Agreement Suspending the Countervailing Duty Investigation on Hot-Rolled Flat-Rolled Carbon-Quality Steel From Brazil; Termination of Suspension Agreement and Notice of Countervailing Duty Order

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

ACTION:

Termination of the suspension agreement on hot-rolled flat-rolled carbon-quality steel from Brazil and notice of countervailing duty order.

SUMMARY:

On July 28, 2004, the Government of Brazil (“GOB”) formally submitted a letter to the Department of Commerce (“the Department”) announcing its desire to terminate the Agreement Suspending the Countervailing Duty (“CVD”) Investigation on Hot-Rolled Flat-Rolled Carbon-Quality Steel From Brazil (“the Agreement”). In accordance with Section XI.B of the Agreement, termination of the Agreement shall be effective 60 days after notice of termination of the Agreement is given to the Department. On July 19, 1999, pursuant to section 704(g) of the Tariff Act of 1930, as amended (“the Act”), the underlying investigation was continued following the signature of the Agreement, resulting in an affirmative determination of countervailable subsidy practices resulting in material injury to a domestic industry. Therefore, the Department is terminating the Agreement and issuing a CVD order, effective September 26, 2004 (60 days from the official filing of the request for termination), and will direct suspension of liquidation to also begin on that date.

EFFECTIVE DATE:

September 26, 2004.

FOR FURTHER INFORMATION CONTACT:

Sally Gannon or Jonathan Herzog, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington DC 20230; telephone: (202) 482-0162 or (202) 482-4271, respectively.

SUPPLEMENTARY INFORMATION:

Background

On October 15, 1998, the Department initiated a countervailing duty investigation under section 702 of the Act to determine whether manufacturers, producers, or exporters of certain hot-rolled flat-rolled carbon-quality steel products from Brazil receive subsidies. See Initiation of Countervailing Duty Investigation: Certain Hot-Rolled Flat-Rolled Carbon-Quality Steel Products From Brazil, 63 FR 56623 (October 22, 1998). On November 25, 1998, the International Trade Commission (“ITC”) published its affirmative preliminary injury determination. See Certain Hot-Rolled Steel Products From Brazil, Japan, and Russia, 63 FR 65221 (ITC 1998). On February 12, 1999, the Department preliminary determined that countervailable subsidies were being provided to Companhia Siderugica Nacional (“CSN”), Usinas Siderugicas de Minas Gerais (“USIMINAS”) and Companhia Siderurgica Paulista (“COSIPA”). See Preliminary Affirmative Countervailing Duty Determination and Alignment of Final Countervailing Duty Determination With Final Antidumping Duty Determination: Certain Hot-Rolled Flat-Rolled Carbon-Quality Steel Products From Brazil, 64 FR 8313 (February 19, 1999).

On July 6, 1999, the Department suspended the CVD investigation involving certain hot-rolled flat-rolled carbon-quality steel products from Brazil by entering the Suspension Agreement on Hot-Rolled Flat-Rolled Carbon Quality Steel From Brazil (“the Agreement”) under section 704(c) of the Act with the Government of Brazil (“GOB”). See Suspension of Countervailing Duty Investigation: Certain Hot-Rolled Flat-Rolled Carbon-Quality Steel Products From Brazil, 64 FR 38797 (July 19, 1999). Following signature of the Agreement, the underlying investigation was continued pursuant to section 704(g) of the Act, resulting in an affirmative determination by the Department and the ITC in the continued countervailing duty investigation. See Final Affirmative Countervailing Duty Determination: Certain Hot-Rolled Flat-Rolled Carbon-Quality Steel Products From Brazil, 64 FR 38741 (July 19, 1999); Certain Hot-Rolled Steel Products From Brazil and Russia, 64 FR 46951, Inv. Nos. 701-TA-384 (Final) and 731-TA-806 and 808 (Final) (Aug. 27, 1999) (“Final Determinations”).

