[Federal Register Volume 63, Number 84 (Friday, May 1, 1998)]
[Notices]
[Pages 24156-24162]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-11666]


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

DEPARTMENT OF COMMERCE

International Trade Administration
[A-412-810; C-412-811; A-428-811; C-428-812]


Hot-Rolled Lead and Bismuth Carbon Steel Products From Germany 
and the United Kingdom; Negative Preliminary Determinations of 
Circumvention of Antidumping and Countervailing Duty Orders

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

ACTION: Notice of negative preliminary determinations of circumvention 
of antidumping and countervailing duty orders.

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

SUMMARY: On April 14, 1997, the Department of Commerce received an 
application requesting circumvention inquiries of the antidumping and 
countervailing duty orders on hot-rolled lead and bismuth carbon steel 
products from Germany and the United Kingdom. The application alleged 
that the principal German and British producers of hot-rolled lead and 
bismuth carbon steel products are circumventing the respective orders 
by shipping leaded steel billets to the United States, where they are 
easily and inexpensively converted into the hot-rolled lead and bismuth 
carbon steel products covered by the orders. Pursuant to the 
application, the Department of Commerce initiated anticircumvention 
inquiries on June 25, 1997.
    We preliminarily determine that imports into the United States of 
leaded steel billets that were exported from Germany and the United 
Kingdom do not constitute circumvention of the antidumping and 
countervailing duty orders on hot-rolled lead and bismuth carbon steel 
products from Germany and the United Kingdom, within the meaning of 
section 781(a) of the Tariff Act of 1930, as amended. Interested 
parties are invited to comment on these preliminary determinations.

EFFECTIVE DATE: May 1, 1998.

FOR FURTHER INFORMATION CONTACT: Anne D'Alauro, Russell Morris, or 
Richard Herring, Office of CVD/AD Enforcement VI, Import 
Administration, International Trade Administration, U.S. Department of 
Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C. 
20230; telephone (202) 482-2786.

SUPPLEMENTARY INFORMATION:

Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute are 
references to the provisions of the Tariff Act of 1930, as amended, by 
the Uruguay Round Agreements Act (URAA), effective January 1, 1995 (the 
Act). In addition, unless otherwise indicated, all references to the 
Department's regulations are to 19 CFR Parts 353 and 355 (1997).

Background

    On March 22, 1993, the Department of Commerce (the Department) 
published in the Federal Register the antidumping duty orders (58 FR 
15334) and countervailing duty orders (58 FR 15325, 15327) on hot-
rolled lead and bismuth carbon steel products (hot-rolled lead bar) 
from Germany and the United Kingdom. On April 14, 1997, the Department 
received an application (amended on May 14, 1997) filed by Inland Steel 
Bar Company and USS/KOBE Steel Company (the petitioners), requesting 
that the Department conduct anticircumvention inquiries of the 
antidumping and countervailing duty orders on hot-rolled lead bar from 
Germany and the United Kingdom pursuant to section 781(a) of the Tariff 
Act. The petitioners alleged that the principal German (Saarstahl A.G. 
i.K. and Thyssen Stahl A.G.) and British (British Steel plc) producers 
of hot-rolled lead bar are circumventing the respective orders by 
shipping leaded-steel billets (lead billets) to the United States, 
where they are easily and inexpensively converted into the hot-rolled 
lead bar products covered by the orders.
    The Department received written comments opposing the request to 
initiate the inquiries from Thyssen on May 12, 1997, from Saarstahl 
A.G. i.K. on May 16, 1997, from British Steel plc on May 23, 1997, and 
from the European Community (EC) on May 27, 1997. We also received 
written comments in opposition to the initiation of the inquiries from 
Bar Technologies, Inc. (Bar Tech) on May 19, 1997, Sheffield Steel 
Corporation on June 2, 1997, Birmingham Steel Corporation on June 3, 
1997, and Nucor Steel Corporation on June 5, 1997.
    Pursuant to the petitioners' application and in accordance with 19 
CFR 353.29(e) and 355.29(e), the Department initiated circumvention 
inquiries of the antidumping and countervailing duty orders on hot-
rolled lead bar from Germany and the United Kingdom (62 FR 34213; June 
25, 1997).
    We sent initial questionnaires to the foreign respondents on June 
25, 1997, and received responses on July 21, 1997. On September 10, 
1997, the Department again issued questionnaires to all foreign 
respondents. Also on this date, the Department issued questionnaires to 
those U.S. steel companies which were identified in the foreign 
respondents' July 21, 1997 questionnaire responses as lead billet 
customers. The U.S. steel companies which responded to the Department's 
questionnaires on October 29, 1997 and November 3, 1997, purchased 
virtually all of the foreign respondents' exports of lead billets to 
the United States in 1995 and 1996, and rolled them into hot-rolled 
lead bar (hereafter referred to as U.S. re-rollers). The Department 
issued supplemental questionnaires to both the U.S. re-rollers and 
foreign respondents.
    In conducting the inquiries, we requested and received detailed 
information on a range of topics, such as processing, pricing 
information, and conversion costs. We also collected data on patterns 
of trade, sourcing patterns, and other trend data for the period 
January 1, 1991, through June 30, 1997.

