Stainless Steel Hollow Products From Sweden; Preliminary Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

[A-401-603]

Stainless Steel Hollow Products From Sweden; Preliminary Results

of Antidumping Duty Administrative Review

AGENCY: International Trade Administration/Import Administration,

Commerce.

ACTION: Notice of preliminary results of antidumping duty

administrative review.

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SUMMARY: In response to a timely request from Sandvik AB, AB Sandvik

Steel, and the Sandvik Steel Company (collectively, Sandvik), the

Department of Commerce (the Department) is conducting an administrative

review of the antidumping duty order on seamless stainless steel hollow

products (SSHP) from Sweden. This review covers one manufacturer and/or

exporter of this merchandise, Sandvik, during the period December 1,

1990 through November 30, 1991.

The preliminary results of this review indicate the existence of

dumping margins for Sandvik during the period of review. As a result,

the Department has preliminarily determined to assess dumping duties

equal to the calculated differences between U.S. prices and foreign

market values. Interested parties are invited to comment on these

preliminary results of review.

EFFECTIVE DATE: August 9, 1994.

FOR FURTHER INFORMATION CONTACT:

Charles Vannatta or Tom Futtner in the Office of Antidumping

Compliance; International Trade Administration; U.S. Department of

Commerce; Washington, DC 20230; telephone number (202) 482-5253.

SUPPLEMENTARY INFORMATION:

Background

On December 2, 1991, the Department published in the Federal

Register an ``Opportunity to Request an Administrative Review'' (56 FR

61229) of the antidumping duty order on seamless SSHP from Sweden (52

FR 45985), December 3, 1987). On December 13, 1991, Sandvik requested

an administrative review of the antidumping duty order. On January 23,

1992, the Department initiated an administrative review for the period

December 1, 1990 through November 30, 1991 (57 FR 2705). The Department

is now conducting this review in accordance with Section 751 of the

Tariff Act of 1930, as amended (the Tariff Act).

Scope of the Review

The merchandise covered by this review is seamless SSHP, including

pipes, tubes, hollow bars, and blanks of circular cross-section,

containing over 11.5 percent chromium by weight. This merchandise is

currently classified under subheadings 7304.41.00 and 7204.49.00 of the

Harmonized Tariff Schedule (HTS). The HTS numbers are provided for

convenience and Customs purposes. The written description remains

dispositive.

This review covers sales and entries made during the period of

review by one Swedish manufacturer and/or exporter, Sandvik, of

seamless SSHP to the United States. The period covered by this review

is December 1, 1990 through November 30, 1991.

The Department has determined that there are three such or similar

categories of merchandise: (1) pipes and tubes; (2) redraw hollows; and

(3) hollow bars. During this review period, Sandvik sold only pipes and

tubes in the United States. Sandvik also imported redraw hollows into

the United States, which Sandvik subsequently further manufactured into

pipes and tubes and sold to unrelated customers in the United States.

For these latter sales, such or similar comparisons were made between

the foreign market sales value of redraw hollows and the U.S. sales

value of the imported redraw hollows, which the Department calculated

as the U.S. sales value of the pipe or tube sold to the unrelated U.S.

customer less the value added by the U.S. further manufacturing.

United States Price

In calculating the U.S. price, the Department used purchase price

(PP) and exporter's sales price (ESP), both as defined in Section 772

of the Tariff Act. PP and ESP were based upon the packed, delivered

prices, net of discounts, to unrelated customers in the United States.

The Department made adjustments to the U.S. price, where appropriate,

for freight and insurance charges for movement from Sweden to the

United States, U.S. brokerage and handling expenses, U.S. duties, U.S.

inland freight and insurance charges, rebates, and U.S. packaging

costs. For ESP sales, the Department also adjusted the U.S. price for

commissions, credit expenses, royalties, direct selling expenses

incurred in both Sweden and the United States, and indirect selling

expenses, which included Sandvik's reported indirect selling expenses,

product liability insurance premiums, and inventory carrying costs

incurred in both Sweden and the United States.

In addition to the aforementioned adjustments, the Department

deducted, for sales involving imported redraw hollows which were

further manufactured into pipes and tubes by the Sandvik Steel Company,

the value added in the United States after importation and the portion

of profit from the U.S. sale which was attributable to the U.S. value

added, pursuant to Section 772(e)(3) of the Tariff Act. The Department

considered all such sales to be ESP sales. The U.S. value added

consists of further manufacturing costs incurred in converting an

imported redraw hollow into a finished pipe or tube. The Department

calculated profit or loss by deducting from the sales price of the

finished pipe or tube: (1) the foreign manufacturing costs of the

imported redraw hollow; (2) the U.S. further manufacturing costs of the

finished pipe or tube; and (3) all other selling expenses incurred by

Sandvik.

