Stainless Steel Wire Rod From the Republic of Korea: Preliminary Results of Antidumping Duty Administrative Review

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

ACTION:

Notice of Preliminary Results of Antidumping Duty Administrative Review.

SUMMARY:

The Department of Commerce (the Department) is conducting an administrative review of the antidumping duty order on stainless steel wire rod (SSWR) from the Republic of Korea (Korea). The review covers two manufacturers/exporters of subject merchandise during the period of review (POR) September 1, 2001 through August 31, 2002. Based upon our analysis, the Department has preliminarily determined that dumping margins exist for both manufacturers/exporters. If these preliminary results are adopted in our final results of administrative review, we will instruct the U.S. Bureau of Customs and Border Protection (BCBP) to assess antidumping duties as appropriate. Interested parties are invited to comment on these preliminary results.

EFFECTIVE DATE

: October 7, 2003.

FOR FURTHER INFORMATION CONTACT:

Karine Gziryan, Jeff Pedersen, or Crystal Scherr Crittenden, AD/CVD Enforcement, Office IV, Group II, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th and Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202) 482-4081, (202) 482-2769 or (202) 482-0989, respectively.

SUPPLEMENTARY INFORMATION:

Background

On September 15, 1998, the Department published in the Federal Register the antidumping duty order on SSWR from Korea. See Notice of Amendment of Final Determination of Sales at Less Than Fair Value and Antidumping Duty Order: Stainless Steel Wire Rod From Korea, 63 FR 49331 (September 15, 1998) (Amended Final Determination). On September 3, 2002, the Department published a notice of “Opportunity to Request an Administrative Review” of the antidumping duty order on SSWR from Korea. See Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation; Opportunity to Request Administrative Review, 67 FR 56267 (September 3, 2002). On September 30, 2002, Changwon Specialty Steel Co., Ltd. (Changwon) and Dongbang Special Steel Co., Ltd. (Dongbang) (collectively, together with Pohang Iron and Steel Co., Ltd. (POSCO), respondent¹ (see the “Affiliation and Collapsing” section of this notice)) requested an administrative review of the U.S. sales of Changwon and Dongbang that were subject to the antidumping order on SSWR from Korea. On October 24, 2002, the Department initiated an administrative review of Changwon and Dongbang. See Initiation of Antidumping and Countervailing Duty Administrative Reviews, 67 FR 65336 (October 24, 2002).

On October 15, 2002, the Department issued an antidumping questionnaire to Changwon and Dongbang. The Department received Changwon's and Dongbang's responses in November and December 2002. The Department issued supplemental questionnaires to Changwon and Dongbang in December 2002 and, January, February, March and April 2003, and received responses from Changwon and Dongbang in January, February, March and April 2003.

On May 16, 2003 the Department published in the Federal Register a notice extending the deadline for issuing the preliminary results in this case until no later than September 30, 2003. See Stainless Steel Wire Rod from South Korea: Extension of Time Limit for Preliminary Results of Antidumping Duty Administrative Review, 68 FR 26571 (May 16, 2003).

Scope of the Review

For purposes of this review, SSWR comprises products that are hot-rolled or hot-rolled annealed and/or pickled and/or descaled rounds, squares, octagons, hexagons or other shapes, in coils, that may also be coated with a lubricant containing copper, lime or oxalate. SSWR is made of alloy steels containing, by weight, 1.2 percent or less of carbon and 10.5 percent or more of chromium, with or without other elements. These products are manufactured only by hot-rolling or hot-rolling annealing, and/or pickling and/or descaling, are normally sold in coiled form, and are of solid cross-section. The majority of SSWR sold in the United States is round in cross-sectional shape, annealed and pickled, and later cold-finished into stainless steel wire or small-diameter bar. The most common size for such products is 5.5 millimeters or 0.217 inches in diameter, which represents the smallest size that normally is produced on a rolling mill and is the size that most wire-drawing machines are set up to draw. The range of SSWR sizes normally sold in the United States is between 0.20 inches and 1.312 inches in diameter.

