Notice of Final Determination of Sales at Less Than Fair Value: Small Diameter Circular Seamless Carbon and Alloy Steel, Standard, Line and Pressure Pipe From Germany

DEPARTMENT OF COMMERCE

[A-428-820]

Notice of Final Determination of Sales at Less Than Fair Value:

Small Diameter Circular Seamless Carbon and Alloy Steel, Standard, Line

and Pressure Pipe From Germany

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: June 19, 1995.

FOR FURTHER INFORMATION CONTACT: Irene Darzenta or Fabian Rivelis,

Office of Antidumping Investigations, Import Administration, U.S.

Department of Commerce, 14th Street and Constitution Avenue NW.,

Washington, DC 20230; telephone (202) 482-6320 or (202) 482-3853,

respectively.

FINAL DETERMINATION: The Department of Commerce (the Department)

determines that small diameter circular seamless carbon and alloy

steel, standard, line and pressure pipe (seamless pipe) from Germany is

being, or is likely to be, sold in the United States at less than fair

value, as provided in section 735 of the Tariff Act of 1930, as amended

(the Act). The estimated margins are shown in the ``Suspension of

Liquidation'' section of this notice.

Case History

Since the notice of the preliminary determination published on

January 27, 1995, (60 FR 5355), the following events have occurred.

On February 8, 1995, petitioner alleged that the Department made a

ministerial error in its preliminary margin calculations. The

Department determined on February 17, 1995, that the allegation raised

by petitioners was methodological in nature and improperly raised under

Section 751(f) of the Act.

In our notice of preliminary determination we stated that we would

solicit further information on various scope-related issues, including

class or kind of merchandise.

On February 10, 1995, we issued a questionnaire to interested

parties to request further information on whether the scope of the

investigation constitutes more than one class or kind of merchandise.

Responses to this questionnaire were submitted on March 27, 1995.

On February 10, 1995, we issued a supplemental questionnaire to

Mannesmannrohren-Werke AG (MRW). MRW submitted its supplemental

responses and revised home market and U.S. sales listings on February

28, 1995, and March 6, 1995, respectively.

Pursuant to requests by petitioner and respondent, on February 16,

1995, a notice was published in the Federal Register (60 FR 9012)

announcing the postponement of the final determination until June 12,

1995.

In March and April 1995, we conducted verification of MRW's

questionnaire responses. Our verification reports were issued in May

1995.

On April 27, 1995, Koppel Steel Corporation, a U.S. producer of

subject merchandise which appeared as an interested party from the

outset of this investigation, requested co-petitioner status.

Respondent and petitioner submitted case briefs on May 16, 1995,

and rebuttal briefs on May 23, 1995. No public hearing was requested.

On May 23, 1995, we returned portions of MRW's case brief because we

determined that it contained new factual information submitted after

the deadline specified in 19 CFR 353.31 (a)(i)) for the submission of

factual information. On May 24, 1995, MRW refiled its case brief with

the new information deleted.

Scope of Investigation

The following scope language reflects certain modifications made

for purposes of the final determination, where appropriate, as

discussed in the ``Scope Issues'' section below.

The scope of this investigation includes seamless pipes produced to

the ASTM A-335, ASTM A-106, ASTM A-53 and API 5L specifications and

meeting the physical parameters described below, regardless of

application. The scope of this investigation also includes all products

used in standard, line, or pressure pipe [[Page 31975]] applications

and meeting the physical parameters below, regardless of specification.

For purposes of this investigation, seamless pipes are seamless

carbon and alloy (other than stainless) steel pipes, of circular cross-

section, not more than 114.3 mm (4.5 inches) in outside diameter,

regardless of wall thickness, manufacturing process (hot-finished or

cold-drawn), end finish (plain end, bevelled end, upset end, threaded,

or threaded and coupled), or surface finish. These pipes are commonly

known as standard pipe, line pipe or pressure pipe, depending upon the

application. They may also be used in structural applications. Pipes

produced in non-standard wall thicknesses are commonly referred to as

tubes.

