from Margaret Pusey to Neal M. Halper, dated June 
14, 2006 (Cost Calculation Memorandum), and Preliminary Analysis 
Memorandum.

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 Mexinox's volume of home market sales of the foreign like 
product to the volume of its U.S. sales of the subject merchandise, in 
accordance with section 773(a)(1)(B) of the Tariff Act. Because 
Mexinox'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 subject merchandise, we determined the home market was 
viable. See, e.g., Mexinox's March 8, 2006, supplemental questionnaire 
response at Attachment A-12.

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 section 773(f)(2) of 
the Tariff Act; see, also 19 CFR 351.102(b). Consistent with 19 CFR 
351.403(c) and (d) and agency practice to date, ``the Department may 
calculate NV based on sales to affiliates if satisfied that the 
transactions were made at arm's length.'' See China Steel Corp. v. 
United States, 264 F. Supp. 2d 1339, 1365 (CIT 2003). 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). We found one affiliated home market customer 
failed the arm's length test and, in accordance with the Department's 
practice, we excluded sales to this affiliate from our analysis.

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 Stainless Steel Sheet and Strip 
in Coils from Mexico; Preliminary Results of Antidumping Duty 
Administrative Review, 69 FR 47905, 47909 (August 6, 2004); unchanged 
in Stainless Steel Sheet and Strip in Coils from Mexico; Final Results 
of Antidumping Duty Administrative Review, 70 FR 3677 (January 26, 
2005) (2002-2003 Final Results), we had reasonable grounds to believe 
or suspect that sales of the foreign like product under consideration 
for the determination of NV in this review for Mexinox may have been 
made at prices below the COP, as provided by section 773(b)(2)(A)(ii) 
of the Tariff Act. Pursuant to section 773(b)(1) of the Tariff Act, we 
initiated a COP investigation of sales by Mexinox.
    We adjusted material costs from the transfer price to market price 
in accordance with section 773(f)(2) of the Act. We also recalculated 
Mexinox's G&A to include employee profit sharing in the numerator and 
exclude production and planning and market administration expenses from 
the cost of goods sold denominator. In addition, we revised INTEX to 
exclude the interest income offset for accounts receivable and 
miscellaneous net financial expenses and adjusted ThyssenKrupp AG's 
cost of goods sold to exclude packing expenses. See Cost Calculation 
Memorandum and Preliminary Analysis Memorandum. We added material and 
fabrication costs for the foreign like product, plus amounts for SG&A 
and packing costs, in accordance with section 773(b)(3) of the Tariff 
Act. To determine whether these sales had been made at prices below the 
COP, we 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 Tariff Act. On a 
product-specific basis, we compared the COP to the home market prices 
net of billing adjustments, discounts and rebates, any applicable 
movement charges, selling expenses and packing expenses.
    In determining whether to disregard home market sales made at 
prices below the COP, we examined, in accordance with sections 
773(b)(1)(A) and (B) of the Tariff Act, 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 were at prices below the COP, we did not disregard any 
below-cost sales of

[[Page 35623]]

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 Tariff 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 Tariff 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 home market sales of other models, more than 20 
percent 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 Tariff 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 Tariff 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 Tariff Act, we based SG&A expenses and profit on 
the amounts incurred and realized by the respondent in connection with 
the production and sale of the foreign like product in the ordinary 
course of trade, for consumption in the foreign country.

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. 
Mexinox S.A. reported home market sales in Mexican pesos, but noted 
certain home market sales were invoiced in U.S. dollars during the POR. 
See Mexinox's November 8, 2005, questionnaire response at B-26. In our 
margin calculation we used the currency of the sale invoice at issue 
and applied relevant adjustments in the currency invoiced or incurred 
by Mexinox. We accounted for billing adjustments, discounts, rebates 
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 Tariff Act. In 
addition, we made adjustments for differences in cost attributable to 
differences in physical characteristics of the merchandise compared 
pursuant to section 773(a)(6)(C)(ii) of the Tariff Act and 19 CFR 
351.411. We also made adjustments for differences in circumstances of 
sale (COS) in accordance with section 773(a)(6)(C)(iii) of the Tariff 
Act and 19 CFR 351.410. We made COS adjustments for imputed credit 
expenses and warranty expenses. As noted above 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 Tariff Act. 
Finally, we deducted home market packing costs and added U.S. packing 
costs in accordance with sections 773(a)(6)(A) and (B) of the Tariff 
Act.
    We used Mexinox's adjustments and deductions as reported, except 
for certain handling expenses and imputed credit expenses. We have 
recalculated the handling expenses incurred by home market affiliate, 
Mexinox Trading, and applied the revised ratio to those home market 
sales where Mexinox reported a handling expense. We calculated imputed 
credit expenses based on the short-term borrowing rate associated with 
the currency of each home market sale transaction. See Preliminary 
Analysis Memorandum. Our methodology for calculating handling charges 
and imputed credit expenses are consistent with past administrative 
reviews of this case. See, e.g., 2003-2004 Final Results, 70 FR 73444 
and accompanying Issues and Decisions Memorandum at Comment 1.

F. Price-to-CV Comparisons

    If we were unable to find a home market match of such or similar 
merchandise, in accordance with section 773(a)(4) of the Tariff Act, we 
based NV on CV. Where appropriate, we made adjustments to CV in 
accordance with section 773(a)(8) of the Tariff Act.

