Notice of Preliminary Determination of Sales at Less Than Fair Value; Certain Cold-Rolled Carbon Steel Flat Products From Turkey

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

EFFECTIVE DATE:

May 9, 2002.

FOR FURTHER INFORMATION CONTACT:

Melissa Blackledge, or Robert James at (202) 482-3518, (202) 482-1131, or (202) 482-0649, respectively; Antidumping and Countervailing Duty Enforcement Group III, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230.

THE APPLICABLE STATUTE AND REGULATIONS:

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 Tariff Act) by the Uruguay Round Agreements Act (URAA). In addition, unless otherwise indicated, all citations to the Department of Commerce (the Department) regulations are to the regulations at 19 CFR part 351 (April 2001).

Preliminary Determinations

We preliminarily determine that certain cold-rolled carbon steel flat products (cold-rolled steel) from Turkey are being sold, or are likely to be sold, in the United States at less than fair value (LTFV), as provided in section 733 of the Tariff Act. The estimated margins of sales at LTFV are shown in the “Suspension of Liquidation” section of this notice.

Case History

On October 18, 2001, the Department initiated antidumping investigations of cold-rolled steel from Argentina, Australia, Belgium, Brazil, France, Germany, India, Japan, Korea, the Netherlands, New Zealand, the People's Republic of China, the Russian Federation, South Africa, Spain, Sweden, Taiwan, Thailand, Turkey and Venezuela. The petitioners in this investigation are Bethlehem Steel Corporation, LTV Steel Company, Inc., National Steel Corp., NUCOR Corporation, Steel Dynamics, Inc., United States Steel LLC, WCI Steel, Inc., and Weirton Steel Corporation. See Notice of Initiation of Antidumping Duty Investigations: Certain Cold-Rolled Carbon Steel Flat Products from Argentina, Australia, Belgium, Brazil, France, Germany, India, Japan, Korea, the Netherlands, New Zealand, the People's Republic of China, the Russian Federation, South Africa, Spain, Sweden, Taiwan, Thailand, Turkey, and Venezuela, 66 FR 54198 (October 26, 2001).

In the initiation the Department set aside a period for all interested parties to raise issues regarding product coverage. For a complete discussion of all scope exclusion requests submitted in the context of the on-going cold-rolled steel investigations, see the “Scope Appendix” attached to the Notice of Preliminary Determination of Sales at Less Than Fair Value: Certain Cold-Rolled Carbon Steel Flat Products from Argentina, published concurrently with this preliminary determination. Since the initiation of these investigations the following events have occurred.

On November 13, 2001, the United States International Trade Commission (ITC) notified the Department that it preliminarily determined there is a reasonable indication that an industry in the United States is materially injured by reason of imports of the subject merchandise from Argentina, Australia, Belgium, Brazil, France, Germany, India, Japan, Korea, the Netherlands, New Zealand, the People's Republic of China, the Russian Federation, South Africa, Spain, Sweden, Taiwan, Thailand, Turkey, and Venezuela. See Cold-Rolled Steel Products from Argentina, Australia, Belgium, Brazil, France, Germany, India, Japan, Korea, the Netherlands, New Zealand, the People's Republic of China, the Russian Federation, South Africa, Spain, Sweden, Taiwan, Thailand, Turkey, and Venezuela, 66 FR 57985 (November 19, 2001).

On November 8, 2001, the Department issued Section A, Question 1 of the antidumping questionnaire to Borcelik Celik Sanayii ve Ticaret A.S.(Borcelik), Eregli Demir ve Celik, and Cargill Tarim Sanayii ve Ticaret, requesting volume and value information for the POI for each exporter. We received the information requested on November 22, 2001, and November 26, 2001. Based on this information, the Department selected Borcelik, the largest exporter/producer by volume and value, as the respondent in this investigation. See Memorandum to Joseph A. Spetrini, “Selection of Respondents,” dated November 29, 2001.

