Stainless Steel Sheet and Strip in Coils From Germany; Notice of Preliminary Results of Antidumping Duty Administrative Review, 45024-45030 [E6-12798]

Agencies

• DEPARTMENT OF COMMERCE
• International Trade Administration

[Federal Register Volume 71, Number 152 (Tuesday, August 8, 2006)]
[Notices]
[Pages 45024-45030]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-12798]


-----------------------------------------------------------------------

DEPARTMENT OF COMMERCE

International Trade Administration

(A-428-825)


Stainless Steel Sheet and Strip in Coils From Germany; Notice of 
Preliminary Results of Antidumping Duty Administrative Review

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.
SUMMARY: In response to requests from Allegheny Ludlum, North American 
Stainless, United Auto Workers Local 3303, United Steelworkers, and 
Zanesville Armco Independent Organization, Inc. (collectively, 
petitioners) and the collapsed respondents ThyssenKrupp Nirosta GmbH 
(ThyssenKrupp Nirosta), ThyssenKrupp VDM GmbH (TKVDM), and ThyssenKrupp 
Nirosta Prazisionsband GmbH (TKNP) (collectively, TKN), the Department 
of Commerce (the Department) is conducting an administrative review of 
the antidumping duty order on stainless steel sheet and strip in coils 
(S4) from Germany. The review covers exports of the subject merchandise 
to the United States produced by TKN. The period of review (POR) is 
July 1, 2004, through June 30, 2005.
    We preliminarily find that TKN made sales at less than normal value 
during the POR. If these preliminary results are adopted in our final 
results of this review, we will instruct U.S. Customs and Border 
Protection (CBP) to assess antidumping duties based on the difference 
between the constructed export price (CEP) and normal value (NV).
    Interested parties are invited to comment on these preliminary 
results. Parties who submit arguments in this proceeding are requested 
to submit with the arguments: (1) a statement of the issues, (2) a 
brief summary of the arguments (no longer than five pages, including 
footnotes) and (3) a table of authorities.

EFFECTIVE DATE: August 8, 2006.

FOR FURTHER INFORMATION CONTACT: Deborah Scott, Tyler Weinhold, or 
Robert James, AD/CVD Operations, Office 7, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, NW, Washington, DC 20230, telephone: 
(202) 482-2657, (202) 482-1121 or (202) 482-0649, respectively.

SUPPLEMENTARY INFORMATION:

Background

    The Department published an antidumping duty order on S4 from 
Germany on July 27, 1999. See Notice of Amended Final Determination of 
Sales at Less than Fair Value and Antidumping Duty Order; Stainless 
Steel Sheet and Strip in Coils from Germany, 64 FR 40557 (July 27, 
1999). On July 1, 2005, the Department published the notice of 
opportunity to request administrative review of S4 from Germany for the 
period July 1, 2004, through June 30, 2005. See Antidumping or 
Countervailing Duty Order, Finding, or Suspended Investigation; 
Opportunity to Request Administrative Review, 70 FR 38099 (July 1, 
2005).
    On July 29, 2005, petitioners and TKN both requested an 
administrative review

[[Page 45025]]

of TKN's sales for the period July 1, 2004, through June 30, 2005. On 
August 29, 2005, the Department published in the Federal Register a 
notice of initiation of this antidumping duty administrative review. 
See Initiation of Antidumping and Countervailing Duty Administrative 
Reviews and Requests for Revocation in Part, 70 FR 51009 (August 29, 
2005).
    On September 7, 2005, the Department issued an antidumping duty 
questionnaire to TKN. TKN submitted its response to section A of the 
questionnaire on September 28, 2005, and its response to sections B 
through D of the questionnaire on November 7, 2005. On February 27, 
2006, the Department issued a supplemental questionnaire requesting 
additional information regarding TKN's response to section D of the 
questionnaire. On March 20, 2006, the Department issued a supplemental 
questionnaire for sections A and B, to which TKN responded on April 21, 
2006. On March 28, 2006, the Department issued a supplemental 
questionnaire for section C, to which TKN responded on May 2, 2006. On 
May 24, 2006, the Department issued another supplemental questionnaire, 
to which TKN responded on June 12, 2006.
    Because it was not practicable to complete this review within the 
normal time frame, on March 10, 2006, we published in the Federal 
Register a notice of the extension for this review. See Stainless Steel 
Sheet and Strip in Coils From Germany: Extension of Time Limit for 
Preliminary Results of Antidumping Duty Administrative Review, 71 FR 
12342 (March 10, 2006). This extension established the deadline for 
these preliminary results as July 31, 2006.

