Preliminary Determination of Sales at Less Than Fair Value and Postponement of the Final Determination: Certain Circular Welded Carbon Quality Steel Line Pipe from the Republic of Korea, 66020-66030 [E8-26504]

Agencies

• DEPARTMENT OF COMMERCE
• International Trade Administration

[Federal Register Volume 73, Number 216 (Thursday, November 6, 2008)]
[Notices]
[Pages 66020-66030]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-26504]


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DEPARTMENT OF COMMERCE

International Trade Administration

(A-580-861)


Preliminary Determination of Sales at Less Than Fair Value and 
Postponement of the Final Determination: Certain Circular Welded Carbon 
Quality Steel Line Pipe from the Republic of Korea

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

EFFECTIVE DATE: November 6, 2008.
SUMMARY: The U.S. Department of Commerce (the Department) preliminarily 
determines that certain circular welded carbon quality steel line pipe 
(welded line pipe) from the Republic of Korea (Korea) is being, or is 
likely to be, sold in the United States at less than fair value (LTFV), 
as provided in section 733(b) of the Tariff Act of 1930, as amended 
(the Act). The estimated margins of sales at LTFV are listed in the 
``Suspension of Liquidation'' section of this notice. Interested 
parties are invited to comment on this preliminary determination in 
accordance with the

[[Page 66021]]

time frame explained in the ``Public Comment'' section of this notice.

FOR FURTHER INFORMATION CONTACT: Patrick Edwards (Hyundai HYSCO) or 
Dena Crossland (SeAH Steel Corporation), 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) 482-8029 or (202) 482-3362, 
respectively.

SUPPLEMENTARY INFORMATION:

Background

    On April 23, 2008, the Department initiated the antidumping duty 
investigation of welded line pipe from Korea. See Certain Circular 
Welded Carbon Quality Steel Line Pipe from the Republic of Korea and 
the People's Republic of China: Initiation of Antidumping Duty 
Investigations, 73 FR 23188 (April 29, 2008) (Initiation Notice). The 
petitioners in this investigation are United States Steel Corporation 
(U.S. Steel), Maverick Tube Corporation (Maverick), Tex-Tube Company, 
and the United Steel, Paper and Forestry, Rubber, Manufacturing, 
Energy, Allied Industrial and Service Workers International Union, and 
AFL-CIO-CLC (collectively, petitioners).
    The Department set aside a period of time for parties to raise 
issues regarding product coverage and encouraged all parties to submit 
comments withinendar days from the date of signature of the Initiation 
Notice (i.e., May 13, 2008). See Initiation Notice, 73 FR at 23189. On 
May 13, 2008, Wheatland Tube Company, a domestic interested party, 
submitted comments on the scope.
    On June 3, 2008, the United States International Trade Commission 
(ITC) preliminarily determined that there is a reasonable indication 
that imports of welded line pipe from Korea and the People's Republic 
of China are materially injuring or threatening with material injury 
the U.S. industry and the ITC notified the Department of its findings. 
See Certain Circular Welded Carbon Quality Steel Line Pipe From China 
and Korea: 701 TA 455 and 731 TA 1149 1150 (Preliminary), 73 FR 31712 
(June 3, 2008).
    Section 777A(c)(1) of the Act directs the Department to calculate 
individual dumping margins for each known exporter and producer of the 
subject merchandise. In their petition, petitioners identified four 
potential Korean respondents. See Petitions for the Imposition of 
Antidumping and Countervailing Duties: Certain Circular Welded Carbon 
Quality Steel Line Pipe from the People's Republic of China and the 
Republic of Korea, dated April 3, 2008, Vol. I (Petition), at Exhibit 
6b. In the Initiation Notice, the Department stated that it expected to 
determine respondents based on U.S. Customs and Border Protection (CBP) 
data of U.S. imports of welded line pipe from Korea. On April 30, 2008, 
we invited interested parties to provide comments on a respondent-
selection methodology. As an attachment to the April 30, 2008, letter, 
the Department released an electronic version of the relevant CBP data 
to eligible parties under administrative protective order (APO). On May 
9, 2008, the Department received comments from Maverick and U.S. Steel. 
Additionally, we received comments from Korean producers/exporters, 
Hyundai HYSCO (HYSCO), Husteel Co., Ltd. (Husteel), and SeAH Steel 
Corporation (SeAH).
    The Department determined that it was not practicable to examine 
each known exporter/producer of the subject merchandise, as provided in 
section 777A(c)(1) of the Act. Based on CBP data and interested 
parties' comments, the Department selected two companies, HYSCO and 
SeAH, as mandatory respondents pursuant to section 777A(c)(2)(1)(B) of 
the Act, because these two companies accounted for the largest volume 
of sales of subject merchandise. See Memorandum to Deputy Assistant 
Secretary Stephen J. Claeys, titled ``Antidumping Duty Investigation on 
Certain Circular Welded Carbon Quality Steel Line Pipe from the 
Republic of Korea (A-580-861): Respondent Selection,'' dated May 29, 
2008 (Respondent Selection Memorandum). We issued antidumping duty 
questionnaires to HYSCO and SeAH on May 29, 2008.

HYSCO

    The Department received the section A questionnaire response 
(Section A Response), and the section B and C questionnaire responses 
(Section B and C Responses), from HYSCO on July 3, 2008, and July 17, 
2008, respectively. Petitioners filed comments on HYSCO's section A 
through C questionnaire responses on August 5, 2008, and the Department 
subsequently issued a supplemental questionnaire regarding HYSCO's 
section A through C questionnaire responses on August 6, 2008.
    On August 26, 2008, based on an allegation timely filed by 
petitioners, the Department initiated a sales-below-cost investigation 
for HYSCO, finding reasonable grounds to believe that HYSCO made 
comparison market sales of welded line pipe at prices below its cost of 
production (COP). See ``Cost of Production Analysis'' section below for 
further information. Consequently, the Department requested in a letter 
dated August 27, 2008, that HYSCO respond to section D of the 
Department's antidumping duty questionnaire.
    HYSCO submitted its response to the Department's supplemental 
questionnaire on September 3, 2008 (Supplemental Response). On 
September 11, 2008, the Department issued a second supplemental 
questionnaire to HYSCO regarding its section A through C supplemental 
questionnaire responses. HYSCO filed its response to the second 
supplemental questionnaire on September 24, 2008 (Second Supplemental 
Response), concurrent with its section D questionnaire response 
(Section D Response).
    On October 1, 2008, the Department issued a third supplemental 
questionnaire to HYSCO concerning its sections A through C sales 
responses. On October 6, 2008, the Department issued a supplemental COP 
questionnaire to HYSCO concerning its Section D Response. HYSCO filed 
its third supplemental questionnaire response on October 7, 2008 (Third 
Supplemental Response). On October 14, 2008, petitioners submitted 
comments for the Department's consideration prior to the preliminary 
determination. See Letter from United States Steel Corporation, dated 
October 14, 2008. On October 17, 2008, HYSCO submitted revised sales 
and cost data due to errors it discovered while preparing its response 
to the Department's supplemental COP questionnaire. On October 20, 
2008, the Department granted a partial request for extension for HYSCO 
to respond to certain aspects of the Department's supplemental cost 
questionnaire. See HYSCO's Extension Request for Supplemental D 
Questionnaire, dated October 16, 2008. On October 20, 2008, the 
Department received HYSCO's initial response to the Department's 
supplemental cost questionnaire. On October 22, 2008, the Department 
received comments from HYSCO responding to petitioners October 14, 
2008, comments for the preliminary determination. HYSCO filed the 
remainder of its response to the Department's supplemental cost 
questionnaire on October 27, 2008.