After signature of the Agreement, Petitioners challenged the Department's determination to enter into the Agreement with the GOB before the U.S. Court of International Trade (“CIT”). On August 3, 2001, the CIT issued its opinion, remanding the case to the Department for it to comply with section 704(e) of the Act, to reconsider its determination to enter into the Agreement in light of all comments and consultations, and to correct clerical errors. See Bethlehem Steel Corporation v. United States, 159 F. Supp. 2d 730 (CIT 2001). On November 19, 2001, the Department submitted its redetermination, upholding the validity of the Agreement, and requested that the CIT allow the Department more time to consult with the parties, rather than ruling on the remand determination. See Final Redetermination Pursuant to Court Remand, filed on November 19, 2001. The CIT granted this extension request. On March 7, 2002, the Department filed its Amended Final Redetermination with the CIT. See Amended Final Redetermination Pursuant to Court Remand, filed on March 7, 2002. After reviewing the Department's redetermination, the CIT remanded the case again to the Department on February 17, 2004, instructing the Department to comply with the notice and comment, and consultation requirements of section 704(e) of the Act, and to make the case that the consultations conducted gave meaningful consideration to terminating, abandoning, or revising the Agreement. See Bethlehem Steel Corp. v. United States, 316 F. Supp. 2d 1309 (CIT 2004). The Department complied with the CIT's remand, and submitted its second redetermination on April 5, 2004. See Final Redetermination Pursuant to Court Remand, filed on April 5, 2004. On May 3, 2004, the Department and the International Trade Commission (“ITC”) initiated a sunset review of this case. See Notice of Initiation of Five-Year (“Sunset”) Reviews, 69 FR 24118 (May 3, 2004); Hot-Rolled Flat-Rolled Carbon-Quality Steel Products From Brazil, Japan, and Russia, 69 FR 24189 (May 3, 2004).

On June 24-25, 2004, the Department held consultations with the GOB in Brasilia, Brazil. In these meetings, the Department and the GOB discussed matters pertaining to the Agreement, such as the pending expiration of the agreed upon export limits on September 30, 2004, as well as the ongoing litigation. See Memorandum to the File from Sally C. Gannon, dated July 8, 2004. Further, in July 2004, the Department invited interested parties to meet with Department officials regarding the issues related to the Agreement; however, the domestic interested parties did not accept this invitation and a meeting with the representative of the Brazilian interested parties was subsequently cancelled. See Memorandum to the File from Sally C. Gannon, dated July 14, 2004. On July 13, 2004, Petitioners submitted a letter indicating their belief that the time for consultations had passed and that the Department should immediately terminate the Agreement.

On July 28, 2004, pursuant to Article XI.B of the Agreement, the Brazilian Embassy in Washington, DC, submitted a letter informing the Department that the GOB desired to terminate the Agreement. See Letter from Mr. Alusio G. de Lima-Campos to Secretary Donald Evans, dated July 28, 2004.

Scope of Investigation

For purposes of this investigation, the products covered are certain hot-rolled flat-rolled carbon-quality steel products of a rectangular shape, of a width of 0.5 inch or greater, neither clad, plated, nor coated with metal and whether or not painted, varnished, or coated with plastics or other non-metallic substances, in coils (whether or not in successively superimposed layers) regardless of thickness, and in straight lengths, of a thickness less than 4.75 mm and of a width measuring at least 10 times the thickness. Universal mill plate (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 thickness of not less than 4 mm, not in coils and without patterns in relief) of a thickness not less than 4.0 mm is not included within the scope of these investigations.

Specifically included in this scope are vacuum degassed, fully stabilized (commonly referred to as interstitial-free (“IF”)) steels, high strength low alloy (“HSLA”) steels, and the substrate for motor lamination steels. IF steels are recognized as low carbon steels with micro-alloying levels of elements such as titanium and/or niobium added to stabilize carbon and nitrogen elements. HSLA steels are recognized as steels with micro-alloying levels of elements such as chromium, copper, niobium, titanium, vanadium, and molybdenum. The substrate for motor lamination steels contains micro-alloying levels of elements such as silicon and aluminum.

