[Federal Register Volume 72, Number 150 (Monday, August 6, 2007)]
[Notices]
[Pages 43600-43607]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-15201]


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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
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, 2005 to 
June 30, 2006.
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    \1\ Petitioners are Allegheny Ludlum Corporation, United Auto 
Workers Local 3303, Zanesville Armco Independent Organization, Inc. 
and the United Steelworkers of America.
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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:  August 6, 2007.

FOR FURTHER INFORMATION CONTACT: Maryanne Burke or Robert James, AD/CVD 
Operations, 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 3, 2006, the 
Department published a notice entitled Antidumping or Countervailing 
Duty Order, Finding, or Suspended Investigation; Opportunity To Request 
Administrative Review, 71 FR 37890 (July 3, 2006), covering, inter 
alia, S4 in coils from Mexico for the period July 1, 2005 through June 
30, 2006.
    In accordance with 19 CFR 351.213(b)(1), Mexinox and petitioners 
requested that the Department conduct an administrative review. On 
August 30, 2006, we published in the Federal Register a notice of 
initiation of this antidumping duty administrative review covering the 
period July 1, 2005 through June 30, 2006. See Initiation of 
Antidumping and Countervailing Duty Administrative Reviews and Requests 
for Revocation in Part, 71 FR 51573 (August 30, 2006).
    On September 13, 2006, the Department issued an antidumping duty 
questionnaire to Mexinox. Mexinox submitted its response to section A 
of the questionnaire on October 13, 2006, and its response to sections 
B through E of the questionnaire on November 20, 2006. On March 9, 
2007, the Department issued its first supplemental questionnaire for 
sections A through C. Mexinox responded to this first supplemental 
questionnaire on April 10, 2007. The Department also issued a 
supplemental questionnaire for section D on April 25, 2007, to which 
Mexinox responded on May 21, 2007. On May 7, 2007, the Department 
issued a second supplemental questionnaire for sections A through C, as 
well as for section E, which pertains to an affiliated U.S. reseller, 
Ken-Mac Metals (Ken-Mac). Mexinox filed its response to this second 
supplemental questionnaire on May 21, 2007. Finally, the Department 
issued a second supplemental questionnaire covering section D on June 
26, 2007, to which Mexinox responded on July 3, 2007.
    Because it was not practicable to complete this review within the 
normal time frame, on February 20, 2007, we published in the Federal 
Register our notice of the extension of time limits for this review. 
See Stainless Steel Sheet and Strip in Coils from Mexico; Extension of 
Time Limit for Preliminary Results of Antidumping Duty Administrative 
Review, 72 FR 7764 (February 20, 2007). This extension established the 
deadline for these preliminary results as July 31, 2007.

Period of Review

    The period of review (POR) is July 1, 2005 through June 30, 2006.

[[Page 43601]]

Scope of the Order

    For purposes of this order, the products covered are certain 
stainless steel sheet and strip in coils. Stainless steel is an alloy 
steel containing, by weight, 1.2 percent or less of carbon and 10.5 
percent or more of chromium, with or without other elements. The 
subject sheet and strip is a flat-rolled product in coils that is 
greater than 9.5 mm in width and less than 4.75 mm in thickness, and 
that is annealed or otherwise heat treated and pickled or otherwise 
descaled. The subject sheet and strip may also be further processed 
(e.g., cold-rolled, polished, aluminized, coated, etc.) provided that 
it maintains the specific dimensions of sheet and strip following such 
processing.
    The merchandise subject to this order is currently classifiable in 
the Harmonized Tariff Schedule of the United States (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.''\2\
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    \2\ ``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.''\3\
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    \3\ ``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

[[Page 43602]]

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.''\4\
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    \4\ ``Durphynox 17'' is a trademark of Imphy, S.A.
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    Finally, three specialty stainless steels typically used in certain 
industrial blades and surgical and medical instruments are also 
excluded from the scope of this order. These include stainless steel 
strip in coils used in the production of textile cutting tools (e.g., 
carpet knives).\5\ 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.''\6\
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    \5\ This list of uses is illustrative and provided for 
descriptive purposes only.
    \6\ ``GIN4 Mo,'' ``GIN5'' and ``GIN6'' are the proprietary 
grades of Hitachi Metals America, Ltd.
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Verification

    As provided in section 782(i) of the Tariff Act of 1930, as amended 
(the Tariff Act), we verified sales information provided by Mexinox, 
using standard verification procedures such as the examination of 
relevant sales and financial records. We will issue our verification 
report and allow parties to comment on the findings of that report 
prior to the issuing of our final results.

