The domestic "like product", for purposes of this investigation, is hot-rolled low-carbon steel coils, of thickness of 2.0 to 12.7 mm, in widths of up to 1220 mm and conforming to JIS G3101, G3131, G3132, G3113 or its equivalent in ASTM standard.

The Commission determines that the domestically produced HRC, constitutes a "like product" to the product under consideration.

1.2.2 On Domestic Industry Support

1.2.3 On Price Difference

Export Price

The Commission based its estimates of export price on the import entries on file with the Commission, entries forwarded by the DTI-BIS, and summary of sales invoices submitted by Magnitogorks.

Export prices were adjusted to ex-works level, i.e., net of ocean freight, insurance, inland freight, transshipment services, customs’ clearance, traders’ compensation and profit, if any. Adjustments made on export price to arrive at ex-works level varied depending upon the manufacturer and port of origin.

Novolipetsk, an identified Russian manufacturer, was excluded in the determination of export price since it is not a direct exporter.

With respect to exporters of HRCs originating from Russia whose manufacturers cannot be identified, adjustments in export prices, in addition to customs clearance and trader’s/contract commission, were based on Magnitogorks.

Normal Value

The Commission used adjusted domestic selling prices of Magnitogorsk from the months of January to August. Said values were found to be not below cost of production.

For the months of September to December, adjusted domestic selling prices were below cost of production. Hence, the constructed normal value, based on the cost of production plus selling and administrative expenses and profit margin was used.

Adjusted domestic selling prices submitted by Novolipetsk were not used since the company's exporters cannot be identified, and available import documents do not identify Russian manufacturers from which known exporters were sourcing their HRCs. Severstal did not submit any document which may be used as basis for determining normal value.

Thus, for all of HRCs originating from Russia, the adjusted domestic selling prices and constructed normal value of Magnitogorsk was used. The values ranged from US$108.40-US$229.86/MT.

1.2.4 On Negligible Volume of Dumped Imports

The volume of dumped imports, at 27% of total HRC imports from Russia during the POI, is not negligible.

1.2.5 On the Determination of Material Injury and Causal Linkage

Volume of Dumped Imports

In determining the volume of dumped imports, NSO statistics, 1998 HRC import entries on file with the Commission and entries forwarded by the BIS were used.

NSO statistics show total HRC imports within the POI at 340,308 MT, of which 136,000 MT originated from Russia. However, available import entries accounted for only 116,273 MT of HRC importations from Russia. Based on the latter, the volume of dumped imports was estimated at 90,500 MT or 27% of total HRC imports.

Despite the possibility of being undervalued, the 27% share of dumped imports to total is not negligible.

Price Effect

The incidence or extent of price undercutting was estimated using the landed cost of dumped HRC from Russia against the average ex-factory domestic selling price of local HRC.

Dumped HRC undercut domestic products only in the 1^st quarter of 1998 at 10.80% and resulted in almost equal shares of domestic sales and dumped imports to total domestic consumption. There were no dumped imports recorded in the 4^th quarter.

Price depression occured in the 4^th quarter of 1998 but this cannot be attributed to dumping because no imports of dumped HRC were recorded in that period.

Price suppression was apparent in the 2^nd and 3^rd quarters. NSC's average selling price in the 2^nd quarter fell despite an increase in production cost. In the 3^rd quarter, average selling price contracted by a larger margin than that in production cost. The pressure on NSC to reduce prices in these quarters was evident as landed costs of dumped imports were about 10.34% lower than the company's production costs.

Market Share

Total market contracted by an average 25% from 1996 to 1998, while domestic sales of NSC decreased by an average of 30% in the same period. Total imports declined by an average 24%. For imports specifically from Russia, the contraction was even greater at an average 35%.

Production, Sales and Inventory

Volume of production declined from 793,000 MT in 1996 to 693,000 MT in 1997 and to 336,000 MT in 1998.

The inventory level for HRC in 1997 reached 124,000 MT, 10.7% higher than the 1996 level of 112,000 MT. In 1998, however, inventory level decreased by 63.71%, to 45,000 MT.

Cash Flow

NSC was unable to generate funds from HRC operations in 1996 to 1998, because it sold below cost. Payments of huge interest expense exacerbated the negative cash position. Thus, NSC had to depend largely on borrowings and restructuring to fund its accountabilities.