Based on our examination of Turkey's inflation indices, we determined the Turkish economy was experiencing high inflation during the POI. “High inflation” is a term used to refer to a high rate of increase in price levels. Investigations involving exports from countries with highly inflationary economies require special methodologies for comparing prices and calculating constructed value and cost of production. Generally a twenty-five percent inflation rate has been used as a guide for assessing the impact of inflation on AD investigations and reviews (see Policy Bulletin No. 94.5, “Differences in Merchandise Calculations in Hyper-inflationary Economies,” dated March 25, 1994). Based upon our examination of the consumer price and wholesale price indices, which indicated that Turkey experienced an inflation rate of over sixty percent during the POI, we find Turkey's economy experienced high inflation. See 2000 and 2001 issues of the International Monetary Fund's International Financial Statistics.

On November 30, 2001, the Department issued an antidumping questionnaire to Borcelik. We requested that Borcelik respond to sections A through D.

Respondent submitted its initial response to section A of the Department's questionnaire on December 21, 2001. We received Borcelik's sections B through D response on January 22, 2002. Petitioners filed comments regarding the section A response on January 14, 2002, and on February 11, 2002, regarding the remaining portions of respondent's questionnaire response. We issued the following supplemental questionnaires to respondent: (i) section A on February 6, 2002, and (ii) sections B, C, and D on March 5, 2002. Respondent filed a response to our section A and sections B through D supplemental questionnaires on March 1, 2002 and April 1, 2002, respectively. Petitioners filed comments regarding the section A supplemental questionnaire on April 1, 2002, and on April 12, 2002, regarding the sections B, C, and D supplemental questionnaires.

Period of Investigation

The period of investigation (POI) is July 1, 2000 through June 30, 2001. This period corresponds to the four most recent fiscal quarters prior to the month of the filing of the petition (i.e., September 2001), and is in accordance with our regulations. See section 19 CFR 351.204(b)(1) of the Department's regulations.

Scope of Investigation

For purposes of this investigation, the products covered are certain cold-rolled (cold-reduced) flat-rolled carbon-quality steel products. For a full description of the scope of this investigation, as well as a complete discussion of all scope exclusion requests submitted in the context of the on-going cold-rolled steel investigations, see the “Scope Appendix” attached to the Notice of Preliminary Determination of Sales at Less Than Fair Value: Certain Cold-Rolled Carbon Steel Flat Products from Argentina, published concurrently with this preliminary determination.

Product Comparisons

Pursuant to section 771(16) of the Tariff Act, all products produced by Borcelik, covered by the description in the “Scope of the Investigation” above, and sold in Turkey during the POI are considered to be foreign like products for purposes of determining appropriate product comparisons to U.S. sales. We have relied on the following fourteen criteria to match U.S. sales of subject merchandise to comparison-market sales of the foreign like product: hardening and tempering, painting, carbon level, quality, yield strength, thickness, thickness tolerance, width, edge finish, form, temper rolling, leveling, annealing, and surface finish. 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 next most similar foreign like product on the basis of the characteristics and reporting instructions listed in the Department's November 30, 2001 questionnaire. If there was no home market foreign like product to compare to a U.S. sale, we used constructed value (CV).

Fair Value Comparisons

To determine whether sales of cold-rolled steel from Turkey were made in the United States at less than fair value, we compared the export price (EP) to the normal value (NV), as described in the “Export Price” and “Normal Value” sections of this notice. In accordance with section 777A(d)(1)(A)(i) of the Tariff Act, we calculated weighted-average EPs for comparison to weighted-average NVs.

Because Turkey's economy experienced high inflation during the POI, as is Department practice, we limited our comparisons to home market sales made during the same month in which the U.S. sale occurred. This methodology minimizes the extent to which calculated dumping margins are overstated or understated due solely to price inflation that occurred in the intervening time period between the U.S. and home market sales.

Export Price

We calculated EP in accordance with section 772(a) of the Tariff Act because Borcelik sold the merchandise directly to the first unaffiliated purchaser in the United States prior to the date of importation, and because constructed export price (CEP) methodology was not otherwise appropriate. We based EP for Borcelik on the C&F price to unaffiliated purchasers in the United States. We made adjustments for movement expenses in accordance with section 772(c)(2)(A) of the Tariff Act; these included, where appropriate, foreign brokerage and handling, international freight, foreign inland freight, marine insurance, and import duties.