Facts Available

    In accordance with section 776(a)(1) of the Tariff 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 7, 2005, 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 home and U.S. markets. In its September 29, 2005, questionnaire 
response at A-2, Mexinox indicated that its affiliated reseller, Ken-
Mac, sold subject merchandise in the United States during the POR which 
it had purchased from various suppliers, both affiliated and 
unaffiliated. In its November 8, 2005, submission at KMC-2 and KMC-3, 
Mexinox provided data related to Ken-Mac's resales of subject 
merchandise to unaffiliated customers in the United States and notified 
the Department that a small subset of sale transactions could not be 
traced to an original stock item or supplier. In its supplemental 
questionnaire response dated March 8, 2006, Mexinox reported those sale 
transactions (unattributed sales) where the origin of the original 
stock item could not be determined. See Mexinox's March 8, 2006, 
supplemental questionnaire response at 71.
    Because of the unknown origin of certain of Ken-Mac resales, 
Mexinox was not able to provide all the information necessary to 
complete our analysis. Pursuant to section 776(a)(1) of the Tariff Act, 
it is appropriate to use the facts otherwise available in calculating a 
margin on Ken-Mac's unattributed sales. Section 776(a)(1) of the Tariff 
Act provides that the Department will, subject to section 782(d) of the 
Tariff Act, use the facts otherwise available in reaching a 
determination if ``necessary information is not available on the 
record.'' For these preliminary results, we have calculated a margin on 
Ken-Mac's unattributed sales by applying the overall margin calculated 
on Mexinox's other U.S. sales of subject merchandise to the weighted-
average price of Ken-Mac's unattributed sales. This methodology is 
consistent to date 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; Preliminary Results of Antidumping Duty 
Administrative Review, 70 FR 45675, 45681 (August 8, 2005); unchanged 
in 2003-2004 Final Results.
    Prior to applying the overall margin calculated on other sales/
resales of subject merchandise to Ken-Mac's unattributed sales, we 
calculated the portion of the unattributed sales quantity that could be 
reasonably allocated to subject stainless steel merchandise purchased 
from Mexinox.

[[Page 35624]]

We based our allocation on the relative percentage (by volume) of 
subject stainless steel merchandise that Ken-Mac had purchased from 
Mexinox as compared to the total stainless steel merchandise it had 
purchased from all vendors. See Mexinox's March 8, 2006, supplemental 
questionnaire response at Attachment KMC-12. The Department finds that 
Mexinox, to the best of its ability, complied with the Department's 
request for information; thus, the application of an adverse inference, 
as provided under section 776(b) of the Tariff Act, is not warranted in 
calculating a margin on Ken-Mac's unattributed sales.

Currency Conversion

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

Preliminary Results of Review

    As a result of our review we preliminarily determine the following 
weighted-average dumping margin exists for the period July 1, 2003 
through June 30, 2004:

------------------------------------------------------------------------
                                                              Weighted
                                                               Average
                  Manufacturer / Exporter                      Margin
                                                            (percentage)
------------------------------------------------------------------------
ThyssenKrupp Mexinox S.A. de C.V..........................  1.22[percnt]
------------------------------------------------------------------------

    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 of these preliminary results. 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 no later than 30 days after the date of 
publication of these preliminary results of review. See 19 CFR 351.309 
(c). Rebuttal briefs limited to issues raised in the case briefs, may 
be filed no later than 35 days after the date of publication of this 
notice. See 19 CFR 351.309(d). 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, parties submitting case briefs and/or rebuttal 
briefs are requested to 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 argument or at a 
hearing, within 120 days of publication of these preliminary results.

Duty Assessment

    Upon completion of this administrative review, the Department shall 
determine, and United States Customs and Border Protection (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. The total customs value is based on the entered 
value reported by Mexinox for all U.S. entries of subject merchandise 
initially purchased for consumption to the United States made during 
the POR. See Preliminary Analysis Memorandum. In accordance with 19 CFR 
356.8(a), the Department will issue appropriate assessment instructions 
directly to CBP on or after 41 days following the publication of the 
final results of review.
    The Department clarified its ``automatic assessment'' regulation on 
May 6, 2003. See Antidumping and Countervailing Duty Proceedings: 
Assessment of Antidumping Duties, 68 FR 23954 (May 6, 2003). This 
clarification will apply to entries of subject merchandise during the 
POR produced by the company included in these preliminary results for 
which the reviewed company did not know their merchandise was destined 
for the United States. In such instances, we will instruct CBP to 
liquidate unreviewed entries at the all-others rate if there is no rate 
for the intermediate company or companies involved in the transaction.

Cash Deposit Requirements

    Furthermore, the following cash deposit requirements will be 
effective 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)(2)(C) of the Tariff Act: (1) the cash deposit rate for 
the reviewed company will be the rate established in the final results 
of this review, except if the rate is less than 0.50 percent (de 
minimis within the meaning of 19 CFR 351.106(c)(1)), the cash deposit 
will be zero; (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, or the original 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 (4) the cash deposit rate for all 
other manufacturers or exporters will continue to be the ``all others'' 
rate of 30.85 percent, which is the ``All Others'' rate established in 
the LTFV investigation. 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 (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 Importers

    This notice 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 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 Tariff Act.

    Dated: June 14, 2006.
David Spooner,
Assistant Secretary for Import Administration.
[FR Doc. E6-9768 Filed 6-20-06; 8:45 am]
BILLING CODE 3510-DS-S