Stainless Steel Sheet and Strip in Coils From Mexico; Preliminary Results of Antidumping Duty Administrative Review and Intent Not To Revoke Order in Part, 39622-39631 [E9-19008]

Agencies

• DEPARTMENT OF COMMERCE
• International Trade Administration

[Federal Register Volume 74, Number 151 (Friday, August 7, 2009)]
[Notices]
[Pages 39622-39631]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-19008]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-201-822]


Stainless Steel Sheet and Strip in Coils From Mexico; Preliminary 
Results of Antidumping Duty Administrative Review and Intent Not To 
Revoke Order in Part

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

SUMMARY: In response to requests from respondent, ThyssenKrupp Mexinox 
S.A. de C.V. (Mexinox S.A.) and Mexinox USA, Inc. (Mexinox USA) 
(collectively, Mexinox) and Petitioners,\1\ 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 
in coils) from Mexico. This administrative review covers imports of 
subject merchandise from Mexinox S.A. during the period July 1, 2007, 
to June 30, 2008.
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    \1\ Petitioners are Allegheny Ludlum Corporation, AK Steel 
Corporation, and North American Stainless.
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    We preliminarily determine that sales of S4 in coils from Mexico 
have been made below normal value (NV). The Department also finds that 
revocation of the order with respect to Mexinox is not warranted under 
19 CFR 351.222(b)(2). If these preliminary results are adopted in our 
final results of this administrative 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 NV. 
Interested parties are invited to comment on these preliminary results. 
Parties who submit argument in these proceedings are requested to 
submit with the argument: (1) A statement of the issues; (2) a brief 
summary of the argument; and (3) a table of authorities.

DATES: Effective Date: August 7, 2009.

FOR FURTHER INFORMATION CONTACT: Patrick Edwards, Brian Davis, or 
Angelica Mendoza, 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, (202) 482-7924, or (202) 482-3019, respectively.

SUPPLEMENTARY INFORMATION:

Background

    On July 27, 1999, the Department published in the Federal Register 
the Notice of Amended Final Determination of Sales at Less Than Fair 
Value and Antidumping Duty Order; Stainless Steel Sheet and Strip in 
Coils From Mexico, 64 FR 40560 (July 27, 1999) (Order). On July 11, 
2008, the Department published a notice entitled Antidumping or 
Countervailing Duty Order, Finding, or Suspended Investigation; 
Opportunity To Request Administrative Review, 73 FR 39948 (July 11, 
2008), covering, inter alia, S4 in coils from Mexico for the period of 
review (POR) (i.e., July 1, 2007, through June 30, 2008).
    On July 30, 2008, Mexinox requested (1) revocation of the 
antidumping order on S4 in coils from Mexico with respect to Mexinox 
and (2) that the Department conduct an administrative review of Mexinox 
for the period from July 1, 2007, through June 30, 2008. On July 31, 
2008, in accordance with 19 CFR 351.213(b)(1), Petitioners also 
requested that the Department conduct an administrative review of 
Mexinox for the period July 1, 2007, through June 30, 2008. On August 
26, 2008, the Department published in the Federal Register a notice of 
initiation of this

[[Page 39623]]

antidumping duty administrative review covering the period July 1, 
2007, through June 30, 2008. See Initiation of Antidumping and 
Countervailing Duty Administrative Reviews, 73 FR 50308 (August 26, 
2008). On September 2, 2008, the Department issued an antidumping duty 
questionnaire to Mexinox. Mexinox submitted its response to section A 
of the questionnaire (AQR) on October 7, 2008, and its response to 
sections B, C, D, and E of the questionnaire (BQR, CQR, DQR, and EQR, 
respectively) on November 12, 2008. On December 12, 2008, Mexinox 
submitted factual information for the Department's consideration in the 
instant review. On January 29, 2009, the Department issued a 
supplemental questionnaire for sections A through C. The Department 
received comments from Petitioners on February 6, 2009 \2\ and February 
13, 2009.\3\ Because it was not practicable to complete this review 
within the normal time frame, on March 2, 2009, the Department 
published in the Federal Register a notice extending the time limits 
for this review. See Stainless Steel Sheet and Strip in Coils from 
Mexico; Extension of Time Limit for Preliminary Results of Antidumping 
Duty Administrative Review, 74 FR 9079 (March 2, 2009). This extension 
established the deadline for these preliminary results as July 31, 
2009. Mexinox responded to the Department's January 29, 2009, 
supplemental questionnaire on March 4, 2009 (SQR). On March 16, 2009, 
the Department received comments on Mexinox's AQR, BQR, CQR, and SQR 
from Petitioners. On March 31, 2009, and April 8, 2009, the Department 
issued section D and section E supplemental questionnaires, 
respectively. On May 1, 2009, Mexinox submitted its response to the 
Department's March 31, 2009, section D supplemental questionnaire 
(SDQR). On May 12, 2009, the Department issued a second section D 
questionnaire. On May 19, 2009, Mexinox submitted its response to the 
Department's April 8, 2009, section E supplemental questionnaire (SEQR) 
and on June 3, 2009, it submitted its response to the Department's 
second section D supplemental questionnaire (SSDQR). On June 4, 2009, 
the Department issued a second supplemental questionnaire covering 
sections A through C, and on June 11, 2009, the Department issued a 
third supplemental questionnaire covering section D. On July 6, 2009, 
Mexinox filed its collective responses to the Department's June 4, 
2009, second supplemental questionnaire as well as the Department's 
June 11, 2009, third section D supplemental questionnaire 
(collectively, SSQR).
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    \2\ Comments were in regard to Mexinox's AQR, BQR, and CQR.
    \3\ Comments were in regard to Mexinox's DQR.
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Period of Review

    The POR is July 1, 2007, through June 30, 2008.

