Preliminary Determination of Sales at Less Than Fair Value: Certain Cut-to-Length Carbon-Quality Steel Plate Products From the Republic of Korea

[Federal Register Volume 64, Number 145 (Thursday, July 29, 1999)]
[Notices]
[Pages 41224-41230]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-19305]


-----------------------------------------------------------------------

DEPARTMENT OF COMMERCE

International Trade Administration
[A-580-836]


Preliminary Determination of Sales at Less Than Fair Value: 
Certain Cut-to-Length Carbon-Quality Steel Plate Products From the 
Republic of Korea

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

EFFECTIVE DATE: July 29, 1999.

FOR FURTHER INFORMATION CONTACT: Frank Thomson or Howard Smith, Group 
II, Office 4, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW, Washington, DC 20230; telephone: (202) 482-
4793, or (202) 482-5193, respectively.

The Applicable Statute

    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 references are made to the Department's 
regulations at 19 CFR Part 351 (1998).

Preliminary Determination

    We preliminarily determine that certain cut-to-length carbon-
quality steel plate products (``CTL plate'') from the Republic of Korea 
(``Korea'') are being, or are likely to be, sold in the United

[[Page 41225]]

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.

Case History

    Since the initiation of this investigation (Notice of Initiation of 
Antidumping Investigations: Certain Cut-To-Length Carbon-Quality Steel 
Plate from Czech Republic, France, India, Korea, Italy, Japan, Republic 
of Korea, and Former Yugoslav Republic of Macedonia (64 FR 12959, March 
16, 1999)) (``Initiation Notice''), the following events have occurred:
    In their petition, the petitioners 1 identified Daekyung 
Corporation (``Daekyung''), Dongkuk Steel Mill Co., Ltd (``Dongkuk''), 
Korea Iron & Steel (``KISCO''), and Pohang Iron & Steel Co., Ltd 
(``POSCO'') as possible exporters of CTL plate from Korea. We requested 
on March 12, 1999, data on all producers and exporters of the subject 
merchandise during the period of investigation (``POI'') from the U.S. 
Embassy in Seoul. Based on information contained in the petition and 
received from the Embassy, the Department issued antidumping 
questionnaires to Daekyung, Dongkuk, KISCO, and POSCO on March 17, 
1999.2
---------------------------------------------------------------------------

    \1\ The petitioners are Bethlehem Steel Corporation, Gulf States 
Steel, Inc.,IPSCO Steel Inc., Tuscaloosa Steel Corporation, United 
Steelworkers of America, and the U.S. Steel Group (a unit of USX 
Corporation).
    \2\ Section A of the questionnaire requested general information 
concerning the company's corporate structure and business practices, 
the merchandise under investigation that it sells, and the sales of 
that merchandise in all markets. Sections B and C of the 
questionnaire requested home market sales listings and U.S. sales 
listings. Section D of the questionnaire requested information 
regarding the cost of production of the foreign like product and the 
constructed value of the merchandise under investigation. Section E 
of the questionnaire requested information regarding the cost of 
further manufacture or assembly performed in the United States.
---------------------------------------------------------------------------