Scope of Antidumping and Countervailing Duty Orders

    Imports covered by these orders include hot-rolled bars and rod of 
non-alloy or other alloy steel, whether or not

[[Page 24157]]

descaled, containing by weight 0.03 percent of lead or 0.05 percent of 
bismuth, in coils or cut lengths, and in numerous shapes and sizes. The 
order excludes ``other alloy steels,'' as defined by Chapter 72, note 
1(f) of the Harmonized Tariff Schedule of the United States (HTSUS), 
``except steels classified as other alloy steel by reason of containing 
by weight 0.4 percent or more of lead or 0.1 percent or more of 
bismuth, tellurium or selenium.'' Most of the products covered are 
provided for under subheadings 7213.20.00.00 and 7214.30.00.00 of the 
HTSUS. Small quantities of these products may also enter the United 
States under the following HTSUS subheadings: 7213.31.30.00, 60.00; 
7213.39.00.30, 00.60, 00.90; 7214.40.00.10, 00.30, 00.50; 
7214.50.00.10, 00.30, 00.50; 7214.60.00.10, 00.30, 00.50; and 
7228.30.80.00. Although the HTSUS subheadings are provided for 
convenience and for customs purposes, the written description of the 
scope of the order remains dispositive.

Scope of the Circumvention Inquiries

    The products subject to these circumvention inquiries are carbon or 
alloy steel billets containing 0.03 percent or more of lead or 0.05 
percent or more of bismuth (the only accepted metallurgical equivalent 
to lead), and other alloy steel billets by reason of containing by 
weight 0.4 percent or more of lead or 0.1 percent or more of bismuth, 
tellurium or selenium, that meet the chemical requirements for the 
merchandise subject to the orders.

Facts Available

    Section 776(a)(2) of the Act requires the Department to use facts 
available if ``an interested party or any other person * * * withholds 
information that has been requested by the administering authority * * 
* under this title.'' The facts on the record show that Bar Tech did 
not comply with the Department's requests for information required to 
calculate the value of the processing performed in the United States. 
In our initial questionnaire dated September 10, 1997, the Department 
requested information regarding the total amount of lead billet 
consumed in the production of one unit of hot-rolled lead bar (lead 
billet consumption rate). Bar Tech responded to our questionnaire on 
October 29, 1997, but did not provide its lead billet consumption rate.
    The Department's supplemental questionnaires dated November 18, 
1997 and January 7, 1998, again requested that Bar Tech report its lead 
billet consumption rate. Bar Tech, however, did not provide its lead 
billet consumption rate to the Department.
    Section 776(b) of the Act permits the administrative authority to 
use an inference that is adverse to the interests of an interested 
party if that party has ``failed to cooperate by not acting to the best 
of its ability to comply with a request for information.'' Such an 
adverse inference may include reliance on information derived from (1) 
the petition, (2) a final determination in the investigation under this 
title, (3) any previous review under section 751 or determination under 
section 753 regarding the country under consideration, or (4) any other 
information placed on the record. Because Bar Tech did not comply with 
the Department's request to provide its lead billet consumption rate, 
we find that Bar Tech failed to cooperate by not acting to the best of 
its ability to comply with the Department's request. Therefore, we are 
using adverse inferences in accordance with section 776(b) of the Act. 
The adverse inference for Bar Tech's lead billet consumption rate is 
the use of the highest average lead billet consumption rate submitted 
by another U.S. re-roller participating in these inquiries.

Nature of the Circumvention Inquiry

    Section 781(a)(1) of the Act provides that the Department, after 
taking into account any advice provided by the United States 
International Trade Commission (ITC) under section 781(e), may include 
the imported merchandise under review within the scope of an order if 
the following criteria have been met:
    A. The merchandise sold in the United States is of the same class 
or kind as any other merchandise that is the subject of--
    (i) An antidumping duty order issued under section 736,
    (ii) A finding issued under the Antidumping Act, 1921, or
    (iii) A countervailing duty order issued under section 706 or 
section 303;
    B. Such merchandise sold in the United States is completed or 
assembled in the United States from parts or components produced in the 
foreign country with respect to which such order or finding applies;
    C. The process of assembly or completion in the United States is 
minor or insignificant; and
    D. The value of the parts or components [produced in the foreign 
country with respect to which the order applies], is a significant 
portion of the total value of the merchandise.
    If one of the four elements does not apply, there can be no finding 
of circumvention. However, even if all four of these criteria are met, 
the Act requires that the Department also consider additional factors. 
Section 781(a)(3) of the Act directs the Department to consider, in 
determining whether to include parts or components produced in a 
foreign country within the scope of a countervailing and antidumping 
duty order, such factors as: (A) the pattern of trade, including 
sourcing patterns; (B) whether the manufacturer or exporter of the 
parts or components is affiliated with the person who assembles or 
completes the merchandise sold in the United States from the parts or 
components produced in the foreign country; and (C) whether imports 
into the United States of the parts or components produced in such 
foreign country have increased after the initiation of the 
investigation which resulted in the issuance of such order or finding.

