Oil Country Tubular Goods From Mexico; Final Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[A-201-817]

Oil Country Tubular Goods From Mexico; Final Results of

Antidumping Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of Final Results of Antidumping Duty Administrative

Review.

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SUMMARY: On September 9, 1999, the Department of Commerce (``the

Department'') published the preliminary results of its administrative

review of the antidumping order on oil country tubular goods (``OCTG'')

from Mexico covering exports of this merchandise to the United States

by one manufacturer, Tubos de Acero de Mexico, S.A. (``TAMSA''). Oil

Country Tubular Goods from Mexico; Preliminary Results of

Administrative Review (``Preliminary Results''), 64 FR 48983. We

invited interested parties to comment on the Preliminary Results. We

received comments from TAMSA and rebuttal comments from petitioners. We

have now completed our final results of review and determine that the

results have not changed.

EFFECTIVE DATE: January 11, 2000.

FOR FURTHER INFORMATION CONTACT: Dena Aliadinov, John Drury, or Linda

Ludwig, Enforcement Group III--Office 8, Import Administration,

International Trade Administration, U.S. Department of Commerce, 14th

Street and Constitution Avenue, NW, Room 7866, Washington, DC 20230;

telephone (202) 482-2667 (Aliadinov), (202) 482-0195 (Drury), or (202)

482-3833 (Ludwig).

SUPPLEMENTARY INFORMATION:

Applicable Statute

Unless otherwise indicated, all citations to the Tariff Act of

1930, as amended (the Act) are references to the provisions effective

January 1, 1995, the effective date of the amendments made to the Act

by the Uruguay Round Agreements Act (URAA). In addition, unless

otherwise indicated, all citations to the Department's regulations are

references to the provisions codified at 19 CFR Part 351 (1998).

Background

The Department published a final determination of sales at less

than fair value for OCTG from Mexico on June 28, 1995 (60 FR 33567),

and subsequently published the antidumping order on August 11, 1995 (60

FR 41056). The Department published a notice of ``Opportunity to

Request Administrative Review'' of the antidumping order for the 1997/

1998 review period on August 11, 1998 (63 FR 42821). Upon receiving a

request for an administrative review from TAMSA, we published a notice

of initiation of the review on September 29, 1998 (63 FR 51893).

Scope of the Review

Imports covered by this review are oil country tubular goods,

hollow steel products of circular cross-section, including oil well

casing, tubing, and drill pipe, of iron (other than cast iron) or steel

(both carbon and alloy), whether seamless or welded, whether or not

conforming to American Petroleum Institute (API) or non-API

specifications, whether finished or unfinished (including green tubes

and limited service OCTG products). This scope does not cover casing,

tubing, or drill pipe containing 10.5 percent or more of chromium. The

OCTG subject to this order are currently classified in the Harmonized

Tariff Schedule of the United States (HTSUS) under item numbers:

7304.20.10.10, 7304.20.10.20, 7304.20.10.30, 7304.20.10.40,

7304.20.10.50, 7304.20.10.60, 7304.20.10.80, 7304.20.20.10,

7304.20.20.20, 7304.20.20.30, 7304.20.20.40, 7304.20.20.50,

7304.20.20.60, 7304.20.20.80, 7304.20.30.10, 7304.20.30.20,

7304.20.30.30, 7304.20.30.40, 7304.20.30.50, 7304.20.30.60,

7304.20.30.80, 7304.20.40.10, 7304.20.40.20, 7304.20.40.30,

7304.20.40.40, 7304.20.40.50, 7304.20.40.60, 7304.20.40.80,

7304.20.50.15, 7304.20.50.30, 7304.20.50.45, 7304.20.50.60,

7304.20.50.75, 7304.20.60.15, 7304.20.60.30, 7304.20.60.45,

7304.20.60.60, 7304.20.60.75, 7304.20.70.00, 7304.20.80.30,

7304.20.80.45, 7304.20.80.60, 7305.20.20.00, 7305.20.40.00,

7305.20.60.00, 7305.20.80.00, 7306.20.10.30, 7306.20.10.90,

7306.20.20.00, 7306.20.30.00, 7306.20.40.00, 7306.20.60.10,

7306.20.60.50, 7306.20.80.10, and 7306.20.80.50.

Although the HTSUS subheadings are provided for convenience and

customs purposes, our written description of the scope of this

proceeding is dispositive.

Period of Review

The period of review (``POR'') is August 1, 1997 through July 31,

1998. The Department is conducting this review in accordance within

section 751 of the Act, as amended.