The Department allocated the total profit or loss from the U.S.

sale to the imported redraw hollow and to the U.S. value added based

upon the ratio of the manufacturing costs of the redraw hollow and the

U.S. further manufacturing costs to the total foreign and U.S.

manufacturing costs. The Department adjusted the U.S. price only for

the profit or loss attributable to the U.S. further manufacturing

costs.

Foreign Market Value

In order to determine whether there was a sufficient volume of

sales of SSHP in the home market to serve as a basis for calculating

foreign market value (FMV), the Department compared the quantity of

home market sales to the aggregate quantity of third country sales, in

accordance with Section 773(a)(1) of the Tariff Act. The quantity of

home market sales was less than five percent of the aggregate quantity

of third country sales. Therefore, the Department based FMV on third

country sales (19 CFR 353.48).

In selecting the appropriate third country market to use for

comparison purposes, the Department first determined which third

country markets had adequate volumes of sales within the meaning of 19

CFR 353.49(b)(1). The Department determined that the volume of sales to

a third country market was adequate if the quantity of sales of such or

similar merchandise equalled or exceeded five percent of the quantity

of sales in the United States. The Department then selected the third

country market with the largest volume of sales, and whose organization

and development is most like that of the United States, as the most

appropriate market for comparison, in accordance with 19 CFR

353.49(b)(2) and 19 CFR 353.49(b)(3). Therefore, for Sandvik's sales to

the first unrelated U.S. customer of seamless stainless pipe and tube,

both imported pipe and tubes and those which were further manufactured

in the United States from imported redraw hollows, the Department based

FMV on Sandvik's sales in Germany.

In this review, the petitioner alleged that Sandvik sold pipes,

tubes, and redraw hollows in the German market at prices below their

cost of production. Based on the evidence presented in the petitioner's

allegation, the Department initiated a cost of production inquiry of

this merchandise.

The Department based the cost of production on the cost data

submitted by Sandvik in response to the Department's questionnaire.

Sandvik adjusted its cost data to conform with generally accepted

accounting principles (GAAP) used in the United States. Sandvik's cost

records are based upon Swedish GAAP, while its financial statements

conform to U.S. GAAP. Under Swedish GAAP, production costs must include

an imputed interest expense, and depreciation must be based upon

replacement costs. Sandvik adjusted its cost data by replacing imputed

interest with actual interest expenses, and by basing its depreciation

expense on historical costs rather than replacement costs.

The Department performed a model-specific cost of production test,

in which the Department examined whether each German sale was priced

below the merchandise's cost of production. The Department defines the

cost of production as the sum of direct material, direct labor,

variable and fixed factory overhead, general expenses, and packaging.

For each model, the Department compared this sum to the reported German

unit price, net of price adjustments and movement expenses. In

accordance with Section 773(b) of the Tariff Act, the Department also

examined whether the German sales of each model were made at prices

below their cost of production in substantial quantities over an

extended period of time, and whether such sales were made at prices

which would permit recovery of all costs within a reasonable period of

time in the normal course of trade.

For each model where less than ten percent of the quantity sold in

the German market during the seventeen months of reported German sales

were made at prices below the cost of production, the Department

included all sales of that model in its computation of FMV. For each

model where ten percent or more, but less than ninety percent, of the

quantity sold in the German market over the seventeen month period were

priced below the merchandise's cost of production, the Department

excluded from its calculation of FMV those German sales which were

priced below the merchandise's cost of production provided that these

below-cost sales were made over an extended period of time. For each

model where ninety percent or more of the quantity sold in the German

market over the seventeen month period were priced below the cost of

production, the Department disregarded all sales of that model from its

analysis, and used constructed value as described below.

In order to determine whether below-cost sales had been made over

an extended period of time, the Department compared the number of

months in which below-cost sales occurred for each product to the

number of months in which each model was sold over the seventeen month

period. If a product was sold in fewer than three months during the

seventeen month period, the Department did not exclude the below-cost

sales unless there were below-cost sales in each month of sale. If a

product was sold in three or more months, the Department did not

exclude the below-cost sales unless there were below-cost sales in at

least three months during the seventeen months of the reported German

sales.

Where there were adequate sales of a such or similar product in the

contemporaneous month at a given level of trade (as identified in the

model match), the Department based FMV upon the C.I.F. and delivered

prices, net of discounts, to unrelated customers in Germany. The

Department made adjustments, where appropriate, for freight and

insurance charges for movement from Sweden to Germany, German brokerage

and handling expenses, German inland freight for movement to the

customer, and rebates.