The seamless pipes subject to these investigations are currently

classifiable under subheadings 7304.10.10.20, 7304.10.50.20,

7304.31.60.50, 7304.39.00.16, 7304.39.00.20, 7304.39.00.24,

7304.39.00.28, 7304.39.00.32, 7304.51.50.05, 7304.51.50.60,

7304.59.60.00, 7304.59.80.10, 7304.59.80.15, 7304.59.80.20, and

7304.59.80.25 of the Harmonized Tariff Schedule of the United States

(HTSUS).

The following information further defines the scope of this

investigation, which covers pipes meeting the physical parameters

described above:

Specifications, Characteristics and Uses: Seamless pressure pipes

are intended for the conveyance of water, steam, petrochemicals,

chemicals, oil products, natural gas and other liquids and gasses in

industrial piping systems. They may carry these substances at elevated

pressures and temperatures and may be subject to the application of

external heat. Seamless carbon steel pressure pipe meeting the American

Society for Testing and Materials (ASTM) standard A-106 may be used in

temperatures of up to 1000 degrees fahrenheit, at various American

Society of Mechanical Engineers (ASME) code stress levels. Alloy pipes

made to ASTM standard A-335 must be used if temperatures and stress

levels exceed those allowed for A-106 and the ASME codes. Seamless

pressure pipes sold in the United States are commonly produced to the

ASTM A-106 standard.

Seamless standard pipes are most commonly produced to the ASTM A-53

specification and generally are not intended for high temperature

service. They are intended for the low temperature and pressure

conveyance of water, steam, natural gas, air and other liquids and

gasses in plumbing and heating systems, air conditioning units,

automatic sprinkler systems, and other related uses. Standard pipes

(depending on type and code) may carry liquids at elevated temperatures

but must not exceed relevant ASME code requirements.

Seamless line pipes are intended for the conveyance of oil and

natural gas or other fluids in pipe lines. Seamless line pipes are

produced to the API 5L specification.

Seamless pipes are commonly produced and certified to meet ASTM A-

106, ASTM A-53 and API 5L specifications. Such triple certification of

pipes is common because all pipes meeting the stringent A-106

specification necessarily meet the API 5L and ASTM A-53 specifications.

Pipes meeting the API 5L specification necessarily meet the ASTM A-53

specification. However, pipes meeting the A-53 or API 5L specifications

do not necessarily meet the A-106 specification. To avoid maintaining

separate production runs and separate inventories, manufacturers triple

certify the pipes. Since distributors sell the vast majority of this

product, they can thereby maintain a single inventory to service all

customers.

The primary application of ASTM A-106 pressure pipes and triple

certified pipes is in pressure piping systems by refineries,

petrochemical plants and chemical plants. Other applications are in

power generation plants (electrical-fossil fuel or nuclear), and in

some oil field uses (on shore and off shore) such as for separator

lines, gathering lines and metering runs. A minor application of this

product is for use as oil and gas distribution lines for commercial

applications. These applications constitute the majority of the market

for the subject seamless pipes. However, A-106 pipes may be used in

some boiler applications.

The scope of this investigation includes all seamless pipe meeting

the physical parameters described above and produced to one of the

specifications listed above, regardless of application, and whether or

not also certified to a non-covered specification. Standard, line and

pressure applications and the above-listed specifications are defining

characteristics of the scope of this investigation. Therefore, seamless

pipes meeting the physical description above, but not produced to the

A-335, A-106, A-53, or API 5L standards shall be covered if used in a

standard, line or pressure application.

For example, there are certain other ASTM specifications of pipe

which, because of overlapping characteristics, could potentially be

used in A-106 applications. These specifications generally include A-

162, A-192, A-210, A-333, and A-524. When such pipes are used in a

standard, line or pressure pipe application, such products are covered

by the scope of this investigation.

Specifically excluded from this investigation are boiler tubing and

mechanical tubing, if such products are not produced to A-335, A-106,

A-53 or API 5l specifications and are not used in standard, line or

pressure applications. In addition, finished and unfinished OCTG are

excluded from the scope of this investigation, if covered by the scope

of another antidumping duty order from the same country. If not covered

by such an OCTG order, finished and unfinished OCTG are included in

this scope when used in standard, line or pressure applications.

Finally, also excluded from this investigation are redraw hollows for

cold-drawing when used in the production of cold-drawn pipe or tube.