SEAH

    The Department received SeAH's section A questionnaire response, 
and the section B and C questionnaire responses, from SeAH on July 3, 
2008, and July 18, 2008, respectively (Section

[[Page 66022]]

A Response; Section B and C Responses). Petitioners filed comments on 
SeAH's Section A Response, and its Section B and C Responses on July 
22, 2008, and July 29, 2008, respectively. The Department subsequently 
issued a supplemental questionnaire regarding SeAH's section A through 
C questionnaire responses on August 5, 2008. On August 26, 2008, based 
on an allegation timely filed by petitioners, the Department initiated 
a sales-below-cost investigation for SeAH, finding reasonable grounds 
to believe that SeAH made comparison market sales of welded line pipe 
at prices below its COP. See ``Cost of Production Analysis'' section 
below for further information. Consequently, the Department requested 
in a letter dated August 27, 2008, that SeAH respond to section D of 
the Department's antidumping duty questionnaire.
    SeAH replied to the Department's supplemental questionnaire on 
August 27, 2008 (Supplemental Response). Petitioners filed comments on 
SeAH's section A through C supplemental questionnaire responses on 
September 9, 2008, and the Department issued a second supplemental 
questionnaire to SeAH regarding its section A through C questionnaire 
supplemental responses on September 12, 2008. SeAH filed its response 
to the second supplemental questionnaire on September 23, 2008 (Second 
Supplemental Response). On September 24, 2008, SeAH filed its response 
to the Department's section D questionnaire (Section D Response). On 
October 6, 2008, the Department issued a supplemental cost 
questionnaire to SeAH concerning its section D Response. On October 14, 
2008, the Department received SeAH's response to the Department's 
supplemental cost questionnaire (Supplemental Cost Response). On 
October 17, 2008, the Department issued a second supplemental cost 
questionnaire to SeAH concerning its Supplemental Cost Response. On 
October 21, 2008, the Department received SeAH's response to the 
Department's second supplemental cost questionnaire (Second 
Supplemental Cost Response).

Targeted Dumping Allegations

    On September 30, 2008, petitioners (i.e., U.S. Steel and Maverick) 
timely filed with the Department separate allegations of targeted 
dumping for both HYSCO and SeAH. Upon review of petitioners' 
allegations, the Department determined that further information was 
needed in order to adequately analyze the targeted dumping allegations 
for HYSCO and SeAH. The Department issued supplemental questionnaires 
to petitioners on October 14, 2008, and October 21, 2008, regarding 
HYSCO and SeAH, respectively, requesting they address deficiencies 
identified by the Department. See Letters from Angelica L. Mendoza, 
Program Manager, to U.S. Steel and Maverick, dated October 14, 2008, 
and October 21, 2008, respectively. Because there was a need for 
substantative supplemental information regarding the allegation for 
HYSCO, we do not have a sufficient basis for making a finding of 
targeted dumping with respect to HYSCO prior to the October 30, 2008, 
deadline for issuance of the preliminary determination. We intend to 
address the allegation for HYSCO in full upon receipt of a satisfactory 
response by petitioner U.S. Steel to our request for additional 
information. However, after reviewing petitioner Maverick's 
supplemental questionnaire response, we have accepted Maverick's 
targeted dumping allegation with respect to SeAH. See ``Analysis of 
Targeted Dumping Allegation for SeAH'' section below for further 
description.

Postponement of Preliminary Determination

    On August 12, 2008, petitioners requested that the Department 
postpone the preliminary determination by 50 days. The Department 
published an extension notice on August 29, 2008, which set the new 
deadline for the preliminary determination at October 30, 2008. See 
Certain Circular Welded Carbon Quality Steel Line Pipe from the 
Republic of Korea and the People's Republic of China: Postponement of 
Preliminary Determination of Antidumping Duty Investigations, 73 FR 
50941 (August 29, 2008).

Analysis of Targeted Dumping Allegation for SeAH

    As noted above, petitioner Maverick, submitted an allegation of 
targeted dumping with respect to SeAH on October 3, 2008. See section 
777A(d)(1)(B) of the Act. In its allegation, Maverick asserts that 
there are patterns of constructed export prices (CEPs) for comparable 
merchandise that differ significantly among purchasers and regions. We 
note that all of SeAH's U.S. sales are CEP sales. The Department 
requested additional information and clarification from Maverick with 
respect to its targeted dumping allegation. See Letter from Angelica 
Mendoza to Maverick, dated October 21, 2008. On October 27, 2008, 
Maverick provided its response in which it relied on the Department's 
targeted dumping test utilized in Tires from the PRC. See Certain New 
Pneumatic Off-The-Road Tires from the People's Republic of China: Final 
Affirmative Determination of Sales at Less Than Fair Value and Partial 
Affirmative Determination of Critical Circumstances, 73 FR 40485 (July 
15, 2008) and accompanying Issues and Decision Memorandum (Tires from 
the PRC) dated July 7, 2008, at Comment 23.B and 23.G.

New Targeted Dumping Test

    The statute allows the Department to employ the average-to-
transaction methodology if: 1) there is a pattern of export prices that 
differ significantly among purchasers, regions, or periods of time, and 
2) the Department explains why such differences cannot be taken into 
account using the average-to-average or transaction-to-transaction 
methodology.\1\
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    \1\ Section 777A(d)(1)(B) of the Act.
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    In the recent final determination memorandum in the antidumping 
investigation of sodium metal from France, the Department applied a new 
targeted dumping standard and methodology for analyzing targeted 
dumping allegations.\2\
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    \2\ See Sodium Metal from France: Notice of Final Determination 
of Sales at Less Than Fair Value and Negative Critical 
Circumstances, 73 FR 62252, (October 20, 2008) and accompanying 
Issues and Decision Memorandum at Comments 2 and 3 and the 
Memorandum to James Terpstra, Program Manager for the Office of AD/
CVD Operations, from Dennis McClure and Joy Zhang, Analysts for the 
Office of AD/CVD Operations, RE: Antidumping Duty Investigation of 
Sodium Metal from France, Subject: Final Analysis Memorandum for 
Sales MSSA, dated October 10, 2008 (Sodium Metal Final Analysis 
Memorandum).
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    We conducted customer- and region-targeted dumping analyses for 
SeAH using the methodology described in the Sodium Metal Final Analysis 
Memorandum, which was based on the final determinations of the recent 
Steel Nails, Tires from the PRC,\3\ and LWTP\4\ targeted dumping test 
for purposes of the final determination. This is also the test put 
forward in the Department's Proposed Methodology for Identifying and 
Analyzing Targeted Dumping in Antidumping Investigations; Request for 
Comment, 73 FR 26371 (May 9, 2008). The Department is currently 
analyzing

