65 FR 18044, April 6, 2000 A-580-815 A-580-816 Sunset Reviews Public Document MEMORANDUM TO: Robert S. LaRussa Assistant Secretary for Import Administration FROM: Jeffrey A. May Director Office of Policy SUBJECT: Issues and Decision Memo for the Sunset Review of the Antidumping Duty Orders on Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products from Korea; Final Results Summary We have analyzed the substantive responses of interested parties in the expedited sunset reviews of the antidumping duty orders covering certain cold- rolled and corrosion-resistant carbon steel flat products from Korea. We recommend that you approve the positions we have developed in the Discussion of the Issues section of this memorandum for these final results. Below is the complete list of the issues in these expedited sunset reviews for which we received substantive comments. 1. Likelihood of continuation or recurrence of dumping Weighted-average dumping margin Volume of imports Other factors 2. Magnitude of the margin likely to prevail Margins from investigation Use of a more recent margin Duty absorption History of the Orders: On July 9, 1993, the Department published in the Federal Register the final determinations of sales at less than fair value ("LTFV") on certain cold-rolled and corrosion-resistant carbon steel flat products from Korea (58 FR 37176). On August 2, 1993, the Department published in the Federal Register the antidumping duty orders and amended final determinations of LTFV on certain cold-rolled and corrosion carbon steel flat products from Korea (58 FR 41083). In the antidumping duty order on certain cold-rolled carbon steel flat products, the Department determined an estimated weighted-average dumping margin of 14.44 percent for Pohang Iron and Steel Company, ("POSCO") and "all others." In the antidumping duty order on certain corrosion-resistant steel flat products, the Department determined an estimated weighted-average dumping margin of 17.70 percent for POSCO, and "all others." Id. At the time of the initiation of these sunset reviews, the Department had completed four administrative reviews since the issuance of these orders.(1) The fifth administrative review was pending. Since that time the fifth review has been completed. See 65 FR 13359 (March 13, 2000).(2) The antidumping duty orders on certain cold-rolled and corrosion-resistant carbon steel flat products remain in effect for all Korean manufacturers and exporters. Background: On September 1, 1999, the Department of Commerce ("the Department") published the notice of initiation of sunset review of the antidumping duty orders on certain cold-rolled and corrosion-resistant carbon steel flat products from Korea (64 FR 47767). On September 10, 1999, the Department received Notices of Intent to Participate in both reviews on behalf of Bethlehem Steel Corporation, Ispat Inland, Inc., LTV Steel Company, Inc., US Steel Group (a unit of USX Corporation), and National Steel Corporation (collectively, "the domestic interested parties"), within the deadline specified in section 351.218(d)(1)(i) of the Sunset Regulations. On October 1, 1999, we received complete substantive responses to the notice of initiation in both reviews from the domestic interested parties, within the deadline specified in section 351.218(d)(3)(i) of the Sunset Regulations. Pursuant to section 771(9)(C) of the Act, the domestic interested parties claimed interested party status as U.S. producers of the domestic like product. The domestic interested parties assert that since the petition was filed, one or more of the domestic interested parties have participated in all subsequent administrative reviews, including the recent fifth review. The Department did not receive a substantive response from any respondent interested party in either of these two reviews. As a result, and in accordance with our regulations (19 CFR 351.218(e)(1)(ii)(C)(2)), we determined to conduct expedited sunset reviews of these antidumping duty orders. In accordance with section 751(c)(5)(C)(v) of the Act, the Department may treat a review as extraordinarily complicated if it is a review of a transition order (i.e., an order in effect on January 1, 1995). These review concern transition orders within the meaning of section 751(c)(6)(C)(ii) of the Act. Therefore, on December 22, 1999, the Department determined that the sunset review of the antidumping duty orders on certain cold-rolled and corrosion-resistant carbon steel flat products from Korea are extraordinarily complicated and extended the time limit for completion of the final results of these reviews until not later than, March 29, 2000, in accordance with section 751(c)(5)(B) of the Act. (3) Discussion of the Issues In accordance with section 751(c)(1) of the Act, the Department conducted these sunset reviews to determine whether revocation of the antidumping duty orders would be likely to lead to continuation or recurrence of dumping. Section 752(c) of the Act provides that, in making this determination, the Department shall consider the weighted-average dumping margins determined in the investigation and subsequent reviews and the volume of imports of the subject merchandise for the period before and the period after the issuance of the antidumping duty order. In addition, section 752(c)(3) of the Act provides that the Department shall provide to the International Trade Commission ("the Commission") the magnitude of the margin of dumping likely to prevail if the order is revoked. Below we address the comments of interested parties. 