Analysis of Comments Received

We invited parties to comment on the preliminary results of the

review. We received comments from TAMSA and rebuttal comments from the

petitioners. The following is a summary of these comments.

Comment 1: EP/CEP

TAMSA argues that the Department incorrectly treated its sole U.S.

sale as a constructed export price (``CEP'') transaction in the

preliminary results of this review. See Preliminary Results, 64 FR at

48984. Regarding whether sales should be classified as EP sales despite

some involvement by a U.S. affiliate, the Department uses the following

criteria: (1) Whether the merchandise was shipped directly to the

unaffiliated buyer, without being introduced into the affiliated

selling agent's inventory; (2) whether this is the customary sales

channel between the parties; and (3) whether the affiliated selling

agent located in the United States acts only as a processor of

documentation and a communications link between the foreign producer

and the unaffiliated buyer. See, e.g., Notice of Final Determination of

Sales at Less Than Fair Value: Newspaper Printing Presses From Germany,

61 FR 38175 (July 23, 1996).

TAMSA argues that the Department relied solely on the third

criterion for its CEP determination, and did not properly address the

first two criteria. TAMSA claims that its sale meets the first two

criteria for indirect EP sales because the merchandise in question is

not introduced into the physical inventory of the affiliated selling

agent, and direct shipment to the customer is the customary commercial

channel for sales of this merchandise. TAMSA also claims that it, in

fact, meets the third criterion because its affiliated selling agent in

the United States, Siderca Corp., had an ``ancillary'' role.

[[Page 1594]]

According to TAMSA, setting price is the only U.S. selling activity

the existence of which would justify CEP treatment. Referring to

Certain Corrosion-Resistant Carbon Steel Flat Products & Certain Cut-

to-Length Carbon Steel Plate from Canada: Final Results of Antidumping

Duty Administrative Reviews (``Canadian Steel''), 63 FR 12738 (March

16, 1998); Certain Welded Stainless Steel Pipe from Taiwan: Final

Results of Administrative Reviews (``Taiwan Pipe''), 63 FR 38382, 38385

(July 16, 1998); Stainless Steel Wire Rod From Korea: Final

Determination of Sales at Less Than Fair Value (``Korean Wire Rod''),

63 FR 40418 (July 29, 1998); and Notice of Final Determination of Sales

at Less Than Fair Value: Beryllium Metal and High Beryllium Alloys From

the Republic of Kazakhstan (``Beryllium Metal''), 62 FR 2648, 2649

(January 17, 1997), TAMSA points out that the Department categorized

sales as EP sales when the affiliates in these cases had limited or no

pricing authority. Additionally, TAMSA claims that U.S. Steel Group v.

United States, 15 F. Supp. 2d 892 (CIT 1998) (``U.S. Steel Group'')

strengthens its argument, because the Court's ruling in that case

looked to the existence of sale or contract negotiations. TAMSA also

relies upon AK Steel v. United States (``AK Steel''), 34 F. Supp. 2d

756, 762 (CIT 1998), in which the affiliate negotiated the initial

price, but within certain limitations set by the exporter. TAMSA states

that the Court in AK Steel upheld the Department's decision to treat

the sales at issue as EP sales, even though the U.S. affiliate found

customers, negotiated price based upon predetermined factors, and

maintained contact with the customer. TAMSA concludes that the

Department must therefore reconsider the nature of Siderca Corp.'s

activities in the light of AK Steel.

TAMSA claims that information in its Section A questionnaire

response supports its claim that it, and not Siderca Corp., has the

authority to set price and sales terms and therefore that its U.S. sale

meets the third criterion. See TAMSA November 4, 1998 Section A

Response, at A-20-21. According to TAMSA, the Department does not have

any facts to support its conclusion that Siderca Corp. brought the

customer to TAMSA. On the contrary, TAMSA argues that Siderca Corp.

acted merely as a communications link and processor of documentation.

TAMSA also disputes that the existence of a commercial agreement

constitutes sufficient grounds for concluding that a transaction is a

CEP sale. Citing Certain Cold-Rolled Carbon Steel Flat Products from

the Netherlands: Final Results of Antidumping Duty Administrative

Review (``Dutch Steel''), 64 FR 11825 (March 10, 1999), TAMSA argues

that Siderca Corp.'s selling functions are not sufficient for Commerce

to classify its POR sale as a CEP sale. TAMSA supports its argument by

stating that Siderca Corp. stopped its OCTG selling and marketing

activities in the United States at or around the time of the

antidumping order in this case, making the sales agency agreement

``meaningless.'' See TAMSA Supplemental Response, February 2, 1999, at

9-10.

