[Federal Register Volume 65, Number 123 (Monday, June 26, 2000)]
[Notices]
[Pages 39351-39355]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-16107]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-580-843]


Notice of Preliminary Determination of Sales at Less Than Fair 
Value and Postponement of Final Determination: Certain Expandable 
Polystyrene Resins From the Republic of Korea

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

EFFECTIVE DATE: June 26, 2000.

FOR FURTHER INFORMATION CONTACT: Valerie Ellis at (202) 482-2336 or 
Charles Riggle at (202) 482-0650, Import Administration, Room 1870, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, NW, Washington, DC 20230.

The Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute are 
references to the provisions effective January 1, 1995, the effective 
date of the amendments made to the Tariff Act of 1930 (the Act) by the 
Uruguay Round Agreements Act (URAA). In addition, unless otherwise 
indicated, all citations to Department of Commerce (Department) 
regulations refer to the regulations codified at 19 CFR part 351 (April 
1999).

Preliminary Determination

    We preliminarily determine that certain expandable polystyrene 
resins (EPS) from the Republic of Korea (Korea) are being sold, or are 
likely to be sold, in the United States at less than fair value (LTFV), 
as provided in section 733 of the Act.

Case History

    On November 22, 1999, the Department received a petition on certain 
EPS from Korea filed, in proper form by BASF Corporation, Huntsman 
Expandable Polymers Company LC, Nova Chemicals Inc., and Styrochem 
U.S., Ltd., (collectively, the petitioners).\1\ On December 1 and 3, 
1999, the Department received amendments to the petition.
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    \1\ A petition was also filed at the same time on EPS from 
Indonesia.
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    On December 13, 1999, the Department initiated an antidumping 
investigation of EPS from Korea. See Initiation of Antidumping Duty 
Investigations: Certain Expandable Polystyrene Resins from Indonesia 
and the Republic of Korea, 64 FR 71112 (December 20, 1999) (Initiation 
Notice). Since the initiation of the investigation, the following 
events have occurred:
    On January 7, 2000, the United States International Trade 
Commission (ITC) preliminarily determined that there is a reasonable 
indication that imports of the subject merchandise are materially 
injuring the U.S. industry. See Certain Expandable Polystyrene Resins 
from Indonesia and Korea, 65 FR 2429 (January 14, 2000).
    On January 31, 2000, the Department issued antidumping 
questionnaires to Cheil Industries, Inc. (Cheil) and Shinho 
Petrochemical Co., Ltd. (Shinho). See Selection of Respondents section 
of this notice. The respondents submitted their initial responses to 
the questionnaire in March and April 2000. After analyzing these 
responses, we issued supplemental questionnaires to the respondents. We 
received timely responses to these supplemental questionnaires.
    On April 13, 2000, the Department published a Federal Register 
notice postponing until June 20, 2000, the deadline for the preliminary 
determination in this and in the companion investigation involving 
Indonesia. See Notice of Postponement of Preliminary Antidumping Duty

[[Page 39352]]

Determinations: Certain Expandable Polystyrene Resins from Indonesia 
and the Republic of Korea, 65 FR 19872 (April 13, 2000). On April 13, 
2000, the petitioners alleged that both Cheil and Shinho were selling 
EPS in the home market at prices below their respective production 
costs. See Normal Value Section below.

Postponement of Final Determination and Extension of Provisional 
Measures

    Section 735(a)(2) of the Act provides that a final determination 
may be postponed until not later than 135 days after the date of 
publication of the preliminary determination if, in the event of an 
affirmative preliminary determination, a request for such postponement 
is made by exporters who account for a significant portion of exports 
of the subject merchandise or, if in the event of a negative 
determination, a request for such postponement is made by the 
petitioners. The Department's regulations, at 19 CFR 351. 210(e)(2), 
require that requests by the respondents for postponement of a final 
determination be accompanied by a request for extension of provisional 
measures from a four-month period to not more than six months.
    On June 6, 2000 and June 15, 2000, we received requests from the 
respondents for postponement of the final determination. In the 
request, the respondents consented to the extension of provisional 
measures to no longer than six months. Because the preliminary 
determination in this investigation is affirmative, the respondents 
filing the requests account for a significant proportion of exports of 
the subject merchandise, and there is no compelling reason to deny the 
respondent's request, we have extended the deadline for issuance of the 
final determination in this case until the 135th day after the date of 
publication of this preliminary determination in the Federal Register.