U.S. Re-rollers

    We requested information from U.S. re-rollers with respect to these 
circumvention inquiries. Information was submitted by the following 
U.S. re-rollers: American Steel & Wire (AS&W), a wholly-owned 
subsidiary of Birmingham Steel Corporation; Bar Tech; Nucor Steel 
Corporation (Nucor); Republic Engineered Steels (Republic); and 
Sheffield Steel Corporation (Sheffield). Based upon our analysis of the 
information submitted by the foreign respondents and the U.S. re-
rollers, we have determined that no affiliation exists between the U.S. 
re-rollers and the foreign respondents, as defined in section 771(33) 
of the Act. A determination with respect to section 781(a)(1) and (2) 
of the Act, is based solely on the processing of lead billets into hot-
rolled lead bar by these unaffiliated U.S. re-rollers.
    The rolling facilities owned by each of the U.S. re-rollers were in 
operation before the initiation of the respective antidumping and 
countervailing (AD and CVD) investigations of hot-rolled lead bar from 
Germany and the United Kingdom. All of the U.S. re-rollers, except Bar 
Tech, existed as re-rollers before the initiation of the 
investigations. Bar Tech was established after the issuance of the AD 
and CVD orders when Bar Tech purchased Bethlehem Steel's Bar, Rod & 
Wire (BRW) facilities in Lackawanna, New York in 1994. Bethlehem Steel, 
a former re-roller of hot-rolled lead bar, was one of the original 
petitioners in the lead bar investigations.
    Much of the information provided by the U.S. re-rollers is 
proprietary. Therefore, in most instances, the

[[Page 24158]]

information used in our analysis below has been ranged, and our 
discussion of this information has been generalized in order to 
maintain the proprietary treatment of submitted information. In 
addition, for most of the U.S. re-rollers, the source of their imported 
lead billets is also proprietary. Therefore, the analysis below refers 
to both imports from Germany and the United Kingdom.

Statutory Analysis

(1) Whether the Class or Kind of Merchandise Is Sold in the United 
States

    AS&W, Bar Tech, Republic, and Sheffield sell hot-rolled lead bar in 
the United States. Nucor processes lead billets into hot-rolled lead 
bar, which the company further processes into cold-finished products.

(2) Whether Merchandise Sold in the United States Is Completed or 
Assembled in the United States From Foreign Parts or Components

    All of the U.S. re-rollers purchase lead billets from one or more 
of the foreign respondents subject to the AD and CVD orders. They each 
use the lead billets to produce hot-rolled lead bar in the United 
States.

