Import Administration, International Trade Administration, Department of Commerce.
Notice of preliminary determination of sales at not less than fair value.
May 9, 2002.Start Further Info
FOR FURTHER INFORMATION CONTACT:
Angelica Mendoza, John Drury or Abdelali Elouaradia at (202) 482-3019, (202) 482-0195 and (202) 482-1374, respectively; AD/CVD Enforcement, Office 8, Group III, Import Administration, International Trade Start Printed Page 31205Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230.End Further Info End Preamble Start Supplemental Information
The Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute are references to the provisions effective January 1, 1995, the effective date of the amendments made to the Tariff Act of 1930 (the Act) by the Uruguay Round Agreements Act (URAA). In addition, unless otherwise indicated, all citations to the Department of Commerce (Department's) regulations are to the regulations at 19 CFR part 351 (April 2001).
We preliminarily determine that certain cold-rolled carbon steel flat products (cold-rolled steel) from France are not being sold, or are not likely to be sold, in the United States at less than fair value (LTFV), as provided in section 733 of the Act. The estimated margins of sales at LTFV are shown in the “Suspension of Liquidation” section of this notice.
On October 18, 2001, the Department initiated antidumping duty investigations of cold-rolled steel from a number of countries, including France. See Notice of Initiation of Antidumping Duty Investigations: Certain Cold-Rolled Carbon Steel Flat Products From Argentina, Australia, Belgium, Brazil, France, Germany, India, Japan, Korea, the Netherlands, New Zealand, the People's Republic of China, the Russian Federation, South Africa, Spain, Sweden, Taiwan, Thailand, Turkey, and Venezuela, 66 FR 54198, (October 26, 2001) (Initiation Notice). Also on October 18, 2001, based on information provided in the petition, we found “reasonable grounds to believe or suspect” that sales of the foreign like product in the markets of Belgium, France, Germany, India, Japan, Korea, the Netherlands, Thailand, and Turkey were made at prices below their respective costs of production (COP) within the meaning of section 773(b)(2)(A)(i) of the Act. Accordingly, the Department initiated country-wide cost investigations on sales of the foreign like product in these markets. The petitioners in this investigation are Bethlehem Steel Corporation, LTV Steel Company, National Steel Corporation, Nucor Corporation, Steel Dynamics, Inc., WCI Steel, Inc., Weirton Steel Corporation, and United States Steel Corporation. Since the initiation of this investigation the following events have occurred.
The Department set aside a period for all interested parties to raise issues regarding product coverage. See Initiation Notice at 54198. From October 30, 2001, through November 8, 2001, petitioners filed comments proposing clarifications to the scope of these investigations. Also, from November to December 2001, the Department received numerous responses from interested parties aimed at clarifying the scope of the investigations.
On October 30, 2001, the Department issued a letter to interested parties in all of the concurrent cold-rolled steel antidumping investigations, providing an opportunity for comment on the Department's proposed model matching characteristics and hierarchy. On November 8, 2001, petitioners and the Usinor Group (Usinor) submitted comments on the Department's request for information. For purposes of the antidumping duty questionnaires subsequently issued by the Department to the respondents, no changes were made to the product characteristics or the hierarchy of those characteristics from those originally proposed by the Department in its October 18, 2001, letter.
On November 13, 2001, the United States International Trade Commission (ITC) notified the Department of its affirmative preliminary injury determination on imports of subject merchandise from Argentina, Australia, Belgium, Brazil, France, Germany, India, Japan, Korea, the Netherlands, New Zealand, the People's Republic of China, the Russian Federation, South Africa, Spain, Sweden, Taiwan, Thailand, Turkey, and Venezuela. On November 20, 2001, the ITC published its preliminary determination determining that there is a reasonable indication that the United States industry producing cold-rolled steel is materially injured or threatened with material injury by reason of imports of the subject merchandise from cold-rolled steel from Argentina, Australia, Belgium, Brazil, France, Germany, India, Japan, Korea, the Netherlands, New Zealand, the People's Republic of China, the Russian Federation, South Africa, Spain, Sweden, Taiwan, Thailand, Turkey, and Venezuela. See Certain Cold-Rolled Steel Products from Argentina, Australia, Belgium, Brazil, China, France, Germany, India, Japan, Korea, the Netherlands, New Zealand, Russia, South Africa, Spain, Sweden, Taiwan, Thailand, Turkey, and Venezuela, 66 FR 57985 (November 19, 2001).
On December 3, 2001, we selected the largest producer/exporter of cold-rolled steel, Usinor, from France as the mandatory respondent in this proceeding. For further discussion, see Memorandum from Nancy Decker and Angelica Mendoza to Richard O. Weible, Selection of Respondent(s), dated December 3, 2001.
The Department subsequently issued its antidumping duty questionnaire to Usinor on November 16, 2001. The questionnaire was divided into five parts, in which we requested that Usinor respond to Section A (general information, corporate structure, sales practices, and merchandise produced), Section B (home market or third-country sales), Section C (U.S. sales), Section D (cost of production/constructed value), and Section E (further manufacturing) where appropriate. The Department also issued corrected pages of the model matching criteria on November 26, 2001.
On December 26, 2001, the Department received Usinor's response to Section A of the questionnaire. On January 14, 2002, we received Usinor's response to Sections B through D of the Department's questionnaire.