Although the HTSUS subheadings are provided for convenience and

customs purposes, our written description of the scope of this

investigation is dispositive.

Scope Issues

Interested parties in these investigations have raised several

issues related to the scope. We considered these issues in our

preliminary determination and invited additional comments from the

parties. These issues, which are discussed below, are: (A) Whether to

continue to include end use as a factor in defining the scope of these

investigations; (B) whether the seamless pipe subject to these

investigations constitutes more than one class or kind of merchandise;

and (C) miscellaneous scope clarification issues and scope exclusion

requests.

A. End Use

We stated in our preliminary determination that we agreed with

petitioner that pipe products identified as potential substitutes used

in the same applications as the four standard, line, and pressure pipe

specifications listed in the scope would fall within the class or kind

of subject merchandise and, therefore, within the scope of any orders

issued in these investigations. However, we acknowledged the

difficulties involved with requiring end-use certifications,

particularly the burdens placed on the Department, the U.S. Customs

Service, and the parties, and stated that we would strive to simplify

any procedures in this regard.

For purposes of these final determinations, we have considered

carefully additional comments submitted by the parties and have

determined that it is appropriate to [[Page 31976]] continue to employ

end use to define the scope of these cases with respect to non-listed

specifications. We find that the generally accepted definition of

standard, line and pressure seamless pipes is based largely on end use,

and that end use is implicit in the description of the subject

merchandise. Thus, end use must be considered a significant defining

characteristic of the subject merchandise. Given our past experience

with substitution after the imposition of antidumping orders on steel

pipe products 1, we agree with petitioner that if products

produced to a non-listed specification (e.g., seamless pipe produced to

A-162, a non-listed specification in the scope) were actually used as

standard, line, or pressure pipe, then such product would fall within

the same class or kind of merchandise subject to these investigations.

\1\ See Preliminary Affirmative Determination of Scope Inquiry

on Antidumping Duty Orders on Certain Welded Non-Alloy Steel Pipes

from Brazil, the Republic of Korea, Mexico and Venezuela, 59 FR

1929, January 13, 1994.

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Furthermore, we disagree with respondents' general contention that

using end use for the scope of an antidumping case is beyond the

purview of the U.S. antidumping law. The Department has interpreted

scope language in other cases as including an end-use specification.

See Ipsco Inc. v. United States, 715 F.Supp. 1104 (CIT 1989)(Ipsco). In

Ipsco, the Department had clarified the scope of certain orders, in

particular the phrase, ``intended for use in drilling for oil and

gas,'' as covering not only API specification OCTG pipe but, `` `all

other pipe with [certain specified] characteristics used in OCTG

applications * * *' '' Ipsco at 1105. In reaching this determination,

the Department also provided an additional description of the covered

merchandise, and initiated an end-use certification procedure.

Regarding implementation of the end use provision of the scope of

these investigations, and any orders which may be issued in these

investigations, we are well aware of the difficulty and burden

associated with such certifications. Therefore, in order to maintain

the effectiveness of any order that may be issued in light of actual

substitution in the future (which the end-use criterion is meant to

achieve), yet administer certification procedures in the least

problematic manner, we have developed an approach which simplifies

these procedures to the greatest extent possible.

First, we will not require end-use certification until such time as

petitioner or other interested parties provide a reasonable basis to

believe or suspect that substitution is occurring.2 Second, we

will require end-use certification only for the product(s) (or

specification(s)) for which evidence is provided that substitution is

occurring. For example, if, based on evidence provided by petitioner,

the Department finds a reasonable basis to believe or suspect that

seamless pipe produced to A-162 specification is being used as pressure

pipe, we will require end- use certifications for imports of A-162

specification. Third, normally we will require only the importer of

record to certify to the end use of the imported merchandise. If it

later proves necessary for adequate implementation, we may also require

producers who export such products to the United States to provide such

certification on invoices accompanying shipments to the United States.

For a complete discussion of interested party comments and the

Department's analysis on this topic, see June 12, 1995, End Use

Decision Memorandum from Deputy Assistant Secretary Barbara Stafford

(DAS) to Assistant Secretary Susan Esserman (AS).

\2\ This approach is consistent with petitioner's request.