Investment and Ability to Raise Capital

NSC’s inability to generate investment and raise capital is traced to the fact that the company was saddled with enormous debt, high interest cost, foreign exchange losses and high operating costs.

Employment and Wages

The total manpower complement in HRC operations numbered 233 in 1998 as against 274 in 1996. Dumping did not cause the retrenchment of forty one (41) employees from HRC operation in 1998. It was management’s solution to address the problem of overstaffing.

Factors Other Than Dumping

The Commission evaluated factors, other than dumping, which could have caused major injury to the local HRC industry.

a. Competition From Normal Imports (Undumped Imports)

Normal HRC imports posed stiff competition to the domestic industry as evidenced by their market performance from 1996 to 1998. The market share of HRC from Russia declined from 43% in 1997 to 30% in 1998. Despite the market slump in 1998, however imports from countries other than Russia managed to capture a 46% share of the Philippine market against dumped imports at 18%. Taiwan, Korea and Japan’s share of total imports is at 18%, 16% and 14%, respectively.

Under EO 465 which took effect on 22 January 1998, the tariff duty on HRC was lowered from 10% to 7%. Lower tariffs on HRC reduced its landed cost. To maintain parity or competitiveness, NSC has to adjust its prices accordingly.

b. Transfer of HRC for its own Cold Mill

The bulk of HRC production was transferred to its cold mill for further processing to cold-rolled steel coils (CRC). The competition from imported CRC, coupled by the contracting CRC market adversely affected the operations of its hot mill.

NSC’s cold mill production declined by 37% from P408,000 in 1997 to P259,000 in 1998.

c. Market Contraction

With the Asian financial crisis in mid-1997, the peso devaluation commenced. All countries in Asia had to brace from the economic crisis that resulted to a drastic reduction in

steel consumption. Philippine steel market was no exception from that regional market contraction. The Philippine market for HRC contracted by 14% from 1996 to 1997 and by 36% from 1997 to 1998.

d. High Cost to Produce

The cost to produce HRC was relatively higher than its imported counterpart because NSC had to import its slab requirement.

e. Financial Performance

The slow-down in the Philippine economy had significantly affected the company in terms of higher financing costs and reduced sales and production volume. NSC’s total operation in 1998 incurred its biggest deficit prior to the shutdown of its operations in November 1999.

In 1996, NSC incurred a loss of P2.032 billion on its operation (EBIT) due to revaluation of assets as required by the incoming investor Hottick, resulting to a negative return on sales, assets and stockholder’s equity. In 1997 EBIT improved to P780 million or an increase of 62% compared to previous years. However, in 1998 NSC incurred a loss of P1.79 billion on its operation (EBIT). It may be noted that 1998 net sales of P8.58 billion is 28.74% lower than in 1997 of P12.04 billion.

f. Foreign Currency Losses

As of 31 December 1997, the company had total foreign currency losses of P2.5 billion which went down to P154.9 million in 1998. Though the 1998 figure is much lower, the high cost of money for the servicing of NSC’s dollar denominated loans as a result of the peso devaluation had major adverse impact on the company’s financial position.

1.3    APPLICATION OF PROCEDURAL MATTERS UNDER RA 8752 (ANTI-DUMPING ACT OF 1999)

On 12 August 1999, RA 8752 was signed by the President amending Section 301 of TCCP. The new law became effective on 04 September 1999, i.e., after fifteen (15) days, following its publication on 19 August 1999 in Malaya and Philippine Standard.

Procedural provisions of RA 8752 are applicable to the instant anti-dumping case. In Republic vs. Court of Appeals, G.R. No. 92326, January 24, 1992, the Court held:

"Procedural matters are governed by the law in force when they arise, and procedural statutes are generally retroactive in that they apply to pending proceedings and are not confined to those begun after enactment although, with respect to such pending proceedings, they affect only procedural steps taken after their enactment." (205 SCRA 356).

1.4 FINAL DETERMINATION

The Commission finds that:

1.    Price differences existed between the normal values and export prices of HRC originating in or exported from Russia in the 1^st, 2^nd and 3^rd quarters of 1998. No dumped imports were recorded in the 4^th quarter hence, no price difference in the same quarter.

2.    Dumping, per se, of HRC from Russia during the POI did not cause material injury to the domestic industry but a host of factors other than dumping, i.e., competition from normal imports, transfer of HRC production for its own cold mill (captive production), market contraction, high cost to produce, foreign exchange losses, high interest on its loan obligations and difficulty in opening Letter of Credit (LC) for its raw materials led to the overall impairment in the financial position of the company.