[[Page 66023]]

comments received by interested parties. See https://ia.ita.doc.gov/ia-
highlights-and-news.html.
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    \3\ See Certain Steel Nails from the United Arab Emirates: 
Notice of Final Determination of Sales at Not Less Than Fair Value, 
73 FR 33985 (June 16, 2008) and accompanying Issues and Decision 
Memorandum dated June 6, 2008, at Comment 5; see also; Certain Steel 
Nails from the People's Republic of China: Final Determination of 
Sales at Less Than Fair Value and Partial Affirmative Determination 
of Critical Circumstances, 73 FR 33977 (June 16, 2008) and 
accompanying Issues and Decision Memorandum, dated June 6, 2008, at 
Comments 3, 5, and 9 (collectively, Steel Nails).
    \4\ See Lightweight Thermal Paper from Germany: Notice of Final 
Determination of Sales at Less Than Fair Value, 73 FR 57326 (October 
2, 2008) (LWTP).
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    The methodology we employed involves a two-stage test: the first 
stage addresses the pattern requirement, and the second stage addresses 
the significant difference requirement. All price comparisons have been 
done on the basis of identical merchandise (i.e., by control number or 
CONNUM). The test procedures are the same for customer, region, and 
time period targeted dumping allegations,\5\ even though the example 
given in the general description below applies to customer targeting.
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    \5\ Petitioners also made a targeted dumping allegation based on 
region for SeAH in this investigation.
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    In the first stage of the test, referred to as the ``standard 
deviation test,'' the Department determined, on an exporter-specific 
basis, the share of the alleged targeted customer's purchases of 
subject merchandise (by sales volume) that are at prices more than one 
standard deviation below the weighted-average price to all customers of 
that exporter, targeted and non-targeted. We calculated the standard 
deviation on a product-specific basis (i.e., CONNUM by CONNUM) using 
the period of investigation-wide average prices (weighted by sales 
volume) for each alleged targeted customer and each distinct non-
targeted customer. If that share did not exceed 33 percent of the total 
volume of the exporter's sales of subject merchandise to the alleged 
targeted customer, then the pattern requirement is not met and the 
Department did not conduct the second stage of the test.
    However, if that share exceeded 33 percent of the total volume of 
the exporter's sales of subject merchandise to the alleged targeted 
customer, then the pattern requirement is met and the Department 
proceeded to the second stage of the test. Specifically, the Department 
examined in the second stage all of the sales of identical merchandise 
(i.e., by CONNUM) by that exporter to the alleged targeted customer 
that meet the standard deviation requirement. From those sales, we 
determined the total volume of sales for which the difference between 
(i) the sales-weighted-average price to the alleged targeted customer 
and (ii) the next higher sales-weighted-average price to a non-targeted 
customer exceeded the average price gap (weighted by sales volume) for 
the non-targeted group.\6\ Each of the price gaps in the non-targeted 
group was weighted by the combined sales volume associated with the 
pair of prices to non-targeted customers that make up the price gap. In 
doing this analysis, the alleged targeted customers were not included 
in the non-targeted group; each alleged targeted customer's average 
price was compared to only the average prices to non-targeted 
customers. If the share of the sales that met this test exceeded five 
percent of the total sales volume of subject merchandise to the alleged 
targeted customer,\7\ the significant difference requirement was met 
and the Department determined that customer targeting occurred.
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    \6\ The next higher price is the sales-weighted-average price to 
the non-targeted group that is above the sales-weighted-average 
price to the alleged targeted group. For example, if the sales-
weighted-average price to the alleged targeted group is $7.95 and 
the sales-weighted-average prices to the non-targeted group are 
$8.30, $8.25, and $7.50, we would calculate the difference between 
$7.95 and $8.25 because this is the next higher price in the non-
targeted group above $7.95 (the average price to the targeted 
group).
    \7\ For example: If non-targeted A's weighted-average price is 
$1.00 with a total sales volume of 100 metric tons (MT) and non-
targeted B's weighted-average price is $0.95 with a total sales 
volume of 120 MT, then the difference of $0.05 ($1.00- $0.95) would 
be weighted by 220 MT (100 MT + 120 MT).
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    If the Department determined that, for sales to the customer, there 
was a pattern of prices that differ significantly, we applied the 
transaction-to-average methodology to any targeted sales and applied 
the average-to-average methodology to the remaining non-targeted 
sales.\8\ When calculating the weighted-average margin, we combine the 
margin calculated for the targeted sales with the margin calculated for 
the non-targeted sales, without offsetting any margins found among the 
targeted sales.
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    \8\ Consistent with 19 CFR 351.414(f)(2), we have limited our 
application of the average-to-transaction methodology to the 
targeted sales under 19 CFR 351.414(f)(1)(i). As specified in the 
preamble to the regulations, the Department will apply the average-
to-transaction methodology solely to address the practice of 
targeting. See Antidumping Duties; Countervailing Duties; Final 
Rule, 62 FR 27296, 27375 (May 19, 1997). In the preamble, the 
Department indicated that where the targeting is so widespread that 
it is administratively impractical to segregate targeted sales 
prices from the normal pricing behavior of the company, it may be 
necessary to apply the average-to-transaction methodology to all 
sales of a particular respondent. In this case, however, we are able 
to segregate the targeted sales prices, by customer or region, where 
appropriate, from the normal pricing behavior of the company and, 
therefore, have limited our application of the average-to-
transaction methodology to the sales to the targeted group.
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    We based all of our targeted dumping calculations on the U.S. net 
price determined in our margin program in our Preliminary Calculation 
Memorandum. See Memorandum to the File titled ``Analysis of Data 
Submitted by SeAH Steel Corporation (SeAH) in the Preliminary 
Determination of the Antidumping Duty Investigation of Certain Circular 
Welded Carbon Quality Steel Line Pipe from the Republic of Korea,'' 
dated October 30, 2008 (SeAH Analysis Memo) on file in the Central 
Records Unit, Room 1117 of the main Department building.

Results of the Application of the New Targeted Dumping Test

    For purposes of this preliminary determination on targeted dumping, 
we have applied the above-described test to the U.S. sales data 
reported by SeAH. Our observations and results are discussed in more 
detail in a separate memorandum placed on the record of this 
investigation.
    We preliminarily determine that there is a pattern of CEPs for 
comparable merchandise that differ significantly among customers and 
regions for SeAH. Therefore, we applied the average-to-transaction 
methodology to the targeted sales by SeAH under 19 CFR 
351.414(f)(1)(i). For all other U.S. sales by SeAH (i.e., non-
targeted), we have applied the average-to-average methodology for 
purposes of determining SeAH's overall weighted-average dumping margin.

Comments by Interested Parties

    Parties may comment on the Department's overall preliminary 
determination application of the new targeted dumping test in this 
proceeding. Consistent with 19 CFR 351.309(c)(2), all comments should 
be filed in the context of the case and rebuttal briefs. See the 
``Public Comment'' section below for details regarding the briefing 
schedule for this investigation.

Period of Investigation

    The period of investigation (POI) is April 1, 2007, to March 31, 
2008.