Scope of the Order

    The products covered by this order are certain stainless steel 
sheet and strip in coils. Stainless steel is an alloy steel containing, 
by weight, 1.2 percent or less of carbon and 10.5 percent or more of 
chromium, with or without other elements. The subject sheet and strip 
is a flat-rolled product in coils that is greater than 9.5 mm in width 
and less than 4.75 mm in thickness, and that is annealed or otherwise 
heat treated and pickled or otherwise descaled. The subject sheet and 
strip may also be further processed (e.g., cold-rolled, polished, 
aluminized, coated, etc.) provided that it maintains the specific 
dimensions of sheet and strip following such processing. The 
merchandise subject to this order is currently classifiable in the 
Harmonized Tariff Schedule of the United States (HTS) at subheadings: 
7219.13.0031, 7219.13.0051, 7219.13.0071, 7219.1300.81\1\, 
7219.14.0030, 7219.14.0065, 7219.14.0090, 7219.32.0005, 7219.32.0020, 
7219.32.0025, 7219.32.0035, 7219.32.0036, 7219.32.0038, 7219.32.0042, 
7219.32.0044, 7219.33.0005, 7219.33.0020, 7219.33.0025, 7219.33.0035, 
7219.33.0036, 7219.33.0038, 7219.33.0042, 7219.33.0044, 7219.34.0005, 
7219.34.0020, 7219.34.0025, 7219.34.0030, 7219.34.0035, 7219.35.0005, 
7219.35.0015, 7219.35.0030, 7219.35.0035, 7219.90.0010, 7219.90.0020, 
7219.90.0025, 7219.90.0060, 7219.90.0080, 7220.12.1000, 7220.12.5000, 
7220.20.1010, 7220.20.1015, 7220.20.1060, 7220.20.1080, 7220.20.6005, 
7220.20.6010, 7220.20.6015, 7220.20.6060, 7220.20.6080, 7220.20.7005, 
7220.20.7010, 7220.20.7015, 7220.20.7060, 7220.20.7080, 7220.20.8000, 
7220.20.9030, 7220.20.9060, 7220.90.0010, 7220.90.0015, 7220.90.0060, 
and 7220.90.0080. Although the HTS subheadings are provided for 
convenience and customs purposes, the Department's written description 
of the merchandise under this order is dispositive.
---------------------------------------------------------------------------

    \1\ Due to changes to the HTS numbers in 2001, 7219.13.0030, 
7219.13.0050, 7219.13.0070, and 7219.13.0080 are now 7219.13.0031, 
7219.13.0051, 7219.13.0071, and 7219.13.0081, respectively.
---------------------------------------------------------------------------

    Excluded from the scope of the order are the following: (1) Sheet 
and strip that is not annealed or otherwise heat treated and pickled or 
otherwise descaled, (2) sheet and strip that is cut to length, (3) 
plate (i.e., flat-rolled stainless steel products of a thickness of 
4.75 mm or more), (4) flat wire (i.e., cold-rolled sections, with a 
prepared edge, rectangular in shape, of a width of not more than 9.5 
mm), and (5) razor blade steel. Razor blade steel is a flat-rolled 
product of stainless steel, not further worked than cold-rolled (cold- 
reduced), in coils, of a width of not more than 23 mm and a thickness 
of 0.266 mm or less, containing, by weight, 12.5 to 14.5 percent 
chromium, and certified at the time of entry to be used in the 
manufacture of razor blades. See chapter 72 of the HTS, ``Additional 
U.S. Note'' 1(d).
    Flapper valve steel is also excluded from the scope of the order. 
This product is defined as stainless steel strip in coils containing, 
by weight, between 0.37 and 0.43 percent carbon, between 1.15 and 1.35 
percent molybdenum, and between 0.20 and 0.80 percent manganese. This 
steel also contains, by weight, phosphorus of 0.025 percent or less, 
silicon of between 0.20 and 0.50 percent, and sulfur of 0.020 percent 
or less. The product is manufactured by means of vacuum arc remelting, 
with inclusion controls for sulphide of no more than 0.04 percent and 
for oxide of no more than 0.05 percent. Flapper valve steel has a 
tensile strength of between 210 and 300 ksi, yield strength of between 
170 and 270 ksi, plus or minus 8 ksi, and a hardness (Hv) of between 
460 and 590. Flapper valve steel is most commonly used to produce 
specialty flapper valves in compressors.
    Also excluded is a product referred to as suspension foil, a 
specialty steel product used in the manufacture of suspension 
assemblies for computer disk drives. Suspension foil is described as 
302/304 grade or 202 grade stainless steel of a thickness between 14 
and 127 microns, with a thickness tolerance of plus-or-minus 2.01 
microns, and surface glossiness of 200 to 700 percent Gs. Suspension 
foil must be supplied in coil widths of not more than 407 mm, and with 
a mass of 225 kg or less. Roll marks may only be visible on one side, 
with no scratches of measurable depth. The material must exhibit 
residual stresses of 2 mm maximum deflection, and flatness of 1.6 mm 
over 685 mm length.
    Certain stainless steel foil for automotive catalytic converters is 
also excluded from the scope of this order. This stainless steel strip 
in coils is a specialty foil with a thickness of between 20 and 110 
microns used to produce a metallic substrate with a honeycomb structure 
for use in automotive catalytic converters. The steel contains, by 
weight, carbon of no more than 0.030 percent, silicon of no more than 
1.0 percent, manganese of no more than 1.0 percent, chromium of between 
19 and 22 percent, aluminum of no less than 5.0 percent, phosphorus of 
no more than 0.045 percent, sulfur of no more than 0.03 percent, 
lanthanum of less than 0.002 or greater than 0.05 percent, and total 
rare earth elements of more than 0.06 percent, with the balance iron.
    Permanent magnet iron-chromium-cobalt alloy stainless strip is also 
excluded from the scope of this order. This ductile stainless steel 
strip contains, by weight, 26 to 30 percent chromium, and 7 to 10 
percent cobalt, with the remainder of iron, in widths 228.6 mm or less, 
and a thickness between 0.127 and 1.270 mm. It exhibits magnetic 
remanence between 9,000 and 12,000 gauss, and a coercivity of between 
50 and 300 oersteds. This

