64 FR 44483 August 16, 1999 

DEPARTMENT OF COMMERCE

International Trade Administration
[A-588-824]

 
Certain Corrosion-Resistant Carbon Steel Flat Products From 
Japan: Preliminary Results of Antidumping Duty Administrative Review

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

ACTION: Notice of preliminary results of the antidumping duty 
administrative review of certain corrosion-resistant carbon steel flat 
products from Japan.

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SUMMARY: In response to requests from interested parties, the 
Department of Commerce (``the Department'') is conducting an 
administrative review of the antidumping duty order on certain 
corrosion-resistant carbon steel flat products from Japan. This review 
covers two manufacturers of the subject merchandise. The period of 
review (``POR'') is August 1, 1997 through July 31, 1998.
    We have preliminarily determined that certain sales subject to this 
review have been made below normal value (``NV''). If these preliminary 
results are adopted in our final results of this administrative review, 
we will instruct the U.S. Customs Service to assess antidumping duties 
based on the difference between the export price (``EP'') and the NV.

EFFECTIVE DATE: August 16, 1999.

FOR FURTHER INFORMATION CONTACT: Doreen Chen, Brandon Farlander, or 
Rick Johnson, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, N.W., Washington, DC 20230; telephone: (202) 482-
0413, 482-0182, or 482-3818, respectively.

SUPPLEMENTARY INFORMATION:

The Applicable Statute

    Unless otherwise indicated, all citations to the Tariff Act of 
1930, as amended (``the Act''), are to the provisions effective January 
1, 1995, the effective date of the amendments made to the Act by the 
Uruguay Round Agreements Act (``URAA''). In addition, unless otherwise 
indicated, all citations to the Department's regulations are to 19 CFR 
Part 351 (1998).

Background

    On July 19, 1993, the Department published in the Federal Register 
(58 FR 37154) the antidumping duty order on certain corrosion-resistant 
carbon steel flat products from Japan. On August 31, 1998, Nippon Steel 
Corporation (``NSC'') and Kawasaki Steel Corporation (``KSC'') 
requested reviews of their exports to the United States of corrosion-
resistant steel. On September 29, 1998, in accordance with section 751 
of the Act, we published a notice of initiation of administrative 
review of this order for the period August 1, 1997 through July 31, 
1998 (63 FR 51893).
    Under 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 365 days. On February 24, 1999, the Department 
published a notice of extension of the time limit for the preliminary 
results of this review to August 1, 1999. See Corrosion-Resistant 
Carbon Steel Flat Products From Japan: Extension of Time Limit for 
Preliminary Results of the Antidumping Duty Administrative Review, 64 
FR 9127 (February 24, 1999). Petitioners submitted comments for 
consideration for the preliminary results for NSC and KSC on July 22, 
1999, and July 20, 1999, respectively. The Department is conducting 
this review in accordance with section 751(a) of the Act.