Two stainless steel grades are excluded from the scope of the review. SF20T and K-M35FL are excluded. The chemical makeup for the excluded grades is as follows:

The products subject to this review are currently classifiable under subheadings 7221.00.0005, 7221.00.0015, 7221.00.0030, 7221.00.0045, and 7221.00.0075 of the Harmonized Tariff Schedule of the United States (HTSUS). Although the HTSUS subheadings are provided for convenience and customs purposes, the written description of the scope of this review is dispositive.

Affiliation and Collapsing

A. Changwon, POSCO, and Dongbang

During the less-than-fair value (LTFV) investigation, POSCO was the sole supplier to Dongbang of black coil (unfinished SSWR). See Notice of Final Determination of Sales at Less than Fair Value: Stainless Steel Wire Rod from Korea, 63 FR 40404, 40410 (July 29, 1998) (Final Determination). Based on this fact, and the fact that Dongbang was not able to obtain suitable black coil from alternative sources, the Department determined that POSCO and its wholly-owned subsidiary, Changwon, were affiliated with Dongbang through a close supplier relationship pursuant to section 771(33)(G) of the Act and section 351.102(b) of the Department's regulations. See id. In the Final Determination, the Department also collapsed Changwon, POSCO, and Dongbang and treated them as a single entity for purposes of the dumping analysis in accordance with section 351.401(f) of the Department's regulations. See id.

Neither POSCO, Changwon, nor Dongbang has provided any new evidence requiring the Department to revisit this finding. Therefore, we continue to find that POSCO and Changwon are affiliated with Dongbang through a close supplier relationship.² Further, we have continued to treat POSCO, Changwon, and Dongbang as a single entity and to calculate a single margin for them. (See, e.g., Frozen Concentrated Orange Juice from Brazil; Preliminary Results and Partial Rescission of Antidumping Duty Administrative Review, 66 FR 29930, 29931 (June 4, 2001), citing Certain Welded Carbon Steel Pipes and Tubes from Thailand: Preliminary Results of Antidumping Duty Administrative Review, 64 FR 17998, 17999 (April 13, 1999) (unchanged by the final results)).

B. Affiliation Between Changwon, Dongbang and U.S. Trading Company Customers

Dongbang reported U.S. sales to trading companies whom it classified as unaffiliated parties in its November 19, and December 12, 2002 questionnaire responses. The petitioners (Carpenter Technoloy Corporation and Empire Specialty Steel) contend that Dongbang is affiliated with these trading company customers through a principal/agent relationship.

In the review of SSWR from Korea covering the period September 1, 1999 through August 31, 2000, the petitioners also contended that Changwon and Dongbang were affiliated with certain U.S. trading company customers through a principal/agent relationship. However, the Department determined that no such relationship existed. See Stainless Steel Wire Rod From Korea; Final Results of Antidumping Duty Administrative Review, 67 FR 6685 (February 13, 2002). See also Memorandum from Holly Kuga to Bernard Carreau on Whether Changwon and Dongbang are Affiliated With Certain U.S. Customers Under Section 771(33) of the Act, dated October 1, 2001. Because the petitioners have not provided any new evidence indicating a change in the relationship between these companies, we continue to find that Dongbang is not affiliated with its U.S. trading company customers through a principal/agent relationship.

Duty Absorption

On November 5, 2002, the petitioners requested that the Department determine whether antidumping duties had been absorbed during the POR by the respondent. Section 751(a)(4) of the Tariff Act of 1930, as amended (the Act), provides for the Department, if requested, to determine, during an administrative review initiated two or four years after the publication of the order, whether antidumping duties have been absorbed by a foreign producer or exporter, if the subject merchandise is sold in the United States through an affiliated importer. Because the collapsed entity POSCO/Changwon/Dongbang (see “Affiliation and Collapsing” section of this notice) sold to unaffiliated customers in the United States through an importer that is affiliated, and because this review was initiated four years after the publication of the order, we will make a duty absorption determination in this segment of the proceeding within the meaning of section 751(a)(4) of the Act.

