66 FR 7617, January 24, 2001 A-122-823 Circumvention Inquiry Public Document DAS III/9/MFP MEMORANDUM TO: Troy H. Cribb Assistant Secretary for Import Administration FROM: Joseph A. Spetrini Deputy Assistant Secretary AD/CVD Enforcement Group III SUBJECT: Issues and Decision Memorandum for the Circumvention Inquiry: Cut-to-Length Carbon Steel Plate From Canada SUMMARY: We have analyzed the comments of interested parties in this circumvention inquiry of the antidumping duty order covering cut-to-length carbon steel plate from Canada. As a result of our analyses, we have made no changes to our preliminary determination. We recommend that you approve the positions we have developed in the "Discussion of the Issues" section of this Issues and Decision Memorandum. Below is the complete list of the issues in this inquiry for which we received comments by parties: COMMENTS 1. The Department should terminate this inquiry because the remedy would not bring relief to the U.S. industry. 2. The Department should terminate this inquiry because there is no longer an order which can be circumvented. 3. Continuation of this Inquiry would not serve the purposes of the Statute. 4. The Department cannot include boron-added carbon steel within the class or kind of merchandise subject to this order. 5. The Department should recalculate the "All-Others" rate. 6. The addition of boron does not lead to an affirmative determination of circumvention. BACKGROUND: On October 31, 2000, pursuant to Sections 751 and 781(c) of the Tariff Act of 1930, as amended ("the Act"), the Department published the Preliminary Determination of Circumvention of Antidumping Order for Cut-to- Length Carbon Steel Pate from Canada, 65 FR 64926 ("Preliminary Determination"). We invited interested parties to comment on our preliminary results. Respondents Gerdau MRM Steel ("MRM") and Co-Steel Lasco ("CSL") submitted comments to the Preliminary Determination on November 30, 2000. Kentucky Electric Steel Company ("Petitioner") did not file comments with the Department. On November 2, 2000, the U.S. International Trade Commission ("ITC") found, pursuant to a Sunset Review, that revocation of the antidumping order on carbon steel plate from Canada would not injure or threaten to injure the U.S. industry. See, Certain Carbon Steel Products from Australia, Belgium, Brazil, Canada, Finland, France, Germany, Japan, Korea, Mexico, Netherlands, Poland, Romania, Spain, Sweden, Taiwan, and United Kingdom, 65 FR 75301 (December 1, 2000). Subsequently, the Department has revoked the antidumping order with an effective date for revocation of January 1, 2000. See, Revocation of Antidumping and Countervailing Duty Orders on Certain Carbon Steel Products From Canada, Germany, Korea, the Netherlands, and Sweden, 65 FR 78467 (December 15, 2000). DISCUSSION OF THE ISSUES: Comment 1: CSL noted in its brief that an affirmative final determination would only reach a limited segment of imports and have no prospective effect. CSL stated that pursuant to the ITC's findings, only imports of steel plate that entered the United States before January 1, 2000, and remained unliquidated as of the date the Department instructed the Customs Service to suspend liquidation of the subject merchandise, could be subject to duty deposits and antidumping duties. Moreover, because CSL is on a 314-day liquidation schedule at the U.S. Custom's Service, the existence of unliquidated entries is remote. In light of this limitation on the number of imports that would be affected by an affirmative circumvention determination, CSL argued that the Department should terminate these anticircumvention procedures. Department's Position: The Department recognizes that, in light of the revocation of this order under the sunset provisions effective January 1, 2000, only imports of steel plate that entered the United States before that date would be subject to duty deposits and antidumping duties pursuant to an affirmative circumvention determination in this matter. However, merely because an order would be applicable only to specific imports does not justify the termination of anticircumvention proceedings. We note that under section 351.225(l)(2) of the Department's regulations, this circumvention inquiry has effect with respect to all unliquidated entries of the circumventing merchandise made on or after the date of initiation, May 12, 1998. While entries of much of this merchandise may have been liquidated, the Department has no practical means of determining this conclusively. If the Department suspects that a respondent circumvented an existing antidumping order, then the Department has the statutory authority under Section 781(c) of the Act to pursue an anticircumvention investigation regardless of the number of entries which may be subject to such an inquiry. Finally, anticircumvention proceedings and orders are meant to discourage the circumvention of existing antidumping orders, and the Department's Final Determination in this matter effectively furthers this goal. Comment 2: CSL has argued that, in any event, that there is no class or kind of merchandise subject to the antidumping order following the ITC's findings. MRM also has argued that the Department lacks statutory authority to continue this circumvention inquiry because, since the Preliminary Determination, the ITC has ordered the revocation of the current Antidumping Order and because "with no order there is nothing to circumvent and no basis for proceeding with the inquiry." Department's Position: We disagree with respondents. Although we agree that a final determination would have no practicable effect for merchandise entered after December 31, 1999, boron-added merchandise entered between May 12, 1998 and December 31, 1999 is potentially subject to administrative review. Moreover, it is well-established that the Department has the authority, under Section 751(c) of the Act, to conduct, and indeed has conducted, administrative reviews covering periods through the date that suspension of liquidation is terminated as a result of a Sunset Review conducted by the ITC. See, e.g., Elemental Sulphur from Canada, 65 FR 77567 (December 12, 2000). We also note in this regard that the Department is continuing to conduct its annual administrative reviews of this order. See, Notice of Initiation of Antidumping and Countervailing Duty Administrative Reviews and Requests for Revocation in part, 65 FR 58733, (October 2, 2000). Therefore, contrary to either CSL or MRM's claims, the Department does have the authority to pursue an anticircumvention investigation of subject merchandise that allegedly circumvented existing orders prior to January 1, 2000. Comment 3: CSL states that continuation of this anticircumvention inquiry would not serve the underlying purposes of the statute to prevent foreign producers from circumventing existing antidumping orders. CSL believes that if a respondent is found guilty of circumvention in this case, because