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B. Class or Kind

In the course of these investigations, certain respondents have

argued that the scope of the investigations should be divided into two

classes or kinds. Siderca S.A.I.C., the Argentine respondent, has

argued that the scope should be divided according to size: seamless

pipe with an outside diameter of 2 inches or less and pipe with an

outside diameter of greater than 2 inches constitute two classes or

kinds. Mannesmann S.A., the Brazilian respondent, and Mannesmannrohren-

Werke AG, the German respondent, argued that the scope should be

divided based upon material composition: carbon and alloy steel

seamless pipe constitute two classes or kinds.

In our preliminary determinations, we found insufficient evidence

on the record that the merchandise subject to these investigations

constitutes more than one class or kind. We also indicated that there

were a number of areas where clarification and additional comment were

needed. For purposes of the final determination, we considered a

significant amount of additional information submitted by the parties

on this issue, as well as information from other sources. This

information strongly supports a finding of one class or kind of

merchandise. As detailed in the June 12, 1995, Class or Kind Decision

Memorandum from DAS to AS, we analyzed this issue based on the criteria

set forth by the Court of International Trade in Diversified Products

v. United States, 6 CIT 155, 572 F. Supp. 883 (1983). These criteria

are as follows: (1) The general physical characteristics of the

merchandise; (2) expectations of the ultimate purchaser; (3) the

ultimate use of the merchandise; (4) the channels of trade in which the

merchandise moves; and (5) the cost of that merchandise.

In the past, the Department has divided a single class or kind in a

petition into multiple classes or kinds where analysis of the

Diversified Products criteria indicates that the subject merchandise

constitutes more than one class or kind. See, for example, Final

Determination of Sales at Less than Fair Value; Anti-Friction Bearings

(Apart from Tapered Roller Bearings) from Germany, 54 FR 18992, 18998

(May 3, 1989) (``AFBs from Germany''); Pure and Alloy Magnesium from

Canada: Final Affirmative Determination; Rescission of Investigation

and Partial Dismissal of Petition, 57 FR 30939 (July 13, 1992).

1. Physical Characteristics

We find little meaningful difference in physical characteristics

between seamless pipe above and below two inches. Both are covered by

the same technical specifications, which contains detailed

requirements.3 While we recognize that carbon and alloy pipe do

have some important physical differences (primarily the enhanced heat

and pressure tolerances associated with alloy grade steels), it is

difficult to say where carbon steel ends and alloy steel begins. As we

have discussed in our Class or Kind Decision Memorandum of June 12,

1995, carbon steel products themselves contain alloys, and there is a

range of percentages of alloy content present in merchandise made of

carbon steel. We find that alloy grade steels, and pipes made

therefrom, represent the upper end of a single continuum of steel

grades and associated attributes.4

\3\ The relevant ASTM specifications, as well as product

definitions from other independent sources (e.g., American Iron and

Steel Institute (AISI)), describe the sizes for standard, line, and

pressure pipe, as ranging from 1/2 inch to 60 inches (depending on

application). None of these descriptions suggest a break point at

two inches.

\4\ The Department has had numerous cases where steel products

including carbon and alloy grades were considered to be within the

same class or kind. See, e.g., Preliminary Determination of Sales at

Less than Fair Value: Oil Country Tubular Goods from Austria, et

al., 60 FR 6512 (February 2, 1995); Final Determination of Sales at

Less than Fair Value: Certain Alloy and Carbon Hot-Rolled Bars,

Rods, and Semi-Finished Products of Special Bar Quality Engineered

Steel from Brazil, 58 FR 31496 (June 3, 1993); Final Determination

of Sales at Less than Fair Value: Forged Steel Crankshafts from the

United Kingdom, 60 FR 22045 (May 9, 1995). [[Page 31977]]

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In those prior determinations where the Department divided a single

class or kind, the Department emphasized that differences in physical

characteristics also affected the capabilities of the merchandise

(either the mechanical capabilities, as in AFBs from Germany, 54 FR at

18999, 19002-03, or the chemical capabilities, as in Pure and Alloy

Magnesium from Canada, 57 FR at 30939), which in turn established the

boundaries of the ultimate use and customer expectations of the

products involved.

