Advisory opinion letter

FROM: Harry Hull SUBJECT: IWPA Advisory Opinion Request Today, June 21, 1977, I called Beth Ring, one of the attorneys - handling the IWPA request, and asked her to clarify the statement in her March 7 letter that because “there are relatively few suppliers of wire rod, the independent wire producers are greatly dependent on these few sources.” She explained that what was meant was that there are few suppliers of wire rod compared to the number of wire producers and that independent wire producers, which are not capable of producing their raw material (wire rod), are, of course, dependent upon wire rod suppliers to fill their raw material needs.

Staff Memo to the File
June 20, 1977
FROM: Harry Hull
SUBJECT: IWPA Advisory Opinion Request

I have initiated several phone conversations with Beth Ring and Jack Wasserman about their client’s (the IWPA’s) advisory opinion request.

June 9, 1977 (Beth Ring). Responding to my inquiry, Ms. Ring informed me that the TSUSA nos. of the wire rods imported by IWPA members were.as follows: 608.7000, 608.7100, 608.7300, 608.7500. She also indicated that IWPA members dealt with wire rod suppliers from the following countries—Belgium, Netherlands, U.K., W. Germany, France, and Japan—and that there were more than one supplier for each country. Domestic prices of wire rod are generally higher than foreign, which accounts for the “dependence” of IWPA members on the foreign supply of wire rod, she said. Ms. Ring promised to send _ some IWPA testimony that might be of some help in understanding the world market for wire rod.

June 10, 1977 (Ring). I asked Ms. Ring to clarify an apparent conflict between a statement in her letter of March 7, (p. 2) which states that “American independent wire producers have been required to purchase wire rod at high, virtually uniform prices * * *” (emphasis mine) and a statement in the original request letter (p. 5) which represents that in anutain nwennn afalw. Tr A fa

ADVISORY OPINIONS 1181 injustifiably higher price for wire rod than such producers in other weas of the country. Ms. Ring explained that in referring to iniformity of prices in her letter of March 7 she meant that wire rod . yurchasers in a given geographic area of the country were paying rirtually identical prices, not that all quotations for rod throughout the J.S. were identical. June 10, 1977 (Wasserman). In response to my yuestions Mr. Wasserman explained that independent wire producers nust purchase rod from steel companies that are either “integrated” or ‘affiliated” with wire producing divisions or companies. This modifies, somewhat, the statement on page 1 of Ms. Ring’s March 7 letter to the 2ffect that independents must purchase rod from only integrated steel sompanies.

Mr. Wasserman also estimated that of the domestic wire rod oroduced, about 50% was sold to independent wire producers and about 50% used by the steel companies producing the rod. [Available statistics give only quantities of wire rod shipments and do not reflect total production. See, e.g., AISI Annual Statistical Report, Table 12 ‘1975); Bureau of the Census, Current Industrial Reports: Steel Mill Products, Table 4 (1975).] He also characterized the wire rod industry as oligopolistic, with 60-70% of total domestic production being supplied by three U.S. companies, and characterized the demand for wire rod as inelastic.

In response to the question of how the export price of foreign wire rod could be relevant to an antidumping proceeding concerning wire or wire products, Mr. Wasserman noted that it was frequently necessary in such proceedings to construct the foreign market value of the wire or wire product involved using the export price of foreign wire rod as a starting point. [See 19 U.S.C. § 165.] He said he would send a copy of a recent antidumping complaint concerning upholstery spring wire as an example of how foreign market values are determined in such proceedings.

_ June 18, 1977 (Wasserman). If foreign wire rod is sold at considerably lower prices to foreign wire producers (integrated, affiliated or even independents), doesn’t this explain the lower price of foreign wire and wire products exported to the U.S. as compared to domestic wire and wire products? How, then, can a dumping charge reasonably be made under such circumstances? In answer to these questions Mr. Wasserman pointed out that the difference in price between foreign wire rod sold in this country and abroad does not preclude the possibility of dumping by foreign wire producers. He said that what might appear to be irrational pricing in such dumping contexts was, in economic terms, quite rational. The Japanese, for example, are often content to let their m:.: ;inal cost equal marginal

revenues. Since this discussion was getting over my head he referred me to a white paper by the AISI on Japanese export steel pricing. [1 have obtained a copy of that paper from AISI.] Fourth Supplemental Letter Relative to Request June 10, 1977 Dear Harry:

Pursuant to your conversation today with Jack Wasserman and myself, I enclose herewith a copy of the 1972 antidumping complaint against upholstery spring wire from Japan.1 If you have any further questions do not hesitate to call me at your

convenience.
Sincerely,
/s/ Beth C. Ring

Third Supplemental Letter Relative to Request