The petitioners counter that TAMSA has not provided sufficient

evidence for the Department to change its position, and that the

respondent bears the burden of proving that all three EP criteria have

been met. The petitioners state that Siderca Corp. may not have total

autonomy in setting final sales terms, but its role in the sales

process is not ``ancillary.''

With regard to U.S. Steel Group and AK Steel, the petitioners argue

that the former supports CEP classification for TAMSA because Siderca

had the freedom to negotiate prices, and the latter has limited

relevance because the Department sought a remand to reconsider EP

classification. Furthermore, the petitioners assert that, as was the

case in U.S. Steel, Siderca Corp.'s additional selling functions--i.e.,

taking title to the merchandise, using its insurance policy to cover

shipment, etc.--add weight to the other factors in this case,

supporting CEP classification.

The petitioners argue that TAMSA has not proven that Siderca Corp.

did not play any role in determining price; therefore, even greater

weight must be accorded to the sales agency agreement between TAMSA and

Siderca Corp. TAMSA may have set the minimum price, according to the

petitioners' analysis of the sales agency agreement, but Siderca played

a substantial role in negotiating the price with the customer. The

petitioners further assert that a U.S. affiliate does not need to make

independent pricing decisions for its role to be more than ``incidental

or ancillary.'' See Industrial Nitrocellulose from the United Kingdom:

Final Results of Antidumping Duty Administrative Review (``Industrial

Nitrocellulose''), 64 FR 6609, 6611 (February 10, 1999).

The petitioners maintain that signed contracts among parties are

more important than internal communications, such as the e-mails relied

upon by TAMSA. See Section A Response at Attachment A-10 (APO Version).

The petitioners contend that the e-mails do not provide evidence that

TAMSA authorized this sale or that this sale would have been made

without Siderca Corp.'s contacts with the U.S. customer. Furthermore,

the petitioners disagree with TAMSA's assertion that its sales and

marketing agreement is not dispositive with respect to this case. In

fact, according to the petitioners, Siderca Corp. has exclusive rights

to market and sell TAMSA's product in the United States, demonstrating

Siderca's pivotal, primary role.

Referring to Dutch Steel, the petitioners disagree with TAMSA's

allegation that failure to solicit new customers invalidates the agency

agreement. The petitioners state that TAMSA has not proven that its

sale in the instant review was to the same customer as the sale in the

previous review. Additionally, the petitioners disagree with TAMSA's

claim that the agreement became ``meaningless'' because TAMSA

discontinued OCTG exports to the United States after the antidumping

order, and Siderca Corp. did not take part in OCTG selling or marketing

activities for nearly two years. The petitioners argue that the sales

and marketing agreement never ceased to exist and, in fact, was renewed

after the antidumping order was issued. According to the petitioners,

this proves that TAMSA continued to sell to the United States.

Furthermore, Siderca Corp. received payment and compensation for its

U.S. sale and maintained a sales staff for OCTG, according to the terms

of the agreement.

The petitioners also claim that TAMSA does not meet criterion two

because TAMSA only had one U.S. sale, making it difficult to determine

the customary commercial channel. Moreover, the merchandise associated

with the U.S. sale in this review was picked up by the customer at the

port, and petitioners argue that this was not the customary commercial

channel established in the sales agency agreement.

Department's Position

After careful examination of the record, and based upon our

analysis using the three-pronged test discussed below, the Department

has determined to treat TAMSA's U.S. sale as a CEP sale, as defined in

section 772(b) of the Act. Pursuant to section 772 (a) and (b) of the

Act, an EP sale is a sale of merchandise for export to the United

States made by a foreign producer or exporter outside the United States

prior to importation. A CEP sale is a sale made in the United States

before or after

[[Page 1595]]

importation by or for the account of the exporter/producer or by a

party affiliated with the exporter or producer. In determining whether

the sales activity of a U.S. affiliate rises to such a level that CEP

methodology is warranted, the Department has examined the following

criteria: (1) whether the merchandise was shipped directly from the

manufacturer to the unaffiliated U.S. customer (rather than being

introduced into the inventory of the U.S. affiliate), (2) whether this

was the customary commercial channel between the parties involved, and

(3) whether the function of the U.S. affiliate is limited to that of a

``processor of sales-related documentation'' and a ``communication

link'' with the unaffiliated U.S. buyer. See, e.g., Canadian Steel, 63

FR at 12738. Unless all three criteria are met, a sale made by the U.S.

affiliate will not be attributed to the exporting affiliated party and,

therefore, considered an indirect EP sale.