On February 21, 2003, the Department requested evidence from the respondent to demonstrate that the U.S. purchasers will pay any antidumping duties ultimately assessed on entries during the POR. In its response, submitted on February 28, 2003, Changwon, which is affiliated with the importer of the subject merchandise, stated that it negotiates a duty paid delivered price that includes the antidumping duties, and thus it sets prices so as to pass the cost of the antidumping duties to the customer. In determining whether the antidumping duties have been absorbed by the respondent during the POR we presume that the duties will be absorbed for those sales that have been made at less than normal value (NV). This presumption can be rebutted with evidence (e.g., an agreement between the affiliated importer and unaffiliated purchaser) that the unaffiliated purchaser will pay the full duty ultimately assessed on the subject merchandise.

Although Changwon claims that the price charged to the unaffiliated U.S. customer includes duties paid, it provided no evidence that these duties include antidumping duties nor did it provide an agreement between the affiliated importer and the unaffiliated purchaser stating that the unaffiliated purchaser will pay the full duty ultimately assessed on the subject merchandise. Therefore, we preliminarily find that antidumping duties have been absorbed by POSCO/Changwon/Dongbang on all U.S. sales made through its affiliated importer.

Section 201 Duties

The Department notes that merchandise subject to this review is subject to duties imposed under section 201 of the Act (section 201 duties). Because the Department has not previously addressed the appropriateness of deducting section 201 duties from export price and constructed export price, on September 9, 2003 the Department published a request for public comments on this issue (68 FR 53104). All comments are due by October 9, 2003 and rebuttal comments are due October 24, 2003. Since the Department has not made a determination on this issue at this time, for purposes of these preliminary results, no adjustment has been made.

Normal Value Comparisons

To determine whether the respondent's sales of SSWR from Korea to the United States were made at less than NV, we compared the export price (EP) and constructed export price (CEP), as appropriate, to the NV, as described in the “Export Price,” “Constructed Export Price” and “Normal Value” sections of this notice, below. We first attempted to compare contemporaneous U.S. and comparison-market sales of products that are identical with respect to the following characteristics: grade, diameter, further processing and coating. Where we were unable to compare sales of identical merchandise, we compared U.S. sales to comparison-market sales of the most similar merchandise based on the above characteristics, which are listed in order of importance for matching purposes.

Export Price

For all reported U.S. sales, other than those made by the U.S. affiliate POSAM, in calculating U.S. price, the Department used EP, as defined in section 772(a) of the Act, because the merchandise was sold, prior to importation, to unaffiliated purchasers in the United States, or to an unaffiliated purchaser for exportation to the United States, and CEP methodology was not otherwise warranted based on the facts on the record. We calculated EP based on the packed, delivered prices charged to unaffiliated customers in the United States or to unaffiliated customers for exportation to the United States. In accordance with section 772(c)(2)(A) of the Act, we made deductions from the starting price, where applicable, for foreign movement expenses (including brokerage and handling and inland freight), international freight, and marine insurance. We added duty drawback received on imported materials, pursuant to section 772(c)(1)(B) of the Act.

Constructed Export Price

For all reported sales by the U.S. affiliate POSAM, in calculating U.S. price, the Department used CEP, as defined in section 772(b) of the Act, because the merchandise was sold, after importation, to unaffiliated purchasers in the United States. We calculated CEP based on delivered prices to unaffiliated customers in the United States. We made deductions from the starting price, where appropriate, for foreign and U.S. brokerage and handling, foreign and U.S. inland freight, international freight, marine insurance, U.S. duties, and direct and indirect selling expenses to the extent that they are associated with economic activity in the United States in accordance with section 772(d)(1)(B) and (D) of the Act. These deductions included credit expenses. We added duty drawback received on imported materials pursuant to section 772(c)(1)(B) of the Act. Finally, in accordance with section 772(d)(3) of the Act, we made a deduction for CEP profit.

For further details, see Calculation Memorandum dated September 30, 2003, on file in the Central Records Unit, Room B-099 of the Main Commerce Building (CRU).