Period of Investigation

    The period of investigation (POI) is October 1, 1998, through 
September 30, 1999. This period corresponds to the four most recent 
fiscal quarters prior to the month of the filing of the petition (i.e., 
December 1999).

Scope of Investigation

    The scope of this investigation includes certain EPS in primary 
forms; namely, raw material or resin manufactured in the form of 
polystyrene beads, whether of regular (shape) type or modified (block) 
type, regardless of specification, having a weighted-average molecular 
weight of between 160,000 and 260,000, containing from 3 to 7 percent 
blowing agents, and having bead sizes ranging from 0.4 mm to 3 mm.
    Specifically excluded from the scope of this investigation are off-
grade, off-specification expandable polystyrene resins.
    The covered merchandise is found in the Harmonized Tariff Schedule 
of the United States (HTSUS) subheading 3903.11.00.00. Although this 
HTSUS subheading is provided for convenience and customs purposes, the 
written description of the merchandise is dispositive.

Selection of Respondents

    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. However, section 777A(c)(2) of the Act gives the 
Department discretion, when faced with a large number of exporters/
producers, to limit its examination to a reasonable number of such 
companies if it is not practicable to examine all companies. Where it 
is not practicable to examine all known producers/exporters of subject 
merchandise, this provision permits the Department to investigate 
either: (1) A sample of exporters, producers, or types of products that 
is statistically valid based on the information available at the time 
of selection, or (2) exporters and producers accounting for the largest 
volume of the subject merchandise that can be reasonably examined.
    We examined producer-specific data accounting for total POI exports 
of EPS resin from Korea. We identified five companies who exported EPS 
to the U.S. during the POI. Due to constraints on our time and 
resources, we found it impracticable to examine all five of them. 
Therefore, because their combined export volume accounted for the vast 
majority of all exports from Korea, we selected Cheil and Shinho as the 
mandatory respondents. For a more detailed discussion of respondent 
selection in this investigation, see Memorandum to Gary Taverman: 
Selection of Respondents, dated January 13, 2000.

Product Comparisons

    Pursuant to section 771(16) of the Act, all products produced by 
the respondents that are within the scope of the investigation and were 
sold in the comparison market during the POI were considered to be 
foreign like products. We have relied on six criteria to match U.S. 
sales of subject merchandise to comparison-market sales of the foreign 
like product: color, whether modified with flame retardants, expected 
minimum density, bead size, blowing agent level and molecular weight. 
In this case, for all sales comparisons, we have relied on matches of 
identical merchandise.

Fair Value Comparisons

    To determine whether sales of EPS from Korea were made in the 
United States at LTFV, we compared the export price (EP) or constructed 
export price (CEP) to the normal value (NV), as described in the Export 
Price and Constructed Export Price and Normal Value sections of this 
notice. In accordance with section 777A(d)(1)(A)(i) of the Act, we 
calculated POI weighted-average EPs and CEPs for comparison to POI 
weighted-average NVs.

Export Price and Constructed Export Price

    In accordance with section 772 of the Act, we calculated either EP 
or CEP, depending on the nature of each sale. Section 772(a) of the Act 
defines EP as the price at which the subject merchandise is first sold 
before the date of importation by the exporter or producer outside the 
United States to an unaffiliated purchaser in the United States, or to 
an unaffiliated purchaser for exportation to the United States. Section 
772(b) of the Act defines CEP as the price at which the subject 
merchandise is first sold in the United States before or after the date 
of importation, by or for the account of the producer or exporter of 
the merchandise, or by a seller affiliated with the producer or 
exporter, to an unaffiliated purchaser, as adjusted under sections 
772(c) and (d) of the Act.
    We made company-specific adjustments as follows:
Cheil
    We based EP and CEP on CIF and FOB prices to unaffiliated customers 
in the United States. We made deductions from the starting price, where 
appropriate, for movement expenses including international freight, 
U.S. customs duties, and miscellaneous movement charges.
    We have reclassified as CEP sales all sales of subject merchandise 
involving ``commissionaires'' because the sale to the first 
unaffiliated customer (which is facilitated by the commissionaire) is 
made in the United States. Accordingly, as the starting price, we have 
relied on the invoice price charged to the first

