67 FR 43583, June 28, 2002 A-580-834 Changed Circumstances Review Public Document IA III/IX: CW MEMORANDUM TO: Faryar Shirzad Assistant Secretary for Import Administration FROM: Joseph A. Spetrini Deputy Assistant Secretary for Import Administration, Group III SUBJECT: Issues and Decision Memorandum for the Changed Circumstances Review of Stainless Steel Sheet and Strip in Coils from the Republic of Korea ------------------------------------------------------------------------ SUMMARY: We have analyzed the comments and briefs of interested parties in the changed circumstances antidumping duty review of stainless steel sheet and strip in coils from the Republic of Korea. As a result of our analysis, we have not made changes from the Notice of Preliminary Results of Changed Circumstances Antidumping Duty Administrative Review: Stainless Steel Sheet and Strip in Coils from the Republic of Korea, 66 FR 67513, (December 31, 2001) ("Preliminary Results"). We recommend that you approve the positions developed in the "Discussion of the Issues" sections of this Issues and Decision Memorandum. Below is the complete list of the issues in this changed circumstances antidumping duty administrative review for which we received comments and rebuttal comments by interested parties: 1. Collapsing INI and Sammi 2. Application of Sammi's antidumping duty rate to INI BACKGROUND: On August 6, 2001, INI Steel Company ("INI") notified the Department of Commerce ("Department") that it had legally changed its corporate name from Inchon Iron and Steel Co., Ltd. ("Inchon") to INI on July 31, 2001, and the change became effective on August 1, 2001. At the request of INI, the Department initiated a changed circumstances antidumping administrative review to determine if INI is the successor-in-interest to Inchon. See Notice of Initiation of Changed Circumstances Antidumping Duty Administrative Review, 66 FR 49929, (October 1, 2001). During the course of the review, the Department learned of INI's acquisition of Sammi Steel Co. Ltd. ("Sammi"). Subsequently, the Department gathered information concerning the acquisition of Sammi's shares by INI. INI acquired Sammi from court receivership by purchasing 68.42% of Sammi's shares on December 6, 2000. Sammi continues to operate under the name of Sammi. On December 31, 2001, the Department published the Preliminary Results in which we found that INI is the successor-in-interest to Inchon, and that INI and Sammi remain separate legal entities. See Preliminary Results. We invited interested parties to comment on our Preliminary Results. We received written comments from petitioners on January 22, 2002. On January 28, 2002, we received rebuttal comments from respondents. DISCUSSION OF THE ISSUES: Comment 1: Collapsing INI and Sammi Petitioners argue that because INI owns over two thirds of Sammi's equity, Sammi and INI are under common ownership and control and are therefore affiliated under sections 771(33)(E) and (F) of the Tariff Act of 1930, ("the Act"), as amended. Petitioners also contend that both Sammi and INI have production facilities for similar or identical products, and that most stainless steel sheet and strip is a basic, fungible product, which can be substituted by one company for another company's production. Moreover, petitioners refer to the final results of antidumping duty administrative review of certain porcelain-on-steel cookware from Mexico where the Department failed to collapse two producers because they found that they did not have the capability to manufacture the subject merchandise to the same quality and styles of each other. See Certain Porcelain-on-Steel Cookware From Mexico: Final Results of Antidumping Duty Administrative Review, 62 FR 42496 (August 7, 1997) ("Cookware from Mexico"). Petitioners state that while the Department did not collapse the producers in Cookware from Mexico, INI and Sammi's products and facilities are highly similar and it is likely that the producers' subject merchandise can be interchanged. Petitioners assert that there is a significant potential for manipulation of price or production because Sammi and INI are commonly owned and controlled, and therefore have the ability to share sales information, coordinate production and pricing decisions, and transact with each other, as well as have common suppliers and customers. Therefore, petitioners argue that according to 19 C.F.R. 351.401(f) the Department should find the two companies to be a single entity and collapse them in order to determine an antidumping duty order rate. Respondents argue that the Department's findings that INI and Sammi remain separate legal entities in the preliminary results and that INI remained essentially unchanged after the name change with respect to subject merchandise was correct. Respondents assert that the Department properly addressed and analyzed the relevant facts concerning INI's acquisition of Sammi's shares in the Preliminary Results and found that INI and Sammi remain separate legal entities. Department Position: We agree with respondents that the Department properly concluded in the Preliminary Results that INI and Sammi remain separate legal entities. The Department has reviewed the facts on the record and finds no evidence to indicate that INI and Sammi should be treated as a single entity because of INI's acquisition of Sammi's shares. In the Preliminary Results, we found that INI and Sammi have not merged and remain separate legal entities since there is only one overlapping member on INI's and Sammi's boards of directors (and is a non-standing director of Sammi), very few former employees of Inchon are now employed by Sammi, and no changes were made at INI in terms of production facilities, production