[Federal Register Volume 81, Number 222 (Thursday, November 17, 2016)]
[Notices]
[Pages 81057-81062]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-27850]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-570-029, C-570-030]


Certain Cold-Rolled Steel Flat Products From the People's 
Republic of China: Initiation of Anti-Circumvention Inquiries on the 
Antidumping Duty and Countervailing Duty Orders

AGENCY: Enforcement and Compliance, International Trade Administration, 
Department of Commerce.

SUMMARY: In response to requests from ArcelorMittal USA LLC, Nucor 
Corporation, United States Steel Corporation, and AK Steel Corporation, 
as well as Steel Dynamics, Inc. and California Steel Industries, 
(collectively, Domestic Producers), the Department of Commerce (the 
Department) is initiating anti-circumvention inquiries to determine 
whether imports of certain cold-rolled steel flat products (CRS), which 
are produced in the Socialist Republic of Vietnam (Vietnam) from hot-
rolled steel produced in the People's Republic of China (PRC), are 
circumventing the antidumping duty (AD) and countervailing duty (CVD) 
orders on CRS from the PRC.

DATES: Effective November 17, 2016.

FOR FURTHER INFORMATION CONTACT: John K. Drury or Victoria Cho, AD/CVD 
Operations, Office VI, Enforcement and Compliance, International Trade 
Administration, U.S. Department of Commerce, 1401 Constitution Avenue 
NW., Washington, DC 20230; telephone: (202) 482-0195 or (202) 482-5075, 
respectively.

SUPPLEMENTARY INFORMATION: 

Background

    On July 28, 2015, AK Steel Corporation, ArcelorMittal USA EEC, 
Nucor Corporation, Steel Dynamics, Inc., and the United States Steel 
Corporation (collectively, Petitioners) filed petitions seeking the 
imposition of antidumping and countervailing duties on imports of CRS 
from Brazil, the People's Republic of China, India, Japan, the Republic 
of Korea, the Netherlands, Russia, and the United Kingdom. Following 
the Department's final affirmative determinations of dumping and 
countervailable subsidies,\1\ and the U.S. International Trade 
Commission (ITC)'s finding of material injury,\2\ the Department issued 
AD and CVD orders on imports of CRS from the PRC.\3\
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    \1\ See Certain Cold-Rolled Steel Flat Products From the 
People's Republic of China: Final Affirmative Countervailing Duty 
Determination and Final Partial Affirmative Critical Circumstances 
Determination, FR 81 (May 24, 2016).
    \2\ See Cold-Rolled Steel Flat Products From China and Japan; 
Determinations, 81 FR 45305 (July 13, 2016)
    \3\ See Certain Cold-Rolled Steel Flat Products From Japan and 
the People's Republic of China: Antidumping Duty Orders, 81 FR 45956 
(July 14, 2016) (AD Order); see also Certain Cold-Rolled Steel Flat 
Products From the People's Republic of China: Countervailing Duty 
Order, 81 FR 45960 (July 14, 2016) (CVD Order) (collectively, 
Orders).
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    On September 22, 2016, pursuant to section 781(b) of the Tariff Act 
of 1930, as amended (the Act) and 19 CFR 351.225(h), Steel Dynamics, 
Inc. and California Steel Industries submitted a request for the 
Department to initiate anti-circumvention inquiries to determine 
whether producers of CRS in Vietnam are circumventing the Orders by 
exporting to the United States CRS which is completed or assembled in 
Vietnam using hot-rolled steel (HRS) sourced from the PRC.\4\ On 
September 27, 2016, ArcelorMittal USA LLC, Nucor Corporation, United 
States Steel Corporation, and AK Steel Corporation also submitted a 
request for the Department to initiate anti-circumvention inquiries and 
issue preliminary determinations of circumvention to suspend 
liquidation of imports of CRS from Vietnam.\5\ On October 13, 2016, we 
received comments supporting the allegation from the United 
Steelworkers.\6\ Domestic Producers request that the Department treat 
CRS imports from Vietnam as subject merchandise under the scope of the 
Orders and impose cash deposit requirements on all imports of CRS from 
Vietnam.
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    \4\ See Letter from Schagrin Associates to the Secretary of 
Commerce, ``Certain Cold-Rolled Steel Flat Products from China: 
Request for Circumvention Ruling,'' dated September 22, 2016 
(Schagrin Request).
    \5\ See Letter from Kelley Drye & Warren LLP to the Secretary of 
Commerce, ``Certain Cold-Rolled Steel Flat Products From the 
People's Republic of China--Request for Circumvention Ruling 
Pursuant to Section 781(b) of the Tariff Act of 1930,'' dated 
September 27, 2016 (Kelley Drye Request).
    \6\ See Letter from United Steelworkers to the Secretary of 
Commerce, ``Certain Cold-Rolled Steel Flat Products from the 
People's Republic of China,'' dated October 13, 2016.
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    On October 17, 2016, we received comments objecting to the 
allegation from Metallia U.S.A., LLC, Metallia, A Division of Hartree 
Partners, LP, Nippon Steel and Sumiken Bussan Americas Inc., Mitsui & 
Co. (U.S.A.), Inc., and Marubeni-Itochu Steel America Inc. (MISA).\7\ 
Also on October 17, 2016, we