On January 7, 2002, petitioners filed comments on Usinor's Section A response, and also requested that the Department require Usinor to report the resales of cold-rolled steel made by its affiliated steel service centers (SSCs). On January 17, 2002, Usinor submitted rebuttal comments. On January 31, 2002, we issued a letter requesting Usinor to report in its Section B response the sales made by five of its affiliated SSCs (Cisatol, Service Acier Rhenan (SAR), Société Lorraine de Produits Metallurgiques (SLPM), Sotracier, and Produits d'Usines Metallurgiques (PUM)) to the first unaffiliated end-customer. On January 28, 2002, and January 29, 2002, petitioners filed comments on Usinor's Section B through D response.
On January 18, 2002, we issued a supplemental questionnaire for deficiencies in Usinor's Section A response. On February 12, 2002, we issued a supplemental questionnaire for deficiencies in Usinor's Section B and C responses. On February 28, 2002, we issued a supplemental questionnaire for deficiencies found in Usinor's supplemental Section D response.
On January 31, 2002 and February 8, 2002, petitioners requested that the Department collapse Usinor's affiliated producers and SSCs of cold-rolled steel for this proceeding. On February 26, 2002, the Department determined to collapse eight of Usinor's affiliated producers (Sollac Atlantique S.A. Start Printed Page 31206(Atlantique), Sollac Lorraine S.A. (Lorraine), Sollac Méditerranée (Méditerranée), PUM, Usinor Packaging S.A. (Packaging), Etilam, Beautor S.A., and Haironville) into a single entity for purposes of this investigation. For further discussion, see Memorandum on Collapsing from John Drury and Angelica Mendoza through Richard O. Weible to Joseph A. Spetrini, dated February 26, 2002 (Collapsing Memo).
On February 11, 2002, we received Usinor's response to our supplemental Section A questionnaire. On February 14, 2002, we issued a letter requesting that Usinor report the order date associated with all invoiced sales of subject merchandise made during the POI. We received Usinor's responses to the Department's January 31, 2002, February 12, 2002, and February 14, 2002, requests for information on March 5, 2002.
On February 25, 2002, we issued a second supplemental questionnaire for deficiencies found in Usinor's supplemental Section A response. We received Usinor's response on March 13, 2002.
On March 28, 2002, we received Usinor's response to our supplemental questionnaire on Section D. Usinor also submitted new home market and U.S. sales databases to (1) incorporate a small quantity of home-market sales of second-quality merchandise sold by Haironville (affiliated cold-rolled steel producer) to affiliated home-market customers, and (2) to remove a small quantity of sales made by Etilam (affiliated cold-rolled steel producer) of “shadow mask steel” (i.e., non-subject merchandise) that were incorrectly included in the home market and U.S. sales databases. On April 15, 2002, we issued a second supplemental questionnaire for deficiencies found in Usinor's supplemental Section D response. We received Usinor's response on April 17, 2002.
On April 23, 2002, the Department issued Usinor a second supplemental questionnaire for deficiencies found in its March 5, 2002 and March 28, 2002 (with respect to its revised sales databases) questionnaire responses. The response to this request for information is due after our preliminary determination.
On February 7, 2002, petitioners made a timely request for a fifty-day postponement of the preliminary determination pursuant to section 733(c)(1)(A) of the Act. On February 14, 2002, we postponed the preliminary determination until no later than April 26, 2002. See Certain Cold Rolled Carbon Steel Flat Products From Argentina, Australia, Belgium, Brazil, France, Germany, India, Japan, Korea, the Netherlands, New Zealand, the People's Republic of China, the Russian Federation, South Africa, Spain, Sweden, Taiwan, Thailand, Turkey, and Venezuela; Notice of Postponement of Preliminary Determinations in Antidumping Duty Investigations, 67 FR 8227 (February 22, 2002).
Period of Investigation
The period of investigation (POI) is July 1, 2000 through June 30, 2001. This period corresponds to the four most recent fiscal quarters prior to the filing of the petition (i.e., September 28, 2001), and is in accordance with section 351.204(b)(1) of the Department's regulations.
Scope of Investigations
For purposes of this investigation, the products covered are certain cold-rolled (cold-reduced) flat-rolled carbon-quality steel products. For a full description of the scope of this investigation, as well as a complete discussion of all scope exclusion requests submitted in the context of the on-going cold-rolled steel investigations, please see the “Scope Appendix” attached to the Notice of Preliminary Determination of Sales at Less Than Fair Value: Certain Cold-Rolled Carbon Steel Flat Products from Argentina, published concurrently with this preliminary determination.
Facts Available (FA)
Section 776(a)(2)(A) of the Act provides that “if any interested party or any other person—(A) withholds information that has been requested by the administering authority * * *, (B) fails to provide such information by the deadlines for the submission of the information or in the form and manner requested, subject to subsections (c)(1) and (e) of section 782, (C) significantly impedes a proceeding under this title, or (D) provides such information but the information cannot be verified as provided in section 782(i), the administering authority * * * shall, subject to section 782(d), use the facts otherwise available in reaching the applicable determination under this title.” The statute requires that certain conditions be met before the Department may resort to the facts otherwise available. Where the Department determines that a response to a request for information does not comply with the request, section 782(d) of the Act provides that the Department will so inform the party submitting the response and will, to the extent practicable, provide that party the opportunity to remedy or explain the deficiency. If the party fails to remedy the deficiency within the applicable time limits, the Department may, subject to 782(e), disregard all or part of the original and subsequent responses, as appropriate. Briefly, section 782(e) provides that the Department “shall not decline to consider information that is submitted by an interested party and is necessary to the determination but does not meet all the applicable requirements established by the administering authority” if the information is timely, can be verified, is not so incomplete that it cannot be used, and if the interested party acted to the best of its ability in providing the information. Where all of these conditions are met, and the Department can use the information without undue difficulties, the statute requires it to do so.
