Diffusion-Annealed, Nickel-Plated Flat-Rolled Steel Products from Japan Investigation No. 731-TA-1206 (Final) Publication 4466 May 2014 U.S. International Trade Commission Washington, DC 20436 U.S. International Trade Commission COMMISSIONERS Irving A. Williamson, Chairman Dean A. Pinkert David S. Johanson Meredith M. Broadbent F. Scott Kieff Rhonda K. Schmidtlein Robert B. Koopman Director of Operations Staff assigned Nathanael Comly, Investigator Gerald Houck, Industry Analyst John Benedetto, Economist David Boyland, Accountant Mara Alexander, Statistician Carolyn Holmes, Statistical Assistant Nataline Viray-Fung, Attorney Douglas Corkran, Supervisory Investigator Address all communications to Secretary to the Commission United States International Trade Commission Washington, DC 20436 U.S. International Trade Commission Washington, DC 20436 www.usitc.gov Diffusion-Annealed, Nickel-Plated Flat-Rolled Steel Products from Japan Investigation No. 731-TA-1206 (Final) Publication 4466 May 2014 CONTENTS Page Determination ................................................................................................................................. 1 Views of the Commission ............................................................................................................... 3 Part I: Introduction .............................................................................................................. I-1 Background ................................................................................................................................ I-1 Statutory criteria and organization of the report ..................................................................... I-1 Statutory criteria ................................................................................................................... I-1 Organization of report ........................................................................................................... I-2 Market summary ....................................................................................................................... I-3 Summary data and data sources ............................................................................................... I-3 Previous and related investigations .......................................................................................... I-4 Nature and extent sales at LTFV ............................................................................................... I-5 The subject merchandise .......................................................................................................... I-5 Commerce’s scope ................................................................................................................ I-5 Tariff treatment ..................................................................................................................... I-6 The product ............................................................................................................................... I-6 Description and applications ................................................................................................. I-6 Manufacturing processes ...................................................................................................... I-6 Domestic like product issues ..................................................................................................... I-8 Part II: Conditions of competition in the U.S. market........................................................... II-1 U.S. market characteristics....................................................................................................... II-1 U.S. purchasers ......................................................................................................................... II-2 Channels of distribution ........................................................................................................... II-2 Geographic distribution ........................................................................................................... II-3 Supply and demand considerations ......................................................................................... II-3 U.S. supply ............................................................................................................................ II-3 U.S. demand ......................................................................................................................... II-6 i CONTENTS Page Part II: Conditions of competition in the U.S. market--Continued .............................................. Substitutability issues ............................................................................................................. II-12 Lead times .......................................................................................................................... II-12 Knowledge of country sources ........................................................................................... II-12 Factors affecting purchasing decisions............................................................................... II-13 Product qualification .......................................................................................................... II-15 Comparisons of domestic products, subject imports, and nonsubject imports ................ II-20 Comparison of U.S.-produced and imported product ....................................................... II-21 Elasticity estimates ................................................................................................................. II-23 U.S. supply elasticity ........................................................................................................... II-23 U.S. demand elasticity ........................................................................................................ II-23 Substitution elasticity ......................................................................................................... II-24 Part III: U.S. producer’s production, shipments, and employment ...................................... III-1 U.S. producer ........................................................................................................................... III-1 U.S. production, capacity, and capacity utilization ................................................................. III-2 U.S. producer’s U.S. shipments and exports ........................................................................... III-3 U.S. producer’s inventories ..................................................................................................... III-4 U.S. producer’s imports and purchases .................................................................................. III-4 U.S. employment, wages, and productivity ............................................................................ III-4 Part IV: U.S. imports, apparent U.S. consumption, and market shares ................................ IV-1 U.S. importers.......................................................................................................................... IV-1 U.S. imports ............................................................................................................................. IV-2 Negligibility .............................................................................................................................. IV-3 Apparent U.S. consumption and U.S. market shares .............................................................. IV-3 Apparent U.S. consumption ................................................................................................ IV-3 U.S. market shares ............................................................................................................... IV-4 U.S. shipments by application ............................................................................................. IV-5 ii CONTENTS Page Part V: Pricing data ............................................................................................................. V-1 Factors affecting prices ............................................................................................................ V-1 Raw material costs ............................................................................................................... V-1 U.S. inland transportation costs ........................................................................................... V-2 Pricing practices ....................................................................................................................... V-2 Pricing methods .................................................................................................................... V-2 Sales terms and discounts .................................................................................................... V-7 Price leadership .................................................................................................................... V-7 Price data .................................................................................................................................. V-7 Price trends ......................................................................................................................... V-10 Price comparisons .............................................................................................................. V-11 Lost sales and lost revenue .................................................................................................... V-12 Final phase .......................................................................................................................... V-12 Preliminary phase ............................................................................................................... V-13 Part VI: Financial experience of the U.S. producer .............................................................. VI-1 Background .............................................................................................................................. VI-1 Operations on diffusion-annealed, nickel-plated steel ........................................................... VI-2 Revenue ............................................................................................................................... VI-3 Cost of goods sold and gross profit ..................................................................................... VI-3 SG&A expenses and operating income or loss .................................................................... VI-5 Capital expenditures and research and development expenses ............................................ VI-6 Capital and investment ........................................................................................................... VI-6 Actual negative effects ........................................................................................................ VI-6 Anticipated negative effects ................................................................................................ VI-6 iii CONTENTS Page Part VII: Threat considerations and information on nonsubject countries .......................... VII-1 The industry in Japan ............................................................................................................. VII-3 Operations on diffusion-annealed, nickel-plated steel ...................................................... VII-3 Production by application .................................................................................................. VII-5 Alternative products ........................................................................................................... VII-5 U.S. inventories of imported merchandise ............................................................................ VII-6 U.S. importers’ outstanding orders ........................................................................................ VII-6 Antidumping or countervailing duty orders in third-country markets .................................. VII-7 Information on nonsubject countries .................................................................................... VII-7 Appendixes A. Federal Register notices .................................................................................................... A-1 B. List of hearing witnesses ................................................................................................... B-1 C. Summary data ................................................................................................................... C-1 D. Base and total prices ......................................................................................................... D-1 E. U.S. producer’s financial results excluding adjustment for profit or loss on input purchased from related company .................................................................................... E-1 Note.—Information that would reveal confidential operations of individual concerns may not be published and therefore has been deleted. Such deletions are indicated by asterisks. iv UNITED STATES INTERNATIONAL TRADE COMMISSION Investigation No. 731-TA-1206 (Final) DIFFUSION-ANNEALED, NICKEL-PLATED FLAT-ROLLED STEEL PRODUCTS FROM JAPAN DETERMINATION On the basis of the record1 developed in the subject investigation, the United States International Trade Commission (Commission) determines,2 pursuant to section 735(b) of the Tariff Act of 1930 (19 U.S.C. ' 1673d(b)) (the Act), that an industry in the United States is materially injured by reason of imports from Japan of diffusion-annealed, nickel-plated flat-rolled steel products, provided for primarily in subheadings 7210.90.60 and 7212.50.00 of the Harmonized Tariff Schedule of the United States, that have been found by the Department of Commerce (Commerce) to be sold in the United States at less than fair value (LTFV). BACKGROUND The Commission instituted this investigation effective March 27, 2013, following receipt of a petition filed with the Commission and Commerce by Thomas Steel Strip Corporation, Warren, Ohio. The final phase of the investigation was scheduled by the Commission following notification of a preliminary determination by Commerce that imports of diffusion-annealed, nickel-plated flat-rolled steel products from Japan were being sold at LTFV within the meaning of section 733(b) of the Act (19 U.S.C. ' 1673b(b)). Notice of the scheduling of the final phase of the Commission=s investigation and of a public hearing to be held in connection therewith was given by posting copies of the notice in the Office of the Secretary, U.S. International Trade Commission, Washington, DC, and by publishing the notice in the Federal Register of December 11, 2013 (78 FR 75371). The hearing was held in Washington, DC, on April 1, 2014, and all persons who requested the opportunity were permitted to appear in person or by counsel. 1 The record is defined in sec. 207.2(f) of the Commission=s Rules of Practice and Procedure (19 CFR ' 207.2(f)). 2 Commissioner Rhonda K. Schmidtlein not participating. 1