[[Page 39353]]

unaffiliated customer by the commissionaire.\2\
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    \2\ We have not, as proposed by Cheil, used as the starting 
price the amount invoiced by the respondent to the commissionaires. 
The Department does not typically consider a commissionaire to be 
the respondent's customer, since the commissionaire simply 
facilitates a transaction between the respondent and its actual 
customer. In fact, the Department applied adverse facts available in 
the case of a respondent that had reported U.S. sales to a company 
that, as was determined at verification, was a commissionaire. In 
that case, the Department stated that the respondent should have 
reported the sale to the actual customer, and made an adverse 
inference due to the respondent's failure to do so. See Certain 
Welded Stainless Pipe from Taiwan 62 FR 37543, 37544 (July 14, 
1997). In this case, the commissionaires' role in the sale of the 
product is to facilitate matters such as receiving orders, invoicing 
and collection of payment. The respondent negotiates terms directly 
with its actual customers, ships the merchandise directly to the 
customers, and handles all after-sale inquiries.
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    For sales through commissionaires, we have reduced the starting 
price by the amount of commissions charged by the commissionaires to 
Cheil, as well as the other expenses incurred by the commissionaire 
which were not included in the commission (i.e., additional expenses 
which were paid by Cheil). Consistent with the Department's past 
practice, we have not made a deduction for CEP profit, because the 
commissions charged by the commissionaires include an amount for the 
commissionaire's profit. See Fresh Atlantic Salmon from Chile; 
Preliminary Determination of Sales at Less than Fair Value and 
Postponement of Final Determination (Salmon) 63 FR 2664, 2667 (January 
16, 1998) and Certain Fresh Cut Flowers from Colombia; Final Results 
and Partial Rescission of Antidumping Duty Administrative Review 
(Flowers), 62 FR 53287, 53295 (October 14, 1997). Finally, pursuant to 
section 772(d)(1) of the Act, we reduced the CEP by the amount of 
credit expenses.
    We note that evidence on the record in this investigation indicates 
that Cheil and one of its commissionaires, Samsung America, Inc. (SAI), 
may be affiliated. Both companies are members of the Samsung Group, and 
Cheil stated that it shared common directors with the parent company of 
SAI. While we intend to examine this issue further, for the preliminary 
determination we have treated Cheil and SAI as unaffiliated.
Shinho
    We based EP on FOB and CFR prices to unaffiliated customers in the 
United States. We made deductions from the starting price, where 
appropriate, for movement expenses including international freight, 
U.S. customs duty, and miscellaneous movement charges.