Usinor's Downstream Sales
On November 16, 2001, the Department issued Usinor its standard antidumping questionnaire. That questionnaire explicitly instructed Usinor to report sales from affiliated SSCs to the unaffiliated customers. We also directed Usinor to contact the agency official in charge in writing immediately if sales to all affiliated customers constituted less than five percent of total sales, or if Usinor was unable to collect the necessary information.
On December 26, 2001, Usinor stated, in its original Section A response, that it would not report the sales of subject merchandise made by its affiliated SSCs for three reasons: (1) the merchandise sold by these entities is not comparable to merchandise sold in the U.S. market; (2) the records for these sales transactions are not accessible by Usinor, as the affiliated SSCs use incompatible computer systems, distinct software, and different file structures, and therefore, it would be inordinately difficult to report these transactions; and (3) lastly, Usinor believed that the prices for the sales to the affiliated service centers were comparable to the prices for the sales to unaffiliated customers.
On January 7, 2002, petitioners requested that the Department require Usinor to report Section B responses for all sales transactions of cold-rolled steel made by its affiliated SSCs to the first unaffiliated customer. On January 16, 2002, the Department met with counsel for Usinor to discuss issues relating to the reporting of its downstream sales to unaffiliated customers (see Letter from Abdelali Elouaradia to Jeffrey Winton dated January 18, 2002 (Reporting Letter)). On January 17, 2002, Usinor reiterated that it did not believe that any of its affiliated service centers should be Start Printed Page 31207required to report their resales. Usinor also requested that the Department limit its reporting requirements on this matter to avoid a disproportionate and unreasonable burden. Usinor proposed that it be required to report sales of cold-rolled steel made by only four of its affiliated service centers because these sales accounted for most of the purchases of subject merchandise from Usinor mills by affiliated service centers. Usinor further noted that the sales made by the remaining affiliated service centers accounted for less than five percent of total home-market sales. On January 31, 2002, the Department issued a letter requesting Usinor to resubmit its Section B response to the questionnaire and include sales made by five of its affiliated SSCs to the first unaffiliated customer. For further details, see the Department's letter dated January 31, 2002. On February 28, 2002, the Department requested that Usinor report cost information associated with the sales transactions made by the five affiliated SSCs.
On March 5, 2002, Usinor submitted Section B responses for sales made by five of its affiliated SSCs to unaffiliated customers. On March 18, 2002, petitioners filed comments on the responses made by Usinor's affiliated SSCs, noting that these sales of cold-rolled steel included sales made to affiliated customers. Petitioners further noted that sales made by Usinor to affiliated SSCs that are exempted from reporting their resales failed the arm's-length test and, therefore, the Department should apply facts available for these sales. As noted in the Department's January 31, 2002, letter, we determined that because these entities accounted for less than five percent of home market sales, Usinor did not have to report these resales. For the purposes of our preliminary determination, we are excluding from our margin analysis the sales made to these entities by Usinor that fail our arm's length or cost tests.
On March 28, 2002, Usinor submitted the requested cost information associated with sales of cold-rolled steel made by affiliated SSCs. On April 2, 2002, petitioners contended that Usinor submitted an incomplete and unusable response with regard to its downstream sales by SSCs and that the Department should apply adverse facts available in for these sales. On April 4, 2002, Usinor explained that in some instances, because one of the reporting affiliated service centers purchased merchandise from another reporting affiliated reseller, both the initial sale from the supplying reseller to the other, and any subsequent sale from the purchasing reseller to its customer, have been reported. Usinor further explained that as a result of such transactions its home market database includes the SSCs' sales of subject merchandise that had been purchased from affiliated mills and sales of subject merchandise that had been purchased from other affiliated SSCs. For purposes of our preliminary margin analysis, we have excluded all sales made by the five affiliated SSCs to each other and to affiliated mills (see Memorandum to the File regarding Antidumping Duty Investigation on Certain Cold-Rolled Carbon Steel Flat Products from France; Preliminary Determination Analysis for the Usinor Group, dated April 26, 2002, (Sales Analysis Memo)). Usinor also indicated in its April 4, 2002, letter that it had included resales of cold-rolled steel made by the five affiliated SSCs to other affiliated entities that appear to have resold some or all of such merchandise in the home market. Usinor therefore failed to report certain downstream resales of cold-rolled steel (those resales made by the SSCs' affiliated customers) to the first unaffiliated customer.