Scope of Reviews

    This review covers flat-rolled carbon steel products, of 
rectangular shape, either clad, plated, or coated with corrosion-
resistant metals such as zinc, aluminum, or zinc-, aluminum-, nickel-or 
iron-based alloys, whether or not corrugated or painted, varnished or 
coated with plastics or other nonmetallic substances in addition to the 
metallic coating, in coils (whether or not in successively superimposed 
layers) and of a width of 0.5 inch or greater, or in straight lengths 
which, if of a thickness less than 4.75 millimeters, are of a width of 
0.5 inch or greater and which measures at least 10 times the thickness 
or if of a thickness of 4.75 millimeters or more are of a width which 
exceeds 150 millimeters and measures at least twice the thickness, as 
currently classifiable in the Harmonized Tariff Schedule of the United 
States (``HTSUS'') under item numbers 7210.30.0030, 7210.30.0060, 
7210.41.0000, 7210.49.0030, 7210.49.0090, 7210.61.0000, 7210.69.0000, 
7210.70.6030, 7210.70.6060, 7210.70.6090, 7210.90.1000, 7210.90.6000, 
7210.90.9000, 7212.20.0000, 7212.30.1030, 7212.30.1090, 7212.30.3000, 
7212.30.5000, 7212.40.1000, 7212.40.5000, 7212.50.0000, 7212.60.0000, 
7215.90.1000, 7215.90.3000, 7215.90.5000, 7217.20.1500, 7217.30.1530, 
7217.30.1560, 7217.90.1000, 7217.90.5030, 7217.90.5060, and 
7217.90.5090. Included are flat-rolled products of non-rectangular 
cross-section where such 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. 
Excluded are flat-rolled steel products either plated or coated with 
tin, lead, chromium, chromium oxides, both tin and lead (``terne 
plate''), or both chromium and chromium oxides (``tin-free steel''), 
whether or not painted, varnished or coated with plastics or other 
nonmetallic substances in addition to the metallic coating. Also 
excluded are clad products in straight lengths of 0.1875 inch or more 
in composite thickness and of a width which exceeds 150 millimeters and 
measures at least twice the thickness. Also excluded are certain clad 
stainless flat-rolled products, which are three-layered corrosion-
resistant carbon steel flat-rolled products less than 4.75 millimeters 
in composite thickness that consist of a carbon steel flat-rolled 
product clad on both sides with stainless steel in a 20%-60%-20% ratio. 
The HTS item numbers are provided for convenience and Customs purposes. 
The written description remains dispositive of the scope of this 
review.
    Also excluded are certain corrosion-resistant carbon steel flat 
products meeting the following specifications: (1) widths ranging from 
10 millimeters (0.394 inches) through 100 millimeters (3.94 inches); 
(2) thicknesses, including coatings, ranging from 0.11 millimeters 
(0.004 inches) through 0.60 millimeters (0.024 inches); and (3) a 
coating that is from 0.003 millimeters (0.00012 inches) through 0.005 
millimeters (0.000196 inches) in thickness and that is comprised of 
either two evenly applied layers, the first layer consisting of 99% 
zinc, 0.5% cobalt, and 0.5% molybdenum, followed by a layer consisting 
of chromate, or three evenly applied layers, the first layer consisting 
of 99% zinc, 0.5% cobalt, and 0.5% molybdenum followed by a layer 
consisting of chromate, and finally a layer consisting of silicate.

Verification

    As provided in section 782(i) of the Act, we verified sales 
information provided by NSC and sales and cost information provided by 
KSC, using standard verification procedures, including on-site 
inspection of the

[[Page 44484]]

manufacturer's facilities and the examination of relevant sales and 
financial records. Our verification results are outlined in the public 
versions of the verification reports, which are on file with the 
Department in the Central Records Unit, Room B-099.

Transactions Reviewed

    In accordance with section 751 of the Act, the Department is 
required to determine the EP (or Constructed Export Price (``CEP'')) 
and NV of each entry of subject merchandise.

NSC

    On October 9, 1998, respondent requested that it be relieved from 
reporting certain information, e.g., price adjustments, for home market 
sales by certain of NSC's affiliated manufacturers. Respondent argued 
that it should not be required to report such information on sales by 
these affiliated manufacturers because these sales were not exported to 
the United States and would not provide the most similar product 
matches to the subject merchandise under review. Therefore, respondent 
reported only matching characteristics for these sales.
    In addition, for other home market sales by affiliated parties, NSC 
stated that it was unable to collect sales data from all affiliated 
resellers. See Questionnaire Response, dated December 8, 1998 at p. B-
5. For further discussion of NSC's downstream sales, see Normal Value 
(Section C, ``Downstream Sales''), below.

KSC

    KSC reported export sales that occurred in only one month and 
consisted of only prime merchandise. On October 6, 1998, KSC requested 
that it report sales from only a six-month home market period because 
KSC's export sales occurred in only one month. On October 20, 1998, we 
allowed KSC to report sales for a six month period in accordance with 
section 351.414(e)(2)(ii)-(iii) of the Department's regulations. On 
November 12, 1998, KSC requested that the Department allow it to report 
only merchandise similar to U.S. sales. Specifically, KSC requested 
that it only report sales and cost information for prime merchandise. 
On November 20, 1998, we granted KSC's requests, subject to 
verification that its U.S. sale of subject merchandise consisted of 
only prime merchandise and occurred in only one month.