Notice of Intent Not To Revoke Order in Part

    On July 30, 2008, Mexinox requested that, pursuant to 19 CFR 
351.222(b)(2), the Department revoke it from the antidumping duty order 
on S4 in coils from Mexico at the conclusion of this administrative 
review. Mexinox submitted along with its revocation request a 
certification stating that: (1) The company sold subject merchandise at 
not less than NV during the POR, and that in the future it would not 
sell such merchandise at less than NV; (2) the company has sold the 
subject merchandise to the United States in commercial quantities 
during each of the past three years, and (3) the company agrees to 
immediate reinstatement of the antidumping duty order, if the 
Department concludes that the company, subsequent to revocation, sold 
the subject merchandise at less than NV. See 19 CFR 351.222(e).
    In determining whether or not to revoke an antidumping duty order 
with respect to a particular producer/exporter under 19 CFR 
351.222(b)(2), the Department considers whether: (1) The producer/
exporter has sold the subject merchandise at not less than NV for a 
period of at least three consecutive years; (2) the producer/exporter 
has agreed to immediate reinstatement of the order if the Department 
finds that it has resumed making sales at less than NV; and (3) the 
continued application of the order is not otherwise necessary to offset 
dumping.
    In this case, our preliminary margin calculation shows that Mexinox 
sold the subject merchandise at less than NV during the current review 
period. See ``Preliminary Results of Review'' section below. Moreover, 
Mexinox received antidumping duty margins above de minimis in the 
previous two administrative reviews. Mexinox makes its request 
predicated on the assumption that an appeal will result in 
recalculations for both administrative reviews of margins at zero or de 
minimis. However, it is not the Department's policy to speculate 
regarding potential future outcome of appeals when determining whether 
revocation of the merchandise produced and exported by a particular 
company from an existing antidumping duty order is warranted. See, 
e.g., Certain Steel Concrete Reinforcing Bars From Turkey; Final 
Results of Antidumping Duty Administrative Review and Determination To 
Revoke in Part, 73 FR 66218, 66219 (November 7, 2008). While we 
acknowledge that the Department's determinations in the two prior 
segments of this proceeding are currently before NAFTA panels, there is 
no final and conclusive judgment supporting Mexinox's arguments or 
invalidating the Department's findings in the prior administrative 
reviews. Moreover, Mexinox's certification is based on the contention 
that the Department should offset sales made at less than NV with the 
sales that were made at not less than NV. In other words, Mexinox 
suggests that it had sales of the subject merchandise at less than NV 
during the relevant time period. However, 19 CFR 351.22(E)(1)(ii) 
requires the company to certify that the company sold its subject 
merchandise at not less than NV during each of the past three 
consecutive years. Therefore, we preliminarily find that Mexinox has 
sold subject merchandise at less than NV within the period of at least 
three consecutive years. Accordingly, we preliminarily determine, 
pursuant to 19 CFR 351.222(b)(2), that revocation of the order with 
respect to Mexinox is not warranted.

Scope of the Order

    For purposes of the order, the products covered are certain 
stainless steel sheet and strip in coils. Stainless steel is 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 (HTSUS) at 
subheadings: 7219.13.00.31, 7219.13.00.51, 7219.13.00.71, 
7219.13.00.81, 7219.14.00.30, 7219.14.00.65, 7219.14.00.90, 
7219.32.00.05, 7219.32.00.20, 7219.32.00.25, 7219.32.00.35, 
7219.32.00.36, 7219.32.00.38, 7219.32.00.42, 7219.32.00.44, 
7219.33.00.05, 7219.33.00.20, 7219.33.00.25, 7219.33.00.35, 
7219.33.00.36,

[[Page 39624]]

7219.33.00.38, 7219.33.00.42, 7219.33.00.44, 7219.34.00.05, 
7219.34.00.20, 7219.34.00.25, 7219.34.00.30, 7219.34.00.35, 
7219.35.00.05, 7219.35.00.15, 7219.35.00.30, 7219.35.00.35, 
7219.90.00.10, 7219.90.00.20, 7219.90.00.25, 7219.90.00.60, 
7219.90.00.80, 7220.12.10.00, 7220.12.50.00, 7220.20.10.10, 
7220.20.10.15, 7220.20.10.60, 7220.20.10.80, 7220.20.60.05, 
7220.20.60.10, 7220.20.60.15, 7220.20.60.60, 7220.20.60.80, 
7220.20.70.05, 7220.20.70.10, 7220.20.70.15, 7220.20.70.60, 
7220.20.70.80, 7220.20.80.00, 7220.20.90.30, 7220.20.90.60, 
7220.90.00.10, 7220.90.00.15, 7220.90.00.60, and 7220.90.00.80. 
Although the HTSUS subheadings are provided for convenience and customs 
purposes, the Department's written description of the merchandise 
subject to the order is dispositive.
    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 HTSUS, ``Additional 
U.S. Note'' 1(d).
    In response to comments by interested parties, the Department has 
determined that certain specialty stainless steel products are also 
excluded from the scope of the order. These excluded products are 
described below.
    Flapper valve steel 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 for 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 the 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 between 0.002 and 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 the 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 product is most commonly used in electronic 
sensors and is currently available under proprietary trade names such 
as ``Arnokrome III.'' \4\
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    \4\ ``Arnokrome III'' is a trademark of the Arnold Engineering 
Company.
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    Certain electrical resistance alloy steel is also excluded from the 
scope of the 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.'' \5\
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    \5\ ``Gilphy 36'' is a trademark of Imphy, S.A.
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    Certain martensitic precipitation-hardenable stainless steel is 
also excluded from the scope of the 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.'' \6\
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    \6\ ``Durphynox 17'' is a trademark of Imphy, S.A.
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    Finally, three specialty stainless steels typically used in certain 
industrial blades and surgical and medical instruments are also 
excluded from the scope of the order. These include stainless steel 
strip in coils used in the production of textile cutting tools (e.g., 
carpet knives).\7\ This steel is similar to ASTM grade 440F, 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

[[Page 39625]]

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 square micron. 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.'' 
\8\
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    \7\ This list of uses is illustrative and provided for 
descriptive purposes only.
    \8\ ``GIN4 Mo,'' ``GIN5'' and ``GIN6'' are the proprietary 
grades of Hitachi Metals America, Ltd.
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Date of Sale