1. Likelihood of Continuation or Recurrence of Dumping Interested Party Comments: In their substantive responses, the domestic interested parties state that revocation of these antidumping duty orders would lead Korean producers and exporters to continue unfair dumping in the U.S. market. With respect to whether dumping continued at levels above de minimis after the issuance of the orders, the domestic interested parties argue that in the antidumping duty orders, the Department determined an estimated weighted-average dumping margin of 14.44 percent for all Korean respondents on the order on certain cold-roll carbon steel flat products, and 17.70 percent for certain corrosion-resistant carbon steel flat products for all Korean respondents. See Domestic Interested Parties', October 1, 1999, Substantive Response, at 7. Further, they contend that in subsequent administrative reviews, Korean respondents have consistently dumped at above de minimis levels with the antidumping duty orders in place. Id. With respect to import volumes, the domestic interested parties, citing to the Department's IM-145 statistics, demonstrate that imports declined after the issuance of the orders. Id. at 8, and Attachment 3. In 1992, the year before the antidumping duty orders were issued, import volumes of certain cold-rolled and corrosion-resistant carbon steel flat products totaled 172,641 short tons, and 193,496 short tons, respectively. In 1993, after the Department published the antidumping duty orders, imports declined to negligible levels: 17,114 short tons of certain cold-rolled carbon steel flat products, and 94,236 short tons of corrosion-resistant carbon steel flat products. Id. at 8. Thereafter, the domestic interested parties state, import volumes remained depressed through 1997, until 1998 when imports surged. See Id. Substantive Response, at 9. The domestic interested parties assert that the surge of imports was caused by the 1997-1998 Asian financial crisis. As a result of the financial crisis, the domestic interest parties contend the won declined sharply against the U.S. dollar causing the decline of consumer demand of steel products in Korea, and in Korea's major export markets of Japan, and Southeast Asia.(4) The domestic interested parties state that the Korean won has rebound since the financial crisis, by approximately 40 percent, and this trend will continue. Id at 10. With the strengthening of the Korean won, the domestic interested parties argue that Korean market prices increased, in relation to the U.S. prices, thus increasing the likelihood that future sales would be made at LTFV. For these reason, the domestic interested parties argue that revocation of these orders would result in the continuation or recurrence of dumping by Korean producers and exporters. In accordance with section 752(c)(2) of the Act, the domestic interested parties urged the Department to determine that good cause exists, with respect to both of these orders, for considering factors other than dumping margins and import volumes. In their substantive response at 12-17, the domestic interested parties argue that in addition to the decline of the won, the Department should consider other factors that may lead to the continuation or recurrence of dumping if the orders are revoked. The domestic interested parties note (1) Korean producers' excess levels of inventory, specifically, POSCO's inventory of finished goods, (2) the Korean producers' production capacity and increasing levels of utilization of that capacity by Korean producers, (3) respondents history of sales below the cost of production (in the fifth review the Department conducted cost investigations for all three respondents), and (4) the fact that Korean producers and exporters remain subject to other antidumping duty orders and investigations. Finally, the domestic interested parties argue that respondents, POSCO, Dongbu, and Union, benefit from a protected home market, as demonstrated by the fact that they maintain large market share in their home market. The domestic interested parties argue that each of these other factors supports a finding that dumping is likely to continue or recur if the orders