[[Page 45026]]

product is most commonly used in electronic sensors and is currently 
available under proprietary trade names such as ``Arnokrome III.''\2\
---------------------------------------------------------------------------

    \2\ ``Arnokrome III'' is a trademark of the Arnold Engineering 
Company.
---------------------------------------------------------------------------

    Certain electrical resistance alloy steel is also excluded from the 
scope of this order. This product is defined as a non-magnetic 
stainless steel manufactured to American Society of Testing and 
Materials (ASTM) specification B344 and containing, by weight, 36 
percent nickel, 18 percent chromium, and 46 percent iron, and is most 
notable for its resistance to high temperature corrosion. It has a 
melting point of 1390 degrees Celsius and displays a creep rupture 
limit of 4 kilograms per square millimeter at 1000 degrees Celsius. 
This steel is most commonly used in the production of heating ribbons 
for circuit breakers and industrial furnaces, and in rheostats for 
railway locomotives. The product is currently available under 
proprietary trade names such as ``Gilphy 36.''\3\
---------------------------------------------------------------------------

    \3\ ``Gilphy 36'' is a trademark of Imphy, S.A.
---------------------------------------------------------------------------

    Certain martensitic precipitation-hardenable stainless steel is 
also excluded from the scope of this order. This high-strength, ductile 
stainless steel product is designated under the Unified Numbering 
System (UNS) as S45500-grade steel, and contains, by weight, 11 to 13 
percent chromium, and 7 to 10 percent nickel. Carbon, manganese, 
silicon and molybdenum each comprise, by weight, 0.05 percent or less, 
with phosphorus and sulfur each comprising, by weight, 0.03 percent or 
less. This steel has copper, niobium, and titanium added to achieve 
aging, and will exhibit yield strengths as high as 1700 Mpa and 
ultimate tensile strengths as high as 1750 Mpa after aging, with 
elongation percentages of 3 percent or less in 50 mm. It is generally 
provided in thicknesses between 0.635 and 0.787 mm, and in widths of 
25.4 mm. This product is most commonly used in the manufacture of 
television tubes and is currently available under proprietary trade 
names such as ``Durphynox 17.''\4\
---------------------------------------------------------------------------

    \4\ ``Durphynox 17'' is a trademark of Imphy, S.A.
---------------------------------------------------------------------------

    Finally, three specialty stainless steels typically used in certain 
industrial blades and surgical and medical instruments are also 
excluded from the scope of this order. These include stainless steel 
strip in coils used in the production of textile cutting tools (e.g., 
carpet knives).\5\ This steel is similar to AISI grade 420 but 
containing, by weight, 0.5 to 0.7 percent of molybdenum. The steel also 
contains, by weight, carbon of between 1.0 and 1.1 percent, sulfur of 
0.020 percent or less, and includes between 0.20 and 0.30 percent 
copper and between 0.20 and 0.50 percent cobalt. This steel is sold 
under proprietary names such as ``GIN4 Mo.'' The second excluded 
stainless steel strip in coils is similar to AISI 420-J2 and contains, 
by weight, carbon of between 0.62 and 0.70 percent, silicon of between 
0.20 and 0.50 percent, manganese of between 0.45 and 0.80 percent, 
phosphorus of no more than 0.025 percent and sulfur of no more than 
0.020 percent. This steel has a carbide density on average of 100 
carbide particles per 100 square microns. An example of this product is 
``GIN5'' steel. The third specialty steel has a chemical composition 
similar to AISI 420 F, with carbon of between 0.37 and 0.43 percent, 
molybdenum of between 1.15 and 1.35 percent, but lower manganese of 
between 0.20 and 0.80 percent, phosphorus of no more than 0.025 
percent, silicon of between 0.20 and 0.50 percent, and sulfur of no 
more than 0.020 percent. This product is supplied with a hardness of 
more than Hv 500 guaranteed after customer processing, and is supplied 
as, for example, ``GIN6.''\6\
---------------------------------------------------------------------------

    \5\ This list of uses is illustrative and provided for 
descriptive purposes only.
    \6\ ``GIN4 Mo,'' ``GIN5'' and ``GIN6'' are the proprietary 
grades of Hitachi Metals America, Ltd.
---------------------------------------------------------------------------