Normal Value

A. Selection of Comparison Markets
    Section 773(a)(1) of the Act directs that NV be based on the price 
at which the foreign like product is sold in the home market, provided 
that the merchandise is sold in sufficient quantities (or value, if 
quantity is inappropriate) and that there is no particular market 
situation that prevents a proper comparison with the EP or CEP 
transaction. The statute contemplates that quantities (or value) will 
normally be considered insufficient if they are less than five percent 
of the aggregate quantity (or value) of sales of the subject 
merchandise to the United States. Both respondents had viable home 
markets, and they reported home market sales data for purposes of the 
calculation of NV. Adjustments made in deriving the NVs for each 
company are described in detail in Calculation of Normal Value Based on 
Home Market Prices and Calculation of Normal Value Based on Constructed 
Value, below.
B. Cost of Production Analysis
    Based on allegations originally submitted by the petitioners on 
April, 13, 2000, and in accordance with section 773(b)(2)(A)(i) of the 
Act, we found reasonable grounds to believe or suspect that EPS sales 
made in Korea were made at prices below the cost of production (COP). 
See Memorandum to Gary Taverman, Petitioners' Allegation of Sales Below 
Cost of Production for Cheil Industries, Inc., May 12, 2000 and 
Memorandum to Gary Taverman, Petitioners' Allegation of Sales Below 
Cost of Production for Shinho Petrochemical Co, Ltd., May 12, 2000. As 
a result, the Department is conducting an investigation to determine 
whether the respondents made sales in the home market at prices below 
their respective COPs during the POI within the meaning of section 
773(b) of the Act. Given that the responses to the COP section of the 
questionnaire are not due until June 23, 2000, we will include our 
analysis of sales below cost in our final determination.
C. Calculation of Normal Value Based on Home Market Prices
Cheil
    We calculated NV based on delivered prices and made deductions from 
the starting price, where appropriate, for inland freight. In addition, 
we made circumstance of sale (COS) adjustments for direct expenses 
(i.e., credit expenses), in accordance with section 773(a)(6)(C)(iii) 
of the Act.
Shinho
    We calculated NV based on delivered prices and made deductions from 
the starting price, where appropriate, for inland freight. In addition, 
we made COS adjustments for direct expenses (i.e., credit expenses), in 
accordance with section 773(a)(6)(C)(iii) of the Act. Although Shinho 
claimed to have short-term borrowing during part of the POI, we found 
that when Shinho was reorganized in October 1998, only eight days after 
the beginning of the POI, all of the company's short-term debt was 
converted to long-term debt. No documentation was provided to support 
the short-term interest rate claimed by Shinho, and we were unable to 
confirm either that rate, or the existence of any short-term borrowing, 
in Shinho's audited financial statements. Accordingly, we recalculated 
Shinho's imputed home market credit using a published rate from the 
June 2000 issue of International Financial Statistics, published by the 
International Monetary Fund. For a more detailed discussion of Shinho's 
imputed credit rate, see Calculation Memorandum to Charles Riggle dated 
June 20, 2000.
D. Level of Trade
    In accordance with section 773(a)(1)(B) of the Act, to the extent 
practicable, we determined NV based on sales in the comparison market 
at the same level of trade (LOT) as the EP or CEP transaction. The NV 
LOT is that of the starting-price sales in the comparison market or, 
when NV is based on constructed value (CV), that of the sales from 
which we derive SG&A expenses and profit. For EP, the U.S. LOT is also 
the level of the starting-price sale, which is usually from the 
exporter to the importer. For CEP, the LOT is the level of the 
constructed sale from the exporter to the importer.
    To determine whether NV sales are at a different LOT than EP or 
CEP, we examined stages in the marketing process and selling functions 
along the chain of distribution between the producer and the 
unaffiliated customer. 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 pursuant to section 
773(a)(7)(A) of the Act. Finally, for CEP sales, if the NV level is 
more remote from the factory than the CEP level and there is no basis 
for determining whether the difference in the levels between NV and CEP 
affects price

[[Page 39354]]