As the Department said in AFBs from Germany,

[t]he real question is whether the physical differences are so

material as to alter the essential nature of the product, and,

therefore, rise to the level of class or kind distinctions. We

believe that the physical differences between the five classes or

kinds of the subject merchandise are fundamental and are more than

simply minor variations on a theme.

54 Fed. Reg. at 19002. In the present cases, there is insufficient

evidence to conclude that the differences between pipe over 2 inches in

outside diameter and 2 inches or less in outside diameter, rise to the

level of a class or kind distinction.

Furthermore, with regard to Siderca's allegation that a two-inch

breakpoint is widely recognized in the U.S. market for seamless pipe,

the Department has found only one technical source of U.S. market data

for seamless pipe, the Preston Pipe Report. The Preston Pipe Report,

which routinely collects and publishes U.S. market data for this

merchandise, publishes shipment data for the size ranges \1/2\ to 4\1/

2\ inches: It does not recognize a break point at 2 inches.

Accordingly, the Department does not agree with Siderca that ``the U.S.

market'' recognizes 2 inches as a physical boundary line for the

subject merchandise.

In these present cases, therefore, the Department finds that there

is insufficient evidence that any physical differences between pipe

over 2 inches in outside diameter and 2 inches or less in outside

diameter, or between carbon and alloy steel, rise to the level of class

or kind distinctions.

2. Ultimate Use and Purchaser Expectations

We find no evidence that pipe above and below two inches is used

exclusively in any specific applications. Rather, the record indicates

that there are overlapping applications. For example, pipe above and

below two inches may both be used as line and pressure pipe. The

technical definitions for line and pressure pipe provided by ASTM,

AISI, and a variety of other sources do not recognize a distinction

between pipe over and under two inches.

Likewise, despite the fact that alloy grade steels are associated

with enhanced heat and pressure tolerances, there is no evidence that

the carbon or alloy content of the subject merchandise can be

differentiated in the ultimate use or expectations of the ultimate

purchaser of seamless pipe.

3. Channels of Trade

Based on information supplied by the parties, we determine that the

vast majority of the subject merchandise is sold through the same

channel of distribution in the United States and is triple-stenciled in

order to meet the greatest number of applications.

Accordingly, the channels of trade offer no basis for dividing the

subject merchandise into multiple classes or kinds based on either the

size of the outside diameter or on pipe having a carbon or alloy

content.

4. Cost

Based on the evidence on the record, we find that cost differences

between the various products do exist. However, the parties varied

considerably in the factors which they characterized as most

significant in terms of affecting cost. There is no evidence that the

size ranges above and below two inches, and the difference between

carbon and alloy grade steels, form a break point in cost which would

support a finding of separate classes or kinds.

In conclusion, while we recognize that certain differences do exist

between the products in the proposed class or kind of merchandise, we

find that the similarities significantly outweigh any differences.

Therefore, for purposes of the final determination, we will continue to

consider the scope as constituting one class or kind of merchandise.

C. Miscellaneous Scope Clarification Issues and Exclusion Requests

The miscellaneous scope issues include: (1) Whether OCTG and

unfinished OCTG are excluded from the scope of these investigations;

(2) whether pipes produced to non-standard wall thicknesses (commonly

referred to as ``tubes'') are covered by the scope; (3) whether certain

merchandise (e.g., boiler tubing, mechanical tubing) produced to a

specification listed in the scope but used in an application excluded

from the scope is covered by the scope; and (4) whether redraw hollows

used for cold drawing are excluded from the scope. For a complete

discussion of interested party comments and the Department's analysis

on these topics, see June 12, 1995, Additional Scope Clarifications

Decision Memorandum from DAS to AS.

Regarding OCTG, petitioner requested that OCTG and unfinished OCTG

be included within the scope of these investigations if used in a

standard, line or pressure pipe application. However, OCTG and

unfinished OCTG, even when used in a standard, line or pressure pipe

application, may come within the scope of certain separate, concurrent

investigations. We intend that merchandise from a particular country

not be classified simultaneously as subject to both an OCTG order and a

seamless pipe order. Thus, to eliminate any confusion, we have revised

the scope language above to exclude finished and unfinished OCTG, if

covered by the scope of another antidumping duty order from the same

country. If not covered by such an OCTG order, finished and unfinished

OCTG are included in this scope when used in a standard, line or

pressure pipe application, and, as with other non-listed

specifications, may be subject to end-use certification if there is

evidence of substitution.

