Notice of Preliminary Results of Antidumping Duty Administrative Review: Stainless Steel Wire Rod From Spain

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

ACTION:

Notice of the preliminary results of antidumping duty administrative review.

SUMMARY:

In response to a request by Roldan S.A. (“Roldan”), the sole respondent in this review, the Department of Commerce (“the Department”) is conducting an administrative review of the antidumping duty order on stainless steel wire rod (“SSWR”) from Spain. The review covers sales for the period March 5, 1998 through August 31, 1999 (the “period of review” or “POR”).

The Department has preliminarily determined that Roldan did not sell subject merchandise at less than normal value (“NV”). If these preliminary results are adopted in the final results of this administrative review, the Department will instruct the Customs Service to liquidate entries of subject merchandise from Roldan without regard to antidumping duties.

The Department invites interested parties to comment on the preliminary results.

EFFECTIVE DATE:

October 13, 2000.

FOR FURTHER INFORMATION CONTACT:

Howard Smith or Timothy Finn, AD/CVD Enforcement, Office 4, Group II, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C. 20230; telephone (202) 482-5193, and 482-0065, respectively.

SUPPLEMENTARY INFORMATION:

The Applicable Statute and Regulations

Unless otherwise indicated, all citations to the Tariff Act of 1930, as amended, (“the Act”), are references to the provisions effective January 1, 1995, the effective date of the amendments made to the Act by the Uruguay Round Agreements Act. In addition, unless otherwise indicated, all citations to the Department's regulations are to the regulations codified at 19 CFR Part 351 (1999).

Case History

On September 15, 1998, the Department published the antidumping duty order on SSWR from Spain (see Notice of Amended Final Determination of Sales at Less Than Fair Value and Antidumping Duty Order: Stainless Steel Wire Rod From Spain, 63 FR 49330). On September 9, 1999, the Department published a notice of opportunity to request an administrative review of this antidumping duty order (see Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation; Opportunity to Request Administrative Review, 64 FR 48980). On September 30, 1999, in accordance with 19 CFR 351.213(b)(1), the respondent, Roldan, requested that the Department conduct an administrative review of its sales and entries of subject merchandise into the United States during the POR. The Department initiated a review of Roldan's sales on October 28, 1999 (see Initiation of Antidumping and Countervailing Duty Administrative Reviews and Requests for Revocation in Part, 64 FR 60161 (November 4, 1999)).

The Department issued its antidumping duty questionnaire to Roldan on November 19, 1999 and received Roldan's response thereto on January 18, 2000. In addition, the Department issued supplemental questionnaires to Roldan during March and May, 2000 and received Roldan's responses thereto during April, May, and June, 2000.

Pursuant to section 751(a)(3)(A) of the Act, the Department may extend the deadline for completion of an administrative review if it determines that it is not practicable to complete the review within the statutory time limit of 245 days. On May 8, 2000, the Department extended the time limits for the preliminary results until September 29, 2000 in accordance with the Act (see Stainless Steel Wire Rod From Spain: Extension of Time Limit for Preliminary Results of Antidumping Duty Administrative Review, 65 FR 26582).

During June and July, 2000, the Department conducted verifications of Roldan and its affiliates, Acerinox, S.A. (“Acerinox”) and Acerinox, U.S.A. (“Acerinox-USA”)

The Department is conducting this administrative review in accordance with section 751 of the Act.

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

The products under investigation 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 Department's written description of the scope of this review is dispositive.

Period of Review

The POR is March 5, 1998 through August 31, 1999.

Verification

As provided in section 782(i) of the Act, the Department conducted verifications of the information provided by Roldan. The Department used standard verification procedures including: On-site inspection of the manufacturers' facilities, examination of relevant sales, cost, and financial records, and selection of relevant source documentation as exhibits. Verification findings are detailed in the sales and cost verification memoranda dated September 29, 2000, the public versions of which are on file in the Central Records Unit, Room B099 of the Main Commerce building (CRU-Public File).