are revoked. Department's Position: Drawing on the guidance provided in the legislative history accompanying the Uruguay Round Agreements Act ("URAA"), specifically the Statement of Administrative Action ("the SAA"), H.R. Doc. No. 103-316, vol. 1 (1994), the House Report, H.R. Rep. No. 103-826, pt.1 (1994), and the Senate Report, S. Rep. No. 103-412 (1994), the Department issued its Sunset Policy Bulletin providing guidance on methodological and analytical issues, including the basis for likelihood determinations. The Department clarified that determinations of likelihood will be made on an order-wide basis (see section II.A.2 of the Sunset Policy Bulletin). Additionally, the Department normally will determine that revocation of an antidumping duty order is likely to lead to continuation or recurrence of dumping where (a) dumping continued at any level above de minimis after the issuance of the order, (b) imports of the subject merchandise ceased after the issuance of the order, or (c) dumping was eliminated after the issuance of the order and import volumes for the subject merchandise declined significantly (see section II.A.3 of the Sunset Policy Bulletin). In addition to considering the guidance on likelihood cited above, section 751(c)(4)(B) of the Act provides that the Department shall determine that revocation of an order is likely to lead to continuation or recurrence of dumping where a respondent interested party waives its participation in the sunset review. Section 751(c)(4)(B) of the Act provides that the Department shall determine that revocation of an order is likely to lead to continuation or recurrence of dumping where a respondent interested party waives its participation in the sunset review. In the instant reviews, the Department did not receive a response from any respondent interested party. Pursuant to section 351.218(d)(2)(iii) of the Sunset Regulations, this constitutes a waiver of participation. As noted in the SAA, declining import volumes accompanied by the continued existence of dumping margins after the issuance of the order may provide a strong indication that, absent an order, dumping would be likely to continue, because the evidence would indicate that the exporter needs to dump to sell at pre-order volumes. We agree with the domestic interested parties that import volume sharply declined after the issuance of these orders. We confirm that import volumes of certain cold-rolled carbon steel flat products sharply declined immediately after the issuance of the order, and from 1993 through 1997, remained low, despite a surge in 1998. However, our review with respect to certain corrosion- resistant carbon steel flat products reveals that although imports declined immediately after the issuance of the order, import volumes thereafter remained consistent from 1993 through 1997. We further note that although in 1998 imports surged, and in 1999 imports increased beyond the 1998 import levels, imports have never regained their pre-order level. Although the margin of dumping declined over the life of these orders, dumping nevertheless continued at levels above de minimis after the issuance of these orders. As stated above, the existence of dumping at any level above de minimis after the issuance of the order is highly probative of likelihood of continuation or recurrence of dumping. Therefore, given that dumping at levels above de minimis continued over the life of the orders, respondent interested parties waived their right to participate in these reviews, and absent argument and evidence to the contrary, the Department determines that dumping would likely continue or recur if the orders on certain cold-rolled and corrosion-resistant carbon steel flat products from Korea were revoked. Given that the Department based its determination of the existence of dumping at levels above de minimis after the issuance of the orders, it is not necessary that the Department address the domestic interested parties' arguments regarding other factors. 2. Magnitude of the margin likely to prevail Interested Party Comments: With respect to the magnitude of the margin likely to prevail if the orders on certain cold-rolled and corrosion-resistant carbon steel flat products were revoked, the domestic interested parties argue that the Department should follow its normal practice and select margins from the original investigation, because the calculated rates from the investigation best reflect the behavior of producers and exporters absent the discipline of the antidumping duty orders. Furthermore, in their substantive response at 19, the domestic interested parties argue that margins from the most recent review are inappropriate in these cases because, although dumping margins declined after the issuance of the orders, imports declined to negligible levels when the orders were imposed. Further, in 1993, Korea's