Affiliation/Collapsing

    Section 351.401(f)(1) of the Department's regulations provides that 
certain persons found to be affiliated in accordance with section 
771(33) of the Tariff Act of 1930, as amended (the Tariff Act), may be 
treated as a single entity (collapsed), if certain circumstances exist. 
In the July 1, 2003, to June 30, 2004, administrative review of S4 from 
Germany, the Department treated ThyssenKrupp Nirosta, TKNP, and TKVDM 
as a single entity (i.e., collapsed them) because the three companies 
were affiliated, would not need to engage in major retooling to shift 
production of S4 from one company to another and were found capable 
through their sales and production operations of manipulating prices or 
affecting production decisions. See Stainless Steel Sheet and Strip in 
Coils From Germany; Notice of Preliminary Results of Antidumping Duty 
Administrative Review, 70 FR 45682, 45684-45685 (August 8, 2005) 
(unchanged in Final Results, 70 FR 73729 (December 13, 2005)).
    As in the previous administrative review, the record establishes 
that ThyssenKrupp Nirosta and TKVDM are affiliated based on their 
common control by ThyssenKrupp Stainless GmbH (TK Stainless), another 
entity within the ThyssenKrupp group of companies. Section 771(33)(F) 
of the Tariff Act provides that two or more persons directly or 
indirectly controlling, controlled by, or under common control of 
another entity are affiliated. A ``person'' may be an individual, 
corporation, or group. Further, as provided by section 771(33) of the 
Tariff Act, ``a person shall be considered to control another person if 
the person is legally or operationally in a position to exercise 
restraint or direction over the other person.'' The Department has 
analyzed the information on the record of this administrative review 
regarding the affiliation of ThyssenKrupp Nirosta and TKVDM and has 
determined preliminarily that ThyssenKrupp Nirosta and TKVDM should be 
considered affiliated under section 771(33)(F) of the Tariff Act. See 
Memorandum to Richard Weible, Director, Office 7, AD/CVD Operations, 
``Antidumping Duty Administrative Review of Stainless Steel Sheet and 
Strip in Coils from Germany: Affiliation and Collapsing of ThyssenKrupp 
Nirosta GmbH, ThyssenKrupp Nirosta Pr[auml]zisionsband GmbH and 
ThyssenKrupp VDM GmbH,'' dated June 30, 2006 (Collapsing Memorandum).
    Moreover, as in the previous administrative review, the Department 
has determined preliminarily that ThyssenKrupp Nirosta and TKVDM should 
be treated as a single entity or ``collapsed'' for the purpose of 
calculating an antidumping duty margin. As explained in the Collapsing 
Memorandum, ThyssenKrupp Nirosta and TKVDM have production facilities 
to produce similar or identical merchandise without substantial 
retooling and should be treated as a single entity in accordance with 
19 CFR 351.401(f)(1). Additionally, in determining whether there is a 
significant potential for manipulation of price or production, as 
contemplated by 19 CFR 351.401(f)(2), the Department considers the 
totality of the circumstances of the situation and may place more 
reliance on some factors than others. The totality of the circumstances 
here shows there is a significant potential for the manipulation of 
price or production.
    In addition to Thyssen Krupp Nirosta and TKVDM, the record also 
establishes that ThyssenKrupp Nirosta and TKNP are affiliated based on 
Thyssen Krupp Nirosta's 100 percent ownership of TKNP. Section 
771(33)(E) of the Tariff Act provides that ``any person directly or 
indirectly owning, controlling, or

[[Page 45027]]

holding with power to vote, 5 percent or more of the outstanding voting 
stock or shares of any organization and such organization'' shall be 
considered to be affiliated. Further, as provided by section 771(33) of 
the Tariff Act, ``a person shall be considered to control another 
person if the person is legally or operationally in a position to 
exercise restraint or direction over the other person.'' The Department 
has analyzed the information on the record of this administrative 
review regarding the affiliation of ThyssenKrupp Nirosta and TKNP and, 
as in the previous administrative review, has determined preliminarily 
that the two entities should be considered affiliated under section 
771(33)(E) of the Tariff Act. See the Collapsing Memorandum at page 8.
    Furthermore, as in the previous administrative review, the 
Department has also determined preliminarily that ThyssenKrupp Nirosta 
and TKNP should be treated as a single entity or ``collapsed'' for the 
purpose of calculating an antidumping duty margin. As explained in the 
Collapsing Memorandum, ThyssenKrupp Nirosta and TKNP also have 
production facilities to produce similar or identical merchandise 
without substantial retooling and should be treated as a single entity 
in accordance with 19 CFR 351.401(f)(1). Additionally, information on 
the record demonstrates there is a significant potential for 
manipulation of price or production, within the meaning of 19 CFR 
351.401(f)(2).
    In summary, we find that: (1) ThyssenKrupp Nirosta is affiliated 
with both TKNP and TKVDM under section 771(33) of the Tariff Act; (2) a 
shift in production between ThyssenKrupp Nirosta and TKVDM or between 
ThyssenKrupp Nirosta and TKNP would not require substantial retooling 
of the facilities of these companies; and (3) there is a significant 
potential for price and production manipulation between ThyssenKrupp 
Nirosta and TKVDM and also between ThyssenKrupp Nirosta and TKNP. 
Therefore, the Department preliminarily finds that ThyssenKrupp Nirosta 
is affiliated with both TKNP and TKVDM and should be treated as a 
single entity or ``collapsed'' for the purpose of calculating an 
antidumping duty margin for this administrative review.