Product Comparisons

    In accordance with section 771(16) of the Act, we considered all 
products produced by respondents covered by the description in the 
``Scope of the Review'' section of this notice, (supra), and sold in 
the home market during the period of review (``POR''), to be foreign 
like products for purposes of determining appropriate product 
comparisons to U.S. sales. Where there were no sales of identical 
merchandise in the home market to compare to U.S. sales, we compared 
U.S. sales to the most similar foreign like product on the basis of the 
characteristics listed in Appendix V of the Department's September 19, 
1998 antidumping questionnaire. In making product comparisons, we 
matched foreign like products based on the physical characteristics 
reported by respondents and verified by the Department. Consistent with 
Department practice, we matched a given U.S. sale to foreign market 
sales of the next most similar model when all sales of the most 
comparable model were below cost.

Fair Value Comparisons

    To determine whether sales of subject merchandise to the United 
States were made at less than fair value, we compared the EP to the NV, 
as described in the ``United States Price'' and ``Normal Value'' 
sections of this notice. In accordance with section 777A(d)(2) of the 
Act, we calculated monthly weighted-average prices for NV and compared 
these to individual U.S. transaction prices.

Level of Trade (``LOT'')

    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 CV, that of the sales from which we derive SG&A 
expenses and profit. For EP, the U.S. LOT is also the level of the 
starting-price sale, which is usually from exporter to importer.
    To determine whether NV sales are at a different LOT than EP, 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 a LOT adjustment under section 773(a)(7)(A) of the Act. 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).

NSC

    In the present review, NSC claimed that only one LOT existed and 
did not request a LOT adjustment. To evaluate LOTs, we examined 
information regarding the distribution systems in both the U.S. and 
home market, including the selling functions, classes of customer, and 
selling expenses.
    NSC reported one LOT in the home market based on two classes of 
customers: trading companies and end-users. We examined the reported 
selling functions and found that NSC provides the same selling 
functions to its home market customers regardless of channel of 
distribution. We preliminarily conclude that the selling functions 
between the reported channels of distribution are sufficiently similar 
to consider them as one LOT in the comparison market.
    NSC stated that it sells to one LOT in the United States: trading 
companies. We compared the selling functions performed at the home 
market LOT and the LOT in the United States and found them 
substantially similar. Of the thirteen selling functions reported for 
home market sales, twelve of the selling functions were identical to 
U.S. sales. For a further discussion of the Department's LOT analysis, 
see Analysis Memorandum: Preliminary Results of the Antidumping Review 
of Corrosion-Resistant Carbon Steel Flat Products for NSC (``Analysis 
Memo: Preliminary Results for NSC''), (August 2, 1999). Therefore, the 
Department preliminarily finds that no LOT adjustment is warranted for 
NSC.

KSC

    To evaluate LOTs, we examined information regarding the 
distribution systems in both the U.S. and home market, including the 
selling activities, classes of customers, and selling expenses. In the 
present review, KSC reported two LOTs in the home market and one LOT in 
the U.S. market. KSC stated that the LOTs in the home market have 
consistent price differences. Thus, KSC requested an LOT adjustment if 
sales at different LOTs are compared. In the U.S. market, KSC reported 
one channel of distribution in the one LOT, i.e., sales through an 
unaffiliated trading company.
    In the home market, KSC reported two channels of distribution in 
the first LOT:

[[Page 44485]]