Where all German sales of a such or similar product in the

contemporaneous month at a given level of trade (as identified in the

model match) were excluded from the Department's analysis because the

German sales were priced below the cost of production, or where no

German sales of such or similar merchandise were found, then the

Department used the constructed value of the merchandise sold in the

United States as the basis for FMV. The Department calculated the

constructed value, in accordance with Section 773(e) of the Tariff Act,

as the sum of the cost of manufacture of the product sold in the United

States, German selling, general and administrative (SG&A) expenses, and

German profit. The cost of manufacture of the product sold in the

United States is the sum of direct material, direct labor, and variable

and fixed factory overhead expenses. For German SG&A expenses, the

Department used the larger of the actual SG&A expenses reported by

Sandvik or ten percent of the cost of manufacture, the statutory

minimum for foreign SG&A expenses. For German profit, the Department

used the larger of the actual profit reported by Sandvik or the

statutory minimum of eight percent of the sum of the cost of

manufacture and SG&A expenses.

For those products where Sandvik did not submit the necessary

constructed value information, the Department used the best information

available. As the best information available, the Department evaluated

these sales at the highest weighted-average dumping margin which

Sandvik had received in any previous final result or determination, or

which was calculated for the U.S. sales evaluated in this

administrative review using FMV. This highest weighted-average dumping

margin is 20.47 percent, which is the margin found in the final

determination of the orginal less-than-fair-value investigation.

The Department deducted both Swedish and German packaging expenses

for the German sale from the German unit price (for price-based FMV's),

and added the Swedish export packaging expenses for the U.S. sale to

the FMV, based upon either the German unit price or the constructed

value, in accordance with Section 773(a)(1) of the Tariff Act.

For comparisons involving ESP sales, the Department deducted the

U.S. and German credit, warranty, royalties, and direct selling

expenses from both the U.S. unit price and either the German unit price

or the constructed value, respectively. The Department also adjusted

the FMV, based either upon German unit prices or the constructed value,

for Sandvik's German indirect selling expenses, which included its

reported German indirect selling expenses, product liability insurance

premiums, and inventory carrying costs. The adjustment for the Germans

indirect selling expenses was limited to the sum of the indirect

selling expenses, product liability insurance, inventory carrying

costs, and commissions incurred for the U.S. sale, in accordance with

19 CFR 353.56(b).

For comparisons involving PP sales, the Department deducted the

German credit, warranty, royalties, and direct selling expenses from

the German unit price or the constructed value, and added the U.S.

credit, warranty, royalties, and direct selling expenses to the FMV,

based upon either the German unit price or the constructed value, in

accordance with 19 CFR 353.56(a)(2). The Department added the amount of

the commissions incurred for the U.S. sale to the FMV, based upon

either the German unit price or the constructed value, and deducted the

amount of the German indirect selling expenses, as defined above, up to

the amount the commissions incurred for the U.S. sale, in accordance

with CFR 353.56(b)(1).

Where there were no German sales of identical merchandise for

price-based FMV comparisons of a U.S. sale, the Department used German

sales of a similar product, and made an adjustment to the German unit

price for differences in the physical characteristics of the

merchandise, in accordance with Section 773(a)(4)(c) of the Tariff Act.

Where there were no German sales of similar merchandise to use for

comparison to a U.S. sale, the Department used the constructed value of

the merchandise sold in the United States as the basis for FMV, as

noted above.

Sandvik claims that the Department, whenever possible, should

compare U.S. sales to German sales of the same quantity range, and,

whenever this is not possible, that the Department should make a

quantity discount adjustment. In support of its position, Sandvik

argues that there is an inverse relationship between the sales price

and quantity of merchandise sold. The Department has determined that

the evidence on the record does not justify either comparing only sales

of similar quantities or making a quantity discount adjustment. Based

on Sandvik's sales listings, the Department examined the monthly

weighted-average unit prices on a model-specific basis for each unique

combination of the channel of distribution, level of trade, month of

sale (i.e., to recognize the impact of the fluctuating alloy

surcharge), and quantity bracket, which are the factors that, according

to Sandvik, have an impact on the sale's price. When taking into

account all of these price-influencing factors, the Department found

numerous instances where the average price for sales of a smaller

quantity bracket was lower than the average price for sales of a larger

quantity bracket. Therefore, Sandvik's argument concerning the inverse

relationship between price and quantity sold is not supported by the

information which it has submitted on the record.