Fair Value Comparisons

    To determine whether sales of S4 in the United States were made at 
less than fair value, we compared U.S. price to normal value (NV), as 
described in the ``Constructed Export Price'' and ``Normal Value'' 
sections of this notice. In accordance with section 777A(d)(2) of the 
Tariff Act, we calculated monthly weighted-average NVs and compared 
these to individual U.S. transactions. Because TKN made no ``export 
price'' transactions during the POR, we used only CEP sales in our 
comparisons.

Product Comparisons

    In accordance with section 771(16) of the Tariff Act, we considered 
all products produced by TKN covered by the description in the ``Scope 
of the Order'' section, above, and sold in the home market during the 
POR, to be foreign like products for purposes of determining 
appropriate product comparisons to U.S. sales. We relied on nine 
characteristics to match U.S. sales of subject merchandise to 
comparison sales of the foreign like product (listed in order of 
priority): 1) grade; 2) cold/hot rolled; 3) gauge; 4) surface finish; 
5) metallic coating; 6) non-metallic coating; 7) width; 8) temper; and 
9) edge trim. 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 product 
characteristics and reporting instructions listed in the Department's 
September 7, 2005, questionnaire. Because there were sales of identical 
or similar merchandise in the home market suitable for comparison to 
each U.S. sale, we did not compare any U.S. sales to constructed value 
(CV).

Constructed Export Price (CEP)

    In accordance with section 772(b) of the Tariff Act, CEP is the 
price at which the subject merchandise is first sold (or agreed to be 
sold) in the United States before or after the date of importation by 
or for the account of the producer or exporter of such merchandise, or 
by a seller affiliated with the producer or exporter, to a purchaser 
not affiliated with the producer or exporter, as adjusted under 
sections 772(c) and (d) of the Tariff Act. In accordance with section 
772(b) of the Tariff Act, we used CEP for all of TKN's U.S. sales 
because TKN sold merchandise to affiliated companies in the United 
States which, in turn, sold subject merchandise to unaffiliated U.S. 
customers. TKN reported that sales made through its affiliated 
importers ThyssenKrupp Nirosta North America, Inc. (TKNNA), Mexinox 
USA, Inc. (MXXUSA), and ThyssenKrupp VDM USA, Inc. (TKVDMUSA) consisted 
of two channels of distribution: back-to-back sales and inventory 
sales. See ThyssenKrupp Nirosta's November 7, 2005, questionnaire 
response at C-15 and C-16 and TKVDM's November 7, 2005, questionnaire 
response at C-15 and C-16. We have preliminarily found that TKN's U.S. 
sales are properly classified as CEP sales because these sales occurred 
in the United States and were made through TKN's U.S. affiliates to 
unaffiliated U.S. customers.
    We based CEP on the packed, delivered duty paid or FOB warehouse 
prices to unaffiliated purchasers in the United States. We made 
adjustments for price or billing errors and early payment discounts, 
where applicable. We also made deductions for movement expenses in 
accordance with section 772(c)(2)(A) of the Tariff Act, which included, 
where appropriate, foreign inland freight, foreign brokerage and 
handling, international freight, marine insurance, war risk insurance, 
customs duties, U.S. brokerage, U.S. inland freight, and U.S. 
warehousing expenses. In accordance with section 772(d)(1) of the 
Tariff Act, we deducted those selling expenses associated with economic 
activities occurring in the United States, including direct selling 
expenses (credit costs, warranty expenses, and commissions), inventory 
carrying costs, and indirect selling expenses. We also made an 
adjustment for profit in accordance with section 772(d)(3) of the 
Tariff Act. Finally, for those sales in which merchandise was sent to 
an unaffiliated U.S. processor to be further processed, we made an 
adjustment based on the transaction-specific further processing amounts 
reported by TKN; for sales through MXXUSA that were further processed 
in Mexico prior to importation into the United States, we made an 
adjustment to account for these expenses.

Normal Value

A. Selection of Comparison Market

    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 the 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) of the 
Tariff Act. As TKN'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.

[[Page 45028]]

B. Affiliated-Party Transactions and Arm's-Length Test

    Sales to affiliated customers in the home market not made at 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. If 
sales were not made at arm's-length, then the Department used the sale 
from the affiliated party to the first unaffiliated party. To test 
whether sales to affiliates 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 billing adjustments, 
early payment discounts, rebates, movement charges, commissions, direct 
selling expenses, imputed credit expense, and packing. Where, for the 
tested models of subject merchandise, prices to the affiliated party 
were, on average, between 98 and 102 percent of the price of identical 
or comparable merchandise to the unaffiliated parties, we determined 
that sales made to the affiliated party were at arm's length. See 19 
CFR 351.403(c). In instances where no price ratio could be calculated 
for an affiliated customer because identical or similar merchandise was 
not sold to unaffiliated customers, we were unable to determine whether 
these sales were made at arm's-length prices. Therefore, we excluded 
any such sales from our analysis.