Fair Value Comparison

In order to determine whether Roldan sold SSWR to the United States at less than NV, the Department compared the constructed export price (“CEP”) of individual U.S. sales to the monthly weighted-average NV of sales of the foreign like product made in the ordinary course of trade (see section 777A(d)(2) of the Act; see also section 773(a)(1)(B)(i) of the Act). The methodology used to compare sales and to calculate CEP and NV are described in the “Comparison Methodology”, “Constructed Export Price,” and “Normal Value” sections of this notice.

Comparison Methodology

In accordance with section 771(16) of the Act, the Department considered all products within the scope of this review that Roldan produced and sold in the comparison market during the POR to be foreign like products for purposes of determining appropriate product comparisons to SSWR sold in the United States. The Department determined that the home market is the appropriate comparison market because the aggregate quantity of Roldan's home market sales of foreign like product is more than five percent of the aggregate quantity of its U.S. sales of subject merchandise (see section 773(a)(1)(C) of the Act). The Department compared U.S. sales to sales made in the home market within the contemporaneous window period, which extends from three months prior to the U.S. sale until two months after the sale. Where there were no sales of identical merchandise made in the home market in the ordinary course of trade, the Department compared U.S. sales to sales of the most similar foreign like product made in the ordinary course of trade. In making product comparisons, the Department selected identical and most similar foreign like products based on the physical characteristics reported by Roldan in the following order of importance: grade, diameter, further processing, and coating.

Constructed Export Price

Roldan reported that it made sales in the United States through three channels of distribution. In U.S. channel one, Roldan sold SSWR to customers in the United States through its U.S. affiliate, Acerinox-USA. Roldan classified its U.S. channel one sales as export price (“EP”) transactions and its U.S. channel two and three sales as CEP transactions. The Department has preliminarily determined that Roldan's channel one sales should also be classified as CEP transactions because these sales occurred in the United States. Section 772(b) of the Act defines CEP transactions as those in which the subject merchandise is first sold (or agreed to be sold) in the United States before or after the date of importation by or for the account of the producer or exporter of subject merchandise or by a seller affiliated with the producer or exporter. In determining whether sales were made in the United States, the Department examines the totality of the circumstances surrounding the U.S. sales process. Neither the magnitude of the indirect selling expenses incurred by the U.S. affiliate nor the fact that the U.S. affiliate performs a particular type of selling activity is, by itself, a controlling factor in making a CEP determination. The record in the instant review characterizes the POR sales process for U.S. channel one as follows: (1) all communication required to effectuate sales is between Acerinox-USA and unaffiliated customers; (2) Acerinox-USA negotiates the terms of sales based on guidelines established by Roldan and the terms of recent sales; (3) once the terms of sale are agreed upon by Acerinox-USA and the customer, Acerinox-USA accepts the customers' orders and transmits the orders through Acerinox (Roldan's parent corporation) to Roldan; (4) Acerinox arranges for transportation of the subject merchandise to the United States; (5) Acerinox-USA arranges for transportation of the subject merchandise from the U.S. port to the U.S. customer; (5) Acerinox invoices customers in U.S. channel one in Roldan's name; and, (6) U.S. customers remit payment to Acerinox-USA which subsequently transfers the payments to Roldan by wire.

Thus, the record shows that during the POR, Acerinox-USA was involved in every aspect of the sales process except for arranging for shipment of SSWR to the United States and invoicing U.S. customers. Moreover, Acerinox-USA's involvement in the sales process was extensive when compared to that of Roldan or Acerinox. Because the preponderance of selling functions incurred to sell Roldan's SSWR to U.S. customers occurred in the United States, the Department has preliminarily determined that the sales through U.S. channel one were made in the United States, and, thus, are CEP transactions.