    Mexinox reported the invoice date as the date of sale for certain 
sales made in all channels of distribution in both the home and U.S. 
markets. For all other sales in both the home market and the United 
States, Mexinox reported the date of the binding contract as the date 
of its sales made pursuant to these binding contracts. Specifically, 
due to volatile metal prices in recent years, Mexinox stated that it 
entered into binding contracts fixing prices and quantities for 
specified sales of subject merchandise for certain customers. See 
Mexinox's AQR at pages A-50 through A-51. See also Mexinox's SQR at 
page A-46.
    The Department normally uses invoice date as the date of sale, but 
may use a date other than the invoice date, if the Department is 
satisfied that a different date better reflects the date on which the 
exporter or producer establishes the material terms of sale. See 19 CFR 
351.401(i). For purposes of this review, we examined whether invoice 
date, contract date, or another date better represents the date on 
which the material terms of sale were established for all of Mexinox's 
sales to customers in the home and U.S. markets. The Department, in 
reviewing Mexinox's questionnaire responses, found that the material 
terms of sale for all sales are set on the date on which the invoice is 
issued. See Mexinox's AQR at attachments A-5-B through A-5-E for sample 
sales documents in the U.S. and home market for each channel of 
distribution as well as for a fixed-price contract. See also Mexinox's 
SSQR at Attachments A-32-A through A-32-D for relevant written sales 
contracts and documentation (i.e., list of base prices, alloy surcharge 
sales contracts, analysis or quantities shipped under the contract, 
sample transaction(s): Contract sale, and sample transaction(s): Non-
contract sale) between Mexinox and its customers who are part of the 
fixed-price contracts.
    Mexinox explained that other than sales under binding, fixed-price 
contracts, both home market and U.S. sales by Mexinox generally involve 
the placement of a purchase order by the customer. See Mexinox's AQR at 
pages 54-55. Mexinox also states that the purchase order is not binding 
on either party, is subject to cancellation, and the quantities 
initially requested can be changed after the initial order date and up 
until the merchandise is released for shipment. See Mexinox's AQR at 
pages 54-55. See also Mexinox's AQR at 17-19. The sales order entered 
into Mexinox's system at the time of sale may include a provisional 
price term, however, the sales order acknowledgement sent to the 
customer after the order is placed does not contain a sales price. 
Instead, sales prices in both markets are subject to further 
negotiation up until the time of shipment and invoicing (with the final 
price included on the invoice) in order to accommodate rapidly changing 
market price conditions, including changes in steel alloy prices and 
alloy surcharges. See Mexinox's AQR at page 55. In instances in which 
there were changes to the material terms of sale after the invoice, 
Mexinox explained that credit or debit notes will be issued after 
invoicing to correct for any billing errors. See Mexinox's SQR at page 
21.
    In its SQR at page A-55, Mexinox states that the price and quantity 
for its sales made pursuant to the binding, fixed contracts are, 
``firmly established under the contract with the customer, and do not 
change between the contract date and the invoicing of material to the 
customer.'' However, in reviewing the record, the Department 
preliminarily finds that the material terms of sale (e.g., price and 
quantity) are subject to, and in some instances did, change between the 
contract date and when Mexinox issued invoices to its customers for 
sales subject to these allegedly binding contracts. Specifically, we 
noted instances in which (1) Mexinox did not ship the full quantity 
specified under the contract and (2) the contracts specify ranges of 
alloy surcharges which are determined at the time of shipment.
    Lastly, if the respondent or other party wants the Department to 
use a different date than invoice date, it must submit information that 
supports the use of a different date. In the instant review, the 
Department, for purposes of these preliminary results, finds that 
Mexinox has not met its burden of proving that the material terms of 
its U.S. sales were set and were no longer subject to change prior to 
the invoice date. For a detailed discussion of our date of sale 
analysis, see ``Analysis of Data Submitted by ThyssenKrupp Mexinox S.A. 
de C.V. for the Preliminary Results of the Antidumping Duty 
Administrative Review on Stainless Steel Sheet and Strip in Coils from 
Mexico'' from Patrick Edwards and Brian Davis, International Trade 
Compliance Analysts, to the File, dated July 31, 2009 (Preliminary 
Analysis Memorandum).
    Based on all of the above, we preliminarily determine that invoice 
date is the appropriate date of sale for all of Mexinox's home market 
and U.S. sales in this administrative review because it represents the 
date upon which the material terms of sale are established. This is 
consistent with previous administrative reviews of this order. See, 
e.g., Stainless Steel Sheet and Strip in Coils From Mexico; Preliminary 
Results of Antidumping Duty Administrative Review, 73 FR 45708 (August 
6, 2008) (2006-2007 Preliminary Results), unchanged in Stainless Steel 
Sheet and Strip in Coils from Mexico; Final Results of Antidumping Duty 
Administrative Review, 74 FR 6365 (February 9, 2009) (2006-2007 Final 
Results), Stainless Steel Sheet and Strip in Coils from Mexico: Amended 
Final Results of Antidumping Duty Administrative Review, 73 FR 14215 
(March 17, 2008) (2005-2006 Amended Final Results), and Stainless Steel 
Sheet and Strip in Coils from Mexico; Preliminary Results of 
Antidumping Duty Administrative Review, 71 FR 35618 (June 21, 2006) 
(2004-2005 Preliminary Results) unchanged in Stainless Steel Sheet and 
Strip in Coils From Mexico; Final Results of Antidumping Duty 
Administrative Review, 71 FR 76978 (December 22, 2006) (2004-2005 Final 
Results).

Sales Made Through Affiliated Resellers

A. U.S. Market

    Mexinox USA, a wholly-owned subsidiary of Mexinox S.A., which in 
turn is a subsidiary of ThyssenKrupp Stainless AG (see Mexinox's AQR at 
pages A-9 and A-19, respectively), sold subject merchandise in the 
United States during the POR to unaffiliated customers. Mexinox USA 
also made sales of subject merchandise to U.S. affiliate Ken-Mac Metals 
(Ken-Mac)

[[Page 39626]]

which is an operating division of ThyssenKrupp Materials NA, Inc. (id. 
at pages A-15 and A-27), which is a subsidiary of ThyssenKrupp USA, 
Inc. (id. at page A-27), the primary holding company for ThyssenKrupp 
Stainless AG in the U.S. market (id. at page A-26). Ken-Mac purchased 
subject merchandise from Mexinox USA and further manufactured and/or 
resold the subject merchandise to unaffiliated customers in the United 
States during the POR. For purposes of these preliminary results of 
review, we have included both Mexinox USA's and Ken-Mac's sales of 
subject merchandise to unaffiliated customers in the United States in 
our margin calculation.