Because Usinor failed to fully provide all downstream sales to unaffiliated customers pursuant to the Department's request for this information, we preliminarily find, in accordance with section 776(a) of the Act, that the use of partial adverse facts available is appropriate for Usinor. Further, Usinor's failure to provide adequate explanations for its inability to provide the requested information indicates that Usinor has not acted to the best of its ability in responding to the Department's request for information. Therefore, the Department has also determined that Usinor has not acted to the best of its ability, and thus, application of an adverse inference is warranted, pursuant to section 776(b) of the Act. Accordingly, we have applied the highest gross unit price of subject merchandise sold to unaffiliated customers by model to those sales of cold-rolled steel made by the five affiliated resellers to affiliated customers by model that fail the arm's-length test. For those sales that did not have a model match, we applied the weighted-average gross unit price for those models with a match. (See Sales Analysis Memo.)
During this proceeding, the Department gathered information from Usinor regarding the date of payment used to calculate its per unit credit expense. On January 14, 2002, Usinor reported as the date of payment for U.S. sales the date on which it actually received payment, according to its accounts receivables ledger, from its unaffiliated customer. Usinor also reported that, for its U.S. sales of cold-rolled steel made during the POI through its affiliated “super distributor” (Usinor Steel Corporation, Inc. (USC)), it sold its accounts receivables to an affiliated financing company. After subsequent supplemental questionnaires, we learned that not only did USC sell its accounts receivables to an affiliated financing company, but in turn its affiliated financing company sold these accounts receivables to an unaffiliated funding company. On March 5, 2002, as requested by the Department, Usinor reported the date on which USC sold its accounts receivables to its affiliated financing company.
However, Usinor has failed to provide the Department the information necessary to allow us to understand the relationship between USC's affiliated financing company and the unaffiliated funding company, and the terms at which its affiliated financing company transfers title to the accounts receivable to this unaffiliated funding company. We preliminarily find, in accordance with section 776(a) of the Act, that the use of neutral facts available is appropriate for Usinor where Usinor has failed to provide us with the appropriate date of payment for its CEP sales made by USC in the United States. Therefore, based on the facts otherwise available, we are preliminarily calculating the credit period as the payment term applicable to each U.S. sale of cold-rolled steel made through USC where the difference between the reported payment date and the shipment date (i.e., sale date) is less than the indicated payment term. Accordingly, for such instances, we have recalculated Usinor's imputed credit expense using this calculated credit period (see Sales Analysis Memo).
In some instances, Usinor did not report an expense associated with the movement of subject merchandise for sale in the home market and the United States and/or Usinor provided an estimated cost adjusted for a variance between its estimated and actual total expenses. Usinor stated that it was unable to systematically link the movement expenses in question to transaction-specific invoices. It is the Department's practice and preference to use actual expenses for its margin calculations. We preliminarily find, in accordance with section 776(a) of the Act, that the use of facts otherwise available is appropriate for Usinor where Usinor has failed to provide us Start Printed Page 31208with the actual expenses associated with the movement of its sales of cold-rolled steel during the POI in the home market and United States. Accordingly, for purposes of our preliminary determination, we applied a weighted-average movement expense using actual expenses provided by Usinor for those instances in which Usinor failed to report an expense or reported an adjusted estimated expense.
Pursuant to section 771(16) of the Act, all products produced by the respondent that are within the scope of the investigation and were sold in the comparison market during the POI, are considered to be foreign like products. We have relied on fourteen criteria, in descending order of importance, to match U.S. sales of subject merchandise to comparison-market sales of the foreign like product: whether hardened or not; whether painted with poly vinylidene fluoride, other paint, or not; carbon content level; quality; yield strength; thickness; thickness tolerance; width; whether mill, slit, deburred edged, or other edge; whether coiled or cut sheet; whether temper-rolled or not temper-rolled; whether stretch or tension leveled or not; whether annealed open coil, other annealed, or not annealed; and whether finished with bright, embossed/texturized, or matte surface. 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, based on the characteristics and characteristic subcategories indicated in the Department's November 16, 2001 questionnaire.
Fair Value Comparisons
To determine whether sales of cold-rolled steel from France to the United States were made at less than fair value, we compared constructed export price (CEP) and export price (EP), where appropriate, to the normal value (NV), as described in the “Constructed Export Price,” “Export Price,” and “Normal Value” sections of this notice, below. In accordance with section 777A(d)(1)(A)(i) of the Act, we calculated weighted-average CEPs and EPs, where appropriate, for comparison to weighted-average NVs.
Date of Sale
For its home market and U.S. sales, Usinor reported the date of invoice as the date of sale, in keeping with the Department's stated preference for using the invoice date as the date of sale. Usinor stated that the invoice date best reflects the date on which the material terms of sale are established and that it is possible for the quantity, price or other terms of sale to be modified between order date and invoice date.
On January 7, 2002, petitioners requested that the Department require Usinor to report the frequency of changes made to a particular order between the order date and sale date. On February 14, 2002, the Department requested that Usinor submit the order date for all sales made during the POI. On March 5, 2002, Usinor reported the order date for all sales made during the POI in its home market and U.S. databases. Usinor indicated that for the most part when an order is modified, the original information recorded in the company's normal computer systems is written over with the new information, and the original record is not maintained. Usinor explained that for some of its reported sales transactions it is possible to determine that the record has been modified. However, Usinor further explained that it is not possible to determine which fields within the order have changed. Usinor concluded that the frequency of changes in price, quantity, or specifications between the initial order date and the final invoice date cannot be separately measured.
The Department is preliminarily using the invoice date as the date of sale for both home market and U.S. sales. We intend to examine this issue at verification, and will incorporate our findings in our analysis for the final determination.