Scope of Investigation

    The merchandise that is the subject of this investigation is 
circular welded carbon quality steel pipe of a kind used for oil and 
gas pipelines (welded line pipe), not more than 406.4 mm (16 inches) in 
outside diameter, regardless of wall thickness, length, surface finish, 
end finish or stenciling.
    The term ``carbon quality steel'' includes both carbon steel and 
carbon steel mixed with small amounts of alloying elements that may 
exceed the individual weight limits for nonalloy steels imposed in the 
Harmonized Tariff Schedule of the United States (HTSUS). Specifically, 
the term ``carbon quality'' includes products in which (1) iron 
predominates by weight over each of the

[[Page 66024]]

other contained elements, (2) the carbon content is 2 percent or less 
by weight and (3) none of the elements listed below exceeds the 
quantity by weight respectively indicated:
    (i) 2.00 percent of manganese,
    (ii) 2.25 percent of silicon,
    (iii) 1.00 percent of copper,
    (iv) 0.50 percent of aluminum,
    (v) 1.25 percent of chromium,
    (vi) 0.30 percent of cobalt,
    (vii) 0.40 percent of lead,
    (viii) 1.25 percent of nickel,
    (ix) 0.30 percent of tungsten,
    (x) 0.012 percent of boron,
    (xi) 0.50 percent of molybdenum,
    (xii) 0.15 percent of niobium,
    (xiii) 0.41 percent of titanium,
    (xiv) 0.15 percent of vanadium, or
    (xv) 0.15 percent of zirconium.
    Welded line pipe is normally produced to specifications published 
by the American Petroleum Institute (API) (or comparable foreign 
specifications) including API A-25, 5LA, 5LB, and X grades from 42 and 
above, and/or any other proprietary grades or non-graded material. 
Nevertheless, all pipe meeting the physical description set forth above 
that is of a kind used in oil and gas pipelines, including all 
multiple-stenciled pipe with an API line pipe stencil is covered by the 
scope of this investigation.
    The line pipe products that are the subject of this investigation 
are currently classifiable in the HTSUS under subheadings 
7306.19.10.10, 7306.19.10.50, 7306.19.51.10, and 7306.19.51.50. While 
HTSUS subheadings are provided for convenience and customs purposes, 
the written description of the scope of this investigation is 
dispositive.

Model Match

    In accordance with section 771(16) of the Act, all products 
produced by the respondents covered by the description in the ``Scope 
of Investigation'' section above, and sold in Korea during the POI, are 
considered to be foreign like products for purposes of determining 
appropriate product comparisons to U.S. sales.
    On April 29, 2008, the Department asked all parties in this 
investigation and, in the concurrent antidumping duty investigation of 
welded line pipe from the People's Republic of China, for comments on 
the appropriate product characteristics for defining individual 
products. See Initiation Notice, 73 FR at 23190. The Department 
received comments on the model matching methodology from petitioners on 
May 13, 2008, and rebuttal comments from Korean producer/exporter 
Husteel and respondent SeAH on May 20, 2008. Petitioners responded to 
Husteel's and SeAH's rebuttal comments on May 27, 2008. We adjusted our 
model match criteria based on certain comments from the parties.
    We have relied on six criteria to match U.S. sales of subject 
merchandise to comparison market sales of the foreign like product: 
epoxy finish, grade, outside diameter, wall thickness, end finish, and 
surface finish. Where there were no sales of identical merchandise in 
the comparison market made in the ordinary course of trade to compare 
to U.S. sales, we compared U.S. sales to the next most similar foreign 
like product on the basis of the characteristics listed above.

Date of Sale

    19 CFR 351.401(i) states that the Department normally will use the 
date of invoice, as recorded in the producer's or exporter's records 
kept in the ordinary course of business, as the date of sale. The 
regulations further provide that the Department may use a date other 
than the date of the invoice if the Secretary is satisfied that a 
different date better reflects the date on which the material terms of 
sale are established. See 19 CFR 351.401(i).

HYSCO

    HYSCO reported the shipment date as the date of sale for all sales 
in the comparison market, as invoicing occurs subsequent to shipment in 
HYSCO's ordinary course of trade. See HYSCO's Section B Response at B-
12. For its U.S. sales, HYSCO reported the earlier of invoice date or 
shipment date, when applicable. See HYSCO's Section C Response at C-10. 
HYSCO reported in its questionnaire responses that HYSCO invoices its 
comparison market customers on a monthly basis for all sales made 
during a given month. As such and as reported by HYSCO, the shipment 
precedes issuance of the commercial or tax invoice in the comparison 
market. Id.; see also, HYSCO's Supplemental Response at S-8 through S-
10. Normally, the Department employs invoice date as the date of sale 
in accordance with 19 CFR 351.401(i). However, it is the Department's 
practice to use shipment date as the date of sale when shipment date 
precedes invoice date. See Certain Cold-Rolled and Corrosion-Resistant 
Carbon Steel Flat Products From Korea: Final Results of Antidumping 
Duty Administrative Reviews, 63 FR 13170, 13172-73 (March 18, 1998) 
(Corrosion Resistant Steel from Korea). We therefore find that HYSCO's 
reporting methodology is in accordance with our practice, as its 
comparison market sales are invoiced after the date of shipment. See 
Stainless Steel Sheet and Strip in Coils from the Republic of Korea: 
Preliminary Results and Partial Rescission of Antidumping Duty 
Administrative Review, 71 FR 18074, 18079-80 (April 10, 2006), 
unchanged in Stainless Steel Sheet and Strip in Coils from the Republic 
of Korea: Final Results and Rescission of Antidumping Duty 
Administrative Review in Part, 72 FR 4486 (January 31, 2007) and the 
accompanying Issues and Decision Memorandum at Comments 4 and 5 (SSSS 
from Korea); Tires from the PRC, and the accompanying Issues and 
Decision Memorandum at Comment 81. We have, therefore, preliminarily 
determined that shipment date is the appropriate date to use as the 
date of sale for HYSCO's comparison market sales as all of its sales in 
Korea were invoiced subsequent to the date of shipment.
    The circumstances regarding the date of sale of HYSCO's sales to 
the United States are similar to those of its comparison market sales. 
HYSCO reported both export price (EP) and CEP sales to the United 
States. For its EP sales, which HYSCO ships through an unaffiliated 
trading company located in Korea, HYSCO has reported the earlier of 
either shipment date or the date of invoice (where the invoice date is 
the date of issuance of HYSCO's invoice to the Korean trading company). 
See HYSCO's Section C Response at C-10. For its CEP sales, made through 
its U.S. affiliate, Hyundai HYSCO USA, Inc. (HHU), HYSCO has also 
reported the earlier of shipment date or the date of invoice as the 
appropriate date of sale, where applicable, and where the date of 
invoice is the date on which the U.S. affiliate issues the invoice to 
the unaffiliated customer. Id. HYSCO reported in its questionnaire 
responses that certain material terms of its U.S. sales may continue to 
be negotiated up until the issuance of the commercial invoice. Our 
review of HYSCO's sales data indicates that, in some cases, the 
reported shipment date precedes the reported invoice date. In such 
circumstances, the Department normally uses the earlier of invoice date 
or shipment date as the date of sale. Id. See also, HYSCO Supplemental 
Response at S-8 through S-10. We find that HYSCO's reporting 
methodology is consistent with our practice. See, e.g., Corrosion 
Resistant Steel from Korea, SSSS from Korea and Tires from the PRC.
    Therefore, and similar to the circumstances of HYSCO's comparison 
market sales, we have preliminarily determined that in instances where 
the

[[Page 66025]]

sales invoice was issued after the date of shipment for HYSCO's U.S. 
sales, we will use the shipment date as the appropriate date of sale, 
as the Department's practice is to not use a date of sale after the 
date of shipment. See, e.g., Corrosion Resistant Steel from Korea, SSSS 
from Korea and Tires from the PRC. In instances where the invoice was 
issued (where the terms of sale are finalized) prior to the date of 
shipment, we will use the invoice date as the correct date of sale. For 
a further discussion of this issue, see Memorandum to the File titled 
``Analysis of Data Submitted by Hyundai HYSCO (HYSCO) in the 
Preliminary Determination of the Antidumping Duty Investigation of 
Certain Circular Welded Carbon Quality Steel Line Pipe from the 
Republic of Korea,'' dated October 30, 2008 (HYSCO Analysis Memo).