    In April 1999, the United States International Trade Commission 
(``ITC'') issued an affirmative preliminary injury determination in 
this case (see ITC Investigation No. 731-TA-815-822).
    On April 27, 1999, POSCO and Dongkuk submitted responses to section 
A of the questionnaire. On May 5, 1999, Daekyung submitted a letter to 
the Department stating that it did not export the subject merchandise 
to the United States during the POI, with a request that it be excluded 
from further participation in the investigation. We subsequently 
informed Daekyung that these facts are subject to verification. POSCO 
and Dongkuk submitted responses to sections B and C on May 11, 1999, 
and responses to section D on May 14, 1999.
    Petitioners filed comments on POSCO's section A through D responses 
on May 20, 1999, and May 28, 1999, and on Dongkuk's section A response 
on May 20, 1999 and on Dongkuk's sections B through D on May 27, 1999.
    On May 28, 1999, we issued supplemental questionnaires for sections 
A, B, and C to POSCO and Dongkuk, and for section D to POSCO and 
Dongkuk on June 8, and 3, 1999 respectively. POSCO responded to our May 
28, 1999, supplemental questionnaire on June 22, 1999; Dongkuk 
responded to our May 28, 1999, supplemental questionnaire on June 
22,1999 and on June 29 for the Section D supplemental questionnaire. 
Petitioners commented on POSCO's and Dongkuk's supplemental 
questionnaire on June 30, 1999. On July 2, 1999 we issued an additional 
supplemental questionnaire to POSCO.
    In letters dated June 2, 8, and 14, 1999, Dongkuk requested that it 
be excused from reporting sales for its affiliate Korean Iron & Steel 
Co. Ltd. (``KISCO''). Dongkuk stated that KISCO had ceased production 
of subject merchandise early in the POI and had only an insignificant 
quantity of home market sales, and no U.S. sales of subject 
merchandise. Dongkuk argued that the Department should not collapse 
Dongkuk and KISCO. On June 4, 1999 petitioners argued that the 
Department should collapse Dongkuk and KISCO and require that its sales 
and costs be reported. On June 24, 1999, for the reasons outlined in 
its letters, we granted Dongkuk's request to be excused from reporting 
KISCO's sales and cost.
    On June 11, 1999 we instructed POSCO to report downstream sales 
through five of its affiliated resellers. POSCO, in its Section A 
response and in subsequent submissions dated May 17, and June 1, 1999, 
had requested to be excused from reporting any sales through affiliated 
resellers. After reviewing certain supplemental information provided by 
POSCO, we selected the five resellers identified in the June 11, 1999 
letter, and requested POSCO to provide a questionnaire response for 
these affiliated resellers. See Affiliated Reseller Sales section 
below.

Scope of Investigation

    The products covered by the scope of this investigation are certain 
hot-rolled carbon-quality steel: (1) Universal mill plates (i.e., flat-
rolled products rolled on four faces or in a closed box pass, of a 
width exceeding 150 mm but not exceeding 1250 mm, and of a nominal or 
actual thickness of not less than 4 mm, which are cut-to-length (not in 
coils) and without patterns in relief), of iron or non-alloy-quality 
steel; and (2) flat-rolled products, hot-rolled, of a nominal or actual 
thickness of 4.75 mm or more and of a width which exceeds 150 mm and 
measures at least twice the thickness, and which are cut-to-length (not 
in coils). Steel products to be included in this scope are of 
rectangular, square, circular or other shape and of rectangular or non-
rectangular cross-section where such non-rectangular cross-section is 
achieved subsequent to the rolling process (i.e., products which have 
been ``worked after rolling'')--for example, products which have been 
beveled or rounded at the edges. Steel products that meet the noted 
physical characteristics that are painted, varnished or coated with 
plastic or other non-metallic substances are included within this 
scope. Also, specifically included in this scope are high strength, low 
alloy (HSLA) steels. HSLA steels are recognized as steels with micro-
alloying levels of elements such as chromium, copper, niobium, 
titanium, vanadium, and molybdenum. Steel products to be included in 
this scope, regardless of Harmonized Tariff Schedule of the United 
States (HTSUS) definitions, are products in which: (1) Iron 
predominates, by weight, over each of the other contained elements, (2) 
the carbon content is two percent or less, by weight, and (3) none of 
the elements listed below is equal to or exceeds the quantity, by 
weight, respectively indicated: 1.80 percent of manganese, or 1.50 
percent of silicon, or 1.00 percent of copper, or 0.50 percent of 
aluminum, or 1.25 percent of chromium, or 0.30 percent of cobalt, or 
0.40 percent of lead, or 1.25 percent of nickel, or 0.30 percent of 
tungsten, or 0.10 percent of molybdenum, or 0.10 percent of niobium, or 
0.41 percent of titanium, or 0.15 percent of vanadium, or 0.15 percent 
zirconium. All products that meet the written physical description, and 
in which the chemistry quantities do not equal or exceed any one of the 
levels listed above, are within the scope of these investigations 
unless otherwise specifically excluded. The following products are 
specifically excluded from these investigations: (1) Products clad, 
plated, or coated with metal, whether or not painted, varnished or 
coated with plastic or other non-metallic substances; (2) SAE grades 
(formerly AISI grades) of series 2300 and above; (3) products made to 
ASTM A710 and A736 or their proprietary equivalents; (4) abrasion-
resistant steels (i.e., USS AR 400, USS

[[Page 41226]]