[[Page 81058]]

received comments objecting to the allegation from Minmetals, Inc. 
(Minmetals).\8\ On October 17, 2016, we also received comments 
objecting to the allegation from POSCO-Vietnam Co., Ltd. (POSCO 
Vietnam).\9\ On October 21, 2016, we received comments objecting to the 
allegation from China Steel Sumikin Vietnam Joint Stock Company.\10\ 
Also on October 26, 2016, we received comments objecting to the 
allegation from Summit Global Trading, a Subsidiary of Sumitomo 
Corporation of Americas (Sumitomo).\11\ On October 28, 2016, we 
received comments objecting to the allegation from thyssenkrupp 
Materials NA, Inc. (thyssenkrupp).\12\ On October 31, 2016, we also 
received comments objecting to the allegation on behalf of Hoa Sen 
Group (HSG) \13\ and Maruichi Sun Steel Joint Stock Company 
(Maruichi).\14\ On November 1, 2016, we received comments objecting to 
the allegation from behalf of from Vietnam Competition Authority.\15\
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    \7\ See Letter from Morris, Manning & Martin, LLP to the 
Secretary of Commerce, ``Certain Cold-Rolled Steel Flat Products and 
Corrosion-Resistant Steel Products from the People's Republic of 
China: Response to Request for Anti-Circumvention Inquiry,'' dated 
October 17, 2016.
    \8\ See Letter from Minmetals, Inc. to the Secretary of 
Commerce, dated October 17, 2016.
    \9\ See Letter from Arnold and Porter, LLP to the Secretary of 
Commerce, ``Cold-Rolled Steel Flat Products from China: Response to 
Petitioners' Circumvention Allegation,'' dated October 17, 2016 
(POSCO Vietnam Submission).
    \10\ See Letter from Mowry & Grimson, PLLC and Sidley Austin LLP 
to the Secretary of Commerce, ``Certain Corrosion-Resistant Steel 
Products from China--Response to Petitioners' Circumvention 
Allegations,'' dated October 20, 2016.
    \11\ See Letter from Sandler, Travis, and Rosenberg, P.A. to the 
Secretary of Commerce, ``Certain Corrosion-Resistant Steel Products 
from the People's Republic of China: Response to Request for Anti-
Circumvention Inquiry,'' dated October 26, 2016.
    \12\ See Letter from Crowell and Moring, LLP to the Secretary of 
Commerce, ``Certain Corrosion-Resistant and Cold-Rolled Steel 
Products from the People's Republic of China: Comments Opposing 
Petitioners' Circumvention Allegations,'' dated October 28, 2016.
    \13\ See Letter from Curtis, Mallet-Prevost, Colt & Mosle, LLP 
to the Secretary of Commerce, ``Opposition to Request for Anti-
Circumvention Inquiry Certain Corrosion-Resistant Steel Products and 
Cold-Rolled Steel Flat Products from the People's Republic of 
China,'' dated October 31, 2016.
    \14\ See Letter from Curtis, Mallet-Prevost, Colt & Mosle, LLP 
to the Secretary of Commerce, ``Opposition to Request for Anti-
Circumvention Inquiry Certain Corrosion-Resistant Steel Products and 
Cold-Rolled Steel Flat Products from the People's Republic of 
China,'' dated October 31, 2016.
    \15\ See the Letter from the Vietnam Competition Authority to 
the Secretary of Commerce, ``Certain Corrosion-Resistant Steel 
Products from China; Certain Cold-Rolled Steel Flat Products from 
China--Opposition to Initiation of Anticircumvention Proceedings,'' 
dated November 1, 2016.
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Scope of the Orders