(3) Whether the Process of Assembly or Completion Is Minor or 
Insignificant

    Section 781(a)(2) lists the factors the Department will consider in 
determining whether the process of assembly or completion is minor or 
insignificant. The Statement of Administrative Action (SAA), H. Doc. 
No. 316, Vol. 1, 103d Cong., 2nd Sess. (1994), states that no single 
factor listed in section 781(a)(2) of the Act will be controlling. SAA 
at 893. The SAA also states that the Department will evaluate each of 
the factors as they exist in the United States depending on the 
particular circumvention scenario. Id. Therefore, the importance of any 
one of the factors listed under 781(a)(2) of the Act can vary from case 
to case depending on the particular circumstances unique to each 
specific circumvention inquiry. Each of the factors set forth in 
section 781(a)(2) of the Act is examined below for the U.S. re-rollers.
(a) The Level of Investment in the United States
    The rolling facilities owned by each of the U.S. re-rollers were in 
operation before the initiation of the respective AD and CVD 
investigations of hot-rolled lead bar from Germany and the United 
Kingdom. Although Bar Tech did not exist before the initiation of the 
investigations, the facility producing subject merchandise that is 
operated by the company does pre-date the investigations. Each of the 
U.S. re-rollers has made substantial capital investments in its 
respective rolling mills.
    AS&W entered the hot-rolled lead bar market in 1986, with its 
purchase of rolling facilities from U.S. Steel. In 1993, Birmingham 
Steel acquired AS&W and entered the specialty bar, rod, and wire 
products business. In 1996, Birmingham Steel invested $132 million in a 
new high-quality rolling mill at AS&W's Cleveland, Ohio facility, 
enabling the company to produce larger-sized bar products and bars with 
tighter size tolerances and more stringent mechanical properties. AS&W 
primarily produces non-lead hot-rolled bars, and less than a quarter of 
the mill's production utilizes lead billets. AS&W sells the hot-rolled 
lead bar that it produces to unaffiliated customers.
    Bar Tech came into existence in 1994, with the purchase of 
Bethlehem Steel's BRW facilities for $19 million. Between 1994 and 
1997, Bar Tech made additional investments in the rolling facilities' 
buildings, machinery, and equipment. In April 1996, Bar Tech acquired 
Bliss & Laughlin (B&L), the largest cold-finishing company in the 
United States. In September 1997, Bar Tech announced plans to invest 
$30 million in its steelmaking facilities. Approximately half of the 
investment is allocated for the production of lead and non-lead semi-
finished steels (billets) at its Johnstown meltshop. The majority of 
the remaining investment is designated for equipment upgrades at its 13 
inch rolling mill in Lackawanna, New York to roll both lead and non-
lead billets.
    Nucor's steel mill in Darlington, South Carolina became operational 
as a new steel mill in 1969. Prior to 1991, Nucor added a high-speed 
rolling line to its mill. The addition of such equipment allows for 
automatic straightening, shearing, stacking, and bundling of bar, and 
has significantly enhanced Nucor's ability to produce hot-rolled lead 
and non-lead bar from lead and non-lead billets. Since 1991, Nucor has 
made several investments for a variety of improvements.
    In November 1989, Republic was created through an employee stock 
ownership plan with the purchase of LTV's Bar Division. With the 
purchased steelmaking facilities, Republic gained the ability to 
produce lead and non-lead ingots, and hot-rolled and cold-finished bar 
products. Republic currently produces lead billets via the ingot 
process in a shared facility; however, the quantity it can produce is 
restricted by environmental permit limits. During the 1990's, Republic 
invested in the construction of a continuous casting facility which has 
the capability to produce both lead and non-lead billets; however, 
Republic currently only produces non-lead billets at the facility.
    Sheffield was established in the early 1980's, with the purchase of 
the Sand Springs, Oklahoma meltshop and rolling facility in 1981, and 
the construction of the Kansas City, Missouri rolling facility in 1985. 
In 1986, Sheffield purchased a 12 inch rolling mill facility in Joliet, 
Illinois from Continental Steel for $3.5 million. This rolling mill was 
originally installed around 1957. Since acquiring the Joliet mill in 
1986, Sheffield has made additional investments of approximately $6 
million in the facility, which is the company's only rolling mill which 
produces hot-rolled lead bar. Sheffield entered the hot-rolled lead bar 
market in 1992.
(b) The Level of Research and Development (R&D) in the United States
    Four of the five re-rollers reported that they had little or no R&D 
related to the production of hot-rolled lead bar. One U.S. re-roller 
reported that it conducted some R&D with respect to the development of 
heating, rolling and inspection practices used in the production of 
leaded steels. The U.S. re-rollers reported that there have been few 
technological breakthroughs affecting leaded steels since 1991. Because 
the rolling of hot-rolled lead bar is a technically mature process, R&D 
into the process of rolling bar is not a significant factor in this 
industry.
(c) The Nature of the Production Process in the United States
    The International Trade Commission (ITC) states that the 
manufacturing process for the production of hot-rolled lead bar 
consists of three different stages: (1) melting, (2) casting, and (3) 
hot-rolling. See Certain Hot-Rolled Lead and Bismuth Carbon Steel 
Products From Brazil, France, and the United Kingdom, Determinations of 
the Commission in Investigations Nos. 701-TA-314 thru 317, USITC 
Publication 2611 (March 1993). Lead billets are created during the 
second stage; the U.S. re-rollers perform the third and final stage in 
the manufacturing process of hot-rolled lead bar.
    Each of the U.S. re-rollers are fully operational hot-rolled lead 
and non-lead bar producers, manufacturing bar in a like manner. The 
nature of the process overall consists of a series of sizing and 
shaping of the lead billets to produce specific sized and shaped hot-
rolled bar on rolling equipment used to manufacture either hot-rolled 
lead or

[[Page 24159]]