(1) sales to unaffiliated trading companies; and (2) sales directly to 
end-users (unaffiliated and affiliated). In both channels of 
distribution, sales were made by either KSC or its affiliated producer, 
Kawatetsu Galvanizing Co., Ltd. (``Kawahan''). KSC reported one channel 
of distribution in the second LOT: sales through KSC's affiliated 
reseller, Kawasho Corporation (``Kawasho'') to distributors and end-
users. These sales were made by both KSC and Kawahan.
    For the preliminary results, we disagree with KSC's classification 
for the above channels of distribution, and have established the 
following two LOTs in the home market: (1) affiliated and unaffiliated 
trading companies; and (2) end-users. KSC and Kawahan sold subject 
merchandise to two types of customers: (1) trading companies 
(affiliated or unaffiliated), and (2) end-users. These sales represent 
two different points in the chain of distribution between the producers 
and the final end-user. That is, in the one instance (sales to trading 
companies), the subject merchandise passes through the intermediary 
parties, while in the other case, sales are made without any 
intervening parties. As a result, these sales to different points in 
the distribution chain appear to represent different levels of trade in 
the home market.
    The Department then examined whether any differences existed with 
respect to the selling activities KSC performed in making sales to 
these two types of customers. Regarding the selling activities with 
respect to the sales to end-users, KSC and Kawahan conducted the 
following twelve selling activities: market intelligence, end-user 
information, end-user contact lead role, marketing services, credit 
checks, end-user price negotiations, daily issues end-user contact, 
warehousing, processing, arranging for freight, payment collection, and 
evaluating warranty claims. KSC and Kawahan's level of involvement in 
these twelve selling activities was high.
    Regarding sales to trading companies, KSC and Kawahan conducted the 
following nine selling activities to its affiliated trading company: 
market intelligence, end-user information, end-user contact lead role, 
marketing services, end-user price negotiations, daily issues end-user 
contact, warehousing, processing, and evaluating warranty claims. KSC 
and Kawahan's level of involvement in these nine selling activities was 
at a low level except for evaluating warranty claims, which was at a 
high level. KSC and Kawahan conducted the following eleven selling 
activities to its unaffiliated trading companies: market intelligence, 
end-user information, end-user contact lead role, marketing services, 
credit checks, end-user price negotiations, daily issues end-user 
contact, warehousing, processing, arranging for freight, and evaluating 
warranty claims. However, KSC and Kawahan's level of involvement in 
these eleven selling activities was at a low level, except for 
warehousing, processing, arranging for freight, and evaluating warranty 
claims, which were at a high level. Based on this information, we find 
that KSC and Kawahan's selling activities to its trading companies, 
whether affiliated or unaffiliated, were at the same LOT.
    We determined that differences existed with respect to selling 
activities KSC and Kawahan performed in making sales to these two types 
of customers. For sales to end-users, KSC and Kawahan's level of 
involvement for all twelve selling activities was high, whereas, for 
sales to trading companies (either affiliated or unaffiliated), KSC and 
Kawahan's level of involvement was in only nine selling activities for 
the affiliated trading company and eleven selling activities for the 
unaffiliated trading companies, as noted above. In addition, of these 
nine selling activities that KSC and Kawahan was involved in for its 
affiliated trading company, KSC and Kawahan's level of involvement was 
low for eight selling activities. Finally, of the eleven selling 
activities that KSC and Kawahan was involved in for its unaffiliated 
trading companies, KSC and Kawahan's level of involvement was low for 
seven selling activities.
    Based on the different points in the chain of distribution and the 
differences in selling functions between the trading companies and the 
end-users, the Department preliminarily finds that two levels of trade 
exist for KSC's sales in the home market. Furthermore, the U.S. sales 
were at the same LOT as KSC's home market sales to trading companies.
    The Department then checked to determine whether a pattern of 
consistent price differences existed between the two home market levels 
of trade. The Department found that no pattern of consistent price 
differences existed between the home market LOTs by running a pattern 
of price difference SAS program. Therefore, we did not adjust NV to 
account for any differences in LOT. For a further discussion of the 
Department's LOT analysis, see Analysis Memorandum: Preliminary Results 
of the Antidumping Review of Corrosion-Resistant Carbon Steel Flat 
Products for KSC (``Analysis Memo: Preliminary Results for KSC'') 
(August 2, 1999).

Date of Sale

    It is the Department's current practice normally to use the invoice 
date as the date of sale; we may, however, use a date other than the 
invoice date if we are satisfied that a different date better reflects 
the date on which the exporter or producer establishes the material 
terms of sale. See 19 CFR 351.401(i) (62 FR at 27411).

NSC

    For its home market and U.S. sales, NSC reported the date of 
shipment. NSC stated that the invoice/shipment date best reflects the 
date on which the material terms of sale are established, and that 
price and/or quantity can and do change between order confirmation date 
and invoice/shipment date. To ascertain whether NSC accurately reported 
the date of sale, the Department requested information concerning the 
nature and frequency of price and quantity changes occurring between 
the date of order confirmation and date of invoice. See Supplemental 
Questionnaire for Section A (November 13, 1998).
    In its December 11, 1998, December 29, 1998 and February 18, 1999, 
responses, NSC indicated that there were numerous instances in which 
the essential terms of sale changed subsequent to the confirmation of 
the original orders in the U.S. and home markets. NSC reported the 
percentage of total quantity shipped that had changes in the material 
terms of sale subsequent to the confirmation of original orders in the 
U.S. and home markets. See December 11, 1998 Supplemental Response at 
p. 1; Verification Exhibit 1, Revised Exhibit SS-A5 of the February 19, 
1999 Supplemental Response; and Analysis Memo: Preliminary Results for 
NSC (August 2, 1999).
    At verification, we examined NSC's selling practices and found that 
it records sales in its financial records by date of invoice/shipment. 
We reviewed several sales observations for which the price and quantity 
changed subsequent to the original order. We reviewed and confirmed the 
accuracy of NSC's reported percentage of the number of sales that had 
material changes in terms of sale subsequent to the order confirmation. 
We are satisfied that the date of invoice/shipment best reflects the 
date on which material terms of sale were established for NSC's U.S. 
and home market sales. Therefore, the Department is preliminarily using 
the dates of sales reported by NSC.