Steel products to be included in the scope of this investigation, regardless of HTSUS definitions, are products in which: (1) Iron predominates, by weight, over each of the other contained elements; (2) the carbon content is 2 percent or less, by weight; and (3) none of the elements listed below exceeds the quantity, by weight, respectively indicated: 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 0.012 percent of boron, 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 of zirconium.

All products that meet the physical and chemical description provided above are within the scope of this agreement unless otherwise excluded. The following products, by way of example, are outside and/or specifically excluded from the scope of this agreement:

• Alloy hot-rolled steel products in which at least one of the chemical elements exceeds those listed above (including e.g., ASTM specifications A543, A387, A514, A517, and A506).
• SAE/AISI grades of series 2300 and higher.
• Ball bearing steels, as defined in the HTSUS.
• Tool steels, as defined in the HTSUS.
• Silico-manganese (as defined in the HTSUS) or silicon electrical steel with a silicon level exceeding 1.50 percent.
• ASTM specifications A710 and A736.
• USS Abrasion-resistant steels (USS AR 400, USS AR 500).
• Hot-rolled steel coil which meets the following chemical, physical and mechanical specifications:

Width = 44.80 inches maximum; Thickness = 0.063-0.198 inches; Yield Strength = 50,000 ksi minimum; Tensile Strength = 70,000-88,000 psi.

• Hot-rolled steel coil which meets the following chemical, physical and mechanical specifications:

Width = 44.80 inches maximum; Thickness = 0.350 inches maximum; Yield Strength = 80,000 ksi minimum; Tensile Strength = 105,000 psi Aim.

• Hot-rolled steel coil which meets the following chemical, physical and mechanical specifications:

Width = 44.80 inches maximum; Thickness = 0.350 inches maximum; Yield Strength = 80,000 ksi minimum; Tensile Strength = 105,000 psi Aim.

• Hot-rolled steel coil which meets the following chemical, physical and mechanical specifications:

Width = 39.37 inches; Thickness = 0.181 inches maximum; Yield Strength = 70,000 psi minimum for thicknesses ≤ 0.148 inches and 65,000 psi minimum for thicknesses > 0.148 inches; Tensile Strength = 80,000 psi minimum.

• Hot-rolled dual phase steel, phase-hardened, primarily with a ferritic-martensitic microstructure, contains 0.9 percent up to and including 1.5 percent silicon by weight, further characterized by either (i) tensile strength between 540 N/mm² and 640 N/mm² and an elongation percentage ≥ 26 percent for thicknesses of 2 mm and above, or (ii) a tensile strength between 590 N/mm² and 690 N/mm² and an elongation percentage ≥ 25 percent for thicknesses of 2 mm and above.
• Hot-rolled bearing quality steel, SAE grade 1050, in coils, with an inclusion rating of 1.0 maximum per ASTM E 45, Method A, with excellent surface quality and chemistry restrictions as follows: 0.012 percent maximum phosphorus, 0.015 percent maximum sulfur, and 0.20 percent maximum residuals including 0.15 percent maximum chromium.
• Grade ASTM A570-50 hot-rolled steel sheet in coils or cut lengths, width of 74 inches (nominal, within ASTM tolerances), thickness of 11 gauge (0.119 inch nominal), mill edge and skin passed, with a minimum copper content of 0.20%.