non-lead bars. The rolling process does not require equipment dedicated 
exclusively to the production of hot-rolled lead bar. Three of the five 
re-rollers also have cold-finishing operations to further process the 
hot-rolled lead bar. In the cold-finishing process, the bar undergoes 
surface treatments in the form of polishing, turning, grinding, and 
straightening.
    The process for producing hot-rolled lead bar from lead billets is 
as follows. First, the lead billets are placed in a re-heat furnace and 
heated to a temperature usually above 2200 degrees Fahrenheit. This 
heating procedure increases the malleability of the steel, reducing 
energy consumption and wear on the rolling mill. Once the lead billets 
reach the necessary temperature, walking beams gradually discharge them 
from the re-heat furnace onto the rolling lines. The lead billets are 
then rolled on a series of rolling mills, including roughing, 
intermediate, and finishing mills. Each rolling mill has a series of 
stands which compress and shape the lead billets with each pass 
through. As a lead billet passes through the stands, it becomes 
elongated and its cross-section becomes smaller. This process 
transforms a lead billet into a hot-rolled lead bar product having a 
specific size and shape. Generally four to 15 percent of a lead 
billet's weight is lost in the rolling process.
    The hot-rolled lead bar is then placed on a hot bed and cooled to a 
temperature of about 800 degrees Fahrenheit. Once cooled, the hot-
rolled lead bar undergoes straightening, non-destructive testing, 
deburring, and saw cutting. The hot-rolled lead bar is either coiled or 
cut into various lengths at the finishing shear. At this stage, some 
re-rollers apply a surface treatment to clean and coat their products. 
After being inspected for straightness, length, and defects, the hot-
rolled lead bars are weighed, packaged, and placed in the warehouse for 
later shipment
    There are environmental issues and limitations in rolling lead 
billets versus non-lead billets. Environmental controls, worker safety, 
and health regulations are more stringent for lead than for non-lead 
grades. For instance, additional ventilation of exhaust fumes is 
necessary as lead and bismuth steel wastes are classified as hazardous 
waste, necessitating their segregation and separate treatment from 
other scrap. Specialized safety equipment and more rigorous operating 
procedures must also be used in compliance with Occupational Safety and 
Health Administration (OSHA) standards.
(d) The Extent of Production Facilities in the United States
    In general, each of the U.S. re-rollers have production facilities 
in various states throughout the United States, but the rolling of hot-
rolled lead bar mainly takes place in Illinois, Ohio, Utah, South 
Carolina, and New York. As we have noted earlier, most of the U.S. re-
rollers were rolling lead billets into hot-rolled lead bar before the 
initiation of the AD and CVD investigations of hot-rolled lead bar from 
Germany and the United Kingdom.
    In analyzing the extent of production facilities, we considered the 
square footage of building space dedicated to rolling the semifinished 
product (lead billet) into hot-rolled lead bar, the number of employees 
involved in rolling the lead billets, and the capital equipment used in 
the production of hot-rolled lead bar. Sheffield, for example, reported 
that its Joliet rolling facility encompasses 334,305 square feet for 
the processing of lead billet into hot-rolled lead bar.
    With regard to the number and level of skilled employees involved 
in rolling lead billets into hot-rolled lead bar, Sheffield, for 
example, reported that in the production process of hot-rolled lead 
bar, from the time the lead billets are received in the billet yard to 
the time that hot-rolled lead bar is shipped to a customer, there are 
25 skilled workers responsible for the rolling of a lead billet into 
hot-rolled lead bar, and all of the other ancillary functions.
    With respect to the capital equipment used in the processing of 
lead billet into hot-rolled lead bar, the U.S. re-rollers have invested 
a substantial amount of money not only in the construction of factory 
buildings used in rolling operations for both lead and non-lead 
products, but also in the purchase of sophisticated machinery required 
to produce hot-rolled bar from lead and non-lead billets, and the 
maintenance required for such machinery.
(e) Whether the Value of the Processing Performed in the United States 
Represents a Small Proportion of the Value of the Merchandise Sold in 
the United States
    We calculated the difference in value between the hot-rolled lead 
bar sold in the United States and the value of the lead billets 
purchased from the foreign respondents that were used in the production 
of that merchandise. For ASW, BarTech, Republic, and Sheffield, we 
based our calculation of value-added to the merchandise sold in the 
United States on the difference between the delivered lead billet 
import price and the ex-factory sales price of the hot-rolled lead bar. 
This methodology was used because both transactions (lead billet 
purchases and hot-rolled lead bar sales) were sales between 
unaffiliated parties. To derive the value of processing performed by 
each U.S. re-roller, we subtracted from the ex-factory sales price of 
hot-rolled lead bar to unaffiliated customers the delivered price of 
lead billets, after adjusting for a yield factor (to account for 
additional lead billet consumed in the production of one unit of hot-
rolled lead bar).
    In regard to Nucor, because the company uses all the hot-rolled 
lead bar that it produces to further manufacture cold-finished 
products, we applied a different value-added methodology. We based our 
calculation of value-added on the comparison between the conversion fee 
Nucor's rolling mill charged its affiliated cold-finisher and the 
resulting total input cost of hot-rolled lead bar to the cold-finisher, 
after adjusting both for a yield factor (to account for additional lead 
billet consumed in the production of one unit of hot-rolled lead bar).
    Some of the U.S. re-rollers purchased lead billets from all three 
suppliers of lead billets subject to these inquiries, while others 
purchased exclusively from one source. Some of the U.S. re-rollers, 
however, were unable to identify the supplier of lead billets on a 
transaction-specific basis with respect to the U.S. sales of the 
processed hot-rolled lead bar. Therefore, for each U.S. re-roller, the 
calculation of value-added is based upon a weighted-average price of 
imported lead billet from the foreign respondent(s) from whom the U.S. 
re-roller purchased its lead billets. Because the processing of the 
imported lead billet into hot-rolled lead bar is virtually identical 
regardless of the source of the imported lead billet, we consider this 
weighted-average, non-supplier specific calculation of value-added to 
be appropriate in those instances. However, where possible, we used the 
supplier-specific information to calculate the value-added to each 
supplier.
    The value of processing performed in the United States ranges from 
approximately 10 percent to 29 percent for the U.S. re-rollers. The 
value of processing varies because of the lead billet prices charged by 
the foreign respondents to the U.S. re-rollers, the U.S. re-roller's 
yield factor for rolling one unit of lead billet into one unit of hot-
rolled lead bar, and the different prices charged by the U.S. re-
rollers to their customers due to size and shape of the hot-rolled lead 
bar. Because the calculation of the value of processing is based upon 
proprietary data, the value-

[[Page 24160]]

added percentages presented above have been ranged

(4) Whether the Value of Imported Parts Is a Significant Portion of 
Value of Lead Bar

    Under section 781(a)(1)(D) of the Act, the value of the imported 
parts or components must be a significant portion of the total value of 
the subject merchandise sold in the United States in order to find 
circumvention. The imported lead billet is the sole material input into 
the completed hot-rolled lead bar and a significant portion of the 
value of the completed hot-rolled lead bar is based upon this material 
cost.