B. Home Market

    Mexinox Trading, S.A. de C.V. (Mexinox Trading), a subsidiary of 
Mexinox S.A., resold the foreign like product, as well as other 
merchandise, in the home market during the POR. See Mexinox's AQR at 
page A-20. Mexinox S.A.'s sales to Mexinox Trading represented a small 
portion of Mexinox S.A.'s total sales of the foreign like product in 
the home market and constituted less than five percent of all home 
market sales. See, e.g., Mexinox's AQR at page A-3. Because sales to 
Mexinox Trading of the foreign like product were below the five percent 
threshold established under 19 CFR 351.403(d), we did not require 
Mexinox S.A. to report Mexinox Trading's downstream sales to its first 
unaffiliated customer. This is consistent with the most recently 
completed administrative reviews of S4 in coils from Mexico. See, e.g., 
2006-2007 Preliminary Results at 45711, unchanged in 2006-2007 Final 
Results; see also Stainless Steel Sheet and Strip in Coils from Mexico; 
Preliminary Results of Antidumping Duty Administrative Review, 72 FR 
43600, 43602 (August 6, 2007) (2005-2006 Preliminary Results), 
unchanged in Stainless Steel Sheet and Strip in Coils from Mexico; 
Final Results of Antidumping Duty Administrative Review, 73 FR 7710 
(February 11, 2008) (2005-2006 Final Results), and 2005-2006 Amended 
Final Results; see also 2004-2005 Final Results at 35620 and 
accompanying Issues and Decision Memorandum at Comment 2.

Fair Value Comparisons

    To determine whether sales of S4 in coils from Mexico to the United 
States were made at less than fair value (LTFV), we compared CEP sales 
made in the United States by both Mexinox USA and Ken-Mac to 
unaffiliated purchasers to NV as described in the ``Constructed Export 
Price'' and ``Normal Value'' sections of this notice, below. In 
accordance with section 777A(d)(2) of the Tariff Act of 1930, as 
amended (the Act), we compared individual CEPs to monthly weighted-
average NVs. For austenitic grade products where we are using a 
quarterly costing approach, as described in the ``Normal Value'' 
section below, we have not made price-to-price comparisons outside of a 
quarter to lessen the distortive effect of comparing non-
contemporaneous sales prices during a period of significantly changing 
costs.

Product Comparisons

    In accordance with section 771(16) of the Act, we considered all 
products produced by Mexinox S.A. 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 product 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 characteristics and reporting instructions listed in the 
Department's original September 2, 2008, questionnaire.

Level of Trade

    In accordance with section 773(a)(1)(B) of the Act, to the extent 
practicable, we base NV on sales made in the comparison market at the 
same level of trade (LOT) as the export transaction. The NV LOT is 
based on the starting price of sales in the home market or, when NV is 
based on constructed value (CV), that of the sales from which selling, 
general, and administrative (SG&A) expenses and profit are derived. 
With respect to CEP transactions in the U.S. market, the CEP LOT is the 
level of the constructed sale from the exporter to the importer. See 
Mittal Steel USA, Inc. v. United States, 2007 Ct. Int'l Trade Lexis 
138, at *25 (Ct. Int'l Trade August 1, 2007).
    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 customer. 
See 19 CFR 351.412(c)(2). 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 Act. For CEP sales, if the NV level is at a more 
advanced stage of distribution than the CEP level and there is no basis 
for determining whether the difference in the levels between NV and CEP 
affects price comparability, we adjust NV under section 773(a)(7)(B) of 
the Act (the CEP offset provision). See, e.g., Final Determination of 
Sales at Less Than Fair Value: Greenhouse Tomatoes From Canada, 67 FR 
8781 (February 26, 2002) and accompanying Issues and Decision 
Memorandum at Comment 8; see also 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 Notice of Final Results of Antidumping Duty Administrative 
Review: Certain Hot-Rolled Flat-Rolled Carbon Quality Steel Products 
From Brazil, 70 FR 58683 (October 7, 2005). 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 1301, 1314-1315 (Fed. Cir. 
2001). We expect that if the claimed LOTs are the same, the functions 
and activities of the seller should be similar. Conversely, if a party 
claims the 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 Antidumping 
Duty Administrative Review, 65 FR 30068 (May 10, 2000) and accompanying 
Issues and Decision Memorandum at Comment 6.
    We obtained information from Mexinox regarding the marketing stages 
involved in making its reported home market and U.S. sales to both 
affiliated and unaffiliated customers. Mexinox provided a description 
of all selling activities performed, along with a flowchart and tables 
comparing the LOTs among each channel of distribution and customer 
category for both markets. See Mexinox's AQR at A-38 through A-39 and 
Attachments A-4-B and A-4-C.
    Mexinox sold S4 in coils to end-users and retailers/distributors in 
the home market and to end-users and distributors/service centers in 
the United States. For the home market, Mexinox S.A. identified two 
channels of distribution described as follows: (1)

[[Page 39627]]