The merchandise subject to this agreement is classified in the Harmonized Tariff Schedule of the United States (HTSUS) at subheadings: 7208.10.15.00, 7208.10.30.00, 7208.10.60.00, 7208.25.30.00, 7208.25.60.00, 7208.26.00.30, 7208.26.00.60, 7208.27.00.30, 7208.27.00.60, 7208.36.00.30, 7208.36.00.60, 7208.37.00.30, 7208.37.00.60, 7208.38.00.15, 7208.38.00.30, 7208.38.00.90, 7208.39.00.15, 7208.39.00.30, 7208.39.00.90, 7208.40.60.30, 7208.40.60.60, 7208.53.00.00, 7208.54.00.00, 7208.90.00.00, 7210.70.30.00, 7210.90.90.00, 7211.14.00.30, 7211.14.00.90, 7211.19.15.00, 7211.19.20.00, 7211.19.30.00, 7211.19.45.00, 7211.19.60.00, 7211.19.75.30, 7211.19.75.60, 7211.19.75.90, 7212.40.10.00, 7212.40.50.00, 7212.50.00.00. Certain hot-rolled flat-rolled carbon-quality steel covered by this agreement, including: vacuum degassed, fully stabilized; high strength low alloy; and the substrate for motor lamination steel may also enter under the following tariff numbers: 7225.11.00.00, 7225.19.00.00, 7225.30.30.50, 7225.30.70.00, 7225.40.70.00, 7225.99.00.90, 7226.11.10.00, 7226.11.90.30, 7226.11.90.60, 7226.19.10.00, 7226.19.90.00, 7226.91.50.00, 7226.91.70.00, 7226.91.80.00, and 7226.99.00.00. Although the HTSUS subheadings are provided for convenience and Customs purposes, the written description of the merchandise under this agreement is dispositive.

Termination of Suspended Investigation and Issuance of Countervailing Duty Order-

Article XI.B of the Agreement states:

The Government of Brazil may terminate this Agreement at any time upon written notice to the [Department]. Termination will be effective 60 days after such notice is given to the [Department]. Upon termination at the request of GOB, the provisions of U.S. countervailing duty law and regulations will apply.

As noted above, the underlying investigation in this proceeding was continued pursuant to section 704(g) of the Act, following the acceptance of the Agreement. As a result, the Department made a final countervailing duty determination, and the ITC found material injury. See Final Determinations. Section 704(i)(1)(A) of the Act states that the Department shall order the suspension of liquidation of all unliquidated entries, on or after, the later of:

(i) The date which is 90 days before the date of publication of the notice of suspension of liquidation, or

(ii) The date on which the merchandise, the sale or export to the United States of which was in violation of the agreement, or under an agreement which no longer meets the requirements of subsection (b) and (d) or (c) and (d), was first entered, or withdrawn from warehouse, for consumption.

Furthermore, section 704(i)(1)(C) of the Act stipulates that the Department shall issue a countervailing duty order under section 706(a) of the Act effective with respect to entries of merchandise the liquidation of which was suspended, if the underlying investigation was completed. Finally, section 704(i)(1)(E) of the Act stipulates that the Department shall notify the petitioner, interested parties to the investigation, and the ITC of termination of the Agreement.

The GOB's request for termination of the Agreement is effective September 26, 2004. Because the GOB is withdrawing from the Agreement, the Department finds that suspension of the underlying investigation will no longer be in the public interest as of that date (see section 704(d)(1) of the Act). Therefore, the Department will direct U.S. Customs and Border Protection (“CBP”) to suspend liquidation of all entries of hot-rolled flat-rolled carbon-quality steel products from Brazil effective September 26, 2004. Accordingly, pursuant to section 704(i)(1)(C) of the Act, the Department hereby issues a countervailing duty order effective September 26, 2004, which is 60 days from the official filing date of the termination request of the GOB.

Countervailing Duty Order

In accordance with section 706(a)(1) of the Act, the Department will direct CBP to assess, beginning on September 26, 2004, a countervailing duty equal to the amount of the net countervailable subsidy determined or estimated to exist.

We will instruct CBP to require a cash deposit for each entry equal to the countervailing duty ad valorem rates found in the Department's Final Determination of July 19, 1999, as listed below. These suspension-of-liquidation instructions will remain in effect until further notice. The “All Others Rate” applies to all producers and exporters of subject merchandise not specifically listed. The final countervailing duty ad valorem rates are as follows:

This notice constitutes the countervailing duty order with respect to hot-rolled flat-rolled carbon-quality steel products from Brazil. Interested parties may contact the Department's Central Records Unit, room B-099 of the main Commerce building, for copies of an updated list of countervailing duty orders currently in effect. This notice is published in accordance with sections 704(i) and 777(i) of the Act. This order is published in accordance with section 706(a) of the Act.