Normal Value

Home Market Viability

In order to determine whether there was 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 was equal to or greater than five percent of the aggregate volume of U.S. sales), we compared Borcelik'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 Tariff Act. As Borcelik'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 of the subject merchandise, we determined the home market was viable. Therefore, we have based NV on home market sales in the usual commercial quantities and in the ordinary course of trade.

Affiliated-Party Transactions and Arm's-length Test

To test whether these sales were made at arm's-length prices, we compared on a model-specific basis the starting prices of sales to affiliated and unaffiliated customers net of all movement charges, discounts, direct selling expenses, and packing. Where, for the tested models of the foreign-like product, prices to the affiliated party were on average 99.5 percent or more of the price to the unaffiliated parties, we determined sales made to the affiliated party were at arm's length. See 19 CFR 351.403(c). If these affiliated party sales satisfied the arm's-length test, we used them in our analysis. Merchandise sold to affiliated customers in the home market made at non-arm's-length prices were excluded from our analysis because we considered them to be outside the ordinary course of trade. See 19 CFR 351.102(b). 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.

In addition to its other home market sales, Borcelik reported the sales to it's home market affiliate, Kerim Celik Mamulleri Imalat ve Ticaret A.S. (Kerim Celik). These sales account for more than 5 percent of the total of Borcelik's home market sales during the POI. See 19 CFR 351.403(d). The respondent stated its affiliate, Kerim Celik, cut and slit most of the hot-rolled coils purchased from Borcelik, and the subject merchandise would have a low likelihood of matching to U.S. sales of coiled material. Since Borcelik's sales to Kerim Celik were not at arm's-length, the Department required Borcelik to report home market downstream sales by Kerim Celik for this preliminary determination. See Antidumping Duties; Countervailing Duties Final Rule, 62 FR 27296, 27356 (May 19, 1997).

Cost of Production Analysis

Based on our analysis of the cost allegation submitted by petitioners in the original petition, and in accordance with section 773(b)(2)(A)(i) of the Tariff Act, we found reasonable grounds to believe or suspect Turkish producers had made sales of cold-rolled steel in the home market at prices below the cost of production (COP). As a result, the Department initiated an investigation to determine whether Borcelik made home market sales during the POI at prices below their respective COP, within the meaning of section 773(b) of the Tariff Act. We conducted the COP analysis described below.

A. Calculation of COP

In accordance with section 773(b)(3) of the Tariff Act, we calculated a weighted-average COP based on the sum of Borcelik's cost of materials and fabrication for the foreign like product, plus an amount for home market SG&A expenses, interest expenses, and packing costs. We relied on the COP data provided by Borcelik in its original and supplemental section D cost questionnaire responses except for the following change. We deducted packing expenses from the denominators in the general and administrative and financial expense rate calculations. See Memorandum from Gina K. Lee to Neal M. Halper, Director, Office of Accounting, dated April 26, 2002, Re: Cost of Production and Constructed Value Adjustments for Preliminary Determination on file in room B-099 of the Main Commerce building.

B. Test of Home-Market Sales Prices

We compared the adjusted weighted-average COP for Borcelik to the home market sales of the foreign like product, as required under section 773(b) of the Tariff Act, in order to determine whether these sales had been made at prices below the COP. In determining whether to disregard home market sales made at prices below the COP, we 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, in accordance with sections 773(b)(1)(A) and (B) of the Tariff Act.

On a model-specific basis, we compared the revised COP to the home market prices, less any applicable movement charges, discounts, and billing adjustments. See section 773(f)(1)(B) of the Tariff Act.

C. Results of the COP Test

Pursuant to section 773(b)(2)(C)(i) of the Tariff Act, where less than twenty percent of a 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 twenty 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 addition, pursuant to section 773(b)(2)(D) of the Tariff Act, we also determined whether such sales were made at prices which would permit recovery of all costs within a reasonable period of time. In such a case, because we compared prices to POI-average costs, we also determined such sales were not made at prices which would permit recovery of all costs within a reasonable period of time. We disregarded the below-cost sales and used the remaining above cost sales in our analysis, in accordance with section 773(b)(1) of the Tariff Act.