Direct shipments (i.e., products produced to order); and (2) sales from 
inventory. Within each of these two channels of distribution, Mexinox 
S.A. made sales to affiliated and unaffiliated distributors/retailers 
and end-users. See Mexinox's AQR at page A-32. We reviewed the 
intensity of all selling functions Mexinox S.A. claimed to perform for 
each channel of distribution and customer category. For certain 
functions, such as: (1) Pre-sale technical assistance; (2) processing 
of customer orders; (3) sample analysis; (4) prototypes and trial lots; 
(5) freight and delivery; (6) price negotiation/customer 
communications; (7) sales calls and visits; (8) continuous technical 
service; (9) international travel; (10) currency risks; (11) sales 
forecasting and market research; (12) providing rebates; and (13) 
warranty services, the level of performance for both direct shipments 
and sales from inventory was identical across all types of customers. 
Only a few functions exhibited differences, including: (1) Inventory 
maintenance/just-in-time performance; (2) further processing; (3) 
credit and collection; (4) low volume orders; and (5) shipment of small 
packages. See Mexinox's AQR at Attachment A-4-C. While we find 
differences in the levels of intensity performed for some of these 
functions, such differences are minor and do not establish distinct 
LOTs in Mexico. Based on our analysis of all of Mexinox S.A.'s home 
market selling functions, we preliminarily find all home market sales 
were made at the same LOT, the NV LOT.
    We then compared the NV LOT, based on the selling functions 
associated with the transactions between Mexinox S.A. and its customers 
in the home market, to the CEP LOT, which is based on the selling 
functions associated with the transaction between Mexinox S.A. and its 
affiliated importer, Mexinox USA. Our analysis indicates the selling 
functions performed for home market customers are either performed at a 
higher degree of intensity or are greater in number than the selling 
functions performed for Mexinox USA. See Mexinox's AQR at pages A-40 
through A-45 and Attachments A-4-A through A-4-C. For example, in 
comparing Mexinox's selling functions, we find there are more functions 
performed in the home market which are not a part of CEP transactions 
(e.g., pre-sale technical assistance, sample analysis, prototypes and 
trial lots, price negotiation/customer communications, price 
negotiations/customer communications, inventory maintenance/just-in-
time performance, international travel, currency risks, sales 
forecasting and market research, providing rebates, sales calls and 
visits, credit and collection, and warranty services). For selling 
functions performed for both home market sales and CEP sales (e.g., 
processing customer orders, freight and delivery arrangements, further 
processing, low volume orders, and shipment of small packages), we find 
Mexinox S.A. actually performed each activity at a higher level of 
intensity in the home market. See Mexinox's AQR at Attachment A-4-C. 
Based on Mexinox's responses, we note that CEP sales from Mexinox S.A. 
to Mexinox USA generally occur at the beginning of the distribution 
chain, representing essentially a logistical transfer of inventory that 
resembles ex-factory sales. See Mexinox's AQR at page A-42 and at 
Attachment A-4-A. In contrast, sales in the home market (including 
sales to Mexinox Trading) occur closer to the end of the distribution 
chain and involve smaller volumes and more customer interaction which, 
in turn, require the performance of more selling functions. See 
Mexinox's AQR at pages A-43 A-44 and Attachments A-4-A through A-4-C. 
Based on the abovementioned information, we preliminarily conclude the 
NV LOT is at a more advanced stage than the CEP LOT.
    Because we found the home market and U.S. sales were made at 
different LOTs, we examined whether a LOT adjustment or a CEP offset 
may be appropriate in this review. As we found only one LOT in the home 
market, it was not possible to make a LOT adjustment to home market 
sales, because such an adjustment is dependent on our ability to 
identify a pattern of consistent price differences between the home 
market sales on which NV is based and home market sales at the LOT of 
the export transaction. See 19 CFR 351.412(d)(1)(ii). Furthermore, we 
have no other information that provides an appropriate basis for 
determining a LOT adjustment. Because the data available do not form an 
appropriate basis for making a LOT adjustment, and because the NV LOT 
is at a more advanced stage of distribution than the CEP LOT, we have 
preliminarily made a CEP offset to NV in accordance with section 
773(a)(7)(B) of the Act.

Constructed Export Price

    Mexinox indicated it made CEP sales through its U.S. affiliate, 
Mexinox USA, in the following four channels of distribution: (1) Direct 
shipments to unaffiliated customers; (2) stock sales from the San Luis 
Potosi factory; (3) sales to unaffiliated customers through Mexinox 
USA's warehouse inventory; and (4) sales through Ken-Mac.\9\ See 
Mexinox's AQR at pages A-32 through A-35.
---------------------------------------------------------------------------

    \9\ Ken-Mac is an affiliated service center located in the 
United States which purchases S4 in coils produced by Mexinox S.A. 
and then resells the merchandise (after, in some instances, further 
manufacturing) to unaffiliated U.S. customers. See Mexinox's AQR at 
pages A-15 through A-16.
---------------------------------------------------------------------------

    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. We preliminarily find Mexinox properly 
classified all of its U.S. sales of subject merchandise as CEP 
transactions because such sales were made in the United States through 
Mexinox USA or Ken-Mac to unaffiliated purchasers. We based CEP on 
packed prices to unaffiliated purchasers in the United States sold by 
Mexinox USA or its affiliated reseller, Ken-Mac. We made adjustments 
for billing adjustments, discounts and rebates, where applicable. We 
also made deductions for movement expenses in accordance with section 
772(c)(2)(A) of the Act, including foreign inland freight, foreign 
brokerage and handling, inland insurance, U.S. customs duties, U.S. 
inland freight, U.S. brokerage and handling, and U.S. warehousing 
expenses. As directed by section 772(d)(1) of the Act, we deducted 
those selling expenses associated with economic activities occurring in 
the United States, including direct selling expenses (i.e., credit 
expenses, warranty expenses, and a certain expense of proprietary 
nature (see Mexinox's CQR at pages C-49 through C-50)), inventory 
carrying costs, packing costs, and other indirect selling expenses. We 
also made an adjustment for profit in accordance with section 772(d)(3) 
of the Act. We used the expenses as reported by Mexinox made in 
connection with its U.S. sales, with the exception of the U.S. indirect 
selling expense ratio which we recalculated. See Preliminary Analysis 
Memorandum.
    For sales in which the material was sent to an unaffiliated U.S. 
processor, we made an adjustment based on the transaction-specific 
further-processing expenses incurred by Mexinox USA. In addition, the 
U.S. affiliated reseller, Ken-Mac, performed some further manufacturing 
for its sales to

[[Page 39628]]

unaffiliated U.S. customers. For these sales, we deducted the cost of 
further processing in accordance with section 772(d)(2) of the Act. In 
calculating the cost of further manufacturing for Ken-Mac, we relied 
upon Ken-Mac's reported cost of further manufacturing materials, labor 
and overhead. We also included amounts for further manufacturing 
general and administrative expenses (G&A), as reported in Mexinox's 
cost database submitted in its SSDQR, except where adjusted as noted 
above.