market share, a measure used by the Department to determine whether a more recently calculated rate should be used, declined. Department's Position: In the Sunset Policy Bulletin, the Department stated that, consistent with the SAA and House Report, the Department will provide to the Commission the company -specific margin from the investigation because that is the only calculated rate that reflects the behavior of exporters without the discipline of an order. Further, for companies not specifically investigated or for companies that did not begin shipping until after the order was issued, the Department normally will provide a margin based on the "all others" rate from the investigation. (See section II.B.1 of the Sunset Policy Bulletin.) Exceptions to this policy include the use of a more recently calculated margin, where appropriate, and consideration of duty absorption determinations. (See sections II.B.2 and 3 of the Sunset Policy Bulletin.) As stated above, the Department, in the amended final determination of sales at LTFV, established dumping margins of 14.44 percent for POSCO and "all others" with respect to the order on cold-rolled carbon steel flat products from Korea, and 17.70 percent for POSCO and "all others" with respect to the order on corrosion-resistant carbon steel flat products from Korea.(5) Absent argument or evidence to the contrary, we agree with the domestic interested parties that the margins from the original investigation on certain cold-rolled and corrosion carbon steel flat products from Korea are probative of the behavior of producers and exporters without the discipline of the order. Consistent with section 751(a)(4) of the Act, we stated in the Sunset Policy Bulletin that we will provide to the Commission, on a company-specific basis, our findings regarding duty absorption for all reviews in which we conducted a duty absorption analysis. The Department investigated allegations of duty absorption in the administration reviews initiated in 1996 and 1998. In the final results of the 1996-1997 administrative review of these orders, the Department found that antidumping duties were absorbed.(6) In addition, in the recent final results of the 1997-1998 administrative reviews, the Department found that duties were being absorbed.(7) In these reviews, the Department found that duty absorption occurred with respect to sales by three companies that were reviewed. Listed below are the three companies and the percentage of their U.S. sales on which duties were being absorbed. 1998 Duty Absorption Findings ___________________________________________________________________________ Manufacturer/Producer/Exporter/Product Percentage of U.S. affiliate's sales with dumping margins ___________________________________________________________________________ Certain Corrosion-Resistant Carbon Steel Flat Products Dongbu 20.81 POSCO 6.85 Union 4.49 Certain Cold-Rolled Carbon Steel Flat Products POSCO 2.70 ___________________________________________________________________________ Although not argued by the domestic interested parties, in the Sunset Policy Bulletin the Department explained that, where duty absorption had been found in an administrative review initiated in 1998 (for transition orders), the Department will normally determine that a company's current dumping margin is not indicative of the margin likely to prevail if the order is revoked and will provide to the Commission the higher of the margin that the Department otherwise would have reported to the Commission or the most recent margin for that company adjusted to account for findings on duty absorption. Our calculations regarding the 1998 duty absorption findings indicate that the margins from the original investigation are the higher margins after taking 1998 duty absorption levels into consideration. This information can be found in the memorandum to the file dated March 29, 2000, at the Central Records Unit, Room B-099 of the Department's main building. Final Results of Review: We determine that revocation of the antidumping duty orders would be likely to lead to continuation or recurrence of dumping at the following percentage weighted-average margins: ______________________________________________________________________ Manufacturers/Producers Margin (percent) ---------------------------------------------------------------------- Cold-Rolled Steel Pohang Iron and Steel Company (POSCO) 14.44 All Others 14.44 Corrosion-Resistant Steel Pohang Iron and Steel Company (POSCO) 17.70 All Others 17.70 _________________________________________________________________________ Recommendation Based on our analysis of the comments received, we recommend adopting all of the above positions. If these recommendations are accepted, we will publish the Final Results of Review in the Federal Register. AGREE ________ DISAGREE ________ ____________________________ Joseph A. Spetrini Acting Assistant Secretary for Import Administration ____________________________ (Date) _______________________________________________________________________ A-580-815 A-580-816 Sunset Review Public Document Memorandum To: File From: Martha Douthit Financial Analyst/Office of Policy Through: Melissa Skinner Sr. Import Policy Analyst/Office of Policy Subject: Sunset Review of Antidumping Duty Orders on Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products from Korea - Consideration of Duty Absorption COMPANY/PRODUCT PERIOD OF REVIEW Pohang Iron and Steel Company, Ltd. (POSCO) August 1, 1997 - July 31, 1998 Certain Cold-Rolled Carbon Steel Flat Products : Dumping Margin from original investigation - 14.44 ( see 58 FR 41083 (August 2, 1993)). Dumping Margin from administrative review - 0.41 (see 65 FR 13359 (March 13, 2000)). Duty Absorption - 2.70 % (see 65 FR 13359 ( March 13, 2000)) 2 x 0.41 = 0.82 100 - 2.70 = 97.30 0.82 x 2.70 = 2.21 0.41 x 97.30 = 39.90 2.21 +39.90 = 42.11 42.10/100 = .42 0.42 percent is less than 14.44 percent rate from the original investigation. POSCO: Certain Corrosion-Resistant Carbon Steel Flat Products Dumping Margin from original investigation - 17.70 ( see 58 FR 41083 (August 2, 1993)) Dumping Margin from administrative review - 0.68 (see 65 FR 13329 (March 13, 2000)) Duty Absorption - 6.85 % (see 65 FR 13359 ( March 13, 2000)) 2 x 0.68 = 1.36 100 - 6.85 = 93.15 1.36 x 6.85 = 9.32 0.68 x 93.15 = 63.34 9.32 + 63.34 = 72.66 72.66/100 = .73 .73 percent is less than 17.70 percent rate from the original investigation. DONGBU Certain Cold-Rolled Carbon Steel Flat Products - Non Applicable Certain Corrosion-Resistant Carbon Steel Flat Products: Dumping Margin from original investigation ("all others") 17.70% ( see 58 FR 41083 (August 2, 1993)). Dumping Margin from administrative review - 1.29 ( see 65 FR 13359 (March 13, 2000)). Duty Absorption - 20.81 % (see 65 FR 13359 ( March 13, 2000)) 2 x 1.29 = 2.58 100 - 20.81 = 79.19 2.58 x 20.81 = 53.69 1.29 x 79.19 = 102.16 56.69 + 102.66 = 155.85 155.85/100 = 1.56 1.56 is less than the 17.70 percent rate from the original investigation. UNION Certain Cold-Rolled Carbon Steel Flat Products - Non Applicable Certain Corrosion-Resistant Carbon Steel Flat Products: Dumping Margin from original investigation "all others" - 17.70 % (see 58 FR 41083 (August 2, 1993)) Dumping Margin from administrative review - 0.14 (see 65 FR 13359 (March 13, 2000)) Duty Absorption - 4.49 % (see 65 FR 13359 (March 13, 2000)) 2 x 0.14 = 0.28 100 - 4.49 = 95.51 0.28 x 4.49 = 1.26 0.14 x 95.51 = 13.37 1.26 + 13.37= 14.63 14.63/100 = .146 .146 percent is less than the 17.70 percent rate from the original investigation. ___________________________________________________________________________ footnotes: 1. See Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products from Korea: Final Results of Antidumping Duty Administrative Reviews, 62 FR 18404 (April 15, 1997), amended 62 FR 33587 (June 20. 1997); Certain Cold- Rolled and Corrosion-Resistant Carbon Steel Flat Products from Korea: Final Results of Antidumping Duty Administrative Reviews, 63 FR 781 (January 7, 1998); Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products from Korea: Final Results of Antidumping Duty Administrative Reviews, 63 FR 13170 (March 18, 1998), amended 63 FR 20572 (April 27, 1998); and Certain Cold- Rolled and Corrosion-Resistant Carbon Steel Flat Products from Korea: Final Results of Antidumping Duty Administrative Reviews, 64 FR 12927 (March 16, 1999). 2. See Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products from Korea: Final Results of Antidumping Duty Administrative Reviews, 65 FR 13359 (March 13, 2000). 3. See Extension of Time Limit for Final Results of Five-Year Reviews, 64 FR 71726 (December 22, 1999). 4. According to the domestic interested parties, the decrease of steel consumption by the Asian markets forced Korean producers and exporters to make sales in healthier markets, such as the United States (see Domestic Interested Parties', October 1, 1999, Substantive Response, at 9). 5. See Amendment of Final Determination of Sales at Less Than Fair Value: Certain Hot-Rolled Carbon Steel Flat Products, Certain Cold-Rolled Carbon Steel Flat Products, Certain Corrosion-Resistant Carbon Steel Flat Products, and Certain Cut-to-Length Carbon Steel Plate from Korea., 58 FR 41083 (August 2, 1993). 6. See Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products From Korea: Final Results of Antidumping Duty Administrative Reviews: Final Results of Antidumping Duty Administrative Reviews; 63 FR 13170 (March 18, 1998) 7. See Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products From Korea: Final Results of Antidumping Duty Administrative Reviews: Final Results of Antidumping Duty Administrative Reviews; 65 FR 13359 (March 13, 2000).