Level of Trade (LOT)

In accordance with section 773(a)(1)(B) of the Act, to the extent practical, we determined NV based on sales in the comparison market at the same LOT as the EP or CEP sales. The NV LOT is that of the starting-price sales in the comparison market or, when NV is based on CV, that of the sales from which we derive selling, general, and administrative (SG&A) expenses and profit. For EP sales, the U.S. LOT is also the level of the starting-price sale. For CEP sales, it is the level of the constructed sale from the exporter to the importer. The Department adjusts the CEP, pursuant to section 772(d), prior to performing the LOT analysis, as articulated by the Department's regulations at section 351.412. See Micron Technology, Inc. v. United States, 243 F.3rd 1301, 1315 (Fed. Cir. 2001).

To determine whether NV sales are at a different LOT than the EP or CEP sales, we examined stages in the marketing process and selling activities along the chain of distribution between the producer and the unaffiliated customer. If the comparison-market sales are at a different LOT, and the difference affects price comparability, as manifested in a pattern of consistent price differences between the sales on which NV is based and comparison-market sales at the LOT of the export transaction, we make a LOT adjustment under section 773(a)(7)(A) of the Act. Finally, for CEP sales, if the NV level is more remote from the factory than the CEP level and there is no basis for determining whether the difference in the levels between NV and CEP affects price comparability, we adjust NV as provided under section 773(a)(7)(B) of the Act (the CEP offset provision). See Notice of Final Determination of Sales at Less Than Fair Value: Certain Cut-to Length Carbon Steel Plate from South Africa, 62 FR 61731 (November 19, 1997).

In determining whether separate LOTs exist, we obtained information from the collapsed entity POSCO/Changwon/Dongbang about the marketing stages for the reported U.S. and comparison-market sales, including a description of the selling activities performed by POSCO/Changwon/Dongbang for each channel of distribution. In identifying LOTs for EP and comparison-market sales, we considered the selling functions reflected in the starting price before any adjustments. See 19 CFR 351.412(c)(1)(i). In identifying LOTs for CEP sales, we considered the selling functions reflected in the starting price, as adjusted under section 772(d) of the Act. See 19 CFR 351.412(c)(ii). We expect that, if claimed LOTs are the same, the selling functions and activities of the seller at each level should be similar. Conversely, if a party claims that LOTs are different for different groups of sales, the selling functions and activities of the seller for each group should be dissimilar.

In their questionnaire responses, Changwon and Dongbang reported that, during the POR, they sold the foreign like product in the home market through one channel of distribution and in the United States through one channel of distribution. We examined the selling functions for the collapsed entity POSCO/Changwon/Dongbang and found that the selling functions performed by Changwon and Dongbang in the home market are similar. Also, we found that the selling functions performed by Changwon and Dongbang with respect to the U.S. channels of distribution are similar. Based on the similarity of the selling functions, we have determined that the collapsed entity's sales of SSWR are made at one LOT in the home market and one LOT in the U.S. market. Moreover, we examined the selling functions for the collapsed entity POSCO/Changwon/Dongbang, and found that the selling functions performed by the collapsed respondent are sufficiently similar in the home market and the United States to consider the LOTs in the two markets to be the same LOT. Therefore, we preliminarily find that there is one LOT in the U.S. and comparison-market, and thus, no LOT adjustment is required for comparison of U.S. sales to comparison-market sales. Moreover, because there is one LOT in the U.S. and comparison market, we have denied the respondent's request for a CEP offset. For further details, see Memorandum regarding Level of Trade Analysis dated September 30, 2003 on file in the CRU.

Normal Value

After testing home market viability, whether sales to affiliates were at arm's-length prices, and whether home market sales failed the cost test, we calculated NV as noted in subsection 4, “Calculation of NV,” below.

1. Home Market Viability

In order to determine whether there is a sufficient volume of sales in the home market to serve as a viable basis for calculating NV (i.e., whether the aggregate volume of home market sales of the foreign like product is equal to or greater than five percent of the aggregate volume of U.S. sales), we compared the respondents' volume of home market sales of the foreign like product to the volume of its U.S. sales of subject merchandise, in accordance with section 773(a)(1) of the Act. Because the respondents' aggregate volume of home market sales of the foreign like product is greater than five percent of its aggregate volume of U.S. sales of subject merchandise, we determined that the home market is viable for the respondent.