[[Page 44486]]

KSC

    For its home market and U.S. sales, KSC reported the date of 
invoice/shipment as the date of sale. KSC stated that the invoice/
shipment date best reflects the date on which the material terms of 
sale are established and that price and/or quantity can and do change 
between order confirmation date and invoice/shipment date. To ascertain 
whether KSC accurately reported the date of sale, the Department 
requested information concerning the nature and frequency of price and 
quantity changes occurring between the date of order confirmation and 
date of invoice. See Supplemental Questionnaire for Section A dated 
November 13, 1998.
    In its December 4, 1998 and March 22, 1999 supplemental 
questionnaire responses, KSC indicated that there were numerous 
instances in which material terms of sales, such as price and quantity, 
changed subsequent to the confirmation of the original orders in the 
U.S. and home markets. KSC reported the percentages of orders which had 
a change in the material terms of sale after the order confirmation 
date (see KSC's March 22, 1999 Supplemental Questionnaire Response at 
p. 6-7) and the percentages of home market sales of subject merchandise 
that were revised after shipment (Id. at pp. 9-10; Sales Verification 
Exhibit (``SVE'') 37). As this involves proprietary information, see 
Analysis Memo: Preliminary Results for KSC (August 2, 1999).
    At verification, we examined KSC's selling practices and found that 
KSC records sales in its financial records by date of invoice/shipment. 
We reviewed several sales observations for which the price and quantity 
changed subsequent to the original order. We reviewed and confirmed the 
accuracy of KSC's reported percentage of the number of sales that had 
material changes in terms subsequent to the order confirmation. We are 
satisfied that the date of invoice/shipment best reflects the date on 
which material terms of sales were established for KSC's U.S. and home 
market sales. Therefore, the Department is preliminarily using the 
dates of sales reported by KSC.

United States Price

    For calculation of the price to the United States, we used EP 
because the subject merchandise was sold prior to importation, directly 
or indirectly to the first unaffiliated purchaser in the United States 
and CEP was not otherwise warranted.

NSC

    The Department calculated EP for NSC based on packed, prepaid or 
delivered prices to customers in the United States. We made adjustments 
to the starting price, net of billing adjustments, for movement 
expenses (foreign and U.S. movement, brokerage and handling, and U.S. 
Customs duties), in accordance with section 772(c)(2) of the Act.

KSC

    The Department calculated EP for KSC based on packed, prepaid or 
delivered prices to customers in the United States. We made adjustments 
to the starting price, net of billing adjustments, for movement 
expenses (foreign and U.S. movement, brokerage and handling, and U.S. 
Customs duties), in accordance with section 772(c)(2) of the Act.

Normal Value

    After testing home market viability and whether home market sales 
were made at prices that were below the cost of production, we 
calculated NV as noted in the ''Price-to-Price Comparisons'' and 
''Price-to-CV Comparison'' sections of this notice. In addition, in 
accordance with section 773(a)(1)(B)(i) of the Act, where possible, we 
based NV on sales at the same level of trade (``LOT'') as the U.S. 
price. See the Level of Trade section above.

A. 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 each 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. Since 
each 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. Therefore, we have based NV on 
home market sales in the usual commercial quantities and in the 
ordinary course of trade.

B. Arm's Length Test

    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 
for each company, we compared, on a model-specific basis, the prices of 
sales to affiliated and unaffiliated customers net of all applicable 
discounts, rebates, billing adjustments, movement charges, direct 
selling expenses, and packing. 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 unaffiliated parties, we determined 
that sales made to the affiliated party were at arm's length and used 
those sales in determining NV. 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, 
we were unable to determine that these sales were made at arm's length 
prices and, therefore, excluded them from our LTFV 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, we made a comparison to the 
next most similar product.