In both the home and U.S. markets, Usinor had consignment sales in which subject merchandise was shipped to a storage facility at the customer's location. On February 12, 2002, the Department requested that Usinor report the date of sale as the date of shipment if the date of invoice is after the date of shipment for consignment sales transactions. For home market consignment sales, Usinor failed to comply with the Department's request, although for consignment sales made in the United States, Usinor reported, as requested, the date of shipment as the date of sale. For consignment sales made in the home market, we preliminarily determine that the date of shipment is the date of sale. For further details, see Sales Analysis Memo.
We used EP methodology in accordance with section 772(a) of the Act for sales where Usinor sold the merchandise under investigation before the date of importation directly to an unaffiliated purchaser in the United States. We based EP on packed prices to the first unaffiliated customer. In accordance with section 772(c)(2), we made deductions from the starting price for movement expenses, including foreign inland freight, inland insurance, foreign brokerage and handling, international freight, marine insurance, and U.S. customs duty.
Constructed Export Price
Usinor reported as CEP transactions all sales of subject merchandise to its affiliated trading company, USC. USC then resold the subject merchandise to unaffiliated customers in the United States.
We calculated CEP, in accordance with subsection 772(b) of the Act, for those sales made by USC to unaffiliated purchasers in the United States. We based CEP on the packed, delivered, duty paid prices to unaffiliated purchasers in the United States. We made adjustments for discounts and rebates, where applicable. We also made deductions for freight charged to the customer and other movement expenses in accordance with section 772(c)(2)(A) of the Act; these included, where appropriate, foreign inland freight, foreign inland insurance, foreign brokerage and handling, international freight, marine insurance, U.S. inland freight, U.S. inland insurance, other U.S. transportation fees, and U.S. customs duty. In accordance with section 772(d)(1) of the Act, we deducted those selling expenses associated with economic activities occurring in the United States, including commissions, direct selling expenses (warranty expenses and credit expenses), U.S. inventory carrying costs, and U.S. indirect selling expenses. For CEP sales, we also made an adjustment for profit in accordance with section 772(d)(3) of the Act. For sales of cold-rolled steel that were coded as non-prime, we re-coded these sales as prime as Usinor did not provide sufficient evidence showing that these sales are actually of non-prime merchandise (see Sales Analysis Memo). We also removed all canceled sales from our analysis (see Sales Analysis Memo). For further information on adjustments made to our margin calculation please see Sales Analysis Memo.
In order to determine whether there was a sufficient volume of sales in the home market to serve as a viable basis for calculating NV (i.e., the aggregate volume of home market sales of the foreign like product was equal to or greater than five percent of the aggregate volume of U.S. sales), we compared the respondent's volume of home market Start Printed Page 31209sales of the foreign like product to the volume of U.S. sales of the subject merchandise, in accordance with section 773(a)(1)(C) of the Act. As Usinor'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 of the subject merchandise, we determined that the home market was viable. Therefore, we have based NV on home market sales in the usual commercial quantities and in the ordinary course of trade. For those instances in which Usinor did not report a payment date with respect to its home market sales which have not been paid, we assigned the date of this preliminary determination (April 26, 2002) as the date of payment (see Sales Analysis Memo). For warranty expenses that were reported for Usinor's sales of cold-rolled steel produced by Atlantique, Lorraine, and Etilam, we multiplied the gross unit price by the calculated product family and customer-specific warranty expenses (reported by Usinor in its Appendix SB-12 and Appendix SB-14, respectively, dated March 5, 2002). For further information on adjustments made to our margin calculation see Sales Analysis Memo.
Affiliated-Party Transactions and Arm's-Length Test
To test whether sales to affiliated service centers and end-users are made at arm's-length prices, we compare, on a model-specific basis, the prices of sales to affiliated customers with sales to unaffiliated customers net of all movement charges, billing adjustments, discounts, direct selling expenses, and packing. Where, for the tested models of foreign like product, prices to the affiliated party are on average 99.5 percent or more of the price to unaffiliated parties, we determine that such sales are made at arm's length prices. See 19 CFR 351.403(c); see also Antidumping Duties; Countervailing Duties Final Rule, 62 FR 27355 (May 19, 1997).
If these affiliated party sales satisfied the arm's-length test, we used them in our analysis. Merchandise sold to affiliated customers in the home market made at non-arm's-length prices were excluded from our analysis because we considered them to be outside the ordinary course of trade. See 19 CFR 351.102. Where the exclusion of such sales eliminated all sales of the most appropriate comparison product, we made a comparison to the next most similar model.
Cost of Production Analysis
Based on our analysis of the cost allegations submitted by petitioners in the original petition, the Department found reasonable grounds to believe or suspect that French producers had made sales of cold-rolled steel in the home market at prices below the cost of producing the merchandise, in accordance with section 773(b)(2)(A)(i) of the Act. As a result, the Department initiated an investigation to determine whether respondents made home market sales during the POI at prices below their cost of production (COP) within the meaning of section 773(b) of the Act. We conducted the COP analysis described below.
In accordance with section 773(b)(3) of the Act, we calculated a weighted average COP based on the sum of Usinor's cost of materials and fabrication for the foreign like product, plus an amount for home market selling, general and administrative expenses (SG&A) including, interest expenses, and packing costs.