The Department calculated CEP in accordance with section 772 of the Act. Specifically, the Department calculated CEP based on packed, delivered prices to unaffiliated purchasers in the United States. The Department made deductions from the starting price, where appropriate, for billing adjustments and early payment discounts. The Department also made deductions, where appropriate, for foreign inland freight and insurance, foreign brokerage and handling, international freight, U.S. brokerage and Customs fees, U.S. Customs duty, U.S. warehousing expenses, U.S. inland freight, and other U.S. transportation expenses pursuant to section 772(c)(2)(A) of the Act. In accordance with section 772(d)(1) of the Act, the Department deducted those selling expenses associated with economic activity occurring in the United States, including credit expenses, indirect selling expenses, and inventory carrying costs. In addition, the Department reduced the U.S. starting price by further manufacturing costs as required by section 772(d)(2) of the Act. Pursuant to 19 CFR 351.402(e), the Department also reduced the U.S. starting price by the actual selling expenses incurred by Roldan's U.S. affiliate rather than the commissions that Roldan paid the affiliate. Finally, the Department made an adjustment for profit in accordance with section 772(d)(3) of the Act. Based on verification findings, the Department made the following adjustments to Roldan's U.S. sales related charges: (1) corrected invoice-specific figures for billing adjustments, U.S. duty, brokerage and handling, and other U.S. transportation costs; (2) recalculated U.S. credit expense for channel two and three sales based on actual payment and shipment dates; (3) recalculated indirect selling expenses incurred in the United States; and (4) recalculated inventory carrying cost incurred in the home market for one control number.

Normal Value

As noted above in the “Comparison Methodology” section of this notice, the Department determined that the home market is the appropriate comparison market. Therefore, in accordance with section 773(a)(1)(B)(i) of the Act, the Department based NV on the prices at which Roldan first sold usual commercial quantities of foreign like product for consumption in the home market in the ordinary course of trade. In addition, to the extent practicable, the Department based NV on sales of foreign like product at the same level of trade as that of the U.S. sales to which they are being compared.

Disregarded Sales

The Department did not base NV on sales to affiliated home market customers that were not at arm's length because such sales are outside the ordinary course of trade (see 19 CFR 351.102). The Department determined that sales to affiliated home market customers were not arm's-length sales where the weighted-average sales price to the affiliated party was less than 99.5 percent of the weighted-average sales price to unaffiliated parties. See Usinor Sacilor v. United States, 872 F. Supp. 1000, 1004 (CIT 1994).

Furthermore, in accordance with section 773(b) of the Act, the Department did not base NV on home market sales made at prices below the cost of production (“COP”) that failed the cost test. The Department examined whether Roldan sold SSWR in the home market at prices below the COP because in the investigation of SSWR from Spain the Department disregarded home market sales by Roldan which failed the cost test. See section 773(b)(2)(A)(ii) of the Act; see also Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel Wire Rod From Spain, 63 FR 40391 (July 29, 1998). In order to determine whether Roldan made home market sales at prices below the COP, the Department compared product-specific production costs to the prices at which Roldan sold the product in the home market, less any applicable movement charges, selling expenses, and packing costs.

The Department based the cost of producing the foreign like product on Roldan's reported material and fabrication costs, general and administrative (“G&A”) expenses, and financing expenses pursuant to section 773(b)(3) of the Act.

In determining whether below cost sales should serve as a basis for NV, the Department 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 (see section 773(b)(1) of the Act).

Pursuant to section 773(b)(2)(C)(i) of the Act, where less than 20 percent of a respondent's sales of a given product were made at prices less than the COP, the Department does not disregard any below-cost sales of that product in determining NV because the below-cost sales were not made in “substantial quantities.” Where 20 percent or more of a respondent's sales of a given product were at prices below the COP, the Department determines that sales of that model were made in “substantial quantities” within an extended period of time and that such sales were not made at prices which would permit recovery of all costs within a reasonable period of time as defined in section 773(b)(2)(B), (C) and (D) of the Act. Therefore, the Department disregards such below-cost sales in determining NV.