In view of the foregoing, the element of material injury resulting from dumped imports from Russia during the POI, not having been established, it is hereby ordered that the anti-dumping case against Russia be dismissed for lack of merit.

2. ABBREVIATIONS

Agreement	Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (WTO Anti-Dumping Agreement)
ASTM	American Society for Testing and Materials
BIS	Bureau of Import Services
BOC	Bureau of Customs
BPS	Bureau of Product Standards
Cargill	Cargill International Trading PTE. Ltd.
C I F	Cost, Insurance and Freight
CIS	Commonwealth of Independent States
CMC	Customs Memorandum Circular
Commission	Tariff Commission
CMO	Customs Memorandum Order
CRC	Cold-Rolled Coils
DAF	Delivered At Frontier
DO	Department Order
DOF	Department of Finance
DOLE	Department of Labor and Employment
DTI	Department of Trade and Industry
EO	Executive Order
FCA	Free Carrier Agreement
FOB	Freight on Board
FMV	Fair Market Value
Gorkovrsky	Gorkoversky Metallurgichesky Zavod
HRC	Hot-Rolled Coils /Sheets
HS	Harmonized System
ISO	International Standard Organization
JIS	Japanese Industrial Standard
Klockner	Klockner East Asia Limited
Magnitogorsk	Magnitogorsk Iron and Steel Works
Mayer	Mayer Steel Pipe Corporation
MKK	MKK Steel Corporation
NI&S Co.	Novolipetsk Iron and Steel Works
NSC	National Steel Corporation
NSO	National Statistics Office
NV	Normal Value
PD	Presidential Decree
PNS	Philippine National Standards
POI	Period of Investigation
Portalloy	Port Alloy Industrial Supply Corporation
RA	Republic Act
RA 7843	Anti-Dumping Act of 1994
RA 8752	Anti-Dumping Act of 1999
SEC	Securities and Exchange Commission
SGS	Societe Generale de Surveillance
Severstal	Severstal Iron and Steel Works
Sumo	Sumo Steel Pipe Corporation
Supreme	Supreme Steel Pipe Corporation
TCCP	Tariff and Customs Code of the Philippines
TMBP	Tin Mill Blackplate
SAE	Society of Automotive Engineers
WTO	World Trade Organization

3. INTRODUCTION

3.1 THE ANTI-DUMPING PROTEST

The anti-dumping protest against the importation of hot-rolled steel coils (HRC) and sheets from Commonwealth Independent States (CIS)/Russia was filed with the Department of Finance (DOF) by National Steel Corporation (NSC) on 23 September 1998. The company alleged that said products were imported at dumped prices and were causing material injury to the domestic industry.

The dumping protest was endorsed by the DOF to the Bureau of Import Services (BIS) of the Department of Trade and Industry (DTI) on 13 October 1998 for initial investigation. BIS identified Russia as the primary source country of the allegedly dumped imports of HRC and recommended the initiation of a preliminary anti-dumping investigation. The notice of initiation of investigation was published in the Philippine Daily Inquirer and Philippine Star on 27 February 1999.

On 04 June 1999, an affirmative preliminary finding was made by the BIS, imposing an anti-dumping bond ranging from US$5.90/MT – US$80.05/MT. The DTI-BIS adopted US$255/MT as the appropriate normal value for the purpose of the preliminary investigation. The NV adopted is based on the price range of US$255-280/MT specified in the Anti-Dumping Agreement between the US Department of Commerce and the Minister of Trade of the Russian Federation issued on 22 February 1999. The imposition of the anti-dumping bond was, however, suspended by BIS until such time that NSC can show proof that its HRC Division is already on a normal operation status.

On 07 June 1999, a Motion for Reconsideration on the Affirmative Findings of Dumping and Application of Provisional Measures against HRC from Russia was filed by the protestees, namely, Mayer Steel Corporation, MKK Steel Corporation, Supreme Steel Pipe Corporation, Novolipetsk Iron and Steel Corporation, Magnitogorks Iron and Steel Works and Open Joint Stock Company Severstal through their counsel, Lucenario, Margate and Mogpo.

On 14 June 1999, the DTI-BIS, acting on the said Motion, ordered that the affirmative findings of dumping and application of provisional measures against HRC and sheets from Russia be held in abeyance pending resolution of the said Motion.