comparability, we adjust NV pursuant to section 773(a)(7)(B) of the Act 
(the CEP offset provision). See Notice of Final Determination of Sales 
at Less Than Fair Value: Certain Cut-to-Length Carbon Steel Plate from 
South Africa, 62 FR 61731 (November 19, 1997).
    In implementing these principles in this investigation, we examined 
information from the respondent regarding the marketing stages involved 
in the reported home market, EP and CEP sales, including a description 
of the selling activities performed by the respondents for each channel 
of distribution. In identifying levels of trade for EP and home market 
sales, we considered the selling functions reflected in the starting 
price before any adjustments. For CEP sales, we considered only the 
selling activities reflected in the price after the deduction of 
expenses and profit pursuant to section 772(d) of the Act.
    Cheil. In the home market, Cheil reported only one channel of 
distribution, which was to end users. In the U.S. market, Cheil 
reported sales through two channels of distribution, one involving 
sales to a distributor and the second involving sales to end users 
through commissionaires.
    In determining whether separate levels of trade actually existed 
between the U.S. EP sales and home market sales, we examined the chains 
of distribution and customer categories reported in the home market and 
in the United States. Cheil's sales to end users in the home market and 
to the United States appear to be made at different points in the chain 
of distribution. We further examined the selling functions related to 
those sales. Cheil arranged inland Korean freight and provided 
technical services and warranties for the end user customers in the 
home market and the distributor in the U.S. market. For the home market 
customers, Cheil also made frequent contacts and visits and provided 
inventory maintenance to end user customers in the home market. On this 
basis, it appears that the LOT of Cheil's home market sales involves 
significantly more selling functions than the LOT of the EP sales, and 
that the distinctions constitute a difference in level of trade between 
sales in the two markets. Nonetheless, we are unable to make a LOT 
adjustment. This is due to the fact that there is only one LOT for home 
market sales. Cheil does not sell subject merchandise in the home 
market at the same LOT as that of its EP sales, and there are no other 
data on the record that would allow the Department to establish whether 
there is a pattern of consistent price differences between sales at 
different levels of trade in the comparison market. Therefore, an LOT 
adjustment is not possible for comparisons of EP sales to home market 
sales.
    Cheil also made CEP sales through its commissionaires to end-users. 
In determining whether separate levels of trade actually existed 
between the U.S. CEP sales and home market sales, we examined the 
chains of distribution and customer categories reported in the home 
market and in the United States. Cheil's sales to end users in the home 
market and the importers/commissionaires in the U.S. market appear to 
be made at different points of the chain of distribution. We further 
examined the selling functions related to these sales. As noted above, 
in determining levels of trade for CEP sales, we consider only the 
selling activities reflected in the price after the deduction of 
expenses and profit under section 772(d) of the Act. Cheil arranges for 
Korean inland freight and provides frequent contacts and visits for 
U.S. end user customers involved in the CEP transactions and for home 
market end users. It also provides warranties, technical advice and 
arrangements for freight to end user customers in both markets. After 
making CEP deductions from the end user price, we have effectively 
deducted the portion of the price which accounts for the following 
services to the end users involved in CEP sales: the provision of 
warranties and technical advice and frequent contacts and visits with 
end user customers. At the CEP level, the only remaining selling 
function is Cheil's arrangement of Korean inland freight. On this 
basis, we found that the LOT of Cheil's home market sales involves 
significantly more selling functions than the LOT of the CEP sales.
    Based on our review of the selling functions related to CEP and 
home market sales, we have determined that Cheil's home market sales 
are made at a different, and more advanced, stage of marketing than the 
LOT of the CEP sales. Nonetheless, we are unable to make a LOT 
adjustment. This is due to the fact that there is only one LOT for home 
market sales. Cheil does not sell subject merchandise in the home 
market at the same LOT as that of the CEP, and there are no other data 
on the record that would allow the Department to establish whether 
there is a pattern of consistent price differences between sales at 
different levels of trade in the comparison market. Accordingly, while 
we determined that a LOT adjustment may be appropriate for CEP sales, 
for the reasons stated above, we are unable to make such an adjustment. 
Instead, we have made a CEP offset to NV in accordance with section 
773(a)(7)(B) of the Act. This offset is equal to the amount of indirect 
expenses incurred in the comparison market not exceeding the amount of 
the deductions made from the U.S. price in accordance with 772(d)(1)(D) 
of the Act.
    Shinho. In the home market, Shinho reported sales to end users as 
its only channel of distribution. In the U.S. market, Shinho reported 
sales to distributors as its only channel of distribution.
    Shinho has claimed that its home market sales, which are all made 
to end-users, are at a different, more advanced LOT than the company's 
EP sales to distributors. For EP sales, Shinho processes orders and 
provides partial arrangements for the freight. For home market sales, 
Shinho processes orders and provides partial arrangements for freight. 
It also provides for some financing and some limited technical services 
for home market sales. At this time, we do not have enough information 
to determine whether home market sales were made at a different LOT 
than the EP sales. However, even if we were able to determine that 
Shinho's home market sales are made at a different LOT than the EP 
sales, we would be unable to make a LOT adjustment. This is due to the 
fact that there is only one LOT for home market sales. Shinho does not 
sell subject merchandise in the home market at the same LOT as that of 
its EP sales, and there are no other data on the record that would 
allow the Department to establish whether there is a pattern of 
consistent price differences between sales at different levels of trade 
in the comparison market. Therefore, a LOT adjustment is not possible 
for comparisons of EP sales to home market sales.