In both Germany and the United States, Sandvik sells merchandise

out of inventory (ex-stock) as well as merchandise which is produced

and shipped directly from the factory (ex-mill). Sandvik argues that

the Department should match sales, wherever possible, made through the

same channel of distribution, or make an adjustment to take into

account Sandvik's higher costs of selling merchandise out of inventory.

The Department believes that its adjustments, including those for

inventory carrying costs and other indirect selling expenses,

adequately account for any cost differences associated with selling the

merchandise through different distribution channels. Therefore, there

is no reason to take special account of this factor in making

comparisons or any additional adjustments.

Sandvik also argues that the Department should compare U.S. sales

with German sales at the same level of trade, and, if this is not

possible, that the Department should make an adjustment when comparing

sales across levels of trade. The Department has followed its long-

standing practice of comparing, where possible, U.S. sales with German

sales made at the same level of trade. However, with regard to a level

of trade adjustment, Sandvik did not demonstrate that there were

differences in prices at different levels of trade. The Department

examined Sandvik's reported unit sales prices for each product, level

of trade, channel of distribution, month of sale, and quantity

brackets, and could not discern any consistent pattern in the prices

charged between distributors and end-users. Furthermore, the Department

found many instances where the prices charged to end-users were less

than the prices charged to distributors. Therefore, the Department has

made no level of trade adjustment.

Preliminary Results of Review

As a result of this administrative review, the Department

preliminarily determines that the following weighted-average dumping

margin exists for the period December 1, 1990 through November 30,

1991:

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

Dumping

Manufacturer/exporter margin

percent

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Sandvik.................................................... 10.54

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Interested parties may request disclosure within five days of the

date of publication of this notice. Interested parties may also request

a public hearing within 10 days of the date of publication of this

notice. Any hearing, if requested, will be held 44 days after the date

of publication, or the first workday thereafter. Case briefs and/or

written comments may be submitted to the Department not later than 30

days after the date of publication. Rebuttal briefs and rebuttals to

written comments, limited to issues raised in those comments, may be

filed with the Department not later than 37 days after the date of

publication. The Department will include in its publication of the

final results of administrative review an analysis of the issues raised

in any written comments or at the hearing.

The Department will determine, and the U.S. Customs Service will

assess, antidumping duties on all appropriate entries. Individual

differences between the U.S. price and the FMV may vary from the

percentage stated above. The Department will issue appraisement

instructions directly to the U.S. Customs Service.

Furthermore, the following deposit requirements will be effective

upon completion of the final results of this administrative review for

all shipments of seamless SSHP from Sweden, entered for consumption, or

withdrawn from warehouse for consumption, on or after its publication

date, as provided by Section 751(a)(1) of the Tariff Act:

(1) The cash deposit rate for Sandvik AB will be that established

in the final results of this administrative review;

(2) For subject merchandise exported by manufacturers or exporters

not covered in this review but covered in previous reviews or in the

original less-than-fair-value investigation, a cash deposit based upon

the most recently published rate in a final result or determination for

which the manufacturer or exporter received a company-specific rate;

(3) For subject merchandise exported by an exporter not covered in

this review, a prior review, or the original investigation, but where

the manufacturer of the merchandise has been covered by this or a prior

final result or determination, a cash deposit based upon the most

recently published company-specific rate for that manufacturer; and

(4) For merchandise exported by all other manufacturers and

exporters who are not covered by this or any previous administrative

review conducted by the Department, the cash deposit rate will be the

``all others'' rate established in the less-than-fair-value

investigation.

On May 25, 1993, the Court of International Trade (CIT) in Floral

Trade Council v. United States, Slip Op. 93-79, and Federal-Mogul

Corporation and the Torrington Company v. United States, Slip Op. 93-

83, decided that once an ``all others'' rate is established for a

company it can only be changed through an administrative review. The

Department has determined that in order to implement these decisions,

it is appropriate to reinstate the ``all others'' rate from the less-

than-fair-value investigation (or that rate as amended for correction

of clerical errors as a result of litigation) in proceedings governed

by antidumping duty orders. Thus, the ``all others'' rate for this

proceeding is 28.60 percent.

This notice also serves as a preliminary reminder to all importers

of their responsibility under 19 CFR 353.26 to file a certificate

regarding the reimbursement of antidumping duties prior to liquidation

of the relevant entries during the 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 administrative review and notice are in accordance with

Section 751(a)(1) of the Tariff Act (19 USC 1675(a)(1)) and 19 CFR

353.22.

Dated: July 30, 1994.

Susan G. Esserman,

Assistant Secretary for Import Administration.

[FR Doc. 94-19422 Filed 8-8-94; 8:45 am]

BILLING CODE 3510-DS-M