C. Downstream Sales

    Pursuant to section 351.403 of the Department's regulations, the 
Department does not normally require the reporting of downstream sales 
if total sales of the foreign like product by a firm to all affiliated 
customers account for five percent or less of the firm's total sales of 
the foreign like product. The questions concerning the reporting of 
downstream sales are complicated, and the resolution of such questions 
depends on a number of considerations, including the nature of the 
merchandise sold to and by the affiliate, the volume of sales to the 
affiliate, the levels of trade involved, and whether sales to 
affiliates were made at arm's length. Id. In addition, the Department 
normally will not require the respondent to report the affiliate's 
downstream sales unless the sales to the affiliate fail the arm's 
length test. Id. The Department believes that imposing the burden of 
reporting small numbers of downstream sales often is not warranted, and 
that the accuracy of determinations generally is not compromised by the 
absence of such sales. Id.
    As discussed below, after examining the data placed on the record, 
the Department has preliminarily determined that for both NSC and 
Kawasaki, there are sufficient matches

[[Page 44487]]

of sales in the home market, and that the downstream sales in question 
account for less than five percent of each firm's total home market 
sales of subject merchandise. Thus, for purposes of these preliminary 
results, the Department has allowed this limited reporting for 
downstream sales since we found adequate home market matches to U.S. 
sales.

NSC

    In its response to the questionnaire, NSC stated that it was unable 
to collect sales data from all affiliated resellers. See Questionnaire 
Response, dated December 8, 1998 at p. B-5. (As this involves 
proprietary information, see Analysis Memo: Preliminary Results for 
NSC, August 2, 1999.) Thus, NSC only reported sales by one affiliated 
reseller. Id. The Department requested that NSC further explain its 
selection methodology for reporting sales by affiliated resellers. See 
Second Supplemental Questionnaire dated November 13, 1998 at p. 1. NSC 
elaborated concerning its inability to report sales, its methodology in 
reporting certain transactions and the impact of reporting resales on 
the dumping margin. See Second Supplemental Questionnaire Response 
dated December 11, 1998 at pp. 4-5. Based on these responses, for the 
preliminary results, we have used the data as provided by NSC for the 
purposes of establishing NV.

KSC

    KSC stated that it was not able to report all affiliated downstream 
sales information, because neither KSC nor its affiliates maintain the 
necessary information. See KSC's March 22, 1999 Supplemental Response, 
page 21. As reported by KSC, KSC/Kawahan sells to Kawasho Corporation 
(``Kawasho''), who then sells the product to affiliated processors/
distributors. At verification, we examined documentation for these 
transactions. However, as reported by KSC, when the affiliated 
processor/distributor sells the merchandise back to Kawasho (after 
further processing the merchandise), most of the affiliated processors/
distributors do not maintain information to link these sales to the 
prior purchases from Kawasho. Thus, KSC provided limited downstream 
sales made by its affiliated reseller, Kawasho (specifically, KSC 
reported downstream sales for only one of Kawasho's affiliated 
processors/distributors); and reported sales made by Kawahan (itself a 
producer of subject merchandise affiliated with KSC) to its affiliates 
and non-affiliates, but did not report Kawahan's affiliates' sales to 
its downstream customers. KSC was unable to report Kawahan's 
affiliates' sales to its downstream customers because Kawahan cannot 
recover any product characteristic data to link its affiliates' sales 
to Kawahan's sale to its affiliates. In addition, one of Kawahan's 
affiliated customers refused to provide its downstream sales data, 
despite Kawahan's request. At verification, we examined KSC's ability 
to report the sales from affiliates of Kawahan and Kawasho. See Sales 
Verification Report for additional information. We also reviewed, at 
verification, Kawasaki's claim that Kawasho's total sales of KSC-and 
Kawahan-produced subject merchandise to affiliated resellers are less 
than five percent of total home market sales, as stated in KSC's 
October 28, 1998, section A response, page A-3. We found no 
discrepancies. See SVE 31, Analysis of Kawasho's Sales to Affiliated 
Resellers. Because this issue includes proprietary information, see 
Analysis Memo: Preliminary Results for KSC for further discussion. 
Based on these responses, for the preliminary results, we have used the 
data as provided by KSC for the purposes of establishing NV.