On 15 June 1999, NSC, on its part, also filed a Request for Reconsideration on the Affirmative Preliminary Findings specifically on the increase in the amount of "all others rate" from 11.60% to 20%.

On 04 August 1999, the DTI-BIS issued a Resolution lifting the Order holding in abeyance the affirmative preliminary findings on the anti-dumping case against the importation of HRC from Russia. However, the imposition of the anti-dumping bond was suspended until such time that NSC’s hot mill production capacity is at a level when the case was filed in September 1998. On 12 August 1999, the Dispositive Portion of the DTI Resolution lifting the Order holding in abeyance the affirmative preliminary findings on the anti-dumping case against the importation of HRC from Russia was published.

On 09 August 1999, the DTI-BIS endorsed the protest together with its findings to the Tariff Commission (Commission) for formal investigation.

3.2 THE ROLE OF THE COMMISSION

Pursuant to Section 301 (b) of the TCCP, as amended by RA 7843, and further amended by RA 8752 (Anti-Dumping Act of 1999) and in accordance with Article VI of GATT 1994, the Commission, upon receipt of the endorsement of the case, conducted the formal investigation to determine:

1. whether or not the protested articles are imported into the Philippines at a price less than its normal value and to ascertain the difference, if any; and
2. if, as a result thereof, the domestic industry producing like articles in the Philippines suffered, or was threatened with, injury or suffered material retardation of the establishment of a domestic industry.

3.3 THE COMMISSION’S APPROACH TO THE ANTI-DUMPING CASE

The formal investigation involved the following actions by the Commission:

identification of all parties concerned;

notification of foreign governments concerned and sending of questionnaires to all parties, both domestic and foreign;

conduct of consultation, pre-hearing conferences and public hearings;

gathering of economic and financial data such as production, sales inventory, employment, etc.;

conduct of ocular inspection and verification of information submitted by parties concerned;

conduct of on-the-spot investigation in the territory of the exporting country;

	acceptance of position papers, memoranda and counter-memoranda of the parties;
	evaluation and analysis of all information submitted/gathered to determine the existence of dumping, material injury and causal link;

disclosure to all interested parties of the essential facts which form the basis for the decision; and

preparation of report of final determination and submission to the DTI for the issuance of a Department Order for the imposition of the definitive anti-dumping duty, if affirmative, or the release of cash bond, if negative.

4. THE COMMISSION’S INQUIRY

4.1 PRODUCT UNDER CONSIDERATION

The imported product covered by the protest is referred to as the "product under consideration."

In its protest, NSC identified all the subheadings of HS Heading No. 72.08 as applying to the allegedly dumped product. Heading 72.08 is described in the HS TCCP as "Flat-rolled products of iron or non-alloy steel, of a width of 600 mm or more, hot-rolled, not clad, plated or coated." In its preliminary findings, the DTI-BIS included all shipments of HRC and sheets from Russia falling under HS heading 72.08. The Commission, based on its investigation, limited the coverage of the product under consideration to hot rolled low-carbon steel coils and sheets of thickness 2.0 – 12.7 mm with widths of up to 1220 mm which is within the capability of NSC.

The typical domestic applications of HRC are in the production of welded steel pipes/tubes and general/structural fabrication. NSC also processes HRC in its cold mill to produce cold-rolled coils (CRC) for the downstream industries engaged in the production of galvanized and prepainted sheets, drums, welded pipes/tubes, household appliances and general fabrication.

        4.2 PERIOD OF INVESTIGATION

For dumping determination, the Commission’s investigation covered imports of HRC for the 12-month period from 01 January 1998 to 31 December 1998. With respect to injury, the period covered were the years 1996 to 1998.

4.3 NOTIFICATION

                    4.3.1 Formal Investigation/Questionnaire

On 18 August 1999, notification was sent to Ambassador Anatoli Khmelnitski of the Russian Embassy in Makati City and the Philippine Ambassador to Russia, Jaime S. Bautista, informing them that the anti-dumping protest of NSC is now with the Commission for formal investigation. Also notified, through their embassies in Manila, were the governments of the trading firms based outside Russia whose HRC exports from Russia to the Philippines were subjected to temporary suspension of provisional measure.

Individual notifications with attached questionnaires were likewise sent to NSC, twenty-two (22) identified traders, twenty-nine (29) importers, and four (4) Russian steel manufacturers. Parties were given thirty (30) days from receipt of the questionnaire to accomplish and return the same to the Commission.