C. Cost of Production Analysis

    In the segment of this proceeding most recently completed at the 
time of our initiation of this review, the Department disregarded 
certain sales made by TKN in the home market because these sales were 
made at prices less than the cost of production (COP). See Stainless 
Steel Sheet and Strip in Coils from Germany; Notice of Preliminary 
Results of Antidumping Duty Administrative Review, 69 FR 47900, 47903 
(August 6, 2004); Stainless Steel Sheet and Strip in Coils from 
Germany; Notice of Final Results of Antidumping Duty Administrative 
Review, 69 FR 75930 (December 20, 2004). Thus, in accordance with 
section 773(b)(2)(A)(ii) of the Tariff Act, there are reasonable 
grounds to believe or suspect that TKN's sales of the foreign like 
product in the home market were made at prices below their COP in the 
current review period. Accordingly, pursuant to section 773(b)(1) of 
the Tariff Act, we initiated a cost investigation to determine whether 
TKN's sales made during the POR were at prices below their respective 
COP.

D. Calculation of Cost of Production

    In accordance with section 773(b)(3) of the Tariff Act, we 
calculated COP based on the sum of the cost of materials and 
fabrication for the foreign like product, plus an amount for home 
market selling, general and administrative (SG&A) expenses and interest 
expenses. We relied on the COP data submitted by TKN, except for the 
changes noted below.
    In accordance with section 773(f)(2) of the Tariff Act, where TKN's 
reported transfer prices for purchases of nickel from an affiliated 
party were not at arm's-length, we increased these prices to reflect 
the prevailing market prices. See Memorandum to Neal Halper, ``Cost of 
Production and Constructed Value Adjustments for the Preliminary 
Results,'' dated July 31, 2006 (COP/CV Adjustment Memorandum). We also 
revised the interest expense ratio for ThyssenKrupp Nirosta, TKVDM, and 
TKNP to exclude packing costs from the denominator of the financial 
expense calculation. See id. Finally, we revised TKVDM's general and 
administrative expense rate to include other operating incomes and 
expenses. See id.

E. Test of Home Market Prices

    We compared the weighted-average COP of TKN's home market sales to 
home market sales prices (net of billing adjustments, early payment 
discounts, rebates, any applicable movement expenses, direct and 
indirect selling expenses, commissions, and packing) 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, in accordance with sections 
773(b)(1)(A) and (B) of the Tariff Act, whether such sales were made in 
substantial quantities within an extended period of time, and whether 
such sales were made at prices which would permit recovery of all costs 
within a reasonable period of time.

F. Results of the Cost Test

    Pursuant to section 773(b)(2)(C) of the Tariff Act, where less than 
20 percent of TKN's sales of a given model were at prices less than the 
COP, we did not disregard any below-cost sales of that model because 
these below-cost sales were not made in substantial quantities. Where 
20 percent or more of TKN's home market sales of a given model were at 
prices less than the COP, we disregarded the below-cost sales because 
such sales were made: (1) in substantial quantities within the POR 
(i.e., within an extended period of time) in accordance with section 
773(b)(2)(B) of the Tariff Act, and (2) 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 Tariff Act (i.e., the sales 
were made at prices below the weighted-average per-unit COP for the 
POR). We used the remaining sales as the basis for determining NV, if 
such sales existed, in accordance with section 773(b)(1) of the Tariff 
Act. In this review, we have found sales below the COP and have, as 
described above, disregarded such sales from our margin calculations.

G. Price-to-Price Comparisons

    We calculated NV based on prices to unaffiliated customers or 
prices to affiliated customers that we determined to be at arm's 
length. We made adjustments for billing adjustments, early payment 
discounts, and rebates, where appropriate. We made deductions, where 
appropriate, for foreign inland freight and warehousing, pursuant to 
section 773(a)(6)(B) of the Tariff Act. In addition, when comparing 
sales of similar merchandise, we made adjustments for differences in 
cost attributable to differences in physical characteristics of the 
merchandise (i.e., DIFMER) pursuant to section 773(a)(6)(C)(ii) of the 
Tariff Act and 19 CFR 351.411. We also made adjustments for differences 
in circumstances of sale (COS) in accordance with section 
773(a)(6)(C)(iii) of the Tariff Act and 19 CFR 351.410. We made COS 
adjustments for commissions, imputed credit expenses and warranty 
expenses; we offset imputed credit expenses by interest revenue. We 
also made an adjustment, where appropriate, for the CEP offset in 
accordance with section 773(a)(7)(B) of the Tariff Act. See ``Level of 
Trade and CEP Offset'' section below. In accordance with 19 CFR 
351.410(e), we made an adjustment (i.e., the commission offset) to 
account for commissions paid in one market but not the other. Finally, 
we deducted home market packing costs and added U.S. packing costs in 
accordance with sections 773(a)(6)(A) and (B) of the Tariff Act.