    The products covered by the orders are certain cold-rolled (cold-
reduced), flat-rolled steel products, whether or not annealed, painted, 
varnished, or coated with plastics or other nonmetallic substances. The 
products covered do not include those that are clad, plated, or coated 
with metal. The products covered include coils that have a width or 
other lateral measurement (``width'') of 12.7 mm or greater, regardless 
of form of coil (e.g., in successively superimposed layers, spirally 
oscillating, etc.). The products covered also include products not in 
coils (e.g., in straight lengths) of a thickness less than 4.75 mm and 
a width that is 12.7 mm or greater and that measures at least 10 times 
the thickness. The products covered also include products not in coils 
(e.g., in straight lengths) of a thickness of 4.75 mm or more and a 
width exceeding 150 mm and measuring at least twice the thickness. The 
products described above may be rectangular, square, circular, or other 
shape and include products of either rectangular or non-rectangular 
cross-section where such cross-section is achieved subsequent to the 
rolling process, i.e., products which have been ``worked after 
rolling'' (e.g., products which have been beveled or rounded at the 
edges). For purposes of the width and thickness requirements referenced 
above:
    (1) Where the nominal and actual measurements vary, a product is 
within the scope if application of either the nominal or actual 
measurement would place it within the scope based on the definitions 
set forth above, and
    (2) where the width and thickness vary for a specific product 
(e.g., the thickness of certain products with non-rectangular cross-
section, the width of certain products with nonrectangular shape, 
etc.), the measurement at its greatest width or thickness applies.
    Steel products included in the scope of the orders are products in 
which: (1) Iron predominates, by weight, over each of the other 
contained elements; (2) the carbon content is 2 percent or less, by 
weight; and (3) none of the elements listed below exceeds the quantity, 
by weight, respectively indicated:

 2.50 percent of manganese, or
 3.30 percent of silicon, or
 1.50 percent of copper, or
 1.50 percent of aluminum, or
 1.25 percent of chromium, or
 0.30 percent of cobalt, or
 0.40 percent of lead, or
 2.00 percent of nickel, or
 0.30 percent of tungsten (also called wolfram), or
 0.80 percent of molybdenum, or
 0.10 percent of niobium (also called columbium), or
 0.30 percent of vanadium, or
 0.30 percent of zirconium

    Unless specifically excluded, products are included in this scope 
regardless of levels of boron and titanium.
    For example, specifically included in this scope are vacuum 
degassed, fully stabilized (commonly referred to as interstitial-free 
(IF)) steels, high strength low alloy (HSLA) steels, motor lamination 
steels, Advanced High Strength Steels (AHSS), and Ultra High Strength 
Steels (UHSS). If steels are recognized as low carbon steels with 
micro-alloying levels of elements such as titanium and/or niobium added 
to stabilize carbon and nitrogen elements. HSLA steels are recognized 
as steels with micro-alloying levels of elements such as chromium, 
copper, niobium, titanium, vanadium, and molybdenum. Motor lamination 
steels contain micro-alloying levels of elements such as silicon and 
aluminum. AHSS and UHSS are considered high tensile strength and high 
elongation steels, although AHSS and UHSS are covered whether or not 
they are high tensile strength or high elongation steels.
    Subject merchandise includes cold-rolled steel that has been 
further processed in a third country, including but not limited to 
annealing, tempering, painting, varnishing, trimming, cutting, 
punching, and/or slitting, or any other processing that would not 
otherwise remove the merchandise from the scope of the orders if 
performed in the country of manufacture of the cold-rolled steel.
    All products that meet the written physical description, and in 
which the chemistry quantities do not exceed any one of the noted 
element levels listed above, are within the scope of the orders unless 
specifically excluded. The following products are outside of and/or 
specifically excluded from the scope of the orders:
     Ball bearing steels; \16\
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    \16\ Ball bearing steels are defined as steels which contain, in 
addition to iron, each of the following elements by weight in the 
amount specified: (i) Not less than 0.95 nor more than 1.13 percent 
of carbon; (ii) not less than 0.22 nor more than 0.48 percent of 
manganese; (iii) none, or not more than 0.03 percent of sulfur; (iv) 
none, or not more than 0.03 percent of phosphorus; (v) not less than 
0.18 nor more than 0.37 percent of silicon; (vi) not less than 1.25 
nor more than 1.65 percent of chromium; (vii) none, or not more than 
0.28 percent of nickel; (viii) none, or not more than 0.38 percent 
of copper; and (ix) none, or not more than 0.09 percent of 
molybdenum.
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     Tool steels; \17\
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    \17\ Tool steels are defined as steels which contain the 
following combinations of elements in the quantity by weight 
respectively indicated: (i) More than 1.2 percent carbon and more 
than 10.5 percent chromium; or (ii) not less than 0.3 percent carbon 
and 1.25 percent or more but less than 10.5 percent chromium; or 
(iii) not less than 0.85 percent carbon and 1 percent to 1.8 
percent, inclusive, manganese; or (iv) 0.9 percent to 1.2 percent, 
inclusive, chromium and 0.9 percent to 1.4 percent, inclusive, 
molybdenum; or (v) not less than 0.5 percent carbon and not less 
than 3.5 percent molybdenum; or (vi) not less than 0.5 percent 
carbon and not less than 5.5 percent tungsten.