Currency Conversions

    We made currency conversions in accordance with section 773A of the 
Act. The Department's preferred source for daily exchange rates is the 
Federal Reserve Bank. Section 773A(a) of the Act directs the Department 
to use a daily exchange rate in order to convert foreign currencies 
into U.S. dollars unless the daily rate involves a fluctuation. It is 
the Department's practice to find that a fluctuation exists when the 
daily exchange rate differs from the benchmark rate by 2.25 percent. 
The benchmark is defined as the moving average of rates for the past 40 
business days. When we determine a fluctuation to have existed, we 
substitute the benchmark rate for the daily rate, in accordance with 
established practice.

[[Page 39355]]

Verification

    In accordance with section 782(i) of the Act, we intend to verify 
information to be used in making our final determination.

Suspension of Liquidation

    In accordance with section 733(d) of the Act, we are directing the 
Customs Service to suspend liquidation of all entries of EPS from the 
Republic of Korea, except for Cheil (which has a de minimis weighted-
average margin), that are entered, or withdrawn from warehouse, for 
consumption on or after the date of publication of this notice in the 
Federal Register. We are also instructing the Customs Service to 
require a cash deposit or the posting of a bond equal to the weighted-
average amount by which the NV exceeds the EP or CEP, as indicated in 
the chart below. These instructions suspending liquidation will remain 
in effect until further notice.
    The weighted-average dumping margins are as follows:

------------------------------------------------------------------------
                                                              Weighted-
                                                               average
                     Exporter/producer                          margin
                                                              percentage
------------------------------------------------------------------------
Cheil......................................................         1.80
Shinho.....................................................         5.14
All Others.................................................        5.14
------------------------------------------------------------------------
\1\ De minimis.

    Section 735(c)(5)(A) of the Act directs the Department to exclude 
all zero and de minimis weighted-average dumping margins, as well as 
dumping margins determined entirely under facts available under section 
776 of the Act, from the calculation of the ``All Others'' rate. 
Accordingly, we have excluded the de minimis dumping margin for Cheil 
from the calculation of the ``all others'' rate.
    In accordance with section 733(f) of the Act, we have notified the 
ITC of our determination. If our final antidumping determination is 
affirmative, the ITC will determine whether these imports are 
materially injuring, or threaten material injury to, the U.S. industry. 
The deadline for that ITC determination would be the later of 120 days 
after the date of this preliminary determination or 45 days after the 
date of our final determination.

Public Comment

    For the investigation of EPS from Korea, case briefs must be 
submitted no later than 30 days after the publication of this notice in 
the Federal Register. Rebuttal briefs must be filed within five 
business days after the deadline for submission of case briefs. A list 
of authorities used, a table of contents, and an executive summary of 
issues should accompany any briefs submitted to the Department. 
Executive summaries should be limited to five pages total, including 
footnotes. Further, we would appreciate it if parties submitting 
written comments would provide the Department with an additional copy 
of the public version of any such comments on diskette. Section 774 of 
the Act provides that the Department will hold a hearing to afford 
interested parties an opportunity to comment on arguments raised in 
case or rebuttal briefs, provided that such a hearing is requested by 
any interested party. If a request for a hearing is made in an 
investigation, the hearing will tentatively be held two days after the 
deadline for submission of the rebuttal briefs, at the U.S. Department 
of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 
20230. Parties should confirm by telephone the time, date, and place of 
the hearing 48 hours before the scheduled time.
    Interested parties who wish to request a hearing, or to participate 
if one is requested, must submit a written request within 30 days of 
the publication of this notice. Requests should specify the number of 
participants and provide a list of the issues to be discussed. Oral 
presentations will be limited to issues raised in the briefs.
    We will make our final determination no later than 135 days after 
the date of publication of this notice.
    This determination is issued and published pursuant to sections 
733(d) and 777(i)(1) of the Act.

    Dated:June 20, 2000.
Roland L. MacDonald,
Acting Assistant Secretary for Import Administration.
[FR Doc. 00-16107 Filed 6-23-00; 8:45 am]
BILLING CODE 3510-DS-P