2. Affiliated-Party Transactions and Arm's-Length Test

Sales to affiliated customers in the home market not made at arm's length prices were excluded from our analysis because the Department considered them to be outside the ordinary course of trade. See 19 CFR 351.102. To test whether these sales were made at arm's length prices, the Department compared, on a product-specific and quality-specific (i.e., prime and non-prime quality) basis, the prices of sales to affiliated and unaffiliated customers net of all movement charges, direct selling expenses, and packing. Where, for the tested products, prices to the affiliated party were on average 99.5 percent or more of the price to unaffiliated parties, the Department determined that sales made to the affiliated party were at arm's length. See 19 CFR 351.403(c). In instances where no price ratio could be constructed for an affiliated customer because identical merchandise was not sold to unaffiliated customers, the Department was unable to determine that these sales were made at arm's length prices and, therefore, excluded them from our analysis. See Notice of Final Determination of Sales at Less Than Fair Value: Certain Cold-Rolled Carbon Steel Flat Products from Argentina, 58 FR 37062, 37077 (July 9, 1993). Where the exclusion of such sales eliminated all sales of the most appropriate comparison product, the Department made a comparison to the next most similar product.

3. Cost of Production (COP) Analysis

In the second administrative review of SSWR from Korea, the most recently completed segment of this proceeding, the Department disregarded POSCO/Changwon/Dongbang's sales that were found to have failed the cost test. Accordingly, the Department, pursuant to section 773(b) of the Act, initiated a COP investigation of the respondent for purposes of this administrative review. We conducted the COP analysis as described below.

A. Calculation of COP

In accordance with section 773(b)(3) of the Act, we calculated the weighted-average COP, by model, for the POR based on the sum of materials and fabrication costs, general and administrative (G&A) expenses, and packing costs.

B. Test of Comparison-Market Sales Prices

As required under section 773(b) of the Act, we compared the weighted-average COPs to the comparison-market sales of the foreign like product, in order to determine whether these sales had been made at prices below the COP within an extended period of time in substantial quantities, and whether such prices were sufficient to permit the recovery of all costs within a reasonable period of time. On a product-specific basis, we compared the COP to the comparison-market prices, less any applicable movement charges and direct and indirect selling expenses.

C. Results of the COP Test

Pursuant to section 773(b)(2)(C) of the Act, where less than 20 percent of POSCO/Changwon/Dongbang's sales of a given product were made at prices below the COP, we did not disregard any below-cost sales of that product because the below-cost sales were not made in “substantial quantities.” Where 20 percent or more of POSCO/Changwon/Dongbang's sales of a given product were made at prices below the COP, we determined that such sales were made in substantial quantities within an extended period of time (i.e., a period of one year). Further, because we compared prices to POR-average costs, we determined that the below-cost prices would not permit recovery of all costs within a reasonable time period, and thus, we disregarded the below-cost sales in accordance with sections 773(b)(1) and (2) of the Act.

We found that for certain products, POSCO/Changwon/Dongbang made home market sales at prices below the COP within an extended period of time in substantial quantities. Further, we found that these sale prices did not permit the recovery of costs within a reasonable period of time. We therefore excluded these sales from our analysis in accordance with section 773(b)(1) of the Act.

D. Calculation of CV

In accordance with section 773(e)(1) of the Act, we calculated POSCO/Changwon/ Dongbang's CV based on the sum of POSCO/Changwon/Dongbang's cost of materials, fabrication, SG&A, including interest expenses, and profit. We calculated the COPs included in the calculation of CV as noted above in the “Calculation of COP” section of this notice. In accordance with section 773(e)(2)(A) of the Act, we based SG&A and profit on the amounts incurred and realized by POSCO/Changwon/Dongbang in connection with the production and sale of the foreign like product in the ordinary course of trade, for consumption in the foreign country.

4. Calculation of NV

We determined price-based NVs for POSCO/Changwon/Dongbang as follows: we calculated NV based on packed, delivered and ex-factory prices to home market customers. We increased the starting price for duty drawback revenue received from customers, where applicable, and for freight revenue. We made deductions from the starting price for foreign inland freight, where applicable, pursuant to section 773(a)(6)(B)(ii) of the Act. Pursuant to section 773(a)(6)(C)(iii) of the Act and 19 CFR 351.410(c), we made circumstance-of-sale (COS) adjustments to the starting price, where appropriate, for differences in credit and warranty.