AR 500); (5) products made to ASTM A202, A225, A514 grade S, A517 grade 
S, or their proprietary equivalents; (6) ball bearing steels; (7) tool 
steels; and (8) silicon manganese steel or silicon electric steel.
    The merchandise subject to these investigations is classified in 
the HTSUS under subheadings: 7208.40.3030, 7208.40.3060, 7208.51.0030, 
7208.51.0045, 7208.51.0060, 7208.52.0000, 7208.53.0000, 7208.90.0000, 
7210.70.3000, 7210.90.9000, 7211.13.0000, 7211.14.0030, 7211.14.0045, 
7211.90.0000, 7212.40.1000, 7212.40.5000, 7212.50.0000, 7225.40.3050, 
7225.40.7000, 7225.50.6000, 7225.99.0090, 7226.91.5000, 7226.91.7000, 
7226.91.8000, 7226.99.0000.
    Although the HTSUS subheadings are provided for convenience and 
Customs purposes, the written description of the merchandise under 
investigation is dispositive.

Scope Comments

    As stated in our notice of initiation, we set aside a period for 
parties to raise issues regarding product coverage. In particular, we 
sought comments on the specific levels of alloying elements set out in 
the description below, the clarity of grades and specifications 
excluded from the scope, and the physical and chemical description of 
the product coverage.
    On March 29, 1999, Usinor, a respondent in the French antidumping 
and countervailing duty investigations and Dongkuk Steel Mill Co., Ltd. 
and Pohang Iron and Steel Co., Ltd., respondents in the Korean 
antidumping and countervailing duty investigations (collectively the 
Korean respondents), filed comments regarding the scope of the 
investigations on CTL plate and the Department's model matching 
criteria. On April 14, 1999, the petitioners filed comments regarding 
Usinor's and the Korean respondents' comments regarding model matching. 
In addition, on May 17, 1999, ILVA S.p.A. (ILVA), a respondent in the 
Italian antidumping and countervailing duty investigations, requested 
guidance on whether certain products are within the scope of these 
investigations.
    Usinor requested that the Department modify the scope to exclude: 
(1) Plate that is cut to non-rectangular shapes or that has a total 
final weight of less than 200 kilograms; and (2) steel that is 4'' or 
thicker and which is certified for use in high-pressure, nuclear or 
other technical applications; and (3) floor plate (i.e., plate with 
``patterns in relief'') made from hot-rolled coil. Further, Usinor 
requested that the Department provide clarification of scope coverage 
with respect to what it argues are over-inclusive HTSUS subheadings 
included in the scope language.
    The Department has not modified the scope of these investigations 
because the current language reflects the product coverage requested by 
the petitioners, and Usinor's products meet the product description. 
With respect to Usinor's clarification request, we do not agree that 
the scope language requires further elucidation with respect to product 
coverage under the HTSUS. As indicated in the scope section of every 
Department antidumping and countervailing duty proceeding, the HTSUS 
subheadings are provided for convenience and Customs purposes only; the 
written description of the merchandise under investigation or review is 
dispositive.
    The Korean respondents requested confirmation whether the maximum 
alloy percentages listed in the scope language are definitive with 
respect to covered HSLA steels.
    At this time, no party has presented any evidence to suggest that 
these maximum alloy percentages are inappropriate. Therefore, we have 
not adjusted the scope language. As in all proceedings, questions as to 
whether or not a specific product is covered by the scope and, hence, 
must be reported, should be timely raised with Department officials.
    ILVA requested guidance on whether certain merchandise produced 
from billets is within the scope of the current CTL plate 
investigations. According to ILVA, the billets are converted into wide 
flats and bar products (a type of long product). ILVA notes that one of 
the long products, when rolled, has a thickness range that falls within 
the scope of these investigations. However, according to ILVA, the 
greatest possible width of these long products would only slightly 
overlap the narrowest category of width covered by the scope of the 
investigations. Finally, ILVA states that these products have different 
production processes and properties than merchandise covered by the 
scope of the investigations and therefore are not covered by the scope 
of the investigations.
    As ILVA itself acknowledges, the particular products in question 
appear to fall within the parameters of the scope and, therefore, we 
are preliminarily treating them as covered merchandise.

Period of Investigation

    The POI is January 1, 1998, through December 31, 1998.

Fair Value Comparisons

    To determine whether sales of CTL plate from Korea to the United 
States were made at less than fair value, we compared the export price 
(``EP'') or constructed export price (``CEP'') to the Normal Value 
(``NV''), as described in the ``Export Price and Constructed 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 EPs and CEPs for comparison to weighted-average NVs.