We relied on information from Usinor's section D questionnaire responses to calculate COP, except for the following changes: (1) Revised the total cost of manufacturing to include a cost classification variance between the financial and cost accounting systems for three of the collapsed companies (Atlantique, Lorraine, and Packaging); (2) included inland freight, inventory carrying cost, indirect selling and packing expenses between Usinor and its affiliates in the COP of the affiliated resellers, for the merchandise under consideration that was further manufactured by affiliates prior to sale to an unaffiliated party; (3) adjusted the reported value of slab and coil inputs obtained from affiliated parties to reflect the higher of transfer or market price; (4) revised the per-unit SG&A expenses to include application of the SG&A rate to the yield loss variable for the affiliated resellers; (5) revised the SG&A rate calculations to include certain expenses classified as extraordinary in the numerators, for Atlantique, Lorraine, Packaging, and Beautor. For Atlantique, Lorraine, and Packaging, we also revised the SG&A rate calculations to include foreign exchange losses and miscellaneous SG&A related accruals and provisions; (6) revised Etilam's SG&A rate calculation to exclude net exchange gains on accounts receivables from the numerator; (7) revised the unabsorbed SG&A costs rate calculation to exclude transportation costs from the denominator; (8) revised the financial expense rate calculation to exclude research and development costs from the denominator (the COP and CV files submitted by respondent did not reflect the submitted financial expense rate); and (9) based the difference in merchandise adjustment on the total cost of manufacturing rather than variable cost of manufacturing since certain fixed costs were included in variable costs in the affiliated resellers' COP and CV files, for the merchandise under consideration that was further manufactured by affiliates prior to sale to an unaffiliated party. For further details, see Memorandum from Heidi Schriefer to Neal Halper, dated April 26, 2002, Cost of Production and Constructed Value Calculation Adjustments for the Preliminary Determination (Cost Calculation Memo). We compared the weighted-average COP for Usinor to home market sales prices of the foreign like product, as required under section 773(b) of the Act. In determining whether to disregard home market sales made at prices less than the COP, we examined whether such sales were made (1) in substantial quantities within an extended period of time, and (2) at prices which permitted the recovery of all costs within a reasonable period of time in accordance with sections 773(b)(1)(A) and (B) of the Act. On a product-specific basis, we compared the COP to home market prices, less any applicable movement charges, billing adjustments, and discounts and rebates.
Pursuant to section 773(b)(2)(C)(i) of the Act, where less than twenty percent of Usinor's sales of a given product were at prices less than the COP, we did not disregard any below-cost sales of that product because we determined that the below-cost sales were not made in substantial quantities. Where twenty percent or more of Usinor's sales of a given product during the POI were at prices less than the COP, we determined such sales to have been made in substantial quantities, in accordance with section 773(b)(2)(C)(i) of the Act, within an extended period of time. In such cases, because we compared prices to weighted-average COPs for the POI, we also determined that such sales were not made at prices that would not permit recovery of all costs within a reasonable period of time, in accordance with section773(b)(2)(D) of the Act. Therefore, we disregarded those below-cost sales.
In accordance with section 773(e)(1) of the Tariff Act, we calculated CV, where applicable, based on the sum of respondent's cost of materials, fabrication, SG&A including, interest expenses, and profit. We made the same Start Printed Page 31210adjustments to the submitted CV data as noted above in the “Cost of Production” section. In accordance with section 773(e)(2)(A) of the Tariff Act, we based SG&A and profit on the amounts incurred and realized by Usinor in connection with the production and sale of the foreign like product in the ordinary course of trade for consumption in the foreign country.
We calculated NV for Usinor on prices of home market sales that passed the COP test. We made adjustments for billing adjustments and discounts. We made deductions, where appropriate, for warehousing, foreign inland freight, freight adjustments, and inland insurance, pursuant to section 773(a)(6)(B) of the Act. In addition, we made adjustments for differences in physical characteristics of the merchandise pursuant to section 773(a)(6)(C)(ii) of the Act, as well as for differences in circumstances of sale (COS) in accordance with section 773(a)(6)(C)(iii) of the Act and 19 CFR 351.410. We made COS adjustments for imputed credit expenses and warranties. Finally, we deducted home market packing costs in accordance with section 773(a)(6)(A) and (B) of the Act. We have removed sales transactions that were identified as sample or testing/evaluation sales from our margin calculation (see Sales Analysis Memo). Usinor reported that, during the POI, it paid affiliated sales agents commissions for their handling of some cold-rolled steel sales in home market and United States. During the course of this proceeding, the Department requested that Usinor provide evidence for the record showing that these transactions were made at arm's length. With respect to commissions paid for sales of cold-rolled steel made in the home market, Usinor reported commissions paid to its affiliated selling agents. However, Usinor reported actual selling expenses incurred by its affiliated selling agents with respect to sales of cold-rolled steel made in the United States. We preliminarily find that Usinor has not sufficiently demonstrated that the reported commissions it paid to affiliated selling agents were made at arm's length. Therefore, we did not make adjustments for commissions in the home market. There was one more instance in which the Department preliminarily denied Usinor an adjustment to its NV. Due to the proprietary nature of this adjustment, we have explained this calculation in our preliminary analysis memo (see Sales Analysis Memo). We also excluded all intra-company transactions made between collapsed entities and all sales by the affiliated SSC's to other affiliated producers or SSCs that have already reported the resales to the first unaffiliated customer.