4.3.2 Consultations

The Commission sent out invitations to consultations on 16 August 1999.

The consultation was held at the Commission on 31 August 1999. Representatives from NSC, Russian Federation, Portalloy and Counsel for the protestees were present. They were informed of the procedure of the investigation and were asked to explore the possibility of amicable settlement.

Counsel for the protestees informed the body that they are open for settlement.

4.3.3 Pre-Hearing Conference

Invitations to the pre-hearing conference were sent out on 21 September 1999 to the protestant, counsel for protestees, identified importers and the Russian Trade Representative, Mr. Nikolay T. Sychev.

The pre-hearing conference was conducted on 30 September 1999 which discussed the schedules and procedures of the public hearing, the presentation of witnesses and documentary evidences and other relevant matters necessary for the expeditious and/or otherwise orderly conduct of the hearing.

The parties agreed on the following hearing dates: 21, 26 and 28 October and 04, 11 and 17 November 1999.

4.3.4 Public Hearing

Notice of public hearing was published in Today and The Philippine Star on 06 October 1999. All known interested parties and concerned government agencies were also sent individual notices.

During the public hearing of 21 October 1999, protestant manifested that it was adopting as its evidence-in-chief the findings of BIS. On 26 October 1999, the Commission ordered the protestant, to clarify their manifestation, among others. The 28 October hearing was cancelled.

With the passage of RA 8752 (Anti-Dumping Act of 1999) and for the speedy disposition of the instant case, the parties agreed on 04 November 1999 on the new schedule and procedure to be followed in the formal investigation. Four (4) marathon hearings was scheduled and considered. All previously scheduled hearings were cancelled. The new notice of public hearing was published in Today and the Philippine Star on 06 January 2000.

The hearings were terminated on 28 January 2000. The protestant and the protestees submitted their memoranda on 29 February and 02 March 2000, respectively. Counter-memoranda were filed on 20 March and 17 March 2000.

4.3.5    Ocular and/or On-the-Spot Investigation and Verification of Information

Agreement to conduct an ocular inspection, examination of books of accounts and verification of information was requested from all concerned domestic parties. NSC, Sumo Steel Pipe Corporation and Hurleson Steel Corporation granted the request.

Simultaneous with the CRC investigation (Anti-Dumping Inv. 98-01), an ocular inspection of the manufacturing plant and verification of information on the three (3) Russian manufacturers, namely, Novolipetsk, Severstal and Magnitorgorsk was conducted by the Commission’s staff on 16,17, 19 and 20 August 1999, respectively, in Russia.

4.4    INQUIRY

For purposes of final determination, the Commission limited its investigation according to the provisions of Section 6.10 of the Agreement which state:

"Authorities may limit their examination either to a reasonable number of interested parties or products by using samples which are statistically valid on the basis of information available to the authorities at the time of the selection, or to the largest percentage of volume of the exports from the country in question which can be reasonably investigated".

Furthermore, parties who failed to submit answers to questionnaire were to be governed by the provisions of Section 6.8 of the Agreement which provide:

"In cases in which any interested party refuses access to, or otherwise does not provide, necessary information within reasonable period or significantly impedes the investigation, preliminary and final determinations, affirmative or negative, may be made on the basis of facts available…"

4.5 DOMESTIC PRODUCER

4.5.1    NSC

Company Profile

NSC, formerly a wholly-owned subsidiary of the National Development Company (NDC), is majority-owned by the Malaysian-based Hottick Holdings Co. Berhad. NSC is the only producer of HRC in the Philippines. The company produces HRC in various commercial sizes in accordance with JIS/ASTM standards and specific customer requirements.

Its office is located at 377 Sen. Gil J. Puyat Avenue, Makati City with its plant located at Iligan City. The company was incorporated in 1974. Aside from HRC, NSC also produces electrolytic tinplates, billets and CRC. These products were also subject of an anti-dumping protest.

Position/Issues

NSC claimed that the product under consideration was being sold in the Philippines at a price less than the prevailing normal value, in the ordinary course of trade, in the domestic market in Russia.

The company suffered material injury evidenced by contraction in profits, market share, production and employment as a consequence of dumping.

NSC was capable of supplying the requirements of the domestic market during the period of investigation and therefore remains a domestic industry to protect with the imposition of an anti-dumping bond.