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[[Page 81059]]

     Silico-manganese steel; \18\
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    \18\ Silico-manganese steel is defined as steels containing by 
weight: (i) Not more than 0.7 percent of carbon; (ii) 0.5 percent or 
more but not more than 1.9 percent of manganese, and (iii) 0.6 
percent or more but not more than 2.3 percent of silicon.
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     Grain-oriented electrical steels (GOES) as defined in the 
final determination of the U.S. Department of Commerce in Grain-
Oriented Electrical Steel From Germany, Japan, and Poland.\19\
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    \19\ Grain-Oriented Electrical Steel From Germany, Japan, and 
Poland: Final Determinations of Sales at Less Than Fair Value and 
Certain Final Affirmative Determination of Critical Circumstances, 
79 FR 42,501, 42,503 (Dep't of Commerce, July 22, 2014). This 
determination defines grain-oriented electrical steel as ``a flat-
rolled alloy steel product containing by weight at least 0.6 percent 
but not more than 6 percent of silicon, not more than 0.08 percent 
of carbon, not more than 1.0 percent of aluminum, and no other 
element in an amount that would give the steel the characteristics 
of another alloy steel, in coils or in straight lengths.''
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     Non-Oriented Electrical Steels (NOES), as defined in the 
antidumping orders issued by the U.S. Department of Commerce in Non-
Oriented Electrical Steel From the People's Republic of China, Germany, 
Japan, the Republic of Korea, Sweden, and Taiwan.\20\
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    \20\ Non-Oriented Electrical Steel From the People's Republic of 
China, Germany, Japan, the Republic of Korea, Sweden, and Taiwan: 
Antidumping Duty Orders, 79 FR 71,741, 71,741-42 (Dep't of Commerce, 
Dec. 3, 2014). The orders define NOES as ``cold-rolled, flat-rolled, 
alloy steel products, whether or not in coils, regardless of width, 
having an actual thickness of 0.20 mm or more, in which the core 
loss is substantially equal in any direction of magnetization in the 
plane of the material. The term `substantially equal' means that the 
cross grain direction of core loss is no more than 1.5 times the 
straight grain direction (i.e., the rolling direction) of core loss. 
NOES has a magnetic permeability that does not exceed 1.65 Tesla 
when tested at a field of 800 A/m (equivalent to 10 Oersteds) along 
(i.e., parallel to) the rolling direction of the sheet (i.e., B800 
value). NOES contains by weight more than 1.00 percent of silicon 
but less than 3.5 percent of silicon, not more than 0.08 percent of 
carbon, and not more than 1.5 percent of aluminum. NOES has a 
surface oxide coating, to which an insulation coating may be 
applied.''
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    The products subject to the orders are currently classified in the 
Harmonized Tariff Schedule of the United States (HTSUS) under item 
numbers: 7209.15.0000, 7209.16.0030, 7209.16.0060, 7209.16.0070, 
7209.16.0091, 7209.17.0030, 7209.17.0060, 7209.17.0070, 7209.17.0091, 
7209.18.1530, 7209.18.1560, 7209.18.2510, 7209.18.2520, 7209.18.2580, 
7209.18.6020, 7209.18.6090, 7209.25.0000, 7209.26.0000, 7209.27.0000, 
7209.28.0000, 7209.90.0000, 7210.70.3000, 7211.23.1500, 7211.23.2000, 
7211.23.3000, 7211.23.4500, 7211.23.6030, 7211.23.6060, 7211.23.6075, 
7211.23.6085, 7211.29.2030, 7211.29.2090, 7211.29.4500, 7211.29.6030, 
7211.29.6080, 7211.90.0000, 7212.40.1000, 7212.40.5000, 7225.50.6000, 
7225.50.8015, 7225.50.8085, 7225.99.0090, 7226.92.5000, 7226.92.7050, 
and 7226.92.8050.
    The products subject to the orders may also enter under the 
following HTSUS numbers: 7210.90.9000, 7212.50.0000, 7215.10.0010, 
7215.10.0080, 7215.50.0016, 7215.50.0018, 7215.50.0020, 7215.50.0061, 
7215.50.0063, 7215.50.0065, 7215.50.0090, 7215.90.5000, 7217.10.1000, 
7217.10.2000, 7217.10.3000, 7217.10.7000, 7217.90.1000, 7217.90.5030, 
7217.90.5060, 7217.90.5090, 7225.19.0000, 7226.19.1000, 7226.19.9000, 
7226.99.0180, 7228.50.5015, 7228.50.5040, 7228.50.5070, 7228.60.8000, 
and 7229.90.1000.
    The HTSUS subheadings above are provided for convenience and 
customs purposes only. The written description of the scope of the 
orders is dispositive.