The Department found that more than 20 percent of Roldan's home market sales within an extended period of time were made at prices less than the COP. Further, the prices did not provide for the recovery of costs within a reasonable period of time. Therefore, in accordance with section 773(b)(1) of the Act, the Department disregarded those below-cost sales as outside the ordinary course of trade and based NV on the remaining above-cost sales.

For those U.S. sales of SSWR for which there were no comparable home market sales in the ordinary course of trade within the contemporaneous window, the Department compared CEP to constructed value (“CV”), in accordance with section 773(a)(4) of the Act. In accordance with section 773(e) of the Act, the Department calculated CV based on the sum of Roldan's cost of materials, fabrication, selling general and administrative (“SG&A”) expenses (including an appropriate amount for financing expenses), profit, and U.S. packing costs. In accordance with section 773(e)(2)(A) of the Act, the Department based SG&A (including financing expenses), and profit on the amounts incurred and realized in connection with the production and sale of the foreign like product in the ordinary course of trade for consumption in the home market.

Level of Trade

In accordance with section 773(a)(1)(B) of the Act, to the extent practicable, the Department determines NV based on sales in the comparison market at the same level of trade as the U.S. sale. The NV level of trade is that of the starting-price sales in the comparison market or, when NV is based on CV, that of the sales from which the Department derives SG&A expenses and profit. When U.S. price is based on CEP transactions, the starting price is the level of the constructed sale from the exporter to the importer.

To determine whether NV sales are at a different level of trade than CEP sales, the Department examines 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 level of trade and the difference affects price comparability, as manifested by a pattern of consistent price differences between the sales on which NV is based and comparison market sales at the level of trade of the export transaction, the Department makes a level-of-trade adjustment under section 773(a)(7)(A) of the Act. Finally, for CEP sales, if the NV level of trade is more remote from the factory than the CEP level of trade, and there is no basis for determining whether any difference between the NV and CEP levels of trade affects price comparability, the Department adjusts 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).

The U.S. Court of International Trade (“CIT”) has held that the Department's practice of determining levels of trade for CEP transactions after CEP deductions is an impermissible interpretation of section 772(d) of the Act. See Borden, Inc. v. United States, 4 F. Supp. 2d 1221, 1241-42 (CIT 1998) (“Borden”). The Department believes, however, that its practice is in full compliance with the statute. On June 4, 1999, the CIT entered final judgement in Borden on the level of trade issue. See Borden Inc. v. United States, Court No. 96-08-01970, Slip Op. 99-50 (CIT June 4, 1999). The government has filed an appeal of Borden which is pending before the U.S. Court of Appeals for the Federal Circuit. Consequently, the Department has continued to follow its normal practice of adjusting CEP under section 772(d) of the Act prior to starting a level of trade analysis, as articulated by the Department's regulations at 19 CFR 351.412.

Based upon an analysis of the information on the record, the Department has determined that there is a single level of trade in the home market and a single level of trade in the U.S. market which are dissimilar. See the memorandum regarding the Level of Trade Analysis in the 1998-1999 Antidumping Duty Administrative Review of Stainless Steel Wire Rod From Spain—Preliminary Results dated September 29, 2000 (“LOT Memorandum”) in the public file of the CRU. Because Roldan did not make home market sales at the level of trade of its CEP sales, the Department cannot compare CEP sales to home market sales (i.e., NV) at the same level of trade. Moreover, because there is only one level of trade in the home market, any difference in the NV and CEP levels of trade cannot be quantified. Furthermore, the Department does not have information which would allow it to examine pricing patterns based on Roldan's sales of other products and there are no other respondents or other information on the record upon which such an analysis could be based. Therefore, a level of trade adjustment is not possible.

Because all of Roldan's U.S. sales are CEP transactions and a level of trade adjustment is not possible, the Department examined whether to adjust NV under section 773(a)(7)(B) of the Act (the CEP offset provision). In order to determine whether the NV is at a more advanced level of trade than that of the CEP transactions, the Department compared the selling functions performed for home market sales with those performed for CEP transactions after deducting the expenses identified in section 772(d) of the Act which are associated with selling activities occurring in the United States. After making these deductions, the Department found that fewer selling functions were performed for CEP sales than for home market sales. Thus, the Department has found that Roldan's sales in the home market are at a more advanced stage of marketing and distribution (i.e., more remote from the factory) than the level of trade of CEP sales and, therefore, has applied the CEP offset to NV. See the LOT Memorandum.