We deducted home market packing costs from, and added U.S. packing costs to, the starting price, in accordance with section 773(a)(6)(A) and (B) of the Act. Where appropriate, we made adjustments to NV to account for differences in the physical characteristics of the merchandise sold in the U.S. and comparison market, in accordance with section 773(a)(6)(C)(ii) of the Act and 19 CFR 351.411.

Currency Conversion

Pursuant to section 773A(a) of the Act, 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.

Preliminary Results of Review

As a result of this review, we preliminarily determine that the following weighted-average margin exists for the period September 1, 2001, through August 31, 2002:

We will disclose the calculations used in our analysis to parties to this proceeding within five days of the publication date of this notice. See 19 CFR 351.224(b). Any interested party may request a hearing within 30 days of the publication date of this notice. See 19 CFR 351.310(c). If requested, a hearing will be held 44 days after the date of publication of this notice, or the first workday thereafter. Interested parties may submit case briefs within 30 days of the date of publication of this notice. Rebuttal briefs, limited to issues raised in the case briefs, may be filed not later than 7 days after the deadline for filing case briefs. Interested parties are invited to comment on the preliminary results. Parties who submit arguments are requested to submit with each argument: (1) a statement of the issue, (2) a brief summary of the argument and (3) a table of authorities. Further, the parties submitting written comments should provide the Department with an additional copy of the public version of any such comments on a diskette. The Department will issue the final results of this administrative review, which will include the results of its analysis of issues raised in any such comments, within 120 days from the publication date of this notice.

Assessment Rate

Upon completion of this administrative review, the Department will determine, and the BCBP shall assess, antidumping duties on all appropriate entries. For CEP sales, since the respondent reported the entered values and importer for these sales, we will calculate importer-specific ad valorem duty assessment rates based on the ratio of the total amount of dumping margins calculated for the examined sales to the entered value of sales used to calculate those duties. Where the importer-specific assessment rate is above de minimis, we will instruct the BCBP to assess the importer-specific rate uniformly on all entries made during the POR. For EP sales, since the respondent did not report the entered value for these sales, we have calculated exporter-specific per-unit duty assessment rates based on the ratio of the total amount of dumping margins calculated for the examined sales to the quantity corresponding to the sales used to calculate those duties. The Department will issue appropriate assessment instructions directly to the BCBP within 15 days of publication of the final results of review.

Cash Deposit Requirements

The following cash deposit requirements will be effective upon publication of these final results for all shipments of the subject merchandise entered, or withdrawn from warehouse, for consumption on or after the publication date of these final results of administrative review, as provided by section 751(a)(1) of the Act: (1) the cash deposit rate for the reviewed companies will be the rate listed above (except that if the rate is de minimis, i.e., less than 0.5 percent, a cash deposit rate of zero will be required); (2) for previously investigated companies not listed above, the cash deposit rate will continue to be the company-specific rate published for the most recent period; (3) if the exporter is not a firm covered in this review, a prior review, or the original LTFV investigation, but the manufacturer is, the cash deposit rate will be the rate established for the most recent period for the manufacturer of the merchandise; and (4) the cash deposit rate for all other manufacturers or exporters will continue to be the “all others” rate of 5.77 percent, which is the “all others” rate established in the LTFV investigation (see Amended Final Determination). These deposit requirements, when imposed, shall remain in effect until publication of the final results of the next administrative review.

Notification to Interested Parties

This notice also serves as a preliminary reminder to importers of their responsibility under 19 CFR 351.402(f)(2) to file a certificate regarding the reimbursement of antidumping duties prior to liquidation of the relevant entries during this review period. Failure to comply

with this requirement could result in the Secretary's presumption that reimbursement of the antidumping duties occurred and the subsequent assessment of double antidumping duties.

This administrative review and this notice are in accordance with sections 751(a)(1) and 777(I)(1) of the Act.