SEAH

    As stated above, 19 CFR 351.401(i) stipulates that the Department 
normally will use the date of invoice, as recorded in the producer's or 
exporter's records kept in the ordinary course of business, as the date 
of sale. However, if shipment date precedes invoice date, the 
Department's practice has been to use the shipment date as the date of 
sale. See, e.g., Corrosion Resistant Steel from Korea, SSSS from Korea 
and Tires from the PRC.
    SeAH reported the date of the shipping invoice, which is issued on 
the date of shipment, as the date of sale for its comparison market 
sales. See SeAH's Section B and C questionnaire responses at B-12, and 
SeAH's Supplemental Response at 4 and 5. According to SeAH, the 
shipping invoice is the first document that is generated for each 
comparison market sale, once the merchandise has been produced and the 
actual quantity has been finalized, and the date of the shipping 
invoice is the date of sale that is recorded in SeAH's financial 
accounting records. See SeAH's Supplemental Response at 4. SeAH stated 
that the quantity often changes between the time of the order and the 
time of shipment, when the shipping invoice is issued, and provided a 
comparison table and sample sales documents to demonstrate the quantity 
changes that transpired during the POI. See SeAH's Supplemental 
Response at Exhibit A-37.
    For its U.S. sales, SeAH sold through two affiliated companies in 
the United States, Pusan Pipe America (PPA) and State Pipe and Supply 
(State Pipe), and reported that for State Pipe, the subject merchandise 
was inventoried in the United States prior to sale to the unaffiliated 
U.S. customer. For sales through PPA (i.e., back-to-back transactions), 
SeAH reported the shipment date, as listed in the bill of lading, as 
the date of sale, as it preceded the date of PPA's invoice to the 
unaffiliated U.S. customer for all transactions. See SeAH's Section A 
Response at 11, and SeAH's Section B and C Responses at C-11 and C-12. 
For sales through State Pipe, SeAH reported the date of State Pipe's 
invoice to the unaffiliated U.S. customer, which is the same date as 
the shipment date from State Pipe to the unaffiliated U.S. customer, 
because the subject merchandise was inventoried in the United States 
prior to sale to the customer. Id. SeAH provided a comparison table and 
sample documents to demonstrate that there were changes between the 
ordered quantity and the shipped quantity during the POI that were 
outside the normal tolerance level. See SeAH's Supplemental Response at 
Exhibit A-37.
    Based on SeAH's responses, and having no record evidence that would 
indicate otherwise, we preliminarily determine that for SeAH's 
comparison market sales, the shipping invoice date, which is the same 
as the date of shipment, is the appropriate date to use as the date of 
sale because this is the date that is recorded in SeAH's records and it 
is the date when the material terms of sale (i.e., price and quantity) 
are finalized. For SeAH's U.S. sales through State Pipe, we have 
preliminarily determined that the date of State Pipe's invoice to the 
unaffiliated U.S. customer is the appropriate date to use as the date 
of sale because this is the date when the material terms of sale are 
finalized pursuant to 19 CFR 351.401(i). For SeAH's U.S. sales through 
PPA, we have preliminarily determined that the date of shipment from 
SeAH is the appropriate date of sale, in accordance with the 
Department's practice in Corrosion Resistant Steel from Korea, SSSS 
from Korea and Tires from the PRC, because the material terms of sale 
were set prior to the date of PPA's invoice to the unaffiliated U.S. 
customer. For further discussion of this issue, see SeAH Analysis Memo.

Fair Value Comparisons

    To determine whether sales of welded line pipe from Korea were made 
in the United States at less than normal value (NV), we compared the EP 
or CEP to the NV, as described in the ``Export Price and Constructed 
Export Price'' and ``Normal Value'' sections below. In accordance with 
section 777A(d)(1) of the Act, we calculated the weighted-average 
prices for NV and compared these to the weighted-average EP (and CEP), 
when appropriate.

Export Price and Constructed Export Price

    For the price to the United States, we used, as appropriate, EP or 
CEP, in accordance with sections 772(a) and (b) of the Act. Pursuant to 
section 772(a) of the Act, we used the EP methodology when the 
merchandise was sold by the producer or exporter outside the United 
States directly to the first unaffiliated purchaser in the United 
States prior to importation and when CEP was not otherwise warranted 
based on the facts on the record. In accordance with section 772(b) of 
the 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 subsections (c) and (d).
    We based EP and CEP on the packed prices charged to the first 
unaffiliated customer in the United States and the applicable terms of 
sale.

HYSCO

    HYSCO classified two types of sales to the United States: 1) direct 
sales to end-user customers (i.e., EP sales) via an unaffiliated 
trading company based in Korea; and 2) sales via its U.S. affiliate, 
HHU, to unaffiliated distributors (i.e., CEP sales). See HYSCO's 
Section A Response at A-6 through A-12. For purposes of this 
preliminary determination, we have accepted HYSCO's classifications.
    For HYSCO's reported EP sales, we based the date of sale on the 
earlier of either the sales invoice date or the shipment date. We 
calculated EP based on the packed prices to an unaffiliated trading 
company located in Korea, through which HYSCO sold merchandise to the 
United States and had knowledge of the final destination. We made 
deductions for movement expenses in accordance with section 
772(c)(2)(A) of the Act, which included foreign inland freight, foreign 
brokerage and handling, international freight, marine insurance, U.S. 
brokerage and handling, and U.S. customs duties. We made further 
adjustments for direct expenses (credit expenses) in accordance with 
section 772(c)(2)(A) of the Act.
    We calculated CEP based on prices charged to the first unaffiliated 
U.S. customer after importation. We used the

[[Page 66026]]

earlier of either the sales invoice date or the shipment date as the 
date of sale. We based CEP on the gross unit price from HHU to its 
unaffiliated U.S. customers. Where applicable and pursuant to sections 
772(c)(2)(A) and (d)(1) of the Act, the Department made deductions for 
movement expenses, which included foreign inland freight, foreign 
brokerage and handling, brokerage and handling in the United States, 
international freight, marine insurance and U.S. Customs duties. In 
accordance with section 772(d)(1) of the Act, we also deducted, where 
applicable, U.S. direct selling expenses, including credit expenses, 
U.S. indirect selling expenses, and inventory carrying costs incurred 
in Korea associated with economic activities in the United States. We 
also deducted CEP profit in accordance with section 772(d)(3) of the 
Act. For further discussion, see HYSCO Analysis Memo.