Reply to Questionnaire

NSC submitted its duly accomplished questionnaire on 16 September 1999.

Ocular Inspection

The Commission conducted an ocular inspection of the plant facilities and operations of NSC in Iligan City on 16 and 17 September 1999 and disclosed the following:

The company has four (4) major operating facilities, namely: a hot-mill which produces HRCs from steel slabs; a cold-mill for the production of CRC and TMBP; an electrolytic tinning line to produce tinplates; and a steel billet making plant for the production of billets from steel scraps.

NSC has two (2) hot mill (HM#1 and HM#2). HM#1 is no longer in operation. Its Hot Mill #2 has an annual rated capacity of 1.0 M MT/year. It was confirmed that NSC is still producing HRC during the ocular inspection.

The bulk of their 1999 HRC production is delivered (in-house) to its cold mill for further processing into cold-rolled coils (CRC), either for galvanizing or tinplating purposes.

	Records show that NSC continued to import slabs for the same period (1999), totaling 63,560.4 MT, which supports the company’s claim that its hot mill continues to produce HRC during the said period.
	The 1999 level of HRC production is below the 1998 performance. Specifically, the 19,257 MT production for July 1999 is well below the September 1998 production of 45,106 MT. NSC claimed that low production was the result of the company’s inability to source its main raw material, plus the lack of orders from HRC consumers.

Verification of Information

Verification of the company’s records in Makati City was conducted on 26 and 31 January and 04, 14 and 15 February 2000. Information submitted to the Commission, i.e., production, sales, inventory, etc., was found to be consistent with information contained in the company’s book of records. Information on selling prices submitted by the company was consistent with those reflected in its sales invoices.

    4.6    RUSSIAN MANUFACTURERS

4.6.1 Novolipetsk Iron and Steel Corporation (NI&S Co.)

Company Profile

The Company is a publicly-owned joint stock company. NI&S Co. was privatized by the Russian government in 1993. Under the privatization program, two types of shares were issued. Privileged shares, constituting 10-15 percent of the total shares issued, and regular or plain shares, constitutes the remainder. Privileged shares were non-voting, but its holders were guaranteed a fixed dividend. Those holding regular shares were entitled to participate in shareholder meetings and could thereby exercise control over company management decisions.

Reply to Questionnaire

The Commission received Novolipetsk’s faxed letter dated 23 September 1999. The company was adopting the information provided in the BIS Exporter’s Questionnaire as compliance to the Commission’s questionnaire. Additional documents submitted include domestic sales only.

Ocular Inspection

Simultaneous with the CRC investigation (Anti-Dumping Inv. 98-01), an ocular inspection of the company’s manufacturing plant and verification of information provided in exporter’s questionnaire was conducted by the Commission’s staff on 22 and 23 August 1999 in Lipetsk, Russia.

NI&S Co. is one of the largest integrated full-cycle metallurgical enterprise in Russia. It consists of sintering, carbonization, nitrate mineral fertilizer, blast furnace, steel-melting, rolling works, sophisticated power equipment, powerful repair facilities.

Annual volume of hot rolled steel production is about 6 million tons.

It produces a wide range of iron and steel products, including slabs, steel making iron, hot and cold rolled carbon steel in sheets and coils, structural steel, electrical steel and coke by-product such as, liquid ammonia, ammoniacal water, ethyl benzene, solvent, toluene, isopropyl benzene, ammonium sulphate, naphtalene, pitch coke.

Total workforce of the company accounted for 42,000 employees.

    4.6.2 Magnitogorsk Iron and Steel Works (Magnitogorsk)

Company Profile

Magnitogorsk, located in Magnitogorsk, Chelyabinsk Region, Russia, is an integrated steel maker and the third largest steel making in Russia. It is the first metallurgic plant to be transformed into a joint stock company at the end of 1992. The company has a huge production capacity up to 16 million tons of steel making per year and up to 11 million tons of rolled metal output per year.

Reply to Questionnaire

The counsel for protestees manifested that the company was adopting the information provided in its earlier submission to the DTI-BIS. The company provided additional data on 1998 cost of production of HRC and 1998 domestic sales and export sales to the Philippines.

Ocular Inspection and Verification of Information

After the ocular inspection/verification of Severstal, the Commission on 19 and 20 August 1999, conducted an ocular investigation of the plant facilities of Magnitogorsk in Chelyabinsk, Russia, as well as verification of information contained its response to the questionnaire.