Normal Value

A. Cost Averaging Methodology

    The Department's normal practice is to calculate an annual 
weighted-average cost for the entire POR. See, e.g., Certain Pasta From 
Italy: Final Results of Antidumping Duty Administrative Review, 65 FR 
77852 (December 13, 2000), and accompanying Issues and Decision 
Memorandum at Comment 18, and Notice of Final Results of Antidumping 
Duty Administrative Review of Carbon and Certain Alloy Steel Wire Rod 
from Canada, 71 FR 3822 (January 24, 2006), and accompanying Issues and 
Decision Memorandum at Comment 5 (explaining the Department's practice 
of computing a single weighted-average cost for the entire period). 
However, the Department recognizes that possible distortions may result 
if our normal annual average cost method is used during a period of 
significant cost changes. In determining whether to deviate from our 
normal methodology of calculating an annual weighted average cost, the 
Department evaluates the case-specific record evidence using two 
primary factors: (1) The change in the cost of manufacturing (COM) 
recognized by the respondent during the POR must be deemed significant; 
and (2) the record evidence must indicate that sales during the shorter 
averaging periods could be reasonably linked with the cost of 
production (COP) or CV during the same shorter averaging periods. See 
Stainless Steel Plate in Coils From Belgium: Final Results of 
Antidumping Duty Administrative Review, 73 FR 75398, 75399 (December 
11, 2008) (SSPC from Belgium) and accompanying Issues and Decision 
Memorandum at Comment 4; see also 2006-2007 Final Results and 
accompanying Issues and Decision Memorandum at Comment 5.
1. Significance of Cost Changes
    In prior cases, the Department established 25 percent as the 
threshold (between the high and low quarterly COM) for determining that 
the changes in COM are significant enough to warrant a departure from 
our standard annual costing approach. See SSPC from Belgium and 
accompanying Issues and Decision Memorandum at Comment 4 ; see also 
2006-2007 Preliminary Results at 45709-45710, unchanged in 2006-2007 
Final Results and accompanying Issues and Decision Memorandum at 
Comment 5. In the instant case, record evidence shows that Mexinox 
experienced significant changes (i.e., changes that exceeded 25 
percent) between the high and low quarterly COM during the POR and that 
the change in COM is primarily attributable to the price volatility for 
nickel, a major input consumed in the production of the austenitic hot-
rolled stainless steel coil purchased by Mexinox, and then used to 
produce some of the merchandise under consideration. See ``Cost of 
Production and Constructed Value Calculation Adjustments for the 
Preliminary Results--ThyssenKrupp Mexinox S.A. de C.V.,'' from Sheikh 
Hannan, Senior Accountant, to Neal M. Halper, Director, Office of 
Accounting, dated July 31, 2009 (Cost Calculation Memorandum). In 
examining both the company-specific inventory records for austenitic 
hot-rolled stainless steel coil and global market pricing indices for 
nickel, we found that nickel prices changed dramatically throughout the 
POR and consequently directly affected the cost of the material inputs 
consumed by Mexinox. See Cost Calculation Memorandum. Specifically, the 
record data shows that the percentage difference between the high and 
low quarterly COM for the austenitic grades of products clearly 
exceeded 25 percent during the POR. See Cost Calculation Memorandum. As 
a result, we have determined for the preliminary results that the 
changes in COM for austenitic grades for Mexinox are significant enough 
to warrant a departure from our standard annual costing approach, as 
these significant cost changes create distortions in the Department's 
sales-below-cost test as well as the overall margin calculation.
2. Linkage Between Cost and Sales Information
    As noted above, the Department preliminarily found cost changes to 
be significant in this administrative review; thus the Department 
subsequently evaluated whether there is evidence of linkage between the 
cost changes and the sales prices during the POR. The Department's 
definition of linkage does not require direct traceability between 
specific sales and their specific production cost, but rather relies on 
whether there are elements which would indicate a reasonable 
correlation between the underlying costs and the final sales prices 
levied by the company. See 2006-2007 Final Results and accompanying 
Issues and Decision Memorandum at Comment 5; see also SSPC from Belgium 
and accompanying Issues and Decision Memorandum at Comment 4. These 
correlative elements may be measured and defined in a number of ways 
depending on the associated industry, and the overall production and 
sales processes.
    In the instant case, Mexinox employs an alloy surcharge mechanism. 
As articulated in 2006-2007 Final Results (and accompanying Issues and 
Decision Memorandum at Comment 5) and SSPC from Belgium (and 
accompanying Issues and Decision Memorandum at Comment 4), through the 
alloy surcharge levied on all sales during the POR, there is a linkage 
between the volatile direct material costs and final sale prices. 
Specifically, the alloy surcharge mechanism links the nickel 
acquisition and consumption costs to the market prices promulgated by 
the London Metal Exchange (LME). See, e.g., 2006-2007 Preliminary 
Results at 45709, unchanged in 2006-2007 Final Results. The alloy 
surcharge regime is a common business practice in the stainless steel 
industry, whereby the changes in material costs realized by producers 
during the months preceding the date of sale are measured based on the 
LME and ultimately passed on to its final customers. See 2006-2007 
Preliminary Results at 45709, unchanged in 2006-2007 Final Results. The 
alloy surcharge figure does not need to directly correspond to changes 
in the price of the applicable raw material used in the production to 
which the surcharge applies. The surcharge amount is, by design, a 
mechanism developed to account for raw material price changes. This 
alloy surcharge mechanism, as noted above, allows companies to pass on 
the changes in raw material costs to their customers, thereby 
establishing a reasonable link between the underlying costs and sales 
prices.
    In light of the two factors discussed above, a significant change 
in COM between the high and low quarters exists and a reasonable 
linkage between cost and sales information exists through the alloy 
surcharge mechanism. Accordingly, we have preliminarily determined that 
a quarterly costing approach would lead to more appropriate comparisons 
in our antidumping duty calculations for austenitic products. 
Therefore, we preliminarily used quarterly indexed annual average 
direct material costs and annual weighted-average conversion

[[Page 39629]]

costs in the COP and CV calculations for austenitic products. For those 
products reported that do not contain nickel (e.g., ferritic grade 
products), we have continued to use a single weighted-average total COM 
for the POR.