SEAH

    SeAH's U.S. sales were made by its U.S. affiliates, PPA and State 
Pipe. We, therefore, based all of SeAH's prices to the United States on 
CEP. We used shipment date as the date of sale because it preceded the 
invoice date for SeAH's sales through PPA to the United States. For 
sales by State Pipe, we relied on the date of State Pipe's invoice to 
the unaffiliated U.S. customer. When appropriate, we adjusted prices to 
reflect deductions and/or increases for early payment and other 
discounts and warranty expenses. In accordance with section 772(c)(2) 
of the Act, we made deductions, where appropriate, for movement 
expenses including inland freight, brokerage and handling in the 
country of manufacture, international freight, marine insurance, U.S. 
brokerage and handling, U.S. customs duties, U.S. inland freight to the 
U.S. warehouse, warehousing in the United States, and U.S. inland 
freight from the U.S. warehouse to the unaffiliated customer in the 
United States.
    For CEP, in accordance with section 772(d)(1) of the Act, when 
appropriate, we deducted from the starting price those selling expenses 
that were incurred in selling the subject merchandise in the United 
States, including direct selling expenses (e.g., warranty expenses and 
other direct selling expenses), imputed credit expenses, U.S. indirect 
selling expenses, and inventory carrying costs incurred in Korea 
associated with economic activities in the United States. We also 
deducted from CEP an amount for profit in accordance with sections 
772(d)(3) and (f) of the Act. See SeAH Analysis Memo.

Normal Value

A. Home Market Viability and Comparison Market Selection

    To determine whether there was a sufficient volume of sales in the 
home market (i.e., Korea) to serve as a viable basis for calculating 
NV, we compared the respondents' volume of home market sales of the 
foreign like product to the volume of its U.S. sales of the subject 
merchandise. Pursuant to section 773(a)(1)(B)(I) of the Act, because 
each respondent had an aggregate volume of home market sales of the 
foreign like product that was greater than five percent of its 
aggregate volume of U.S. sales of the subject merchandise, we 
determined that the respondents' sales of welded line pipe in Korea 
were sufficient to find the home market as viable for comparison 
purposes. Accordingly, we calculated NV for HYSCO and SeAH based on 
sales prices to Korean customers. However, the Department has concerns 
regarding merchandise HYSCO has reported as the foreign like product in 
this investigation, which may affect the viability of HYSCO's home 
market. Specifically, HYSCO has explained in its questionnaire 
responses that it made sales of secondary merchandise which did not 
meet the required specification or were defective in nature. HYSCO has 
reported these sales as sales of the foreign like product subject to 
this investigation for purposes of establishing normal value. See 
HYSCO's Section B Response at page B-6; HYSCO's Second Supplemental 
Response at page S-13; and HYSCO's Third Supplemental Response. The 
Department intends to thoroughly analyze this issue at verification.

B. Arm's-Length Test

    HYSCO and SeAH reported sales of the foreign like product to 
affiliated and unaffiliated customers in the comparison market. The 
Department calculates NV based on a sale to an affiliated party only if 
it is satisfied that the price to the affiliated party is comparable to 
the price at which sales are made to parties not affiliated with the 
producer or exporter, i.e., sales at ``arm's-length.'' See 19 CFR 
351.403(c). To test whether these sales were made at arm's-length, we 
compared the starting prices of sales to affiliated and unaffiliated 
customers net of all movement charges, direct selling expenses, 
discounts and packing. In accordance with the Department's current 
practice, if the prices charged to an affiliated party were, on 
average, between 98 and 102 percent of the prices charged to 
unaffiliated parties for merchandise identical or most similar to that 
sold to the affiliated party, we considered the sales to be at arm's-
length prices and included such sales in the calculation of NV. See 19 
CFR 351.403(c). Conversely, where sales to the affiliated party did not 
pass the arm's-length test, all sales to that affiliated party were 
excluded from the NV calculation. See Antidumping Proceedings: 
Affiliated Party Sales in the Ordinary Course of Trade, 67 FR 69186 
(November 15, 2002); see also, HYSCO Analysis Memo and SeAH Analysis 
Memo.

C. Cost of Production Analysis

    Based on our analysis of petitioners' allegations, we found that 
there were reasonable grounds to believe or suspect that HYSCO's and 
SeAH's sales of welded line pipe in the comparison market were made at 
prices below their COP. Accordingly, pursuant to section 773(b) of the 
Act, we initiated sales-below-cost investigations to determine whether 
these companies had sales that were made at prices below their 
respective COPs. See Memorandum to Richard O. Weible, Director, Office 
7, titled ``Petitioner's Allegation of Sales Below the Cost of 
Production for Hyundai HYSCO (HYSCO),'' dated August 26, 2008; see 
also, Memorandum to Richard O. Weible, Director, Office 7, titled 
``Petitioner's Allegation of Sales Below the Cost of Production for 
SeAH Steel Corporation (SeAH),'' dated August 26, 2008.

1. Calculation of Cost of Production

    In accordance with section 773(b)(3) of the Act, we calculated the 
respondents' COP based on the sum of their costs of materials and 
conversion for the foreign like product, plus an amount for home market 
selling expenses, general and administrative expenses (SG&A), interest 
expenses and packing costs. See the ``Test of Comparison Market Sales 
Prices'' section below for the treatment of comparison market selling 
expenses.
    The Department relied on the COP data submitted by HYSCO and SeAH, 
in their respective section D questionnaire and supplemental responses 
for the COP calculation, except for the following instances:

SEAH

    During the POI, SeAH purchased carbon steel hot-rolled coil inputs 
from a home market affiliate. The transfer price paid to the home 
market affiliate was less than the market price paid to SeAH's 
unaffiliated supplier. Therefore, for this preliminary determination, 
we have adjusted SeAH's reported total cost

[[Page 66027]]

of manufacturing to reflect the higher market price.
    For a complete discussion of the changes made to the cost 
information submitted by SeAH, see Memorandum to Neal M. Halper, 
Director, Office of Accounting, titled ``Cost of Production and 
Constructed Value Calculation Adjustments for the Preliminary 
Determination SeAH Steel Corporation,'' dated October 30, 2008.

2. Test of Comparison Market Sales Prices

    On a product-specific basis, we compared the adjusted weighted-
average COP to the comparison market sales of the foreign like product, 
as required under section 773(b) of the Act, in order to determine 
whether the sale prices were below the COP. For purposes of this 
comparison, we used the COP exclusive of selling and packing expenses. 
The prices were exclusive of any applicable movement charges, direct 
and indirect selling expenses, and packing expenses.

3. Results of the COP Test

    Pursuant to section 773(b)(2)(C)(i) of the Act, where less than 20 
percent of a respondent's sales of a given product were at prices less 
than the COP, we did not disregard any below-cost sales of that product 
because we determined that the below-cost sales were not made in 
``substantial quantities.'' Where 20 percent or more of a respondent's 
sales of a given product during the POI were at prices less than COP, 
we determined that such sales have been made in ``substantial 
quantities.'' See section 773(b)(2)(C) of the Act. Further, the sales 
were made within an extended period of time, in accordance with section 
773(b)(2)(B) of the Act, because we examined below-cost sales occurring 
during the entire POI. In such cases, because we compared prices to 
POI-average costs, we also determined that such sales were not made at 
prices which would permit recovery of all costs within a reasonable 
period of time, in accordance with section 773(b)(2)(D) of the Act.
    We found that, for specific products, more than 20 percent of 
HYSCO's and SeAH's sales were at prices less than the COP and, in 
addition, such sales did not provide for the recovery of costs within a 
reasonable period of time. We, therefore, excluded these sales and used 
the remaining sales as the basis for determining NV, in accordance with 
section 773(b)(1) of the Act.