Other Factors To Consider

    In making a determination whether to include parts or components 
within an order, section 781(a)(3) of the Act instructs us to take into 
account such factors as: the pattern of trade, including sourcing 
patterns; whether affiliation exists between the exporter of the parts 
and the person who assembles or completes the merchandise sold in the 
United States; and whether imports into the United States of the parts 
produced in the foreign country have increased after the initiation of 
the investigation which resulted in the issuance of the order. Each of 
these factors are examined below.

(1) Pattern of Trade and Sourcing

    The first factor to consider under section 781(a)(3) is changes in 
the pattern of trade, including changes in the sourcing patterns of the 
lead billets. SAA at 894. Unlike our examination of the processing of 
lead billets into hot-rolled lead bar in the United States, which was 
essentially the same for all of the U.S. re-rollers, there are 
differences in the pattern of trade among the U.S. re-rollers and the 
three foreign respondents (British Steel, Thyssen, and Saarstahl). 
Among the foreign respondents, British Steel and Thyssen are the two 
largest lead billet exporters to the United States. In comparison, 
Saarstahl is a small exporter of lead billets.
    British Steel began selling lead billets to the United States in 
1994. By 1996, the company's lead billet sales doubled. British Steel's 
sales of hot-rolled lead bar peaked in 1992, declined in 1993 and 1994, 
rebounded in 1995, and continued to trend upwards in 1996. In general, 
sales of hot-rolled lead bar by British Steel have greatly exceeded its 
sales of lead billets to the U.S. market (in spite of the AD and CVD 
orders). British Steel's sales of hot-rolled lead bar in the U.S. 
market have remained significant since the imposition of the orders. In 
fact, Sheffield reported that its primary competition for hot-rolled 
lead bar shapes is imports from British Steel.
    Thyssen has been selling lead billets to the United States since 
1988, well before the Department initiated its hot-rolled lead bar 
investigations in May 1992. Thyssen's lead billet shipments to the 
United States increased steadily from 1991 to 1996, peaking in 1996, 
while its hot-rolled lead bar sales to the U.S. market terminated in 
1992 . Thyssen has stated that lead billets, and not hot-rolled lead 
bar, have always been its primary U.S. market, and the pattern of trade 
for both products indicates this to be accurate.
    Saarstahl began selling lead billets to the United States in 1992, 
the last year the steelmaker sold hot-rolled lead bar to U.S. 
customers. Saarstahl's exports of lead billets to the United States 
peaked in 1993, and since then have significantly decreased.
    AS&W has been purchasing lead billets since its inception in 1986. 
AS&W reported that since 1992, the company has sourced lead billets 
from both foreign and domestic suppliers. A major change in the 
company's sourcing was the termination of a billet supply agreement 
(inclusive of lead and non-lead billets) with USS/KOBE. When Birmingham 
Steel purchased AS&W in 1993, there was a lead billet supply agreement 
in effect with USS/Lorain Works, which subsequently became USS/KOBE. 
USS/KOBE terminated the supply agreement in 1996, citing a lack of lead 
billet availability. With the termination of this supply agreement, 
AS&W was no longer able to source lead billets domestically.
    Bar Tech began purchasing lead billets in 1996. Bar Tech has not 
sourced lead billets from domestic producers. Bar Tech never purchased 
lead bar from the foreign respondents.
    Nucor did not begin purchasing lead billets until 1992, when the 
company began sourcing from foreign respondents. Purchases from the 
foreign respondents have been generally declining. Nucor had previously 
purchased hot-rolled lead bar from foreign sources.
    Republic's predecessor began purchasing lead billets from foreign 
sources in the mid-80's. Since becoming an independent company in 1989, 
Republic has continued to source its lead billets from foreign sources 
to supplement its own production. Republic has never purchased lead 
billets from domestic producers. The company did purchase hot-rolled 
lead bar from foreign sources in the early 1990's; however, since 1993, 
Republic has sourced hot-rolled lead bar exclusively from domestic 
suppliers.
    Sheffield has sourced lead billets from both domestic and foreign 
producers since it began purchasing lead billets in 1992. Throughout 
much of 1993, Sheffield sourced lead billets from Inland; however, by 
late 1993, Inland stopped its external sales of lead billets citing its 
own internal lead billet consumption needs. In June 1995, Inland was 
again in a position to supply lead billets. Sheffield placed orders 
with Inland, but by the fourth quarter of 1995, Inland once again 
stopped selling lead billets. Since 1996, Sheffield has sourced lead 
billets from abroad.

(2) Affiliation

    The second factor to consider under section 781(a)(3) of the Act is 
whether the manufacturer or exporter of the lead billets is affiliated 
with the entity that assembles or completes the merchandise sold in the 
United States from the imported lead billets. In these circumvention 
inquiries, the Department inquired whether affiliation existed between 
the U.S. re-roller and the foreign respondents, pursuant to section 
771(33) of the Act. Based upon our analysis of the questionnaire 
responses from both the U.S. re-rollers and the foreign respondents, we 
find that no affiliation exists between the parties. There is neither 
common ownership, direct or indirect, between the U.S. re-rollers and 
the foreign suppliers of lead billets, nor a joint venture between the 
companies. Further, there are no facts (e.g., close supplier 
relationship) that suggest control of any of the re-rollers by the 
foreign respondents. In sum, we have found no evidence to indicate that 
the foreign respondents have attempted either to purchase or to 
construct re-rolling facilities in the United States which would allow 
them to import lead billet and process it into hot-rolled lead bar for 
their own use.