We found that for certain models of cold-rolled steel, more than twenty percent of the home-market sales by Borcelik were made within an extended period of time at prices less than the COP. Further, the prices did not provide for the recovery of costs within a reasonable period of time. We therefore disregarded these below-cost sales and used the remaining sales as the basis for determining NV, in accordance with section 773(b)(1) of the Tariff Act. For those U.S. sales of cold-rolled steel for which there were no comparable home market sales in the ordinary course of trade, we compared EP to constructed value (CV) in accordance with section 773(a)(4) of the Tariff Act. See “Price-to-CV Comparisons,” below.

D. Calculation of Constructed Value

If no sales made in the ordinary course of trade in the home market remain, NV shall be based on CV. See section 773(b)(1) of the Tariff Act. In accordance with section 773(e)(1) of the Tariff Act, we calculated CV based on the sum of Borcelik's cost of materials, fabrication, SG&A, interest, U.S. packing, and an amount for profit. In accordance with section 773(e)(2)(A) of the Tariff Act, we based SG&A and profit on the amounts incurred and realized by Borcelik in connection with the production and sale of the foreign like product in the ordinary course of trade for consumption in the home market. For selling expenses we used the weighted-average home market selling expenses. We used the CV data the respondent provided in its sections B through D supplemental questionnaire responses.

Price-to-Price Comparisons

We calculated NV for Borcelik based on the prices of home market sales that passed the COP test. We made deductions, where appropriate, from the starting price for billing adjustments, foreign inland insurance and inland freight, pursuant to section 773(a)(6)(B) of the Tariff Act. Where appropriate, we made adjustments for differences in the physical characteristics of the merchandise in accordance with section 773(a)(6)(C)(ii) of the Tariff Act. In addition, we made adjustments under section 773(a)(6)(C)(iii) of the Tariff Act for differences in circumstances of sale (COS) for imputed credit expenses (offset by interest revenue) and warranties. 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 Tariff Act.

Price-to-CV Comparisons

In accordance with section 773(a)(4) of the Tariff Act, we based NV on CV if we were unable to find a home market match of identical or similar merchandise within the contemporaneous period (i.e., within the same month as the U.S. sale). For selling expenses, we used the weighted-average home market selling expenses. Where appropriate, we made adjustments to CV in accordance with section 773(a)(8) of the Tariff Act. For comparisons to EP, we made COS adjustments by deducting home market direct selling expenses and adding U.S. direct selling expenses.

Level of Trade

In accordance with section 773(a)(1)(B) of the Tariff 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 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 the exporter to the 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 pursuant to section 773(a)(7)(A) of the Tariff 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).

In implementing these principles in this investigation, we obtained information from Borcelik about the marketing stages involved in its reported U.S. and home market sales, including a description of the selling activities performed by Borcelik for each channel of distribution. In identifying levels of trade for EP and home market sales we considered the selling functions reflected in the starting price before any adjustments. Generally, if the reported levels of trade are the same, the functions and activities of the seller should be similar. Conversely, if a party reports levels of trade that are different for different categories of sales, the functions and activities may be dissimilar.

In the home market Borcelik reported two channels of distribution (sales by Borcelik and sales through its affiliated producer/service center) and two levels of trade (unaffiliated end users and affiliated end users). For both channels of distribution in the home market, Borcelik performed similar selling functions, including providing customer advice or product information, warranty services, the coordination of freight and delivery, and advertising. While we note that inventory maintenance was provided for home market sales through the affiliated service center/reseller and the intensity of the selling activity, providing technical service, may differ, we do not agree that these variations in the selling activities supports Borcelik's claim of two distinct levels of trade in the home market.