Product Comparisons

    In accordance with section 771(16) of the Act, we considered all 
products produced by POSCO and Dongkuk covered by the description in 
the ``Scope of Investigation'' section, above, and sold in Korea during 
the POI to be foreign like products for purposes of determining 
appropriate product comparisons to U.S. sales. We compared U.S. sales 
to sales made in the home market. Where there were no sales of 
identical merchandise in the home market made in the ordinary course of 
trade, we compared U.S. sales to sales of the most similar foreign like 
product made in the ordinary course of trade. In making the product 
comparisons, we matched foreign like products based on the physical 
characteristics reported by the respondents in the following order of 
importance (which are identified in Appendix V of the questionnaire): 
painting, quality, grade specification, heat treatment, nominal 
thickness, nominal width, patterns in relief, and descaling.
    Because respondents had no sales of non-prime merchandise in the 
United States during the POI, we did not use home market sales of non-
prime merchandise in our product comparisons (see, e.g., Final 
Determination of Sales at Less Than Fair Value: Stainless Steel Wire 
Rod from Sweden (63 FR 40449, 40450, July 29, 1998) (``SSWR'')).

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 EP or CEP transaction. The NV 
LOT is that of the starting-price sales in the comparison market or, 
when NV is based on constructed value (``CV''), that of the sales from 
which we derive

[[Page 41227]]

selling, general and administrative (``SG&A'') expenses and profit. 
With respect to U.S. sales and EP transactions, the LOT is the level of 
the starting price sale, which is usually from the exporter to the 
importer. For CEP, the LOT is the level of the constructed sale from 
the exporter to the importer.
    To determine whether NV sales are at a different LOT than EP or CEP 
sales, we examine stages in the marketing process and selling functions 
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 an 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 differences in the levels between NV and 
CEP sales affects price comparability, we adjust NV 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).

POSCO

    POSCO reported that it sells at the same LOT in both markets. In 
order to determine whether NV was established at a different LOT than 
EP sales, we examined stages in the marketing process and selling 
functions along the chains of distribution between POSCO and its home 
market and U.S. customers. Based on our analysis of the chains of 
distribution and selling functions performed for EP sales in the U.S. 
market, we preliminarily determine that POSCO and its subsidiaries 
POSCO Steel Sales and Service Co., Ltd. (``POSTEEL'') and POSAM (for EP 
sales) provided a sufficiently similar degree of services on sales to 
all channels of distribution, and that the sales made to the United 
States constitute one LOT.
    Based on a comparison of the selling activities performed in the 
U.S. market to the selling activities in the home market, we 
preliminarily determine that there is not a significant difference in 
the selling functions performed in both markets. Accordingly, because 
we find the U.S. sales and home market sales to be at the same LOT, no 
LOT adjustment under section 773(a)(7)(A) of the Act is warranted. See 
LOT Memo dated July 19, 1999. See also Affiliated Reseller Sales 
section below.

Dongkuk

    In the home market, Dongkuk reported one channel of distribution 
involving sales to distributors and affiliated and unaffiliated end-
users. Dongkuk reported few selling activities for its home market 
sales. We examined the selling functions and found no appreciable 
difference between types of customers. Because there are no appreciable 
differences between the selling functions on sales made to different 
customers in the home market, sales to these customers represent a 
similar stage of marketing. Therefore, we preliminarily conclude that 
all Dongkuk's sales to end-users constitute one LOT in the home market.
    For its EP and CEP sales in the U.S. market, Dongkuk reported four 
sales channels: (1) Dongkuk's sales through Dongkuk Industries Co., 
Ltd. (``DKI''), Dongkuk's affiliated trading company in Korea, to 
Dongkuk International, Inc. (DKA), Dongkuk's affiliate located in the 
United States, to unaffiliated customers; (2) Dongkuk's sales through 
DKI, to unaffiliated customers; (3) Dongkuk's sales to DKA, to an 
unaffiliated customer; and (4) Dongkuk's sales to an unaffiliated 
customer. We examined the selling functions performed for each of the 
four U.S. sales channels. These selling functions included freight and 
delivery arrangements, credit services, and post-sale warehousing. With 
the exception of freight and delivery arrangements for sales in channel 
1, selling functions performed in the four sales channels were 
identical. Thus, sales to these customer categories represent a similar 
stage of marketing. Therefore, we preliminarily determine that the 
sales made to the United States constitute one LOT.
    Further, because we preliminarily conclude that the U.S. LOT and 
the home market LOT included similar selling functions, we conclude 
that these sales are made at the same LOT. Therefore, a LOT adjustment 
for Dongkuk is not appropriate.