Merchandise Subject to the Anti-Circumvention Inquiries

    These anti-circumvention inquiries cover CRS exported from Vietnam 
produced from HRS exported from the PRC.

Initiation of Anti-Circumvention Inquiries

    Section 781(b)(1) of the Act provides that the Department may find 
circumvention of an AD or CVD order when merchandise of the same class 
or kind subject to the order is completed or assembled in a foreign 
country other than the country to which the order applies. In 
conducting an anti-circumvention inquiry, under section 781(b)(1) of 
the Act, the Department relies on the following criteria: (A) 
Merchandise imported into the United States is of the same class or 
kind as any merchandise produced in a foreign country that is the 
subject of an antidumping or countervailing duty order or finding; (B) 
before importation into the United States, such imported merchandise is 
completed or assembled in another foreign country from merchandise 
which is subject to the order or merchandise which is produced in the 
foreign country that is subject to the order; (C) the process of 
assembly or completion in the foreign country referred to in section 
(B) is minor or insignificant; (D) the value of the merchandise 
produced in the foreign country to which the AD or CVD order applies is 
a significant portion of the total value of the merchandise exported to 
the United States; and (E) the administering authority determines that 
action is appropriate to prevent evasion of such order or finding. As 
discussed below, Domestic Producers provided evidence with respect to 
these criteria.

A. Merchandise of the Same Class or Kind

    Domestic Producers claim that CRS exported to the United States is 
the same class or kind as that covered by the Orders in these 
inquiries.\21\ Domestic Producers provided evidence to show that the 
merchandise from Vietnam enters the United States under the same tariff 
classification as subject merchandise.\22\
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    \21\ See Schagrin Request, at 8; Kelley Drye Request, at 8. See 
also sections 781(b)(1)(A)(i) and (iii) of the Act.
    \22\ See Kelley Drye Request, at Attachment 1.
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B. Completion of Merchandise in a Foreign Country

    Domestic Producers note that section 781(b)(l)(B)(ii) of the Act 
requires that ``the Department must also determine whether, prior to 
importation into the United States, the merchandise in the third 
country is completed from merchandise produced in the country subject 
to the antidumping or countervailing duty order.'' \23\ Domestic 
Producers presented evidence showing after the publication of the 
preliminary affirmative CVD determination in December 2015, how the 
imports of CRS from Vietnam to the United States more than tripled than 
the previous two years combined. Additionally, Domestic Producers 
provide evidence that no capacity currently exists in Vietnam to 
produce HRS and, thus, they contend any CRS manufactured in Vietnam 
must use imported HRS.\24\ Domestic Producers also provide information 
reflecting that imports into the United States of CRS from the PRC 
significantly decreased after the imposition of the Orders, and imports 
into the United States of CRS from Vietnam, as well as imports into 
Vietnam of Chinese HRS, also increased significantly.\25\ Finally, 
Domestic Producers state that Minmetals, a U.S. trading company, 
currently has arrangements to ship HRS from the PRC to Vietnam and 
convert

[[Page 81060]]

the HRS to CRS for export to the United States with the purpose of 
evading the Orders.\26\
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    \23\ Id., at 8.
    \24\ See Schagrin Request, at 10; see also Kelley Drye Request, 
at 8-9.
    \25\ See Schagrin Request, at 11-14; see also Kelley Drye 
Request, at 9-10.
    \26\ See Schagrin Request, at 15 and Exhibit 10.
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C. Minor or Insignificant Process