of the ITC's findings, an affirmative determination would neither discourage foreign exporters from changing the price of their products, nor frustrate domestic purchasers from circumventing antidumping duties. Department's Position: The Department agrees that anticircumvention proceedings were instituted by statute to discourage the circumvention of antidumping orders by either foreign producers or domestic purchasers. However, the Department disagrees with CSL that an affirmative anticircumvention determination in this case would not discourage such behavior. Any respondent who increased the boron content of the steel plate subject merchandise before January 1, 2000, in order to circumvent an existing administrative order, becomes, through the implementation of an affirmative anticircumvention determination, subject to remedial action at the U.S. border which may prohibit that respondent from realizing any anticipated benefits from such actions. Thus, the underlying purpose of the anticircumvention provisions would be sufficiently supported by an affirmative determination. Comment 4: CSL and MRM both argue that the Department cannot include steel plate with a minimum .0008 percent boron by weight within the definition of "class or kind"of carbon steel under the anticircumvention provision of the Act. Both claim that the Department has expanded the scope of the antidumping duty order to capture products that were explicitly excluded from the underlying investigation. MRM claims that the Department effectively has changed its administrative practice in a manner inconsistent with the Department's international legal obligations, and both claim that U. S. case law, legislative history, the Harmonized Tariff Schedule and the Act forbid this investigation and an affirmative determination. Department's Position: CSL and MRM's arguments reflect the same arguments made by respondents in Nippon Steel Corp., et. al., v. United States, 219 F.3d 1348 (Fed. Cir., July 26, 2000). That case involved fact patterns mirroring this matter, with the ultimate dispute involving an allegation that the respondents had circumvented the antidumping duty order on corrosion-resistant steel sheet from Japan by increasing the amount of boron by .0008 percent or more. Despite the protestations of the respondents that Commerce was attempting to widen the scope of the antidumping order without statutory authorization, the United States Court of Appeals for the Federal Circuit stated that the addition of such small amounts of boron to steel does nothing more than create an "insignificant alteration to an existing product." Thus, the Court noted that the Department may determine if the addition of a small amount of boron constitutes a "minor alteration" as described in Section 781(c) of the Act. The judgment in Nippon remains the applicable legal standard. As noted in the Preliminary Determination, the only difference in the production of boron-added carbon steel versus ordinary carbon steel is in the refining stage, where boron is simply added to the molten steel. Less than 100 pounds of boron need be added to a hundred tons of molten steel to meet the threshold level of 0.0008 percent boron. Both the physical alternations and the costs of modification of carbon steel to add boron are minor. In fact, the cost to make such a change is approximately one third of one percent of the sales price. In addition, the Department has reviewed numerous other factors already listed in the Preliminary Determination. Thus, the Department has reasonably determined that the addition of boron to steel plate constitutes a "minor alteration" pursuant to section 781(c) of the Act, and it is statutorily within the authority of the Department to determine if the addition of boron to cut-to-length steel plate from Canada constitutes the circumvention of an existing administrative order. In response to MRM's claims that the Department has violated international obligations, because the Department has acted within its statutory authority to pursue anticircumvention investigations of goods that have been slightly altered by the respondents, the Department has violated no international trade agreements. As noted in the Preliminary Determination, anticircumvention laws by their nature permit the agency to include products that may not, initially, technically fall within the scope of the investigation, but fall outside of the scope merely because of an insignificant minor alteration. Such laws do not violate the United States' obligations as a member of the World Trade Organization (WTO) or the North American Free Trade Agreement (NAFTA). Comment 5: CSL requested that the Department, regardless of its final determination, calculate a new "all-others" rate for any duty deposits required of CSL. CSL contends that the "all-others" rate calculated in the original investigation was based on partial facts available for Stelco and, since that time, Stelco's margin has never exceeded .93 percent. Thus, CSL concludes, the 61.88 percent margin does not represent a meaningful estimate of current dumping margins. CSL also argues that use of the 61.88 percent duty deposit rate would be punitive and would not benefit the Petitioner. Therefore, CSL requests that the Department set any duty deposit rate at 0 percent, the rate applicable to MRM. Department's Position: The Department does not have the statutory authority to calculate a new "all-others" rate for CSL. See Floral Trade Council v. US, 822 F.Supp. 766 (May 5, 1993) and Federal Mogul v. United States, Slip Op. 93-83 (May 25, 1993). In addition, CSL provides no legal precedent to the Department to explain the authority under which the Department would make such a determination. Comment 6: Finally, MRM claims that, contrary to the Department's claims in the Preliminary Determination, low levels of boron are routinely used as an alloying element in the modern manufacture of alloy steel products, citing two industry handbooks. Department's Position: We agree with MRM that the addition of boron as an alloying agent is practiced. However, a review of the handbooks to which MRM points confirms Petitioner's statements that this application is limited to increasing "hardenability" in low-carbon steel products. See Petitioner's February 2, 1998 submission at pages 4 and 5 and the affidavit at Exhibit 1. There is no record evidence that this technique yields increased "hardenability" or "toughness" in the higher-carbon steels subject to this order. See our previous discussion of this topic in the Preliminary Determination at 64929. RECOMMENDATION: Based on our analysis of the comments received, we recommend adopting all of the above changes and positions. If accepted, we will publish the final determination in the Federal Register. AGREE___________ DISAGREE___________ __________________________________________ Troy H. Cribb Assistant Secretary for Import Administration __________________________________________ Date