Calculation of Normal Value

The Department calculated monthly weighted-average NVs based on the starting prices of home market sales to unaffiliated customers and the starting prices of arm's-length home market sales to affiliated customers. The Department based NV on the starting price reduced, where appropriate, by billing adjustments and inland freight and insurance (less freight revenue). In addition, in calculating NV the Department adjusted the starting price by credit expenses in accordance with section 773(a)(6)(C)(iii) of the Act. As noted above, the Department applied the CEP offset to NV. The CEP offset reduced NV by the amount of home market indirect selling expenses, including inventory carrying costs and other indirect selling expenses, up to the amount of indirect selling expenses incurred on U.S. sales. Finally, in calculating NV the Department subtracted home market packing costs from the starting price and added U.S. packing costs. Based on verification findings, the Department made the following adjustments to Roldan's home market sales related charges: (1) Corrected the foreign inland freight expense reported for one sales observation; (2) recalculated home market credit expense for one sales observation using the correct payment date; and (3) corrected the inventory carrying cost for four control numbers.

Currency Conversion

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

As a result of this review, the Department preliminarily determines that the following weighted-average dumping margin exists:

In accordance with 19 CFR 351.224(b), within five days of the date of publication of this notice, the Department will disclose to the parties in this proceeding the calculations performed in determining the above dumping margin. An interested party may request a hearing within 30 days of publication of these preliminary results. See 19 CFR 351.310(c)(1999). Any hearing, if requested, will be held 44 days after the date of publication of this notice, or the first working day thereafter. Interested parties may submit case briefs and/or written comments no later than 30 days after the date of publication of the preliminary results of this review. Rebuttal briefs and rebuttals to written comments, limited to issues raised in such briefs or comments, may be filed no later than 37 days after the date of publication of this notice. Further, the Department requests that parties submitting written comments provide the Department with a diskette containing the public version of those comments. The Department will issue the final results of this administrative review, which will include the results of its analysis of issues raised in interested party comments, within 120 days of publication of the preliminary results.

Upon completion of this administrative review, the Department shall determine, and the Customs Service shall assess, antidumping duties on all appropriate entries. The Department will issue appraisement instructions directly to the U.S. Customs Service to assess antidumping duties on appropriate entries by applying the assessment rate to the entered value of the merchandise. The Department will calculate the duty assessment rate based upon the ratio of the total amount of antidumping duties calculated for the examined sales to the total entered value of the examined sales. The rate will be assessed uniformly on all entries made during the POR. Where appropriate, in order to calculate the entered value, the Department will subtract international movement expenses and U.S. duty from the gross sales value.

Furthermore, the following deposit requirements will be effective upon completion of the final results of this administrative review for all shipments of SSWR from Spain entered, or withdrawn from warehouse, for consumption on or after the publication date of the final results of this administrative review, as provided by section 751(a)(1) of the Act: (1) The cash deposit rate for Roldan will be the rate established in the final results of this administrative review except if the rate is de minimis, then no cash deposit will be required; (2) for merchandise exported by manufacturers or exporters not covered in this review but covered in the original less-than-fair-value (“LTFV”) investigation or a previous review, 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, 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) if neither the exporter nor the manufacturer is a firm covered in this or any previous review, the cash deposit rate will be 4.73 percent, the “all-others” rate established in the LTFV investigation.

These deposit requirements, when imposed, shall remain in effect until publication of the final results of administrative review for a subsequent review period.

This notice also serves as a preliminary reminder to importers of their responsibility under 19 CFR 351.402(f) 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 antidumping duties occurred and the subsequent assessment of double antidumping duties.

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