    Domestic Producers maintain that the process for completing CRS 
from HRS is minor or insignificant. Under section 781(b)(2) of the Act, 
the Department considers five factors to determine whether the process 
of assembly or completion is minor or insignificant. Domestic Producers 
allege that the production of HRS in the PRC, which is subsequently 
further processed into CRS in Vietnam, comprises the majority of the 
value associated with the merchandise imported into the United States, 
and that the processing of HRS into CRS in Vietnam adds relatively 
little value.
(1) Level of Investment
    Domestic Producers contend that the level of investment necessary 
to construct a factory which can produce CRS from HRS in Vietnam is 
insignificant. In support of its contention, Domestic Producers compare 
the investment necessary to install a re-rolling facility with the 
investment necessary to produce HRS using a fully-integrated production 
process for melting iron and making steel.\27\ Domestic Producers 
estimate that the investment necessary to construct a re-rolling 
facility in Vietnam that uses HRS substrate to produce CRS would be 
between $28 million at $70 million.\28\ In contrast, Domestic Producers 
estimate that the investment necessary to construct a fully integrated 
steel production facility, including a blast furnace and basic oxygen 
furnace, in the PRC would be between $295 million and $10.1 
billion.\29\ Domestic Producers also argue that using investment levels 
in the PRC for a basic steel making, including a blast furnace and 
basic oxygen furnace, as opposed to an electric arc furnace, is 
appropriate as approximately 90 percent of the steel production in the 
PRC comes from fully integrated steel mills.\30\
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    \27\ See Schagrin Request, at 16-17; see also Kelley Drye 
Request, at 11-13.
    \28\ See Schagrin Request, at 17; see also Kelley Drye Request, 
at 12.
    \29\ See Schagrin Request, at 16; see also Kelley Drye Request, 
at 12 and Attachment 9.
    \30\ See Kelley Drye Request, at 12.
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(2) Level of Research and Development
    Domestic Producers assert that the level of research and 
development in Vietnam is either minimal or non-existent. Domestic 
Producers state that Vietnam is importing technology from other 
sources, rather than developing its own technology.\31\ As an example 
of the importation of technology into Vietnam, Domestic Producers 
provided evidence that ``Dong A, a Vietnamese steel company, recently 
announced that it is installing European and Japanese equipment in a 
new facility that includes a pickling line and a cold-rolling mill.'' 
\32\
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    \31\ See Schagrin Request, at 17-18; see also Kelley Drye 
Request at 13.
    \32\ See Kelley Drye Request at 13 and Attachment 11.
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(3) Nature of Production Process
    According to Domestic Producers, the production process undertaken 
by Vietnamese producers of CRS is less complex than steelmaking, and 
minimal in nature.\33\ Citing to a report from the ITC,\34\ Domestic 
Producers describe the process to produce HRS as consisting of three 
distinct states: Melting and refining, casting molten steel into semi-
finished forms, and hot-rolling the semi-finished forms into HRS.\35\ 
In contrast, Domestic Producers provide information indicating that the 
production of CRS from HRS involves only cleaning and pickling, 
rolling, annealing, and tempering.\36\
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    \33\ See Schagrin Request, at 18; see also Kelley Drye Request 
at 14.
    \34\ See Certain Hot-Rolled Steel Flat Products from Australia, 
Brazil, Japan, Korea, the Netherlands, Turkey, and The United 
Kingdom, Inv. Nos. 70t-TA-545-547 and 73l-TA-1291-1297, USITC 
Pub.4570 (October 2015) (Preliminary) at I-19. Domestic Producers 
attached the report as Attachment 12.
    \35\ See Kelley Drye Request, at 14-16 and Attachment 12.
    \36\ Id., at 17. Domestic Producers cite to Certain Hot-Rolled 
Steel Flat Products from Australia, Brazil, Japan, Korea, the 
Netherlands, Turkey, and The United Kingdom, Inv. Nos. 70t-TA-545-
547 and 73l-TA-1291-1297, USITC Pub. 4570 (Oct.2015) (Preliminary) 
at I-21 in support of their description of the CRS production 
process.
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(4) Extent of Production Facilities in Vietnam
    Domestic Producers provide information indicating that production 
facilities in Vietnam are more limited compared to facilities in the 
PRC.\37\ As noted above, Domestic Producers maintain that Vietnam has 
no HRS capacity. Domestic Producers claim that Vietnam has fewer than a 
dozen large producers of flat steel products. Moreover, Domestic 
Producers indicate that Vietnam has limited production facilities that 
would allow for production of CRS to support the significant increase 
of imports into the United States from Vietnam.\38\
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    \37\ See Schagrin Request, at 18. Domestic Producers cite to 
report on the state of the steel industry in Vietnam in support of 
their statements. See Nozomu Kawabata, ``The Vietnamese Iron and 
Steel Industry in Transition to a Market Economy--Attainments and 
Challenges,'' at 14, 20, & 35 (May, 2016) (Tohoku Economics Research 
Group, Tohoku University, Discussion Paper No. 349) (Kawabata 
Report), attached as Exhibit 4 to the Request.
    \38\ See Kelley Drye Request, at 17-18.
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(5) Value of Processing in Vietnam
    Domestic Producers assert that producing HRS in the PRC accounts 
for a large percentage of the total value of CRS that is produced in 
Vietnam using HRS from the PRC. Using information from the recent CRS 
investigation by the ITC, Domestic Producers state that the price of 
HRS is consistently between 80 percent and 90 percent of the value of 
CRS.\39\ Using another approach, focusing solely on the cost of 
production in Vietnam, Domestic Producers estimate that the cost of 
manufacture for the CRS operations value added in Vietnam is less than 
ten percent.\40\ As noted above, Domestic Producers argue that the vast 
majority of the processing and value of CRS comes from HRS. The value 
of processing CRS in Vietnam is a minor part of the total cost of 
manufacture, unlikely to exceed 20 percent of the total value. Thus, 
the value of the merchandise produced in China is estimated to be at 
least 80 percent of the total value of the merchandise shipped to the 
United States.\41\
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    \39\ See Schagrin Request, at 18-19.
    \40\ See Kelley Drye Request, at 18-19 and Attachment 14.
    \41\ See Kelley Drye Request, at 19.
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D. Additional Factors To Consider in Determining Whether Action Is 
Necessary