In accordance with section 773(a)(4) of the Act, we based NV on CV if we were unable to find a home market match of identical or similar merchandise. We calculated CV based on the costs of materials and fabrication employed in producing the subject merchandise, SG&A, and profit. In accordance with section 773(a)(2)(A) of the Act, we based SG&A expense, interest, 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 France. For selling expenses, we used the weighted-average home market selling expenses. Where appropriate, we made adjustments to CV in accordance with section 773(a)(8) of the Act. When we compared CV to CEP, we deducted from CV the weighted-average home market direct selling expenses.
Level of Trade
In accordance with section 773(a)(1)(B) of the Act, to the extent practicable, we determine NV based on sales in the comparison market at the same level of trade (LOT) as the CEP transaction. The NV LOT is that of the starting-price sales in the comparison market or, when NV is based on CV, is that of the sales from which we derive selling, general and administrative (SG&A) expenses and profit. For CEP, it is the level of the constructed sale from the exporter to the importer.
To determine whether NV sales are at a different LOT than U.S. sales, we examine whether the respondent's sales involved different marketing stages (or their equivalent) based on the channel of distribution, customer categories, and selling functions (or services offered) to each customer or customer category, in both markets. If the comparison market sales are made at different LOTs and the difference affects price comparability, as manifested in a pattern of consistent price differences between LOTs, and if the comparison market sale is at a different LOT from the export transaction, we make a LOT adjustment under section 773(a)(7)(A) of the Act. Finally, for CEP sales, if the NV is determined at a LOT at a more advanced stage of marketing than the CEP LOT, and despite the fact that the respondent has cooperated to the best of its ability, the data available do not provide an appropriate basis to determine whether the difference in LOT affects price comparability, the Department will grant a CEP offset. See section 351.412(f)(1) of the Department's regulations.
In the home market, Usinor made sales to unaffiliated and affiliated end-users, unaffiliated distributors, and affiliated and unaffiliated SSCs. Usinor claims five channels of distribution with respect to these sales: (1) Sales shipped from the mill directly to unaffiliated end-users, distributors or service centers; (2) consignment sales, in which the merchandise is shipped to a storage location at the customer's site; (3) sales from the mills to affiliated producers of downstream products that processed the products into non-subject products prior to sale to the first unaffiliated customer; (4) sales from the mills to affiliated service centers, which generally processed the merchandise into slit strip or cut-to-length sheets, and then sold the processed strips and sheets to affiliated or unaffiliated customers; and (5) sales by affiliated service centers to unaffiliated customers. Usinor claimed two LOTs in the home market: LOT 1 includes direct and consignment sales to unaffiliated end-users, unaffiliated distributors, affiliated and unaffiliated steel service centers, and affiliated customers that used cold-rolled steel as an input for the production of downstream products by Usinor's producing mills; and LOT 2 includes direct sales to affiliated and unaffiliated end-users, and affiliated steel service centers by Usinor's affiliated SSCs.
In the U.S. market, Usinor made sales to unaffiliated end-users and affiliated steel service centers. Usinor claims two channels of distribution with respect to these sales: (1) direct shipment sales; and (2) consignment sales. Usinor claims two LOTs in the U.S.: LOT 1 includes direct and consignment sales made by USC; and LOT 2 includes direct sales made by Usinor.
On February 26, 2002, the Department determined to collapse the eight Usinor affiliated producers (Atlantique, Lorraine, Méditerranée, Packaging, Etilam, Beautor, Haironville and PUM) into a single entity for purposes of this investigation. (See Collapsing Memo.) Therefore, for our preliminary LOT analysis we have considered there to be only four channels of distribution in the home market: (1) Direct sales to unaffiliated customers (i.e., end-users, distributors, and SSCs); (2) consignment sales to unaffiliated customers; (3) sales to affiliated SSCs (that were excluded from reporting their resales—see Reporting Letter); and (4) sales made by the five affiliated SSCs to unaffiliated Start Printed Page 31211customers (i.e., end-users, distributors, and service centers).
Usinor claims that CEP sales (those sales made through its affiliated trading company, USC) were made at a LOT more removed than the LOT of the home market sales made by its affiliated SSCs to unaffiliated customers. Usinor requests that the Department grant a CEP offset on all CEP sales, as Usinor's CEP sales cannot be compared to home market sales at the same LOT.
In determining whether a separate LOT actually existed in the home market, we first examined if sales involved different marketing stages (or their equivalent) and selling functions along the chain of distribution by Usinor and its unaffiliated customers and the affiliated service centers to their unaffiliated customers. Normally, stages of marketing focus on whether sales are to SSCs or end-users, in some instances taking into account whether or not sales are made through intermediate parties. On this basis, it appears that Usinor's sales shipped from the mill directly, or on consignment basis to its unaffiliated customers (all customer categories), are made at the same stage of marketing as sales made by its affiliated service centers to their unaffiliated customers.
In further analyzing Usinor's LOT claims in the home market, we reviewed available information on the record about the company's selling functions performed in the home market. Usinor identified 20 different selling functions (see Exhibit SSA-4 of Usinor's March 13, 2002, second supplemental Section A response) associated with its sales to unaffiliated customers.