Magnitogorsk is an open joint stock company with a large number of shareholders (both natural and juridical) – 76% owned by private share holders and 24% by the Ministry of State Property.

The company has a total of 31,757 employees. It also has huge annual production capacity up to 16 million tons of steel smelting and 11 million tons of rolled metal output.

Domestic sales are based on the price list in effect at the time of sale which are revised from time to time depending on changing market conditions, fluctuations of raw material prices and inflation in Russia. Prices are likewise determined on the basis of mode of payment – prepaid, cash on delivery or credit terms. The most common term is the credit of 30 days.

The company exports its products to the international market through unaffiliated foreign trading companies who buy from the company on the FCA Terms (Railway Station) or FOB Port Terms. Export sales are negotiated with foreign trading companies from time to time and are set forth in contracts called "specifications".

The Board of Directors, whose members are elected during the annual shareholder’s meeting pursuant to its charter, is in charge of the overall management of the company.

Situated atop Magnitnaja mountain, the company claims a comparative advantage over its foreign competitors, given the vast iron ore deposits and sustainable and cheap supply of raw materials and fossil-fuels in the region.

4.6.3 Severstal Iron and Steel Works (Severstal)

Company Profile

Severstal is one of the largest iron steel making enterprises in Russia. The company’s plant facilities has a total land area of 30,000 hectares, situated in Cherepovets, Vologda Region, Russia. It produces a wide range of iron and steel products, including metallurgical coke, cast iron, hot-rolled plates, sheet and strip, cold rolled sheets, cold rolled and galvanized bands, medium and light sections, wire rods, electric welded pipes, enameled kitchenware, metal furniture and mineral-based fertilizers.

Reply to Questionnaire

The counsel for protestees manifested that the company was adopting the information provided in its earlier submission to the DTI-BIS. However, based on the documents forwarded by the DTI-BIS to the Commission, no reply to the questionnaire was submitted.

Ocular Inspections/Verification of Information

On 16 and 17 August 1999, the Commission in connection with the CRC investigation, conducted an ocular investigation of the plant facilities of Severstal in Cherepovets, Russia as well as verification of information provided by the company.

Severstal is a publicly-owned company with large number of shareholders (both natural and juridical) – 90% owned by private shareholders and 10% by the government through the state-owned company, "Rossiyskaya Metallurgia".

The company has 45,257 total employees of which 2,840 are directly involved in HRC production.

Annual and actual capacity utilization of HRC during the POI were 7.6 million tons and 6.2 million tons, respectively.

The company determines the price of its products through direct negotiations with customers/trading companies. Domestic sales include wholesale and retail sales, barter, securities, credit and cash sales. Export sales, on the other hand, may either be expressed free on board (FOB), delivered at frontier or territorial boundary of Russia (DAF) or free carrier agreement (FCA) at varying conversion rates during the year.

Export sales are covered by long-term contracts with trading companies/resellers who take possession of the merchandise at the ports in Russia or the Baltic States. The details of contracts are generally agreed between the company and the trading companies. Export pricing is primarily determined by its Export Department.

The company submits quarterly and annual accounting reports to the owners, state inspection agencies and other government agencies. Its financial statements are subject to audit by independent auditors in accordance with international audit standards.

Production cost of the company reflects the actual market costs to produce end products. Fixed Assets are valued at their historical acquisition costs and are subject to straight line depreciation.

Like any other Russian firms, the company is subject to bankruptcy and property ownership laws.

The highest managerial body of the company is the Board of Directors constituted in an annual general meeting of the stockholders.

Severstal mentioned during the ocular inspection that it did not export HRC to the Philippines during the POI.

Consolidated Position/Issues submitted by Counsel

Normal Value

Normal values of HRC from Russia for the period 1998 be admitted as evidence for the determination of the case.

Product Under Consideration

The specific width of 1.5 mm thick HRC is limited to 915 mm (3 feet) only. They are not producing nor supplying HRC with a specific size of 1.5 mm thick by 1220 mm (4 feet) in width.

Injury

The alleged decline of NSC’s domestic sales of HRC in 1997-1998 was caused by the company’s failure to deliver the requirements of the customers on a timely and consistent manner. NSC is not a reliable supplier. Moreover, they do not produce the product mix which is being demanded by the market, forcing the local users to import, which resulted to the latter’s high inventories.