    Section 781(b)(3) of the Act directs the Department to consider 
additional factors in determining whether to include merchandise 
assembled or completed in a foreign country within the scope of the 
order, such as: ``(A) the pattern of trade, including sourcing 
patterns, (B) whether the manufacturer or exporter of the merchandise . 
. . is affiliated with the person who uses the merchandise. . . to 
assemble or complete in the foreign country the merchandise that is 
subsequently imported into the United States, and (C) whether imports 
into the foreign country of the merchandise. . . have increased after 
the initiation of the investigation which resulted in the issuance of 
such order or finding.''
(1) Pattern of Trade
    Domestic Producers provide information reflecting that at the time 
the petitions were filed for the original investigations of CRS from 
the PRC, Vietnam was not a source of U.S. imports of CRS in 2014. 
Domestic

[[Page 81061]]

Producers provide information reflecting imports of CRS from Vietnam to 
the United States through July 2015 were low.\42\ However, subsequent 
to the preliminary injury determination by the ITC, the final quarter 
of 2015 saw increased imports of CRS from Vietnam to the United 
States.\43\ Domestic Producers provide information demonstrating that 
after the Department's preliminary affirmative CVD determination for 
CRS from the PRC in December 2015, imports of CRS from Vietnam into the 
United States surged dramatically.\44\ Domestic Producers further 
provide evidence that imports of CRS from the PRC to the United States 
decreased substantially over the same time period.\45\ No other factual 
information on the record contradicts this claim.
---------------------------------------------------------------------------

    \42\ See Kelley Drye Request, at 19-20 and Attachment 1.
    \43\ Id., at 20
    \44\ Id.
    \45\ Id., at 5-6.
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(2) Affiliation
    Domestic Producers have not provided any allegation of affiliation 
between producers of HRS in the PRC and producers of CRS in Vietnam.
(3) Increase of HRS Shipments From the PRC to Vietnam After Initiations 
of the AD and CVD Investigations of CRS From the PRC
    Domestic Producers presented evidence indicating that imports of 
HRS from the PRC to Vietnam have increased since the initiation of the 
investigations of CRS from the PRC.\46\ No other factual information on 
the record contradicts this claim.
---------------------------------------------------------------------------

    \46\ See Schagrin Request, at 11-14; see also Kelley Drye 
Request, at 21 and Attachment 3.
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Analysis of the Allegations

    Based on our analysis of Domestic Producers anti-circumvention 
allegations and the information provided therein, the Department 
determines that anti-circumvention inquiries of the AD and CVD orders 
on CRS from the PRC are warranted.
    With regard to whether the merchandise from Vietnam is of the same 
class or kind as the merchandise produced in the PRC, Domestic 
Producers presented information to the Department indicating that, 
pursuant to section 781(b)(1)(A) of the Act, the merchandise being 
produced in and/or exported from Vietnam is of the same class or kind 
as CRS produced in the PRC, which is subject to the Orders.\47\ 
Consequently, the Department finds that Domestic Producers provided 
sufficient information in their requests regarding the class or kind of 
merchandise to support the initiation of these anti-circumvention 
inquiries.
---------------------------------------------------------------------------

    \47\ See Schagrin Request, at 9; see also Kelly Dry Request, at 
8 and Attachment 1.
---------------------------------------------------------------------------

    With regard to completion or assembly of merchandise in a foreign 
country, pursuant to section 781(b)(1)(B) of the Act, Domestic 
Producers also presented information to the Department indicating that 
the CRS exported from Vietnam to the United States is produced in 
Vietnam using HRS from the PRC.\48\ We find that the information 
presented by Domestic Producers regarding this criterion supports its 
request to initiate these anti-circumvention inquiries.
---------------------------------------------------------------------------

    \48\ See Schagrin Request, at 6 and 11-18 and Exhibits 1-2, 4-5, 
7 and 13; see also Kelly Dry Request, at 8-11 and Attachments 1-5.
---------------------------------------------------------------------------