Next, we examined whether these selling functions are provided consistently to Usinor's four categories of customers in the home market, finding that all selling functions were provided to the same degree (i.e., high level of activity) to all customer categories (i.e., end-users, distributors, and SSCs), except for post-sale warehousing for consignment sales, visiting customers and promoting products for sales to affiliated service centers. In this case, we do not consider the difference in selling functions to be a significant difference considering that the majority of sales made in the home market were non-consignment sales and post-sale warehousing is only one selling function out of a total of twenty offered selling functions. Therefore, we preliminarily determine that only one LOT existed for Usinor in the home market.
In determining whether separate LOTs actually existed in the U.S. market, we first examined whether Usinor's sales involved different marketing stages (or their equivalent) and selling functions along the chain of distribution between Usinor and its unaffiliated customers. As noted above, generally the stages of marketing focus on whether sales are to SSCs or end-users, in some instances taking into account whether or not sales are made through intermediate parties. On this basis, it appears that Usinor's cold-rolled steel sales shipped directly from the mill to unaffiliated customers may be at a different stage of marketing than its sales made through USC. This would indicate that Usinor has two U.S. LOTs.
In determining whether the LOT in the home market is at a more removed LOT than LOT 1 that exists in the United States, as Usinor claims, we examined the selling functions performed by Usinor for CEP sales. According to Usinor, the selling functions that were provided for its CEP sales were the same as those provided in the home market, except for administrative support. We noted that the level at which the selling functions were performed by Usinor were not common to its CEP and home market sales (e.g., customer sales contact, production planning and order evaluation, warranty claims, technical service, and freight and delivery services were provided to home market sales, but not to CEP sales). Consequently, we preliminarily determine that Usinor provided significantly different selling functions in the home market than those in the U.S. market for CEP sales.
With respect to its sales made at LOT 2, based on EP, in the United States, we noted insignificant differences in the level at which certain selling functions were performed (i.e., product brochures, general inventory maintenance) and thus, found these selling functions to be comparable to the home market LOT, and therefore no LOT adjustment was needed.
We next examined whether a LOT adjustment was appropriate when Usinor's CEP sales are compared to the home market LOTs. The Department makes this adjustment when it is demonstrated that a difference in LOTs affects price comparability. However, where the available data do not provide an appropriate basis upon which to determine a LOT adjustment, and where the NV is established at a LOT that is at a more advanced stage of distribution than the LOT of the CEP transactions, we adjust NV under section 773(a)(7)(B) of the Act (the CEP offset provision). In the instant case, we were unable to quantify the LOT adjustment in accordance with section 773(a)(7)(A) of the Act, as we found only one LOT in the home market. Instead, because we determined that all of Usinor's home market sales were made at levels of trade more advanced than the LOT of Usinor's U.S. sales, we granted a CEP offset and applied this to comparisons between Usinor's CEP sales and all home market sales.
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.
As provided in section 782(i) of the Act, we intend to verify all information to be used in making our final determination.
Suspension of Liquidation
In accordance with section 733(b)(3) of the Act, the Department will disregard any weighted-average dumping margin that is zero or de minimis, i.e. less than 2 percent ad valorem. Based on our preliminary margin calculation, we will not direct the U.S. Customs Service to suspend liquidation of any entries of cold-rolled steel from France as described in the “Scope of Investigation” section, that are entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice in the Federal Register. The Department does not require any cash deposit or posting of a bond for this preliminary determination. The weighted-average dumping margin in the preliminary determination is as follows:
|Exporter/manufacturer||Weighted average margin (percentage)|
|* De minimis.|
In accordance with section 733(f) of the Act, we have notified the ITC of our determination. If our final determination is affirmative, the ITC will determine, within 75 days after the date of our final determination, whether these imports are materially injuring, or threatening material injury to, the U.S. industry.
Case briefs for this investigation must be submitted no later than one week after the issuance of the verification reports. Rebuttal briefs must be filed within five days after the deadline for Start Printed Page 31212submission of case briefs. A list of authorities used, a table of contents, and an executive summary of issues should accompany any briefs submitted to the Department. Executive summaries should be limited to five pages total, including footnotes.
Section 774 of the Act provides that the Department will hold a hearing to afford interested parties an opportunity to comment on arguments raised in case or rebuttal briefs, provided that such a hearing is requested by any interested party. If a request for a hearing is made in an investigation, the hearing will tentatively be held two days after the deadline for submission of the rebuttal briefs, at the U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 20230. In the event that the Department receives requests for hearings from parties to several cold-rolled steel cases, the Department may schedule a single hearing to encompass all those cases. Parties should confirm by telephone the time, date, and place of the hearing 48 hours before the scheduled time. Interested parties who wish to request a hearing, or participate if one is requested, must submit a written request within 30 days of the publication of this notice. Requests should specify the number of participants and provide a list of the issues to be discussed. Oral presentations will be limited to issues raised in the briefs.
If this investigation proceeds normally, we will make our final determination no later than 75 days after the date of this preliminary determination.
This determination is issued and published in accordance with sections 733(f) and 777(i)(1) of the Act.Start Signature
Dated: April 26, 2002.
Assistant Secretary for Import Administration.
[FR Doc. 02-11186 Filed 5-8-02; 8:45 am]
BILLING CODE 3510-DS-P