B. Selection of Comparison Market

    To determine whether there is 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 is 
greater than five percent of the aggregate volume of U.S. sales), we 
compared Mexinox's volume of home market sales of the foreign like 
product to the volume of its U.S. sales of the subject merchandise, in 
accordance with section 773(a)(1)(B) of the Act. Because Mexinox'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 for 
subject merchandise, we determined the home market was viable. See, 
e.g., Mexinox's SSQR at Attachment B-32 (home market sales database) 
and at Attachment C-33 (U.S. sales database).

C. Affiliated Party Transactions and Arm's Length Test

    Sales to affiliated customers in the home market not made at arm's 
length prices are excluded from our analysis because we consider them 
to be outside the ordinary course of trade. See section 773(f)(2) of 
the Act; see also 19 CFR 351.102(b). Consistent with 19 CFR 351.403(c) 
and (d) and agency practice, ``the Department may calculate NV based on 
sales to affiliates if satisfied that the transactions were made at 
arm's length.'' See China Steel Corp. v. United States, 264 F. Supp. 2d 
1339, 1365 (CIT 2003). To test whether the 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 direct selling expenses, billing adjustments, discounts, 
rebates, movement charges, and packing. Where prices to the affiliated 
party are, on average, within a range of 98 to 102 percent of the price 
of identical or comparable merchandise to the unaffiliated parties, we 
determine that the sales made to the affiliated party are at arm's 
length. See Antidumping Proceedings: Affiliated Party Sales in the 
Ordinary Course of Trade, 67 FR 69186, 69194 (November 15, 2002). In 
this review, however, we found that prices to affiliated parties were, 
on average, outside of the 98 to 100 percent of the price of identical 
or comparable subject merchandise sold to unaffiliated parties. 
Accordingly, we found both affiliated home market customers failed the 
arm's length test and, in accordance with the Department's practice, we 
excluded sales to these affiliates from our analysis.

D. Cost of Production Analysis

    Because we disregarded sales of certain products made at prices 
below the COP in the most recently completed review of S4 in coils from 
Mexico (see 2006-2007 Preliminary Results at 45713-45714, unchanged in 
2006-2007 Final Results), we had reasonable grounds to believe or 
suspect that sales of the foreign like product under consideration for 
the determination of NV in this review for Mexinox may have been made 
at prices below the COP, as provided by section 773(b)(2)(A)(ii) of the 
Act. Pursuant to section 773(b)(1) of the Act, we initiated a COP 
investigation of sales by Mexinox. We relied on home market sales and 
COP information provided by Mexinox in its questionnaire responses, 
except where noted below:
    Using Mexinox's reported quarterly cost database for austenitic 
grades of product, we measured the cost changes, in terms of a 
percentage, to develop the direct material indices for each quarter 
within a specific austenitic stainless steel grade. We used these 
indices to calculate an annual weighted-average COP for the POR and 
then restate that annual average COP to each respective quarter on an 
equivalent basis.
    ThyssenKrupp Nirosta GmbH (TKN) and ThyssenKrupp AST, S.p.A. 
(TKAST), hot-rolled stainless steel coil producers affiliated with 
Mexinox, sold hot-rolled stainless steel coil to Mexinox USA, which in 
turn sold hot-rolled stainless steel coil to Mexinox S.A. Hot-rolled 
stainless steel coil is considered a major input to the production of 
S4 in coils. Section 773(f)(3) of the Act (the major input rule) 
states:

    If in the case of a transaction between affiliated persons 
involving the production by one of such persons of a major input to 
the merchandise, the administering authority has reasonable grounds 
to believe or suspect that an amount represented as the value of 
such input is less than the cost of production of such input, then 
the administering authority may determine the value of the major 
input on the basis of the information available regarding such cost 
of production, if such cost is greater than the amount that would be 
determined for such input under paragraph (2).

Paragraph 2 of section 773(f) of the Act (transactions disregarded) 
states:

    A transaction directly or indirectly between affiliated persons 
may be disregarded if, in the case of any element of value required 
to be considered, the amount representing that element does not 
fairly reflect the amount usually reflected in sales of merchandise 
under consideration in the market under consideration. If a 
transaction is disregarded under the preceding sentence and no other 
transactions are available for consideration, the determination of 
the amount shall be based on the information available as to what 
the amount would have been if the transaction had occurred between 
persons who are not affiliated.

In accordance with the major input rule, and as stated in the 2006-2007 
Preliminary Results at 45714, unchanged in 2006-2007 Final Results, it 
is the Department's normal practice to use all three elements of the 
major input rule (i.e., transfer price, COP and market price) where 
available.
    For these preliminary results, we evaluated the transfer prices 
between Mexinox and its affiliated hot-rolled stainless steel coil 
suppliers on a grade-specific basis. For certain grades of hot-rolled 
stainless steel coil, all three elements of the major input analysis 
were available. These grades of hot-rolled stainless steel coil account 
for the majority of volume of hot-rolled stainless steel coil that 
Mexinox purchased from TKN and TKAST during the POR. As such, we find 
these purchases provide a reasonable basis for the Department to 
measure the preferential treatment, if any, given to Mexinox for 
purchases of hot-rolled stainless steel coil from TKN and TKAST during 
the POR. Therefore, we adjusted the reported costs to reflect the 
higher of transfer prices, COP, or market prices of hot-rolled 
stainless steel coil, where available. Additionally, if necessary, we 
relied on these results to adjust the reported cost for grades where 
all three elements of the major input were not available. See Cost 
Calculation Memorandum.
    Because we have determined that shorter cost periods are 
appropriate for the COP analysis of austenitic grades, we have 
performed the major input analysis on a quarterly basis for all grades 
of austenitic hot-rolled stainless steel coil. For all other grades of 
hot-rolled stainless steel coil, we have performed the cost-based part 
of the major input analysis on a POR basis.
    We revised Mexinox's G&A expenses to include employee profit 
sharing expenses and exclude gains on the sales of land and a 
warehouse. Further, we disallowed the offsets to the G&A expenses for 
the revenues earned from the recovery of accounts receivables, payments 
for certificate of material origin requested by customers, ECS fees, 
lease, travel expenses, and freight because the corresponding expense