D. Calculation of Normal Value Based on Comparison Market Prices

HYSCO

    We calculated NV based on packed prices to unaffiliated customers 
in Korea and matched U.S. sales to NV. We used the date of shipment as 
the appropriate date of sale for HYSCO's comparison market sales. We 
increased the comparison market starting price, where appropriate, to 
account for reported interest revenue pursuant to section 773(a)(6)(A) 
of the Act. We made deductions, where appropriate, for movement 
expenses, and packing pursuant to section 773(a)(6)(B) of the Act. In 
addition, we made adjustments for differences in cost attributable to 
differences in physical characteristics of the merchandise, pursuant to 
section 773(a)(6)(C)(ii) of the Act and 19 CFR 351.411, as well as for 
differences in circumstances of sale as appropriate (i.e., credit 
expenses), in accordance with section 773(a)(6)(C)(iii) of the Act and 
19 CFR 351.410. We also made an adjustment, where appropriate, for the 
CEP offset in accordance with section 773(a)(7)(B) of the Act. See 
``Level of Trade'' section below. Additionally, we deducted home market 
packing costs and added U.S. packing costs in accordance with sections 
773(a)(6)(A) and (B) of the Act.

SEAH

    We based comparison market prices on packed prices to unaffiliated 
customers in Korea. We adjusted the starting price for movement 
expenses and packing, pursuant to section 773(a)(6)(B) of the Act. In 
addition, as SeAH's sales were all CEP sales, for comparisons made to 
those CEP sales, we only deducted Korean credit expenses from 
comparison market prices, because U.S. credit expenses were deducted 
from U.S. price, as noted above and in accordance with section 
772(c)(2) of the Act.
    When comparing U.S. sales with comparison market sales of similar, 
but not identical, merchandise, we also made adjustments for physical 
differences in the merchandise in accordance with section 
773(a)(6)(C)(ii) of the Act and 19 CFR 351.411. We based this 
adjustment on the difference in the variable cost of manufacturing for 
the foreign like product and subject merchandise. See 19 CFR 
351.411(b).

E. Level of Trade/Constructed Export Price Offset

    In accordance with section 773(a)(1)(B) of the Act, to the extent 
practicable, we determine NV based on sales in the comparison market at 
the same level of trade (LOT) as the EP or CEP transaction. The LOT in 
the comparison market is the LOT of the starting-price sales in the 
comparison market or, when NV is based on CV, the LOT of the sales from 
which we derive SG&A expenses and profit. With respect to U.S. price 
for EP transactions, the LOT is also that of the starting-price sale, 
which is usually from the exporter to the importer. See 19 CFR 
351.412(c)(i). For CEP, the LOT is that of the constructed sale from 
the exporter to the affiliated importer. See 19 CFR 351.412(c)(ii). See 
also Micron Technology, Inc. v. United States, 243 F.3d 1301, 1314 
(Fed. Cir. 2001).
    To determine whether comparison market sales are at a different LOT 
from U.S. sales, we examined stages in the marketing process and 
selling functions along the chain of distribution between the producer 
and the unaffiliated customer. See, e.g., Notice of Preliminary 
Determination of Sales at Not Less Than Fair Value: Polyethylene 
Terephthalate Film, Sheet, and Strip from Thailand, 73 FR 24565 (May 5, 
2008) (PET Film from Thailand); and Notice of Preliminary Determination 
of Sales at Less Than Fair Value: Light-Walled Rectangular Pipe and 
Tube From Mexico, 73 FR 5515 (January 30, 2008) (LWR Pipe from Mexico). 
If the comparison market sales are at different LOTs, 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, the 
Department makes an LOT adjustment in accordance with section 
773(a)(7)(A) of the Act. See also LWR Pipe from Mexico at 5522. For CEP 
sales, we examine stages in the marketing process and selling functions 
along the chain of distribution between the producer and the customer. 
See PET Film from Thailand at 24570. We analyze whether different 
selling activities are performed, and whether any price differences 
(other than those for which other allowances are made under the Act) 
are shown to be wholly or partly due to a difference in LOT between the 
CEP and NV. Under section 773(a)(7)(A) of the Act, we make an upward or 
downward adjustment to NV for LOT if the difference in LOT involves the 
performance of different selling activities and is demonstrated to 
affect price comparability, based on a pattern of consistent price 
differences between sales at different LOTs in the country in which NV 
is determined. Id. Finally, if the NV LOT is at a more advanced stage 
of distribution than the LOT of the CEP,

[[Page 66028]]

but the data available do not provide an appropriate basis to determine 
a LOT adjustment, we reduce NV by the amount of indirect selling 
expenses incurred in the foreign comparison market on sales of the 
foreign like product, but by no more than the amount of the indirect 
selling expenses incurred for CEP sales. See section 773(a)(7)(B) of 
the Act (the CEP offset provision) and LWR Pipe from Mexico at 5522.
    In analyzing differences in selling functions, we determine whether 
the LOTs identified by the respondent are meaningful. See Antidumping 
Duties; Countervailing Duties, Final Rule, 62 FR at 27371. If the 
claimed LOTs are the same, we expect that the functions and activities 
of the seller should be similar. Conversely, if a party claims that 
LOTs are different for different groups of sales, the functions and 
activities of the seller should be dissimilar. See Porcelain-on-Steel 
Cookware from Mexico: Final Results of Administrative Review, 65 FR 
30068 (May 10, 2000) and accompanying Issues and Decision Memorandum at 
Comment 6.