Regarding pipe produced in non-standard wall thicknesses, we

determine that these products are clearly within the parameters of the

scope of these investigations. For clarification purposes, we note that

the physical parameters of the scope include all seamless carbon and

alloy steel pipes, of circular cross-section, not more than 4.5 inches

in outside diameter, regardless of wall thickness. Therefore, the fact

that such products may be referred to as tubes by some parties, and may

be multiple-stenciled, does not render them outside the scope.

Regarding pipe produced to a covered specification but used in a

non-covered application, we determine that these products are within

the scope. We agree with the petitioner that the scope of this

investigation includes all merchandise produced to the covered

specifications and meeting the physical parameters of the scope,

regardless of application. The end-use criteria included in the scope

is only applicable to products which can be substituted in the

applications to which the covered specifications are put i.e. standard,

line, and pressure applications.

It is apparent that at least one party in this case interpreted the

scope incorrectly. Therefore, we have clarified the scope to make it

more explicit that all products made to ASTM A-335, [[Page 31978]] ASTM

A-106, ASTM A-53 and API 5L are covered, regardless of end use.

With respect to redraw hollows for cold drawing, the scope language

excludes such products specifically when used in the production of

cold-drawn pipe or tube. We understand that petitioner included this

exclusion language expressly and intentionally to ensure that hollows

imported into the United States are sold as intermediate products, not

as merchandise to be used in a covered application.

Standing

The Argentine, Brazilian, and German respondents have challenged

the standing of Gulf States Tube to file the petition with respect to

pipe and tube between 2.0 and 4.5 inches in outside diameter, arguing

that Gulf States Tube does not produce these products.

Pursuant to section 732(b)(1) of the Act, an interested party as

defined in section 771(9)(C) of the Act has standing to file a

petition. (See also 19 CFR 353.12(a).) Section 771(9)(C) of the Act

defines ``interested party,'' inter alia, as a producer of the like

product. For the reasons outlined in the ``Scope Issues'' section

above, we have determined that the subject merchandise constitutes a

single class or kind of merchandise. The International Trade Commission

(ITC) has also preliminarily determined that there is a single like

product consisting of circular seamless carbon and alloy steel

standard, line, and pressure pipe, and tubes not more than 4.5 inches

in outside diameter, and including redraw hollows. (See USITC

Publication 2734, August 1994 at 18). For purposes of determining

standing, the Department has determined to accept the ITC's definition

of like product, for the reasons set forth in the ITC's preliminary

determination. Because Gulf States is a producer of the like product,

it has standing to file a petition with respect to the class or kind of

merchandise under investigation. Further, as noted in the ``Case

History'' section of this notice, on April 27, 1995, Koppel, a U.S.

producer of the product size range at issue, filed a request for co-

petitioner status, which the Department granted. As a producer of the

like product, Koppel also has standing.

The Argentine respondent argues that Koppel's request was filed too

late to confer legality on the initiation of these proceedings with

regard to the products at issue. Gulf States Tube maintains that the

Department has discretion to permit the amendment of a petition for

purposes of adding co-petitioners who produce the domestic like

product, at such time and upon such circumstances as deemed appropriate

by the Department.

The Court of International Trade (CIT) has upheld in very broad

terms the Department's ability to allow amendments to petitions. For

example, in Citrosuco Paulista, S.A. v. United States, 704 F. Supp.

1075 (Ct. Int'l Trade 1988), the Court sustained the Department's

granting of requests for co-petitioner status filed by six domestic

producers on five different dates during an investigation. The Court

held that the addition of the co-petitioners cured any defect in the

petition, and that allowing the petition to be amended was within

Commerce's discretion:

[S]ince Commerce has statutory discretion to allow amendment of

a dumping petition at any time, and since Commerce may self-initiate

a dumping petition, any defect in a petition filed by [a domestic

party is] cured when domestic producers of the like product [are]

added as co-petitioners and Commerce [is] not required to start a

new investigation.