First, we note Borcelik did not describe the selling activities for sales through its affiliated producer/service center. In addition, Borcelik provided the same sales process description for both channels of distribution; therefore, we are not persuaded that the processing of customer orders is affected by affiliation. Furthermore, Borcelik's questionnaire responses contradict its claim that the selling activity “providing technical service” is more significant with respect to affiliated producers/resellers. For example, Borcelik claims it provides more technical services to unaffiliated and affiliated end-users than to its affiliated service center/reseller. However, we note that in Borcelik's section B response, the company did not report any direct technical service expenses. Instead, Borcelik reported technical service expenses within indirect selling expenses without regard to end-users and resellers. See Borcelik's January 22, 2002 response on B-49. According to respondent's supplemental section A questionnaire response, “there are no customer categories to which Borcelik would not have provided technical assistance during the POI.” See Borcelik's March 1, 2002 response on page 32. Although the respondent claims more technical assistance is provided to affiliated and unaffiliated end-users than to the service center/reseller, and inventory is maintained by the affiliated service center/reseller, we do not find that these differences support Borcelik's claim that there are two separate levels of trade in the home market. Therefore, we preliminarily determine that home market sales in the two channels of distribution constitute a single level of trade.

In the U.S. market Borcelik had only EP sales (i.e., sales made directly from Borcelik to U.S. trading companies). Borcelik reported one channel of distribution for sales of subject merchandise and one level of trade (to importers) during the POI. See Borcelik's December 21, 2001 response at pages A-13 through A-18. We found no differences in the selling functions performed by Borcelik on sales to U.S. importers and those performed for sales in the home market. For example, on sales to both home market customers and to unaffiliated U.S. importers, Borcelik provided customer advice, product information, warranty services, technical services, and arranged freight and delivery. See Borcelik's December 21, 2001 response at page A-18. The Department has preliminarily determined the record does not support Borcelik's claim that home market sales through the service center are at a different LOT than the U.S. EP sales. Accordingly, because we find the U.S. EP sales and the home market sales to be at the same lot, no LOT adjustment under section 773(a)(7)(A) of the Tariff Act is warranted for Borcelik. For a more detailed discussion regarding the basis for our LOT determination, refer to our Preliminary Determination Analysis Memorandum for Borcelik, dated April 26, 2002.

Currency Conversions

We made currency conversions into U.S. dollars based on the exchange rates in effect on the dates of the U.S. sales based on the daily exchange rates from the Dow Jones Service, as published in the Wall Street Journal. The Department's preferred source for daily exchange rates is the Federal Reserve Bank. However, the Federal Reserve Bank does not track or publish exchange rates for the Turkish lira. Section 773A(a) of the Tariff 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 from the benchmark rate by more than 2.25 percent. The benchmark is defined as the moving average of rates for the 40 business days immediately prior to the date of the actual daily rate to be classified. 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 Tariff 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 of eight consecutive weeks. For an explanation of this method, see Policy Bulletin 96-1: Currency Conversions, 61 FR 9434 (March 8, 1996).

Verification

Pursuant to section 782(i) of the Tariff Act, we intend to verify all information relied upon in making our final determination.

Suspension of Liquidation

In accordance with section 733(d)(2) of the Tariff Act, we are directing the Customs Service to suspend liquidation of all entries of cold-rolled steel from Turkey that are entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice in the Federal Register. We will instruct the Customs Service to require a cash deposit or the posting of a bond equal to the estimated preliminary dumping margin indicated in the chart below. This suspension of liquidation will remain in effect until further notice. The weighted-average dumping margins are as follows:

As Borcelik was the only respondent used in our calculations, we used Borcelik's weight-average margin as the “all others” rate.

ITC Notification

In accordance with section 733(f) of the Tariff Act, we have notified the ITC of our determination. If our final antidumping determination is affirmative, the ITC will determine whether these imports are materially injuring, or threaten material injury to, the U.S. industry. The deadline for that ITC determination would be the later of 120 days after the date of this preliminary determination or 45 days after the date of our final determinations.

Public Comment

Case briefs or other written comments in at least six copies must be submitted to the Assistant Secretary for Import Administration no later than fifty days after the date of publication of this notice, and rebuttal briefs, limited to issues raised in case briefs, no later than fifty-five days after the date of publication of this preliminary determination. A list of authorities used, a table of contents, and an executive summary of issues should accompany any briefs submitted to the Department. Executive summaries should be limited to five pages total, including footnotes. In accordance with section 774 of the Tariff 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, any hearing will be held fifty-seven days after publication of this notice, 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 case and rebuttal briefs. We intend to make our final determination no later than 75 days after the date of this preliminary determination.

This determination is published in accordance with sections 733(f) and 777(i)(1) of the Tariff Act.