Because the third criterion is not met in this case, we need not

address the first two criteria. Our examination of the record with

respect to this administrative review indicates that the fact pattern

for sales to the United States is substantially similar to the pattern

for sales in the previous administrative review, in which we found that

sales involving Siderca Corp. were CEP sales.

Under the selling agreement between TAMSA and Siderca Corp.,

Siderca Corp. is the exclusive selling agent for TAMSA products in the

United States and other parts of the world, and has certain rights

affecting price for any sales under the agreement. In exchange for

providing marketing and selling functions, and for providing other

services, Siderca Corp. is entitled to receive compensation under the

agreement. The record indicates that Siderca Corp. did receive, in

connection with this sale, the compensation provided for under the

agreement.

In addition, Siderca Corp. played the primary role in generating

this sale by bringing the customer to TAMSA. The record shows that

Siderca Corp. has a working relationship with the United States

customer. Conversely, TAMSA itself appears to have little, if any,

contact outside of Mexico with regard to the sale of its products in

the United States. Indeed, under the agreement, TAMSA is precluded from

soliciting or negotiating sales directly in the United States.

The judicial cases TAMSA relies upon do not support its position.

Contrary to TAMSA's claim, the opinion in U.S. Steel does not suggest

that the Department should classify the sale in this case as an EP

sale. The Court's decision to uphold Commerce's CEP classification in

that case was not based solely on the evidence that the U.S. affiliate

negotiated the final sale price consistent with a floor price set by

the exporter. Instead, the Court also considered the fact that the U.S.

affiliate had ``flexibility'' to make decisions as to price. In this

case, as well, the binding sales agreement indicates that Siderca Corp.

had the exclusive right and flexibility to negotiate the price. Thus,

by analogy to U.S. Steel Corp., CEP classification is also appropriate

in this OCTG case.

The Court's opinion in AK Steel also does not compel the Department

to adopt an EP classification for the sale in this OCTG review.

Although the Court in that case denied the Department's request for a

remand to reconsider its classification of certain sales as EP sales,

the Court did not find that the facts of that case demanded an EP

classification. Instead, the AK Steel Court held that, prior to making

its determination, ``Commerce may have been free to assess the evidence

differently than it did.'' 34 F. Supp. 2d at 761. The principle of

finality of administrative decisions requires that once a final agency

decision is made, it cannot be changed unless the decision was

erroneous when made. Noting that nothing in the record showed that the

U.S. sales agents were free to negotiate prices, the Court held only

that (although Commerce might have reached a different conclusion),

``it was not an error'' to classify the sales as EP sales. Id.

Furthermore, the facts of this OCTG case weigh more heavily in favor of

a CEP classification than did those in the case underlying AK Steel,

because in this case the administrative record does contain evidence

that the U.S. subsidiary was authorized to negotiate prices.

The administrative cases relied upon by TAMSA also do not support

its claim that the sale in this case should be classified as an EP

sale. For example, although both this case and the Dutch Steel case

involve a sales agency agreement, the Dutch producer, Hoogovens,

maintained direct communication links with its U.S. customers, often

without its affiliate, HSUSA. Hoogovens' ``U.S. customers communicated

directly with Hoogovens regarding post-sale price adjustments for

quality defects.'' See Dutch Steel, 64 FR at 11829. In that case, ``the

preponderance of selling functions involved in U.S. sales occurred in

the Netherlands.'' Id. 64 FR at 11828. In this OCTG case, in contrast,

the preponderance of selling functions were performed in the United

States by Siderca Corp. While HSUSA had no authority to negotiate

prices, Siderca Corp. had the authority to negotiate prices through its

selling agreement. The agreement places the rights and responsibilities

of selling and marketing TAMSA products in the United States squarely

on Siderca Corp.

TAMSA's reliance on Canadian Steel, Taiwan Pipe, Korean Wire Rod,

and Beryllium Metal is also misplaced. Sales at issue in those cases

were deemed to be EP sales because the U.S. affiliates were not free to

solicit sales, negotiate contracts or prices, or provide customer

support. Siderca Corp., in contrast, was authorized to perform all of

the above functions on behalf of TAMSA as well as resolving any

disputes regarding the status of the order, delivery or quality, or any

other customer issues.