H. Constructed Value (CV)

    In accordance with section 773(a)(4) of the Tariff Act, we base NV 
on CV if we are unable to find a contemporaneous comparison market 
match of such or similar merchandise for the U.S. sale. Section 773(e) 
of the Tariff Act provides that CV shall be based on the sum of the 
cost of materials and fabrication employed in making the subject 
merchandise, SG&A expenses,

[[Page 45029]]

profit, and U.S. packing costs. We calculate the cost of materials and 
fabrication for TKN based on the methodology described in the COP 
section of this notice. In accordance with section 773(e)(2)(A) of the 
Tariff Act, we base SG&A expenses 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. However, for these preliminary 
results, we did not base NV on CV in any instances.

Level of Trade and CEP Offset

    In accordance with section 773(a)(1)(B)(i) 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 CEP 
transaction. The NV LOT is based on the starting price of 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 CEP, it is the level of 
the constructed sale from the exporter to the affiliated importer after 
the deductions required under section 772(d) of the Tariff Act.
    To determine whether NV sales are at a different LOT than CEP 
sales, we examine stages in the marketing process and selling functions 
along the chain of distribution between the producer and the 
unaffiliated customer. See, e.g., Final Determination of Sales at less 
Than Fair Value: Greenhouse Tomatoes From Canada, 67 FR 8781 (February 
26, 2002) and the accompanying Issues and Decisions Memorandum at 
Comment 8. 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 Tariff Act. If 
the NV level is more remote from the factory than the CEP level and 
there is no basis for determining whether the differences in the levels 
between NV and CEP affect price comparability, we adjust NV under 
section 773(a)(7)(B) of the Tariff Act (the CEP offset provision). See 
e.g., Certain Hot-Rolled Flat-Rolled Carbon Quality Steel Products From 
Brazil; Preliminary Results of Antidumping Duty Administrative Review, 
70 FR 17406, 17410 (April 6, 2005) (unchanged in Final Results, 70 FR 
58683 (October 7, 2005)); Certain Stainless Steel Butt-Weld Pipe 
Fittings from Taiwan: Final Results and Final Rescission in Part of 
Antidumping Duty Administrative Review, 67 FR 78417 (December 24, 
2002).
    In implementing these principles in this review, we asked TKN to 
identify the specific differences and similarities in selling functions 
and support services between all phases of marketing in the home market 
and the United States. TKN reported home market sales made through four 
channels of distribution: (1) mill direct sales, (2) mill inventory 
sales, (3) service center inventory sales, and (4) service center 
processed sales. See ThyssenKrupp Nirosta's November 7, 2005, 
questionnaire response at B-20, TKVDM's November 7, 2005, questionnaire 
response at B-21, and TKNP's November 7, 2005, questionnaire response 
at B-16 to B-17. For all channels, TKN performs similar selling 
functions such as negotiating prices with customers, setting credit 
terms and collecting payment, arranging freight to the customer, 
conducting sales calls and visits, providing technical service, and 
processing customer orders. See, e.g., TKN's September 28, 2005, 
questionnaire response at Exhibit 3. The remaining selling activities 
did not differ significantly by channel of distribution. Because 
channels of distribution do not qualify as separate LOTs when the 
selling functions performed for each customer class or channel are 
sufficiently similar, we determined that one LOT exists for TKN's home 
market sales.
    In the U.S. market, TKN made sales of subject merchandise through 
TKNNA, MXXUSA, and TKVDMUSA. As stated above, TKN reported that sales 
made through these affiliated importers consisted of two channels of 
distribution, back-to-back sales and inventory sales. See ThyssenKrupp 
Nirosta's November 7, 2005, questionnaire response at C-15 to C-16 and 
TKVDM's November 7, 2005, questionnaire response at C-15 to C-16. All 
U.S. sales were CEP transactions and TKN performed the same selling 
functions in its sale to the affiliated importer in each instance. See, 
e.g., TKN's September 28, 2005, questionnaire response at A-23 to A-25 
and Exhibit 3. Therefore, the U.S. market has one LOT.
    When we compared CEP sales (after deductions made pursuant to 
section 772(d) of the Tariff Act) to home market sales, we determined 
that for CEP sales TKN performed fewer customer sales contacts, 
technical services, delivery services, and warranty services. In 
addition, the differences in selling functions performed for home 
market and CEP transactions indicate home market sales involved a more 
advanced stage of distribution than CEP sales. In the home market TKN 
provides marketing further down the chain of distribution by providing 
certain downstream selling functions that are normally performed by the 
affiliated resellers in the U.S. market (e.g., technical advice, sales 
calls and visits).
    Based on our analysis, we determined that CEP and the starting 
price of home market sales represent different stages in the marketing 
process, and are thus at different LOTs. Therefore, when we compared 
CEP sales to comparison market sales, we examined whether a LOT 
adjustment may be appropriate. In this case, because TKN sold at one 
LOT in the home market, there is no basis upon which to determine 
whether there is a pattern of consistent price differences between 
LOTs. Further, we do not have the information which would allow us to 
examine pricing patterns of TKN's sales of other similar products, and 
there is no other record evidence upon which such an analysis could be 
based.
    Because the data available do not provide an appropriate basis for 
making a LOT adjustment and the LOT of TKN's home market sales is at a 
more advanced stage than the LOT of CEP sales, a CEP offset is 
appropriate in accordance with section 773(a)(7)(B) of the Tariff Act, 
as claimed by TKN. We based the amount of the CEP offset on home market 
indirect selling expenses, and limited the deduction for home market 
indirect selling expenses to the amount of indirect selling expenses 
deducted from CEP in accordance with section 772(d)(1)(D) of the Tariff 
Act. We applied the CEP offset to NV, whether based on home market 
prices or CV.