Citrosuco, 704 F. Supp. at 1079 (emphasis added). The Court reasoned

that if Commerce were to have dismissed the petition for lack of

standing, and to have required the co-petitioners to refile at a later

date, it ``would have elevated form over substance and fruitlessly

delayed the antidumping investigation . . . when Congress clearly

intended these cases to proceed expeditiously.'' Id. at 1083-84.

Koppel has been an interested party and a participant in these

investigations from the outset. The timing of Koppel's request for co-

petitioner status and the fact that it made its request in response to

Siderca's challenge to Gulf States's Tube's standing does not render

its request invalid. See Final Affirmative Countervailing Duty

Determination; Live Swine and Fresh, Chilled, and Frozen Pork Products

from Canada, 50 FR 25097 (June 17, 1985). The Department has rejected a

request to add a co-petitioner based on the untimeliness of the request

only where the Department determined that there was not adequate time

for opposing parties to submit comments and for the Department to

consider the relevant arguments. See Final Affirmative Countervailing

Duty Determination: Certain Stainless Steel Hollow Products from

Sweden, 52 FR 5794, 5795, 5803 (February 26, 1987). In this

investigation, the respondents have had an opportunity to comment on

Koppel's request for co-petitioner status, and the Argentine respondent

has done so in its case brief. Therefore, we have determined that,

because respondents would not be prejudiced or unduly burdened,

amendment of the petition to add Koppel as co-petitioner is

appropriate.

Period of Investigation

The period of investigation (POI) is January 1, through June 30,

1994.

Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute and to the

Department's regulations are in reference to the provisions as they

existed on December 31, 1994.

Such or Similar Comparisons

We have determined that all the products covered by this

investigation constitute a single category of such or similar

merchandise.

Best Information Available (BIA)

We have determined that the questionnaire responses submitted by

MRW are unusable because we were unable to verify their accuracy. Most

importantly, we found at verification that MRW failed to include the

costs incurred by one of its two manufacturing facilities which

produced subject merchandise during the POI among the costs reported

for differences-in-merchandise (difmer) adjustment purposes, despite

the fact that the response had indicated, and MRW claimed up until the

final hours of verification, that its reported costs reflected a

weighted-average of the two plants. Accurate difmer information is

crucial to the Department's analysis in this case because there are

very few, if any, comparisons of identical merchandise. In general,

seamless pipe in Germany is produced and sold to DIN specifications

while seamless pipe exported to the United States is produced to ASTM

specifications.

Other significant problems were discovered at verification. Company

officials could not explain or provide adequate support documentation

to explain numerous discrepancies and omissions. MRW was unable to tie

the reported difmer data to its financial statements. MRW also failed

to adequately demonstrate that the sales data reported to the

Department took into account changes in price, quantity and date of

sale. Finally, numerous other errors were found ranging in magnitude

from significant discrepancies to minor clerical errors, for the

majority of the items we attempted to verify. Collectively, these

discrepancies and omissions demonstrate that MRW's questionnaire

response is unreliable and unusable for purposes of the final

determination.

Section 776(b) of the Act provides that if the Department is unable

to verify, within the time specified, the accuracy and completeness of

the factual information submitted, it shall [[Page 31979]] use BIA as

the basis for its determination. Consequently, we have based this

determination on BIA. (See decision memorandum from The Team to Barbara

R. Stafford dated June 12, 1995, for a detailed discussion of our

verification findings and BIA recommendation.)

In determining what rate to use as BIA, the Department follows a

two-tiered BIA methodology, whereby the Department may impose the most

adverse rate upon those respondents who refuse to cooperate or

otherwise significantly impede the proceeding, or assign a lower rate

for those respondents who have cooperated in an investigation. When a

company is deemed uncooperative, it has been the Department's practice

to apply as BIA the higher of the highest margin alleged in the

petition or the highest rate calculated for any respondent. The

Department's practice for applying BIA to cooperative respondents is to

use the higher of the average of the margins alleged in the petition or

the highest calculated margin for another firm for the same class or

kind of merchandise from the same country. See Final Determination of

Sales at Less Than Fair Value: Antifriction Bearings (Other Than

Tapered Roller Bearings) and Parts Thereof From the Federal Republic of

Germany, 54 FR 18992, 19033 (May 3, 1989). The Department's two-tier

methodology for assigning BIA based on the degree of respondents'

cooperation has been upheld by the U.S. Court of Appeals for the

Federal Circuit. (See Allied-Signal Aerospace Co. v. the United States,

996 F2d 1185 (Fed Cir. 1993); see also Krupp Stahl AG. et al v. the

United States, 822 F. Supp. 789 (CIT 1993).)