D. Cost of Production (COP) Analysis

    For the class or kind of merchandise under review, the Department 
disregarded sales below the cost of production (``COP'') in the last 
completed review as of the date of the issuance of the antidumping 
questionnaire for NSC (Certain Corrosion-Resistant Carbon Steel Flat 
Products Final Results of Antidumping Duty Administrative Review, 64 FR 
12951 (Mar 16, 1999) and for Kawasaki (Certain Corrosion-Resistant 
Carbon Steel Flat Products from Japan:(see Certain Hot-Rolled Carbon 
Steel Flat Products, Certain Cold-Rolled Carbon Steel Flat Products, 
and Certain Corrosion-Resistant Carbon Steel Flat Products from Japan: 
Final Determinations of Sales at Less Than Fair Value), 58 FR 37154 
(July 9, 1993)). We therefore had reasonable grounds to believe or 
suspect, pursuant to section 773(b)(2)(A)(ii) of the Act, that sales of 
the foreign like product under consideration for the determination of 
NV in this review may have been made at prices below the COP. Pursuant 
to section 773(b)(1) of the Act, we initiated COP investigations of 
sales by respondents in the home market.
1. Calculation of COP
    We compared each respondent's sales of the foreign like product in 
the home market with each respondent's model-specific COP figure for 
the POR. In accordance with section 773(b)(3) of the Act, we calculated 
each respondent's COP based on the sum of the costs of materials and 
fabrication employed in producing the foreign like product plus SG&A 
expenses and all costs and expenses incidental to placing the foreign 
like product in condition packed and ready for shipment. In our COP 
analysis, we used each respondent's home market sales and COP 
information provided in its questionnaire responses, with the following 
exceptions. First, where KSC reported more than one cost for the same 
CONNUM, we calculated a single weighted-average cost for each CONNUM 
using the reported production quantities. Second, we revised variable 
cost of manufacturing because KSC double counted labor costs. Third, we 
revised KSC's financial expense rate. See Analysis Memo: Preliminary 
Results for KSC for further information.
2. Test of Home Market Prices
    After calculating each respondent's COP, we tested whether home 
market sales of subject merchandise were made at prices below COP and, 
if so, whether the below-cost sales were made within an extended period 
of time in substantial quantities and at prices that did not permit 
recovery of all costs within a reasonable period of time. Because each 
individual price was compared to the POR average COP, any sales that 
were below cost were also not at prices which permitted cost recovery 
within a reasonable period of time. We compared model-specific COPs to 
the reported home market prices less any applicable movement charges, 
discounts, and rebates.
3. Results of the COP Test
    Pursuant to section 773(b)(2)(C) of the Act, where less than 20 
percent of a respondent's sales of a given model were at prices less 
than COP, we did not disregard any below-cost sales of that model 
because the below-cost sales were not made in substantial quantities 
within an extended period of time. Where 20 percent or more of a 
respondent's sales of a given model during the POR were at prices less 
than the weighted-average COPs for the POR, we disregarded the below-
cost sales because they were made within an extended period of time in 
substantial quantities in accordance with sections 773(b)(2)(B) and (C) 
of the Act, and were at prices which would not permit recovery of all 
costs within a reasonable period of time in accordance with section 
773(b)(2)(D) of the Act.

[[Page 44488]]

4. Calculation of CV
    In accordance with section 773(e)(1) of the Act, we calculated CV 
based on the sum of respondent's cost of materials, fabrication, SG&A, 
including interest expenses, and profit. We calculated the COP included 
in the calculation of CV as noted above, in the ''Calculation of COP'' 
section of the 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 
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.

Price-to-Price Comparisons

NSC

    For those models for which there was a sufficient quantity of sales 
at prices above COP, we based NV on home market prices to unaffiliated 
purchasers, as well as affiliated purchasers passing the arm's length 
test, in accordance with 19 CFR 351.403. Home market prices were based 
on the packed, ex-factory or delivered prices to unaffiliated 
purchasers in the home market.
    We calculated the starting price net of discounts, and other sales 
adjustments, where applicable. We made adjustments, where applicable, 
for packing and movement expenses in accordance with sections 
773(a)(6)(A) and (B) of the Act. We also made adjustments for 
differences in cost attributable to differences in physical 
characteristics of the merchandise pursuant to section 773(a)(6)(C)(ii) 
of the Act and for differences in circumstances of sale (``COS'') in 
accordance with 773(a)(6)(C)(iii) of the Act and 19 CFR 351.410. For 
comparison to EP, we made COS adjustments by deducting home market 
direct selling expenses (credit, royalties, discounts, and warranty 
expenses, where applicable) and adding U.S. direct selling expenses 
(credit, warranty, royalties, and discounts, where applicable).