(3) Whether Imports Have Increased

    The third factor to consider under section 781(a)(3) is whether 
imports of lead billets into the United States have increased after the 
initiation of the hot-rolled lead bar investigations. Therefore, we 
have analyzed the level of imports of lead billets from both Germany 
and the United Kingdom since 1992, the year in which the AD and CVD 
investigations of hot-rolled lead bar were initiated. While we find 
that imports of lead billets have increased from all three foreign 
respondents, the increase appears to be the result of causes other than 
the initiation of the hot-rolled lead bar investigations.

[[Page 24161]]

    According to some of the U.S. re-rollers, there has been a switch 
from domestically produced lead billets to foreign-sourced imports 
because Inland and USS/KOBE have not met the lead billet supply needs 
of the U.S. market. In addition, there were two new entrants to the 
hot-rolled lead bar market after the initiation of the hot-rolled lead 
bar investigations that required supplies of lead billet. Sheffield 
entered into the hot-rolled lead bar market after Bethlehem Steel 
exited the market in 1992. Two years later, Bar Tech entered the hot-
rolled lead bar market after purchasing Bethlehem's rolling facilities. 
Bethlehem Steel, one of the original petitioners in the hot-rolled lead 
bar investigations, produced its own lead billets; however, neither 
Sheffield nor Bar Tech currently have lead billet production and thus, 
must source their lead billets from other outside sources.
    Further, according to the ITC, in the United States almost all 
semifinished steel such as blooms, billets, and slabs are used in 
captive production of finished steel products. Steel processors, such 
as the U.S. re-rollers, are an important outlet for excess semifinished 
steel products manufactured by steel producers. In the relatively 
limited semifinished steel market, the consumer is likely also to be 
the supplier's competitor in sales of finished steel. See USITC 
Publication 2758, Industry & Trade Summary Semifinished Steel (March 
1994) at pages 3, 5, and 11. Because the consumer of a billet is 
generally a competitor of the supplier, the dynamics of supply operate 
differently than for finished steel products. A steelmaker with excess 
melting capacity may have incentive to refrain from selling 
semifinished steel, such as billets.
    It has also been difficult to measure the rise in imports of lead 
billets from Germany and the United Kingdom against import trends from 
other countries. This is because the primary HTS number under which 
lead billets are imported is a basket category which includes other 
imports of semifinished products of iron or nonalloy steel with a 
chemical content of under 0.25 percent carbon. In its application, 
Inland and USS/KOBE provided import data for this HTS category. 
According to these data, imports of semifinished products of iron or 
nonalloy steels from countries not subject to antidumping or 
countervailing duty orders increased after the initiation of the hot-
rolled lead bar investigations, and in some cases significantly.