The Department's position in the Notice of Final Determination of

Sales at Less Than Fair Value: Stainless Steel Wire Rod from Spain

(``Wire Rod from Spain''), 63 FR at 40394 (July 29, 1998), also

supports the conclusion that TAMSA's sale is best classified as a CEP

sale. In that case, the Department treated the U.S. sales as CEP sales

under a similar fact pattern. Specifically, Acerinox's authority to

negotiate and accept sales terms, as well as its authority to initiate

contact with U.S. customers, contradicted the parent company's claim

that the U.S. affiliate's activities were ancillary. Thus, the

Department classified these sales as CEP sales.

Finally, although TAMSA claims that the contract was meaningless

during this period of review, and that an e-mail interchange included

in its submission shows that TAMSA was responsible for setting the

price of this sale, there is record evidence showing that the contract

remains in effect. Siderca Corp. retained its obligations under the

agreement (e.g., maintaining a sales staff) and was substantially

involved in the sales process for this sale. Based on the facts of the

case, and their similarity to previous cases concerning the issue of

whether a sale should be classified as CEP or EP, the Department has

classified TAMSA's sale to the United States as a CEP sale for these

final results.

Comment 2

TAMSA states that, in testing the home market sales database for

below-cost sales, the Department should not compare home market sales

prices that are unadjusted for inflation with costs of production that

are adjusted for inflation.

Petitioners did not comment.

[[Page 1596]]

Department's Position

We agree with respondent and have changed the program for the final

results. Circumstances do not warrant using the Department's high

inflation methodology in this review. Therefore, we have deleted the

inflation adjustment to costs of production.

Comment 3

TAMSA asserts that the Department's antidumping duty calculation

program contained an error in line 1693. According to TAMSA, the

Department underestimated selling expenses, leading to overestimated

levels of profit from U.S. sales and underestimated total expenses.

TAMSA requests that the Department include performance bond costs on

certain home market sales when calculating home market direct selling

expenses.

Petitioners did not comment.

Department's Position

We agree with respondent and have changed the program for the final

results. The program now includes BONDH, a variable for performance

bond costs, in the home market direct selling expenses calculation.

Final Results of the Review

As a result of this review, we determine that the following

weighted-average dumping margin exists:

Circular Welded Non-Alloy Steel Pipes and Tubes

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Weighted-

Producer/manufacturer/exporter average

margin

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TAMSA...................................................... 0.00

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The Department shall determine, and the Customs Service shall

assess, antidumping duties on all appropriate entries. The Department

will issue appraisement instructions directly to the Customs Service.

Furthermore, the following deposit requirement will be effective upon

publication of this notice of final results of review for all shipments

of oil country tubular goods from Mexico entered, or withdrawn from

warehouse, for consumption on or after the publication date, as

provided for by section 751 (a)(1) of the Act: (1) The cash deposit

rate for the reviewed company will be the rate for that firm as stated

above; (2) for previously reviewed or investigated companies not listed

above, the cash deposit rate will continue to be the company-specific

rate published for the most recent period; (3) if the exporter is not a

firm covered in this review, or the original less than fair value

(LTFV) investigation, but the manufacturer is, the cash deposit rate

will be the rate established for the most recent period for the

manufacturer of the merchandise; and (4) if neither the exporter nor

the manufacturer is a firm covered in this review, the cash deposit

rate will be 23.79 percent, the ``all others'' rate from the LTFV

investigation. These deposit requirements, when imposed, shall remain

in effect until publication of the final results of the next

administrative review.

This notice serves as a final reminder to importers of their

responsibility under 19 CFR 351.402(f) of the Department's regulations

to file a certificate regarding the reimbursement of antidumping duties

prior to liquidation of the relevant entries during this review period.

Failure to comply with this requirement could result in the Secretary's

presumption that reimbursement of antidumping duties occurred and the

subsequent assessment of double antidumping duties. This notice also

serves as a reminder to parties subject to administrative protective

order (APO) of their responsibility concerning the disposition of

proprietary information disclosed under APO accordance with 19 CFR

351.306 of the Department's regulations. Timely written notification of

return/destruction of APO materials or conversion to judicial

protective order is hereby requested. Failure to comply with the

regulations and the terms of an APO is a sanctionable violation.

This administrative review and this notice are in accordance with

sections 751(a)(1) and 777(i)(1) of the Act.

Dated: January 4, 2000.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 00-633 Filed 1-10-00; 8:45 am]

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