capacity, production lines, facilities or personnel. See Preliminary Results. Further, our analysis at the preliminary stage of this case revealed that INI has not acquired, or planned to acquire, Sammi's production facilities as a result of its acquisition of Sammi's shares. See Preliminary Results. Thus, for the final results of this changed circumstances review, the Department will continue to treat INI and Sammi as two separate legal entities. Petitioners also addressed the three criteria necessary for collapsing two or more producers under 19 CFR 351.401(f), by arguing that INI and Sammi are affiliated under 771(33) of the Act; have production facilities for similar or identical products; and have the potential for manipulation of price or production. However, while the Department recognizes that 19 C.F.R. 351.401(f) identifies the criteria for treatment of affiliated producers in antidumping proceedings for the calculation of export price, constructed export price, fair value, and normal value, we find that for purposes of this review, we are determining whether INI is the successor- in-interest to Inchon and whether INI's acquisition of Sammi's equity resulted in a merger between INI and Sammi, a new entity, or neither, and not whether the Department should be collapsing INI and Sammi. The Department will analyze whether entities should be collapsed when calculating an antidumping duty margin so that no member of a collapsed group could shift production of the subject merchandise and sell the subject merchandise through the company with the lower margin. In the instant case, the Department is not determining an antidumping duty margin but is instead making a successor-in-interest determination. Therefore, we have not considered whether to collapse INI and Sammi in this proceeding. Comment 2: Application of Sammi's antidumping duty rate to INI Petitioners argue that the Department should collapse INI and Sammi and then apply Sammi's antidumping order status to INI. Moreover, petitioners contend that by not applying Sammi's antidumping order status to INI by virtue of INI's acquisition of Sammi, the Department would be creating a loophole by allowing exporters covered by an antidumping duty order to be excluded from the order if they are acquired by an exporter not in the order. Petitioners cite to Notice of Final Results of Changed Circumstances Antidumping Duty Review: Certain Polyester Staple Fiber From the Republic of Korea, 66 FR 30411 (June 6, 2001) ("PSF from Korea"), as a similar case to INI's acquisition of Sammi, where two exporters formed a 50-50 joint venture and requested that the Department find the joint venture to be the successor of the company excluded from the antidumping duty order, thereby removing the other company from the order. Petitioners state that the Department found that the joint venture was in fact a new legal entity subject to the all others deposit rate and did not exclude the new entity from the antidumping duty order as the exporters had requested. Respondents argue that they have not requested, as in PSF from Korea, that as a result of INI's acquisition of Sammi the Department exclude Sammi from the antidumping duty order. Respondents state that they fully recognize that Sammi, as a separate legal entity, remains subject to the antidumping order. Respondents argue that the facts in PSF from Korea were different because INI acquired Sammi while in PSF from Korea, two exporters established a new legal entity as a 50-50 joint venture. Moreover, respondents argue that its acquisition of Sammi's shares has not changed Sammi's status as being covered by the antidumping order. Respondents also contend that the Department, in the original investigation and subsequent two administrative reviews (the second administrative review is currently ongoing), found Sammi to have no exports of subject merchandise to the United States. Department Position: We agree with respondents that INI's acquisition of a majority stake in Sammi has not changed Sammi's status as being covered by the antidumping order. As we found in the Preliminary Results, and discussed above, the Department continues to recognize Sammi and INI as separate legal entities. See Comment 1. Since the Department is treating INI and Sammi as separate legal entities, they remain subject to their respective antidumping duty deposit rates assigned to them in the most recent administrative review of the subject merchandise. While the Department found in PSF from Korea that the joint venture of the two companies to be a new legal entity subject to the all others deposit rate, in this review the two companies remain separate legal entities subject to their assigned rates from the most recently completed review. Since the Department has made no determination whether to collapse the two producers, we find that it would be inappropriate to assign Sammi's cash deposit rate to INI. Therefore, as a result of this changed circumstances review, Sammi will retain the rate assigned to it during the original investigation. Furthermore, since Inchon was excluded from the antidumping duty order by virtue of its weighted-average margin of zero calculated in the original investigation, INI, as successor in interest to Inchon, is therefore excluded from the order. RECOMMENDATION: Based on our analysis of the comments received, we recommend adopting the above changes and positions. If accepted, we will publish the final results in this changed circumstances antidumping duty administrative review in the Federal Register. AGREE___________ DISAGREE___________ ____________________________________ Faryar Shirzad Assistant Secretary for Import Administration ____________________________________ Date