Export Price and Constructed Export Price

    The Department considers several factors in making its 
determination concerning whether sales made prior to importation 
through a U.S. affiliate to an unaffiliated customer in the United 
States are EP sales. These factors are: (1) whether the merchandise was 
shipped directly from the manufacturer to the unaffiliated U.S. 
customer without being introduced into the physical inventory of the 
affiliated selling agent; (2) whether this is the customary commercial 
channels between the parties involved; and (3) whether the functions of 
the U.S. sales affiliates are limited to those of a ``processor of 
sales-related documentation'' and a ``communication link'' with the 
unrelated U.S. buyer. Where the factors indicate that the activities of 
the U.S. sales affiliate are ancillary to the sale, we treat the 
transactions as EP sales. Where the U.S. sales affiliate has a 
significant role in the sales process, we treat the transactions as CEP 
sales (e.g. See Certain Cut-to-Length Carbon Steel Plate from Germany: 
Final Results of Antidumping Administrative Review, 62 FR 18389, 18391 
(April 15, 1997); Mitsubishi Heavy Industries versus United States, 
Slip Op. 98-82 at 6 (CIT, June 23, 1998)).

POSCO

    POSCO reported four channels of distribution for U.S. sales. In 
channel 1 POSCO sold the subject merchandise directly to the United 
States. In channel 4 POSCO sold the subject merchandise directly to 
unaffiliated Korean trading companies for resale of subject merchandise 
to the United States. In channel 2, POSTEEL, which is POSCO's 
affiliated trading company, sold to a U.S. customer with the assistance 
of another affiliate, POA. In channel 3, POSTEEL sold to a U.S. 
customer through its U.S. affiliate POSAM . We classified the sales 
made through channel 2 as EP sales, since POA had no involvement in the 
selling process.
    In channel 3, the U.S. affiliate, POSAM, was involved in all the 
sales made to unaffiliated U.S. customers. POSCO reported these sales 
as EP transactions in its responses. However, because POSAM is involved 
in the U.S. selling activities for these sales to some degree, we 
examined whether these sales should be properly classified as EP or CEP 
transactions.
    We examine several factors to determine whether sales made prior to 
importation through an affiliated sales agent to an unaffiliated 
customer in the United States are EP sales. Based on our review of the 
selling activities of POSCO's U.S. affiliate, we preliminarily 
determine that EP is appropriate for POSTEEL's sales to the United 
States through POSAM. The customary commercial channel between POSCO 
and its unaffiliated customers is that POSCO ships the EP merchandise 
directly to the unaffiliated U.S. customers without having the 
merchandise enter into the inventory of the U.S. affiliates, and the 
U.S. affiliates' activities are limited to that of a ``processor of 
sales-related

[[Page 41228]]

documentation'' and a ``communication link'' with the unaffiliated U.S. 
buyers. Accordingly, for purposes of the preliminary determination, we 
are treating the sales in question as EP transactions. We will examine 
this issue further at verification.
    We calculated EP in accordance with section 772(a) of the Act. We 
based EP on the relevant terms of delivery price to unaffiliated 
purchasers in the United States. We made deductions to the starting 
price for movement expenses in accordance with section 772(c)(2)(A) of 
the Act; these included, where appropriate, foreign inland freight, 
foreign brokerage and handling charges, ocean freight, U.S. brokerage 
and wharfage charges and U.S. Customs duty, where appropriate. Finally, 
we added to the U.S. price an amount for duty drawback pursuant to 
section 772 (c)(1) (B) of the Act.