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 U.S. affiliate Ken-Mac. Ken-
Mac is an operating division of ThyssenKrupp Materials Inc., which is a 
subsidiary of ThyssenKrupp USA, Inc., 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 October 13, 2006 section A questionnaire response at A-11, A-
20 and A-27 through A-28. 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 October 13, 
2006 section A questionnaire response at A-3 through A-4, and its May 
21, 2007 supplemental questionnaire response covering sections A 
through C and E at Attachment A-28-B (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 with our 
practice to date 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, 71 FR 76978 (December 22, 2006) 
(2004-2005 Final Results), and 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 normal value, we compared CEP sales made 
in the United States by both Mexinox USA and Ken-Mac to unaffiliated 
purchasers to NV as described in the ``Constructed Export Price'' and 
``Normal Value'' sections of this notice. In accordance with section 
777A(d)(2) of 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 Order'' section above, and sold in the home market 
during the POR, to be foreign like product 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 
original September 13, 2006 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 based on the starting price of sales in the home market or, when NV 
is based on constructed value (CV), that of 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

[[Page 43603]]

distribution between the producer and the 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 an 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-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 home 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 LOTs among each channel of distribution and customer 
category for both markets. See Mexinox's October 13, 2006 section A 
questionnaire response at A-30 through A-37 and Attachments A-4-A 
through A-4-C; see also Mexinox's April 10, 2007 supplemental 
questionnaire response at pages 20 through 22 and Attachments A-20 and 
A-21.
    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 October 13, 2006 section A questionnaire response at A-3 and 
A-24 through A-25. We reviewed the intensity of all selling functions 
Mexinox claimed to perform for each channel of distribution and 
customer category. For 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 and collection, low 
volume orders and shipment of small packages. See Mexinox's April 10, 
2007 supplemental questionnaire response at Attachment A-20. 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 LOTs 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 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. See Mexinox's October 13, 2006 
questionnaire response at A-30 through A-37 and Attachments A-4-A 
through A-4-C; see also Mexinox's April 10, 2007 supplemental 
questionnaire response at Attachment A-20. 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, sales calls and 
visits, credit and collection, 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. Based on Mexinox's responses, 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 October 13, 2006 questionnaire response at A-
30 through A-37 and Attachments A-4-A through A-4-C; see also Mexinox's 
April 10, 2007 supplemental questionnaire response at Attachment A-20. 
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 an 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 an 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 an LOT adjustment. Because the data available do not form 
an appropriate basis for making an 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, in the following four channels of distribution: 1) direct 
shipments to

[[Page 43604]]

unaffiliated customers; 2) stock sales from the San Luis Potosi (SLP) 
factory; 3) sales to unaffiliated customers through Mexinox USA's 
warehouse inventory; and 4) sales through Ken-Mac. See Mexinox's 
October 13, 2006 section A questionnaire response at A-25 through A-27. 
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 through 
Mexinox USA or Ken-Mac to unaffiliated purchasers. We based CEP on 
packed prices to unaffiliated purchasers in the United States sold by 
Mexinox USA or its affiliated reseller, Ken-Mac. We accounted for 
billing adjustments, discounts and rebates 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 a certain expense of proprietary nature), commissions, 
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 expenses 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 July 31, 
2007.
    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 Mexinox's May 21, 2007 supplemental section D 
questionnaire response. See the Department's Cost of Production and 
Constructed Value Calculation Adjustments for the Preliminary Results - 
ThyssenKrupp Mexinox S.A. de C.V. from Frederick Mines to Neal M. 
Halper, dated July 31, 2007 (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 May 21, 2007 supplemental questionnaire 
response covering sections A through C and E at Attachment A-28-B.
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, billing 
adjustments, 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 for Mexinox of S4 in coils from Mexico (see 2003-2004 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 relied on home market sales and 
COP information provided by Mexinox in its questionnaire responses, 
except where noted below:
    ThyssenKrupp Nirosta GmbH (TKN) and ThyssenKrupp AST, S.p.A. 
(TKAST), hot-rolled stainless steel band (hot band) producers 
affiliated with Mexinox, sold hot band to Mexinox USA, which in turn 
sold hot band to Mexinox S.A.. Hot band is considered a major input to 
the production of stainless steel sheet and strip in coils. Section 
773(f)(3) of the Tariff Act, the major input rule, states that ``in the 
case of a transaction between affiliated persons involving the 
production by one of such persons of a major input to the merchandise, 
the administering authority has reasonable grounds to believe or 
suspect that an amount represented as the value of such input is less 
than the cost of production of such input, then the administering 
authority may determine the value of the major input on the basis of 
the information available regarding such cost of production, if such 
cost is greater