Summary of Statutory Analysis

    As discussed above, in order to make an affirmative determination 
of circumvention, all the elements under sections 781(a)(1) and (2) of 
the Act must be satisfied. In addition, section 781(a)(3) of the Act 
instructs the Department to consider, in determining whether to include 
parts or components within the scope of an order, such factors as: 
pattern of trade, affiliation, and whether imports into the United 
States of such parts or components increased after the initiation of 
the investigation which resulted in the issuance of the order. When the 
criteria of sections 781(a)(1) and (2) are applied to the individual 
facts, our analysis of whether circumvention is occurring is 
inconclusive. However, when the evidence to be considered under section 
781(a)(3) of the Act is incorporated into our analysis, we find that 
all of the evidence, taken as a whole, does not lead us to find a basis 
for including lead billets within the scope of the AD and CVD orders on 
hot-rolled lead bar from Germany and the United Kingdom.
    Pursuant to sections 781(a)(1) and (2), we find that the processing 
of lead billets into hot-rolled lead bar is essentially identical for 
all of the U.S. re-rollers involved in these inquiries. A detailed 
description of the re-rolling process is provided above. Though the 
U.S. re-rollers perform only one of the three processes needed to 
produce hot-rolled lead bar, they do perform the final process of 
converting the semifinished steel product into a functional finished 
steel good. Also, because the production process of converting lead 
billets into hot-rolled lead bar is a technically mature process, we 
did not expect to find significant R&D expenditures by the U.S. re-
rollers.
    The process of rolling lead billet into hot-rolled lead bar 
requires significant capital investment in rolling machinery and 
equipment, and compliance with a variety of OSHA and environmental 
regulations. Capital equipment and machinery used by the U.S. re-
rollers, once purchased, installed, and operational, represent 
significant fixed plant and equipment which cannot be easily 
disassembled and transported to another location. Investment in re-
rolling facilities requires a long-term investment of capital, long-
term corporate planning, and a long-term business commitment by the 
U.S. re-roller.
    Pursuant to section 781(a)(3), in reaching our determination, we 
took into consideration the factors of pattern of trade, sourcing, 
affiliation, and import trends. The facts concerning pattern of trade, 
sourcing, affiliation, and import trends do not indicate that there is 
circumvention of the hot-rolled lead bar orders. Even if we were to 
conclude that the calculated value of processing performed by the U.S. 
re-rollers in the United States is relatively small, when we examined 
sections 781(a)(1) and (2) in conjunction with the factors under 
section 781(a)(3), the facts, taken as a whole, do not lead us to find 
that circumvention of the hot-rolled lead bar orders is occurring.
    Throughout the United States, the U.S. re-rollers have extensive 
capital-intensive rolling facilities staffed by skilled workers. As 
previously discussed, the U.S. re-rollers are not affiliated with the 
foreign respondents and their rolling facilities were in existence and 
operational before the initiation of the hot-rolled lead bar 
investigations. Indeed, the petition for the hot-rolled lead bar 
investigations was filed on behalf of two of the five U.S. re-rollers, 
AS&W and Republic. In addition, a third U.S. re-roller, Bar Tech, 
purchased its rolling facilities from Bethlehem Steel, one of the two 
original petitioners in the hot-rolled lead bar investigations.
    According to the responses from the U.S. re-rollers, most of their 
investment in rolling facilities in the United States was made before 
the initiation of the AD and CVD investigations of hot-rolled lead bar 
from Germany and the United Kingdom. In addition, some of the U.S. re-
rollers made large investments in their rolling mills after 1992, the 
year in which the investigations on hot-rolled lead bar began. Thus, 
before and after 1992, U.S. re-rollers made large investments of 
capital and resources into their rolling facilities. These facts 
demonstrate that there were substantial production facilities for 
converting lead billets into hot-rolled lead bar before the initiation 
of the hot-rolled lead bar investigations.
    Further, as discussed above, British Steel remains a large exporter 
of hot-rolled lead bar to the United States and its bar market in the 
United States is still much larger than its U.S. lead billet market. 
Thyssen was primarily a lead billet exporter to the United States 
before 1992, the year the lead bar investigations were initiated. That 
did not change after the initiation of the hot-rolled lead bar 
investigations. Saarstahl, which exports a relatively small volume of 
lead billets to the United States, is not a major player in the U.S. 
lead billet market.
    With respect to the U.S. re-rollers, changes in their respective 
sourcing patterns after 1992, appear to be due to changes in the U.S. 
market, independent

[[Page 24162]]

of the hot-rolled lead bar investigations. U.S. re-rollers were 
purchasing lead billets and rolling them into hot-rolled lead bar 
before 1992. As noted above, Republic began purchasing lead billets in 
the mid-80's from foreign sources. New hot-rolled lead bar entrants 
came into the market after the departure of Bethlehem, causing an 
increase in the demand for lead billets. While Bethlehem was able to 
produce its own lead billets, the two new entrants, Bar Tech and 
Sheffield, have to purchase their lead billets from independent 
sources. In addition, there were also shifts from domestic to foreign 
billet suppliers because the domestic companies producing lead billets 
were only able to meet their own internal consumption needs. As 
discussed above, since 1996, both AS&W and Sheffield have been forced 
to source lead billets from foreign suppliers as a result of the 
termination of their supply arrangements with USS/KOBE and Inland, 
respectively.
    Our analysis demonstrates that imposition of the hot-rolled lead 
bar orders in 1993, was not the impetus for the importation of lead 
billet by the U.S. re-rollers in order to produce hot-25 rolled lead 
bar. As noted above, a number of the U.S. re-rollers were producing 
hot-rolled lead bar prior to the orders and continued to produce hot-
rolled lead bar after the orders. In addition, these unaffiliated U.S. 
re-rollers invested a substantial amount in their rolling facilities 
both before and after the AD and CVD orders to roll both lead and non-
lead billets into hot-rolled bar.
    The facts of these inquiries also show that the foreign respondents 
did not change their product lines in the United States as a result of 
the initiation of the hot-rolled lead bar investigations. As noted, 
Thyssen's primary market in the United States has been lead billets 
since the mid-80's. British Steel, which commenced selling lead billets 
in 1994, continues to export a significant amount of hot-rolled lead 
bar to the United States.
    Based upon this analysis under section 781(a) of the Act, we 
preliminarily find that circumvention of the AD and CVD orders on hot-
rolled lead bar is not occurring by reason of imports of lead billets 
from Germany and the United Kingdom.

Public Comment

    Interested parties may request disclosure of the calculations 
performed for these determinations within five days of the date of 
publication of this determination, and may request a hearing within 10 
days of publication. Case briefs and/or written comments from 
interested parties may be submitted no later than 30 days after the 
date of publication of this notice. Rebuttal briefs and rebuttals to 
comments, limited to issues raised in those briefs or comments, may be 
filed no later than 37 days after the publication of this notice. Any 
hearing, if requested, will be held 44 days after the publication of 
this notice. The Department will publish the final determinations with 
respect to these anti-circumvention inquiries, including the results of 
its analysis of any written comments.
    These negative preliminary circumvention determinations and notice 
are in accordance with section 781(a) of the Tariff Act and 19 CFR 
353.29(e) and 19 CFR 355.29(e).

    Dated: April 23, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-11666 Filed 4-30-98; 8:45 am]
BILLING CODE 3510-DS-P