Dongkuk

    For U.S. sales channels two and four, which are defined in the 
Level of Trade section above, we based our calculation on EP, in 
accordance with section 772 (a) of the Act, because the subject 
merchandise was sold by the producer or exporter to the first 
unaffiliated purchaser in the United States prior to importation, and 
CEP methodology was not otherwise indicated. For U.S. sales channels 
one and three, which are defined in the Level of Trade section above, 
we based our calculation on CEP, in accordance with section 772 (b) of 
the Act, because the merchandise was sold by or for the account of the 
producer or exporter of such merchandise or by a seller affiliated with 
the producer or exporter, to a purchaser not affiliated with the 
producer or exporter.
    We have preliminarily determined that the affiliated purchaser in 
the United States, Dongkuk International, Inc. (DKA), did more than 
merely act as a ``processor of sales-related documentation and a 
communication link with the unrelated U.S. buyer.'' (i.e., channels 1 
and 3 sales) Where a U.S. affiliate is involved in making a sale, we 
normally consider the sale to be CEP unless the record demonstrates 
that the U.S. affiliate's involvement in making the sale is incidental 
or ancillary. The record demonstrates that Dongkuk International, 
Inc.'s role exceeds that of an incidental or ancillary role. See LOT/
CEP Memo July 19, 1999
    We based EP on the price to unaffiliated purchasers in the United 
States. We made deductions for movement expenses in accordance with 
section 772(c)(2)(A) of the Act; these included, where appropriate, 
foreign inland freight, foreign wharfage and loading, foreign 
brokerage, international freight, marine insurance, domestic inland 
freight, and U.S. brokerage and wharfage. Additionally, we added to the 
U.S. price an amount for duty drawback pursuant to section 772(c)(1)(B) 
of the Act.
    We calculated CEP, in accordance with subsections 772(b), (c), and 
(d) of the Act, for those sales to the first unaffiliated purchaser 
that took place after importation into the United States. We based CEP 
on the prices to unaffiliated purchasers in the United States. We made 
deductions for discounts and rebates. Additionally we made deductions 
for movement expenses in accordance with section 772(c)(2)(A) of the 
Act; these included, where appropriate, foreign inland freight, foreign 
wharfage and loading, foreign brokerage, international freight, marine 
insurance, domestic inland freight, U.S. brokerage and wharfage, U.S. 
duty and U.S. warehousing expenses. 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 
direct selling expenses (e.g., commissions, credit costs, bank charges, 
and warranty expenses), and indirect selling expenses. For CEP sales, 
we also made an adjustment for profit in accordance with section 
772(d)(3) of the Act. Additionally, we added to the U.S. price an 
amount for duty drawback pursuant to section 772(c)(1)(B) of the Act.

Normal Value

    After testing (1) home market viability, (2) whether sales to 
affiliates were at arm's-length prices, and (3) whether home market 
sales were at below-cost prices, we calculated NV as noted in the 
``Price-to-Price Comparisons'' and ``Price-to-CV Comparisons'' sections 
of this notice.
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., 
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 respondent's volume of home market sales 
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. 
Because each of the respondent's aggregate volume of home market sales 
of the foreign like product was greater than five percent of its 
aggregate volume of U.S. sales for the subject merchandise, we 
determined that the home market was viable for both respondents.
2. Affiliated-Party Transactions and Arm's-Length Test

POSCO

    POSCO reported sales to affiliated parties in the home market. For 
sales to affiliated parties we applied the arm's-length test by 
comparing them to sales of identical merchandise from POSCO to 
unaffiliated home market customers. If these affiliated-party sales 
satisfied the arm's-length test, we used them in our analysis. Sales to 
affiliated customers in the home market not made at arm's-length prices 
(if any) were excluded from our analysis because we 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, we 
compared on a model-specific basis the prices of sales to affiliated 
and unaffiliated customers net of all movement charges, direct selling 
expenses and packing. We added to the starting price interest revenue 
and duty drawback. Where, for the tested models of subject merchandise, 
prices to the affiliated party were on average 99.5 percent or more of 
the price to the unaffiliated parties, we determined that sales made to 
the affiliated party were at arm's length. See 19 CFR 351.403(c) and 62 
FR at 27355. In instances where no price ratio could be constructed for 
an affiliated customer because identical merchandise was not sold to 
unaffiliated customers, we were unable to determine that these sales 
were made at arm's-length prices and, therefore, excluded them from our 
LTFV analysis. See SSWR at 63 FR 40451. 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.

Dongkuk

    Dongkuk also reported sales to affiliated parties in the home 
market. We applied the arm's-length test as described above.

Affiliated Reseller Sales

    POSCO asked to be excused from reporting downstream sales through 
its numerous affiliated service centers. While we denied POSCO's 
request, we limited the number of service centers that POSCO would have 
to report. POSCO submitted its narrative questionnaire response on July 
8, and its electronic database, along with certain supplemental 
information, on July 12,

[[Page 41229]]