    The Department finds that Domestic Producers sufficiently addressed 
the factors described in section 781(b)(1)(C) and 781(b)(2) of the Act 
regarding whether the process of assembly or completion of CRS in 
Vietnam is minor or insignificant. In particular, information in 
Domestic Producers' submission indicates that: (1) The level of 
investment in re-rolling facilities is minimal when compared with the 
level of investment for basic steel making facilities; (2) there is 
little or no research and development taking place in Vietnam; (3) the 
CRS production processes involve the simple processing of HRS from a 
country subject to the Orders; (4) the CRS production facilities in 
Vietnam are more limited compared to facilities in the PRC; and (5) the 
value of the processing performed in Vietnam is a small proportion of 
the value of the CRS imported into the United States, as the production 
of HRS in the PRC accounts for 80 to 90 percent of the value of 
finished CRS.
    With respect to the value of the merchandise produced in the PRC, 
pursuant to section 781(b)(1)(D) of the Act, Domestic Producers relied 
on published sources, a simulated cost structure for producing CRS in 
Vietnam, and arguments in the ``minor or insignificant process'' 
portion of its anti-circumvention allegation to indicate that the value 
of the key material, HRS, produced in the PRC may be significant 
relative to the total value of the CRS exported to the United States. 
We find that this information adequately meets the requirements of this 
factor, as discussed above, for the purposes of initiating these anti-
circumvention inquiries.
    Finally, with respect to the additional factors listed under 
section 781(b)(3) of the Act, we find that Domestic Producers presented 
evidence indicating that shipments of CRS from Vietnam to the United 
States increased since the imposition of the Orders and that shipments 
of HRS from the PRC to Vietnam also increased since the Orders took 
effect, further supporting initiation of these anti-circumvention 
inquiries. Accordingly, we are initiating a formal anti-circumvention 
inquiry concerning the AD and CVD Orders on CRS from the PRC, pursuant 
to section 781(b) of the Act.
    In connection with these anti-circumvention inquiries, in order to 
determine, (1) the extent to which PRC-sourced HRS is further processed 
into CRS in Vietnam before shipment to the United States, (2) the 
extent to which a country-wide finding applicable to all exports might 
be warranted, as alleged by Domestic Producers, and (3) whether the 
process of turning PRC-sourced HRS into CRS is minor or insignificant, 
the Department intends to issue questionnaires to solicit information 
from interested parties. The Department intends to issue questionnaires 
to solicit information from the Vietnamese producers and exporters 
concerning their shipments of CRS to the United States and the origin 
of the imported HRS being processed into CRS. A company's failure to 
respond completely to the Department's requests for information may 
result in the application of partial or total facts available, pursuant 
to section 776(a) of the Act, which may include adverse inferences, 
pursuant to section 776(b) of the Act.
    While we believe sufficient factual information has been submitted 
by Domestic Producers supporting their request for inquiries, we do not 
find that the record supports the simultaneous issuance of a 
preliminary ruling. Such inquiries are by their nature typically 
complicated and can require information regarding production in both 
the country subject to the order and the third country completing the 
product. As noted above, the Department intends to request additional 
information regarding the statutory criteria to determine whether 
shipments of CRS from Vietnam are circumventing the AD and CVD orders 
on CRS from the PRC. Thus, with further development of the record 
required before a preliminary ruling can be issued, the Department does 
not find it appropriate to issue a preliminary ruling at this time.

Notification to Interested Parties

    In accordance with 19 CFR 351.225(e), the Department finds that the 
issue of whether a product is

[[Page 81062]]

included within the scope of an order cannot be determined based solely 
upon the application and the descriptions of the merchandise. 
Accordingly, the Department will notify by mail all parties on the 
Department's scope service list of the initiation of these anti-
circumvention inquiries. In addition, in accordance with 19 CFR 
351.225(f)(1)(i) and (ii), in this notice of initiation issued under 19 
CFR 351.225(e), we have included a description of the product that is 
the subject of these anti-circumvention inquiries (i.e., CRS that 
contains the characteristics as provided in the scope of the Orders) 
and an explanation of the reasons for the Department's decision to 
initiate an anti-circumvention inquiry, as provided above.
    In accordance with 19 CFR 351.225(l)(2), if the Department issues a 
preliminary affirmative determination, we will then instruct U.S. 
Customs and Border Protection to suspend liquidation and require a cash 
deposit of estimated antidumping and countervailing duties, at the 
applicable rate, for each unliquidated entry of the merchandise at 
issue, entered or withdrawn from warehouse for consumption on or after 
the date of initiation of the inquiry. The Department will establish a 
schedule for questionnaires and comments on the issues. In accordance 
with section 781(f) of the Act and 19 CFR 351.225(f)(5), the Department 
intends to issue its final determination within 300 days of the date of 
publication of this initiation.
    This notice is published in accordance with 19 CFR 351.225(f).

    Dated: November 4, 2016.
Paul Piquado,
Assistant Secretary for Enforcement and Compliance.
[FR Doc. 2016-27850 Filed 11-16-16; 8:45 am]
 BILLING CODE 3510-DS-P