KSC

    For those models for which there was a sufficient quantity of sales 
at prices at or above COP, we based NV on home market prices to 
unaffiliated purchasers, as well as affiliated purchasers passing the 
arm's length test, in accordance with 19 CFR 351.403. Home market 
prices were based on the packed, ex-factory or delivered prices to 
unaffiliated purchasers in the home market.
    We calculated the starting price net of billing adjustments and 
rebates, where applicable. We made adjustments, where applicable, for 
packing and movement expenses in accordance with sections 773(a)(6)(A) 
and (B) of the Act. We also made adjustments for differences in cost 
attributable to differences in physical characteristics of the 
merchandise pursuant to section 773(a)(6)(C)(ii) of the Act and for 
differences in circumstances of sale (``COS'') in accordance with 
773(a)(6)(C)(iii) of the Act and 19 CFR 351.410. For comparison to EP, 
we made COS adjustments by deducting home market direct selling 
expenses (credit, advertising, royalties, technical service, and 
warranty expenses, where applicable) and adding U.S. direct selling 
expenses (credit, and advertising expenses, where applicable).

Price-to-CV Comparisons

    For price-to-CV comparisons, if necessary, we made adjustments to 
CV in accordance with section 773(a)(8) of the Act.

Preliminary Results of Review

    As a result of our review, we preliminarily determine the weighted-
average dumping margins for NSC and KSC, for the period August 1, 1997 
through July 31, 1998, to be as follows:

------------------------------------------------------------------------
                                                                Margin
         Manufacturer/exporter               Time period       (percent)
------------------------------------------------------------------------
NSC...................................     08/01/97-07/31/98        2.48
KSC...................................     08/01/97-07/31/98        1.32
------------------------------------------------------------------------

    Parties to the proceeding may request disclosure within five days 
of the date of publication of this notice. Any interested party may 
request a hearing within 30 days of publication. Any hearing, if 
requested, will be held 37 days after the date of publication or the 
first business day thereafter. Case briefs from interested parties may 
be submitted not later than 30 days after the date of publication of 
this notice. Rebuttal briefs, limited to issues raised in those briefs, 
may be filed not later than 35 days after the date of publication of 
this notice. The Department will publish the final results of this 
administrative review, including its analysis of issues raised in the 
case and rebuttal briefs, not later than 120 days after the date of 
publication of this notice.
    Upon issuance of the final results of review, the Department shall 
determine, and the U.S. Customs Service shall assess, antidumping 
duties on all appropriate entries. In accordance with 19 CFR 
351.212(b), we calculated an importer-specific ad valorem duty 
assessment rate based on the ratio of the total amount of antidumping 
duties calculated for the examined sales to the total customs value of 
the sales used to calculate those duties. This rate will be assessed 
uniformly on all entries of that particular importer during the POR.
    Furthermore, the following deposit requirements will be effective 
for all shipments of the subject merchandise entered, or withdrawn from 
warehouse, for consumption on or after the publication date, as 
provided by section 751(a) of the Act: (1) the cash deposit rate for 
NSC and KSC will be that established in the final results of review 
(except that if the rate is zero or de minimis, i.e., less than 0.5 
percent, no cash deposit rate will be required for that company); (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 previous review, or the original less than fair value 
(``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; (4) the cash deposit rate for all 
other manufacturers or exporters will continue to be the ``all others'' 
rate of 40.19 percent, established in the LTFV investigation for 
corrosion-resistant steel products from Japan (see Final Determination, 
58 FR 37154 (July 9, 1993)). These requirements, when imposed, shall 
remain in effect until publication of the final results of the next 
administrative review.

Notification of Interested Parties

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

    Dated: August 9, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-21200 Filed 8-13-99; 8:45 am]
BILLING CODE 3510-DS-P