1999. However, there are a number of problems associated with these 
data that made it difficult to reflect these reseller sales in our 
preliminary margin calculations. Most important is the fact that two of 
these resellers sell subject merchandise which they purchase from both 
POSCO and other unaffiliated suppliers. According to POSCO, these 
resellers cannot distinguish the producer of the subject merchandise. 
This makes it impossible to determine whether any given sale by these 
resellers was produced by POSCO and should be included in our analysis. 
In addition, petitioners have raised a number of issues regarding the 
proper treatment of these sales and accompanying adjustments. However, 
there is insufficient information on the record regarding these issues 
to make a satisfactory determination concerning the use of these sales 
in our antidumping analysis at this time. While we have not used these 
sales for purposes of the preliminary determination, we intend to 
address these issues in a supplemental questionnaire and determine 
whether and in what way to use this information in the final 
determination.
3. Cost of Production Analysis
    In their petition, the petitioners submitted a countrywide 
allegation pursuant to section 773(b)(1) of the Act that Korean 
producers and exporters had made sales in the home market at less than 
the cost of production (``COP''). Our analysis of the allegation 
indicated that there were reasonable grounds to believe or suspect that 
each Korean exporter sold CTL plate in the home market at prices at 
less than the COP. Accordingly, we initiated COP investigations with 
respect to the two Korean exporters to determine whether sales were 
made at prices less than the COP pursuant to section 773(b) of the Act 
(see Initiation Notice at 64 FR 12959, 12965).
    We conducted the COP analysis described below.

A. Calculation of COP

    In accordance with section 773(b)(3) of the Act, for each 
respondent we calculated COP based on the sum of the cost of materials 
and fabrication for the foreign like product plus amounts for home 
market selling, general and administrative expenses (``SG&A''), 
interest expense, and packing costs. We relied on the COP data 
submitted by POSCO and Dongkuk in their section D questionnaire 
responses to calculate each company's weighted-average COPs for the 
POI, except for the following instances where the information was 
improperly quantified or valued: (1) We increased Dongkuk's reported 
material cost for slabs purchased from affiliated suppliers to account 
for an understatement of the affiliated supplier's costs reflected in 
the transfer prices; (2) we increased Dongkuk's reported depreciation 
expense as a result of our disallowance of the extension of the useful 
lives for fixed assets; (3) we recalculated general and administrative 
expenses to exclude certain items which were unrelated to general 
operations; and (4) we recalculated interest expense to ensure 
consistency between this basis for this expense and the basis for the 
other reported costs. See Memo To Neal Halper, July 19, 1999. In 
addition, we analyzed Dongkuk's treatment of certain start-up costs as 
recorded in its accounting records in accordance with Korean GAAP. We 
have allowed this treatment for purposes of the preliminary 
determination as it appears to reasonably state Dongkuk's production 
costs. However, we will continue to probe this issue at verification 
and in the final determination.

B. Test of Home Market Sales Prices

    We compared the weighted-average COP figures to home market sales 
of the foreign like product as required under section 773(b) of the 
Act, in order to determine whether these sales had been made at prices 
below COP. In determining whether to disregard home market sales made 
at prices less than the COP, we examined whether (1) within an extended 
period of time, such sales were made in substantial quantities, and (2) 
such sales were made at prices which permitted the recovery of all 
costs within a reasonable period of time. On a product-specific basis, 
we compared the COP to the home market prices, less any applicable 
movement charges, rebates, discounts, 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 respondent'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 20 percent or more of a respondent'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'' within an extended period of time in accordance with 
section 773(b)(2)(B) of the Act. In such cases, we also determined that 
such sales were not made at prices which would permit recovery of all 
costs within a reasonable period of time, in accordance with section 
773(b)(2)(D) of the Act. Therefore, we disregarded the below-cost 
sales.
    For both Dongkuk and POSCO, we found that, for certain grades of 
CTL plate, more than 20 percent of these firm's sales within an 
extended period of time were at prices less than COP.

D. Calculation of CV

    In accordance with section 773(e)(1) of the Act, we calculated CV 
based on the sum of POSCO's and Dongkuk's cost of materials, 
fabrication, SG&A, interest, U.S. packing costs and profit. We made 
similar adjustments as those described above for COP. In accordance 
with sections 773(e)(2)(A) of the Act, we based SG&A and profit on the 
amounts incurred and realized by the respondent in connection with the 
production and sale of the foreign like product in the ordinary course 
of trade for consumption in the foreign country. For selling expenses, 
we used the weighted-average home market selling expenses.