Currency Conversions

    In accordance with section 773A(a) of the Tariff Act, we made Euro-
U.S. Dollar currency conversions based on the exchange rates in effect 
on the dates of the U.S. sales, as certified by the Federal Reserve 
Board. For certain U.S. sales made by MXXUSA, we converted adjustments 
denominated in Mexican pesos to U.S. dollars based on the exchange 
rates in effect on the dates of the U.S. sales, as certified by the 
Federal Reserve Board. Finally, for certain U.S. sales denominated in 
Canadian dollars, we made currency conversions based on the exchange 
rates in effect on the dates of the U.S. sales, as certified by the 
Federal Reserve Board.

Preliminary Results of Review

    As a result of our review, we preliminarily find the following 
weighted-average dumping margin

[[Page 45030]]

exists for the period July 1, 2004, through June 30, 2005:

------------------------------------------------------------------------
                                                       Weighted Average
               Manufacturer/Exporter                 Margin (percentage)
------------------------------------------------------------------------
TKN................................................         2.51[percnt]
------------------------------------------------------------------------

    The Department will disclose calculations performed within five 
days of the date of publication of this notice in accordance with 19 
CFR 351.224(b). An interested party may request a hearing within thirty 
days of publication. See 19 CFR 351.310(c). Any hearing, if requested, 
will be held 37 days after the date of publication, or the first 
business day thereafter, unless the Department alters the date pursuant 
to 19 CFR 351.310(d). Interested parties may submit case briefs no 
later than 30 days after the date of publication of these preliminary 
results of review. Rebuttal briefs, limited to issues raised in the 
case briefs, may be filed no later than 35 days after the date of 
publication of this notice. Parties who submit arguments in these 
proceedings are requested to submit with the argument: 1) A statement 
of the issue; 2) a brief summary of the argument; and 3) a table of 
authorities. Further, parties submitting written comments should 
provide the Department with an additional copy of the public version of 
any such comments on diskette. The Department will issue final results 
of this administrative review, including the results of our analysis of 
the issues in any such written comments or at a hearing, within 120 
days of publication of these preliminary results.
    The Department shall determine, and CBP shall assess, antidumping 
duties on all appropriate entries. Upon completion of this 
administrative review, pursuant to 19 CFR 351.212(b), the Department 
will calculate an assessment rate on all appropriate entries. TKN has 
reported entered values for all of its sales of subject merchandise to 
the U.S. during the POR. Therefore, in accordance with 19 CFR 
351.212(b)(1), we will calculate importer-specific duty assessment 
rates on the basis of the ratio of the total amount of antidumping 
duties calculated for the examined sales to the total entered value of 
the examined sales of that importer. These rates will be assessed 
uniformly on all entries the respective importers made during the POR 
if these preliminary results are adopted in the final results of 
review. Where the assessment rate is above de minimis, we will instruct 
CBP to assess duties on all entries of subject merchandise by that 
importer. The Department will issue appropriate appraisement 
instructions directly to CBP within fifteen days of publication of the 
final results of review.
    Furthermore, the following deposit requirements will be effective 
upon completion of the final results of this administrative review for 
all shipments of S4 from Germany entered, or withdrawn from warehouse, 
for consumption on or after the publication date of the final results 
of this administrative review, as provided by section 751(a)(1) of the 
Tariff Act:
    1) The cash deposit rate for TKN will be the rate established in 
the final results of review;
    2) If the exporter is not a firm covered in this review or the 
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; and
    3) If neither the exporter nor the manufacturer is a firm covered 
in this or any previous review conducted by the Department, the cash 
deposit rate will be the ``all others'' rate of 13.48 percent from the 
LTFV investigation. See Stainless Steel Sheet and Strip in Coils from 
Germany: Amended Final Determination of Antidumping Duty Investigation, 
67 FR 15178 (March 29, 2002).
    This notice also 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.
    We are issuing and publishing this notice in accordance with 
sections 751(a)(1) and 777(i)(1) of the Tariff Act.

    Dated: July 31, 2006.
David M. Spooner,
Assistant Secretary for Import Administration.
[FR Doc. E6-12798 Filed 8-7-06; 8:45 am]
BILLING CODE 3510-DS-S