[[Page 43605]]

than the amount that would be determined for such input under paragraph 
(2).'' We evaluated the transfer prices between Mexinox and its 
affiliated hot band suppliers on a grade-specific basis. Where 
available on the record, we used market prices for certain grades. 
However, market prices were not available for some grades of hot band 
purchased from affiliates. See Mexinox's section D supplemental 
questionnaire, dated July 3, 2007. Therefore, for each of these grades, 
as facts otherwise available, we constructed a market price using the 
available market prices and COP information for the hot band grade 
purchased from the same affiliated supplier. Specifically, we 
calculated the ratio of the available market prices to the COP for the 
hot band grade, and applied the ratio to the COP of the hot band grades 
with no market price. We noted that, for some grades of hot band the 
market price was higher than the transfer prices between Mexinox and 
its affiliates. Therefore, we increased the reported direct material 
costs to reflect the market price. We also recalculated Mexinox's G&A 
expense rate to include employee profit sharing in the numerator. See 
Cost Calculation Memorandum.
    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 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 20, 2006 section B questionnaire response at B-
26. In our margin calculation we used the currency of the sale invoice 
at issue and applied the relevant adjustments in the actual currency 
invoiced or incurred by Mexinox. We accounted for billing adjustments, 
discounts and rebates, where appropriate. We also 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 Mexinox's 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 is consistent with past 
administrative reviews of this case. See, e.g., 2004-2005 Final Results 
and 2003-2004 Final Results.
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 13, 2006 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 response, Mexinox stated that its 
affiliated U.S. reseller, Ken-Mac, sold subject merchandise in the 
United States during the POR which it had purchased from various 
suppliers. See Mexinox's October 13, 2006 section A questionnaire 
response at A-11. However, Mexinox explained to the Department that a 
small subset of subject merchandise which was resold by Ken-Mac to 
unaffiliated customers in the United States could not be traced to an 
original stock item or supplier. See Mexinox's November 20, 2006 
section E

[[Page 43606]]

questionnaire response at KMC-2 and KMC-3. Mexinox further stated in 
its May 21, 2007 supplemental questionnaire response covering sections 
A through C and E at 23, that it was unable to identify the producer of 
those reported sale transactions (unattributed sales).
    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., 2004-2005 Final Results and 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. 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 May 21, 
2007 supplemental questionnaire response covering sections A through C 
and E at Attachment KME-12. The Department preliminarily finds Mexinox 
acted to the best of its ability in responding to the Department's 
request for information; therefore, 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, 2005 
through June 30, 2006:

------------------------------------------------------------------------
                                                       Weighted-Average
               Manufacturer / Exporter                      Margin
                                                         (percentage)
------------------------------------------------------------------------
ThyssenKrupp Mexinox S.A. de C.V....................        2.82[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 five days after the time limit for submitting the 
case briefs. 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 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 intends to issue 
assessment instructions 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. See Notice of Amended Final Determination of Sales 
at Less Than Fair Value and Antidumping Duty Order; Stainless Steel 
Sheet and Strip in Coils from Mexico, 64 FR 40560 (July 27, 1999). 
These deposit requirements, when imposed, shall remain in effect until 
further notice.

[[Page 43607]]

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) of the Tariff Act.

    Dated: July 31, 2007.
Stephen J. Claeys,
Acting Assistant Secretary for Import Administration.
[FR Doc. E7-15201 Filed 8-3-07; 8:45 am]
BILLING CODE 3510-DS-S