[[Page 39630]]

items are reported by Mexinox as selling activities. We also revised 
the denominator used by Mexinox to calculate the G&A expense rate by 
several items to allow for symmetry between the way the rate was 
calculated and the application of the rate. In addition, we adjusted 
the denominator of the financial expense ratio to exclude the packing 
expenses and include the major input adjustments. See Cost Calculation 
Memorandum.
    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 Act, whether, within an extended period of 
time, such sales were made in substantial quantities, and whether such 
sales were made at prices which permitted the recovery of all costs 
within a reasonable period of time in the normal course of trade. As 
noted in section 773(b)(1)(D) of the Act, prices are considered to 
provide for recovery of costs if such prices are above the weighted 
average per-unit COP for the period of investigation or review. In the 
instant case, we have relied on a quarterly costing approach for 
austenitic grades of merchandise. Similar to that used by the 
Department in cases of high-inflation (see, e.g., Notice of Final 
Determination of Sales at Less Than Fair Value: Certain Cut-to-Length 
Carbon-Quality Steel Plate Products from Indonesia, 64 FR 73164 
(December 29, 1999) at Comment (1), this methodology restates the 
quarterly costs on a year-end equivalent basis, calculates an annual 
weighted-average cost for the POR and then restates it to each 
respective quarter. We find that this quarterly costing method meets 
the requirements of section 773(b)(2)(D) of the Act.
    Where less than 20 percent of the respondent's home market sales of 
a given model were at prices below the COP, we did not disregard any 
below-cost sales of that model because we determined that the below-
cost sales were not made within an extended period of time and in 
``substantial quantities.'' Where 20 percent or more of the 
respondent's home market sales of a given model were at prices less 
than the COP, we disregarded the below-cost sales because: (1) They 
were made within an extended period of time in ``substantial 
quantities,'' in accordance with sections 773(b)(2)(B) and (C) of the 
Act; and (2) based on our comparison of prices to the weighted-average 
COPs for the POR, they were at prices which would not permit the 
recovery of all costs within a reasonable period of time, in accordance 
with section 773(b)(2)(D) of the Act.
    Our cost test for Mexinox revealed that, for home market sales of 
certain models, less than 20 percent of the sales of those models were 
at prices below the COP. We therefore retained all such sales in our 
analysis and used them as the basis for determining NV. Our cost test 
also indicated that for home market sales of other models, more than 20 
percent were sold at prices below the COP within an extended period of 
time and were at prices which would not permit the recovery of all 
costs within a reasonable period of time. Thus, in accordance with 
section 773(b)(1) of the Act, we excluded these below-cost sales from 
our analysis and used the remaining above-cost sales as the basis for 
determining NV.

E. Constructed Value

    In accordance with section 773(e) of the Act, we calculated CV 
based on the sum of Mexinox's material and fabrication costs, SG&A 
expenses, profit, and U.S. packing costs. We calculated the COP 
component of CV as described above in the ``Cost of Production 
Analysis'' section of this notice. In accordance with section 
773(e)(2)(A) of the Act, we based 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.

F. Price-to-Price Comparisons

    We calculated NV based on prices to unaffiliated customers. Mexinox 
S.A. reported home market sales in Mexican pesos, but noted certain 
home market sales were invoiced in U.S. dollars during the POR. See 
Mexinox's BQR at pages B-26 and B-27. In our margin calculations, we 
used the currency of the sale invoice at issue and applied the relevant 
adjustments in the actual currency invoiced or incurred by Mexinox. We 
accounted for billing adjustments, discounts, and rebates, where 
appropriate. We also made deductions, where appropriate, for foreign 
inland freight, insurance, handling, and warehousing, 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 compared pursuant to section 
773(a)(6)(C)(ii) of the 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 Act and 19 CFR 
351.410. In particular, we made COS adjustments for imputed credit 
expenses and warranty expenses. As noted above in the ``Level of 
Trade'' section of this notice, we also made an adjustment for the CEP 
offset in accordance with section 773(a)(7)(B) of the Act. 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 Act.
    We used Mexinox's home market adjustments and deductions as 
reported. For purposes of these preliminary results, we have accepted 
Mexinox's reporting of the handling expenses incurred by Mexinox's home 
market affiliate, Mexinox Trading and imputed credit expenses based on 
reported payment dates. However, in order to be consistent with past 
administrative reviews of this case, we intend to request additional 
information regarding these handling expenses and the actual date of 
payment for these sales after the issuance of these preliminary 
results, and address these issues in our final results. See Preliminary 
Analysis Memorandum. See, e.g., 2006-2007 Final Results and 
accompanying Issues and Decision Memorandum at Comment 1; see also 
2005-2006 Preliminary Results at 43605, 2005-2006 Final Results, and 
2005-2006 Amended Final Results; see also 2004-2005 Preliminary Results 
at 35623 (unchanged in 2004-2005 Final Results).

G. Price-to-CV Comparisons

    Where we were unable to find a home market match of such or similar 
merchandise, in accordance with section 773(a)(4) of the Act, we based 
NV on CV. Where appropriate, we made adjustments to CV in accordance 
with section 773(a)(8) of the Act.

Currency Conversion

    We made currency conversions into U.S. dollars based on the 
exchange rates in effect on the dates of the U.S. sales, as certified 
by Dow Jones Reuters Business Interactive, LLC (trading as Factiva), in 
accordance with section 773A(a) of the Act.

Preliminary Results of Review

    As a result of our review, we preliminarily find that the following 
weighted-average dumping margin exists for the period July 1, 2007, 
through June 30, 2008:

------------------------------------------------------------------------
                                                             Weighted
                  Manufacturer/Exporter                   average margin
                                                            (percentage)
------------------------------------------------------------------------
ThyssenKrupp Mexinox S.A. de C.V........................           13.31
------------------------------------------------------------------------


[[Page 39631]]

Public Comment

    The Department will disclose calculations performed within five 
days of the date of publication of this notice in accordance w