Price-to-Price Comparisons

    We calculated NV based on prices to affiliated (where appropriate) 
and unaffiliated customers. We made deductions, where appropriate, from 
the starting price for inland freight, and also added duty drawbacks 
and interest revenue. We made adjustments for differences in the 
merchandise in accordance with section 773(a)(6)(C)(ii) of the Act. In 
addition, we made adjustments under section 773(a)(6)(C)(iii) of the 
Act for differences in circumstances of sale for imputed credit 
expenses, warranties, and commissions. In the case of Dongkuk, we 
recalculated it's credit expenses in the home market because of 
inconsistencies in its sales response regarding this expense. See 
Dongkuk Calculation Memo from Analyst to the File. Finally, we deducted 
home market packing costs and added U.S. packing costs in accordance 
with section 773(a)(6)(A) and (B) of the Act.

Price-to-CV Comparisons

    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 the foreign like 
product. We made adjustments to CV in accordance with section 773(a)(8) 
of the Act. For comparisons to EP, we made COS adjustments by deducting 
home market direct selling expenses and adding U.S. direct selling 
expenses.

[[Page 41230]]

Currency Conversion

    We made currency conversions into U.S. dollars based on the 
exchange rates in effect on the dates of the U.S. sales as certified by 
the Federal Reserve Bank. See POSCO Calculation Memo from Analyst to 
the File for an explanation of our treatment of currency conversion for 
the POI in this case.
    Section 773A(a) of the Act directs the Department to use a daily 
exchange rate in order to convert foreign currencies into U.S. dollars 
unless the daily rate involves a fluctuation. It is the Department's 
practice to find that a fluctuation exists when the daily exchange rate 
differs. When we determine a fluctuation to have existed, we substitute 
the benchmark rate for the daily rate, in accordance with established 
practice. Further, section 773A(b) of the Act directs the Department to 
allow a 60-day adjustment period when a currency has undergone a 
sustained movement. A sustained movement has occurred when the weekly 
average of actual daily rates exceeds the weekly average of benchmark 
rates by more than five percent for eight consecutive weeks. (For an 
explanation of this method, see Policy Bulletin 96-1: Currency 
Conversions (61 FR 9434, March 8, 1996).)

Verification

    As provided in section 782(i) of the Act, we will verify all 
information determined to be acceptable for use in making our final 
determination.

Suspension of Liquidation

    In accordance with section 733(d) of the Act, we are directing the 
Customs Service to suspend liquidation of all imports of subject 
merchandise that are entered, or withdrawn from warehouse, for 
consumption on or after the date of publication of this notice in the 
Federal Register, except those entries produced by POSCO.
    We will instruct the Customs Service to require a cash deposit or 
the posting of a bond equal to the weighted-average amount by which the 
NV exceeds the EP or CEP, as indicated in the chart below. We will 
adjust the deposit requirements to account for any export subsidies 
found in the companion countervailing duty investigation. These 
suspension-of-liquidation instructions will remain in effect until 
further notice. The weighted-average dumping margins are as follows:

------------------------------------------------------------------------
                                                              Margin
         Exported/manufacturer weighted-average             percentage
------------------------------------------------------------------------
Dongkuk Steel Mill Co. Ltd..............................            6.15
Pohang Iron & Steel Co., Ltd............................             .05
All Others Rate.........................................            6.15
------------------------------------------------------------------------

ITC Notification

    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 before the later of 157 days after the date of 
this preliminary determination or 45 days after our final determination 
whether these imports are materially injuring, or threaten material 
injury to, the U.S. industry.

Public Comment

    Case briefs or other written comments and at least ten copies must 
be submitted to the Assistant Secretary for Import Administration no 
later than August 25, 1999, and rebuttal briefs no later than September 
1, 1999. A list of authorities used and an executive summary of issues 
should accompany any briefs submitted to the Department. Such summary 
should be limited to five pages total, including footnotes. In 
accordance with section 774 of the Act, we will hold a public hearing, 
if requested, to afford interested parties an opportunity to comment on 
arguments raised in case or rebuttal briefs. Tentatively, the hearing 
will be held on September 14, 1999, time and room to be determined, at 
the U.S. Department of Commerce, 14th Street and Constitution Avenue, 
NW, Washington, DC 20230. 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 to participate 
if one is requested, must submit a written request to the Assistant 
Secretary for Import Administration, U.S. Department of Commerce, Room 
1870, within 30 days of the publication of this notice. Requests should 
contain: (1) The party's name, address, and telephone number; (2) the 
number of participants; and (3) 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 by no later than 75 days after the date of this 
preliminary determination.
    This determination is issued and published pursuant to sections 
733(d) and 777(i)(1) of the Act.

    Dated: July 19, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-19305 Filed 7-28-99; 8:45 am]
BILLING CODE 3510-DS-P