HYSCO

    HYSCO reported one channel of distribution in the comparison market 
(i.e., Korea), distinguished by two separate classes of customer: 1) 
direct sales to unaffiliated distributors and, 2) direct sales to 
affiliated and unaffiliated end-users. See HYSCO's Section A Response 
at A-11. HYSCO reported its selling functions to both distributors and 
end-users in the home market as: sales forecasting, strategic/economic 
planning, personnel training, advertising, sales promotion, packing, 
order input/processing, direct sales personnel, sales and marketing 
support, market research, technical assistance, providing warranty 
services, and arranging freight and delivery. Id. at A-12 and Exhibit 
6. Specifically, HYSCO reported that it sold directly to its comparison 
market customers at a single LOT. Id. at A-11 through A-12. We examined 
the selling activities reported for HYSCO's channel of distribution to 
its customers. Based on record evidence and HYSCO's questionnaire 
responses, we found that HYSCO's level of selling functions and stages 
of marketing reported for its comparison market channel of distribution 
customers did not vary significantly by class of customer (i.e., 
distributor vs. end-user). Therefore, we preliminarily conclude that 
the selling functions for the reported channel of distribution and 
classes of customer in that channel constitute one LOT in the 
comparison market.
    With regard to its sales to the United States, HYSCO reported one 
EP LOT and one CEP LOT, with a single channel of distribution for each. 
See HYSCO's Section A Response at A-11 through A-13. HYSCO's EP sales 
to the United States were made through an unaffiliated trading company 
located in Korea, which sold subject merchandise to unaffiliated 
distributors in the United States. HYSCO also made CEP sales through 
its wholly-owned U.S. subsidiary, HHU, to unaffiliated distributors. We 
preliminarily find that HYSCO has two channels of distribution for its 
sales of subject merchandise to the United States: EP sales to 
unaffiliated distributors, and CEP sales to unaffiliated distributors. 
Id. See also, HYSCO's Section A Response at Exhibit A-8.
    For EP sales, we examined the selling activities related to each of 
the selling functions between HYSCO and its unaffiliated trading 
company in Korea. HYSCO reported its selling functions to the trading 
company as: sales forecasting, strategic/economic planning, personnel 
training, advertising, sales promotion, packing, order input/
processing, direct sales personnel, sales and marketing support, market 
research, technical assistance, and providing freight and delivery 
arrangement to the United States. See HYSCO's Section A Response at 
Exhibit A-6. See also, HYSCO's Supplemental Response at S-7.
    For CEP sales, we consider only the selling activities reflected in 
the price after the deduction of expenses and CEP profit under section 
772(d) of the Act. See Micron Technology Inc. v. United States, 243 
F.3d at 1314-1315. We reviewed the selling functions and services 
performed by HYSCO on CEP sales to its U.S. affiliate, HHU, as 
described in its questionnaire responses, after these deductions. We 
found that HYSCO provides almost no selling functions to its U.S. 
affiliate in support of the CEP LOT. HYSCO reported that the only 
services it provided for the CEP sales were logistics for freight and 
delivery, order input and processing, and direct sales personnel. See 
HYSCO's Section A Response at Exhibit A-6. We then examined the selling 
functions performed by HYSCO on its EP sales in comparison with the 
selling functions performed on CEP sales (after the appropriate CEP 
deductions). We found that HYSCO performs an additional layer of 
selling functions at a greater frequency on its EP sales which are not 
performed on its sales to its affiliate. Id. See also, HYSCO's Section 
A Response at A-15 through A-17. Because these additional selling 
functions are significant, we find that HYSCO's EP sales are at a 
different LOT than its CEP sales.
    We then compared the selling functions HYSCO provided in the 
comparison market LOT with the selling functions provided to the U.S. 
EP LOT. On this basis, we determined that the comparison market LOT is 
almost identical to HYSCO's U.S. EP LOT in the selling functions and 
stages of marketing that are provided to each market. See HYSCO's 
Section A Response at Exhibit A-6; see also, HYSCO's Section A Response 
at A-15 through A-17. Moreover, we find that the degree to which HYSCO 
provides these identical selling functions for its customers in both 
markets to be similar (i.e., the exception being the provision of 
warranty services in HYSCO's comparison market LOT). Id., see also, 
HYSCO Analysis Memo. It was, therefore, unnecessary to make an LOT 
adjustment for comparison of HYSCO's comparison market and EP prices.
    HYSCO reported that it provided minimal selling functions and 
services for the CEP LOT and that, therefore, the comparison market LOT 
is more advanced than the CEP LOT. See HYSCO's Section A Response at A-
15. Based on our analysis of the channels of distribution and selling 
functions performed by HYSCO for sales in the comparison market and CEP 
sales in the U.S. market, we found that the functions provided by HYSCO 
to its U.S. affiliate are limited to order processing and the 
arrangement of freight and delivery. See HYSCO's Section A Response at 
Exhibit A-6. Therefore, we preliminarily find that the comparison 
market LOT is at a more advanced stage of distribution when compared to 
CEP sales because HYSCO provides many selling functions to its 
comparison market customers, which are not otherwise provided in 
HYSCO's CEP LOT. Id.; see also, HYSCO's Section A Response at A-15.
    Because the data available do not provide an appropriate basis for 
making a LOT adjustment and the LOT of HYSCO's comparison market sales 
is at a more advanced stage than the LOT of HYSCO's CEP sales, we 
preliminarily determine that a CEP offset is appropriate in accordance 
with section 773(a)(7)(B) of the Act, as claimed by HYSCO. We based the 
amount of the CEP offset on comparison market indirect selling 
expenses, and limited the deduction for comparison market indirect 
selling expense to the amount of the indirect selling expenses deducted 
from CEP in accordance with section 772(d)(1)(D) of the Act. We applied 
the CEP offset to the NV-CEP

[[Page 66029]]

comparisons. For a detailed discussion, see HSYCO Analysis Memo.

SEAH

    SeAH reported two channels of distribution in the comparison market 
(i.e., Korea) distinguished by two separate classes of customer: 1) 
direct sales to distributors and end-users, and 2) sales via an 
affiliated reseller, HD Steel Corporation, to unaffiliated distributors 
and end-users in the comparison market. See SeAH's B and C 
questionnaire responses at B-2. SeAH stated that there was no 
difference in the LOTs for its sales in the comparison market. See 
SeAH's B and C questionnaire responses at B-19. In the U.S. market, 
SeAH reported one LOT corresponding to two channels of distribution for 
the CEP sales made through its affiliated U.S. companies, PPA and State 
Pipe. See SeAH's B and C questionnaire responses at C-20. SeAH stated 
that it was not claiming a LOT adjustment, because it had no comparison 
market sales that were at the same LOT as the U.S. CEP sales, but 
stated that a CEP offset is warranted for its U.S. sales. See SeAH's A 
questionnaire response at 23. Furthermore, SeAH stated that its U.S. 
LOT is less advanced than its comparison market LOT. Id.
    In our analysis, we determined that SeAH's level of selling 
functions to its comparison market customers for each of the four 
selling function categories (i.e., sales process and marketing support, 
freight and delivery, inventory maintenance and warehousing, and 
warranty and technical services) did not vary significantly by channel 
of distribution. See SeAH's Supplemental Response at Exhibit A-46. We 
examined the level of selling functions for SeAH's U.S. customers and 
found that they did not vary significantly by channel of distribution. 
Id. Therefore, we preliminary determine that SeAH's comparison market 
and U.S. market sales constitute a single LOT.
    We then compared the selling functions performed by SeAH for its 
CEP sales to the selling functions provided in the comparison market. 
We found that SeAH provides significant selling activities in the 
comparison market related to the sales process and marketing support 
selling functions, as well as warranty selling functions, which it does 
not provide for the unaffiliated U.S. market customer. See SeAH 
Analysis Memo and SeAH's Supplemental Response at Exhibit A-46, for 
business proprietary information on SeAH's selling functions. The 
differences in selling functions performed for comparison market and 
CEP transactions indicate that SeAH's comparison market sales involved 
a more advanced stage of distribution than its CEP sales. In the 
comparison market, SeAH provides marketing further down the chain of 
distribution by promoting certain downstream selling functions that are 
normally performed by the affiliated reseller in the U.S. market. See 
SeAH Analysis Memo and Supplemental Response at Exhibit A-46. On this 
basis, we determined that the comparison market LOT is at a more 
advanced stage of distribution when compared to CEP sales because SeAH 
provides more selling functions in the comparison market at higher 
levels of service a