Unfavorable economic condition caused the contraction in the market during the years 1996-1998 which in turn depressed market prices and steel demand.

The lifting of import controls on steel and government’s Tariff Liberalization Program has directly and seriously injured NSC, which likewise caused the company to reduce its prices and volume share of the domestic market.

	The company’s uncompetitive costs is the true reason for its losses. This is primarily due to NSC’s lack of slab-making facility and the price of its imported slab is high.
	NSC’s relatively low and obsolete technology employed in its equipment/manufacturing process has resulted to delay in production, reduce capacity utilization which caused the company to incur non-competitive costs.

Foreign exchange losses materially injured HRC. It further contributed to the deterioration of NSC’s financial position by increasing its peso obligation and interest.

NSC’s mismanagement of its finances particularly loan obligation is the principal cause of its financial difficulties.

The reduction of NSC’s personnel commenced as early as 1993, when major projects did not materialize and later, as a requirement for its privatization. The retrenchment was effected to relieve the company’s excess manpower.

    4.6.4 Gorkovesky Metallurgichesky Zavod (Gorkovesky)

A faxed letter from the company was received by the Commission on 14 September 1999 informing that Gorkovesky did not export HRC to the Philippines and therefore has not responded to the questionnaire sent by the Commission.

4.7 TRADERS

4.7.1 Klockner East Asia Limited (Klockner)

The Commission received Klockner’s faxed and original submission on 16 and 28 September 1999, respectively, informing that the company did not export HRC to the Philippines and therefore have not completed the importer’s questionnaire sent by the Commission.

4.7.2 Cargill International Trading PTE Ltd. (Cargill)

Cargill is an international trading company. All of the company’s activities are related to sales and trading of steel and other products. Steel products include hot rolled coil/sheet, cold rolled coil/sheet, galvanized coil/sheet, billet/slab and wire rod/rebar. Cargill maintains a network of trading offices throughout the US, Latin America, Europe, Africa, Asia and the Pacific Rim.

Cargill sent its duly accomplished questionnaire on 27 September 1999. It provided data on the company’s total export sales to the Philippines, list of local customers and export sales to other countries with corresponding commercial invoices.

4.7.3 Port Alloy Industrial Supply Corporation (Portalloy)

The company’s response to the questionnaire was received on 16 September 1999. Portalloy stated that quality wise, there is no difference between the HRC imported from Russia and HRC produced by NSC. Most of the questions were left unanswered.

4.8    IMPORTERS

4.8.1Mayer Steel Pipe Corporation (Mayer)

Company Profile

Since its incorporation in 1972, the company has been dedicated exclusively to the manufacture of steel pipe. Markets for its various products which include galvanized steel pipes, black iron pipes, furniture tubings, spital pipes with different protection, conduit pipes, fabricated elbow and fabricated tanks have expanded over the years to encompass structural and industrial applications in both private and government sectors.

Its office is located at 1221 Tytana Plaza, Plaza Lorenzo Ruiz, Binondo, Manila and manufacturing plants located in Barrio Canumay and Barrio Lingunan, Valenzuela, Metro Manila.

Reply to Questionnaire

The company, through counsel, manifested that they were adopting the DTI-BIS questionnaire.

4.8.2    MKK Steel Corporation (MKK)

MKK was incorporated in 1987 and registered with SEC in 1988. The company’s products are manufactured in accordance with International Standards. The product line includes black iron pipes and galvanized iron pipes. The company’s manufacturing plant is located at Barrio Lingunan, Valenzuela, Metro Manila.

Reply to Questionnaire

MKK manifested through counsel that they were adopting the DTI-BIS questionnaire.

        4.8.3 Sumo Steel Pipe Corporation (Sumo)

Company Profile

Sumo is engaged in the manufacture of black and galvanized pipes. Its office is located at 82 P. Delfin St., Marulas, Valenzuela and plant address at 658 T. Santiago St., Lingunan, Valenzuela. The company started commercial operation in 1996. Annual HRC requirements is 1,500 MT, with gauge 1.5 mm and width of 1220 mm (4 feet). It has one (1) cutting line with a capacity of 3 rolls of HRC per day, while the galvanizing line produces 5 MT of galvanized pipe per day on a single shift.

Reply to Questionnaire

The company manifested that they were adopting the DTI-BIS questionnaire as compliance to the Commission’s questionnaire.