We have determined that MRW was uncooperative during this

proceeding and have assigned a margin based on uncooperative BIA.

Because there are no other respondents in this investigation we are

assigning, as BIA, the highest margin among the margins alleged in the

petition. MRW significantly impeded our administration of the case by

misrepresenting the methodology it used in the response regarding the

costs of the unreported plant.

MRW did not alert the Department at any time to any difficulties in

providing the information requested in the questionnaire concerning the

unreported manufacturing facility, and had indicated that the plant's

costs had been included in a weighted-average calculation. In addition,

much of the documentation we requested at verification was received

late in the verification process, was incomplete, or, in some cases,

not received at all. MRW was unable to demonstrate: (1) How many of the

figures reported on the sales listing were calculated; (2) how they

tied to source documentation; and (3) a tie to financial statements.

Therefore, we are assigning MRW the highest margin alleged in the

petition as uncooperative BIA.

Fair Value Comparisons

To determine whether sales of subject merchandise from Germany to

the United States were made at less than fair value, we compared United

States price (USP) to foreign market value (FMV) as reported in the

petition. See Initiation of Antidumping Duty Investigation of Small

Diameter Circular Seamless Carbon and Alloy Steel Standard, Line, and

Pressure Pipe From Argentina, Brazil, Germany and Italy (59 FR 37025,

July 20, 1994).

Interested Party Comments

General Issues

Comment 1. MRW argues that petitioner lacks standing to seek the

imposition of antidumping duties on products that it does not produce.

According to MRW, petitioner has admitted that it is incapable of

manufacturing seamless pipe and tube in dimensions above two inches in

outside diameter. Therefore, respondent maintains that petitioner is

not an ``interested party'' with respect to this merchandise.

Accordingly, the Department should amend the scope of the investigation

to limit it only to those dimensions and pipe types that petitioner has

a proven ability to manufacture.

Gulf States Tube contends that the antidumping statute neither

requires nor permits the Department to limit the scope of the

investigation to products that the petitioner itself produces. Gulf

States Tube also maintains that respondent's standing claim is untimely

and may not be considered by the Department at this stage of the

proceeding. Nevertheless, Gulf States Tube asserts that the issue is

rendered moot by the request of Koppel Steel Corporation, a domestic

producer of subject merchandise in sizes larger two inches in outside

diameter, for co-petitioner status.

DOC Position. We agree with petitioner for the reasons outlined in

the ``Standing'' section of this notice.

Comment 2. MRW contends that including an end-use certification

requirement in the scope would be both illegal and unworkable.

Respondent maintains that petitioner is effectively seeking to

circumvent the established legal procedure by arguing for an open-ended

scope definition that encompasses products that it does not manufacture

and that petitioner has conceded are not causing present injury. In

addition, respondent states that it is clear that any end-use

certification procedure designed to implement such a scope definition

is wholly unworkable because of the manner in which the subject

products are sold. That is, in almost all cases the importer of record

never knows the ultimate use of the pipe products it sells, and in many

instances, neither do its customers. According to MRW, as a practical

matter, the effect of an end-use certification requirement would be to

ask the impossible of importers. Furthermore, respondent states that

the anticircumvention procedures of the antidumping law provide ample

remedy to petitioner in cases of circumvention via product

substitution. MRW emphasizes that absent the detailed inquiry required

by anti-circumvention legal provisions, the Department cannot include

within the scope of this investigation other merchandise simply because

such other products might in theory be utilized for the same purposes

as pipe meeting the listed specifications. According to respondent, to

do otherwise is contrary to the antidumping law and deprives

respondents of their right to a full and fair hearing on any

circumvention allegations that might be advanced by petitioner at some

later date.

Petitioner argues that there is no factual or legal basis for

eliminating end-use as a defining element of the scope of the

investigation. Furthermore, not only is the feasibility of specific

enforcement mechanisms irrelevant to the scope determination, but it is

also untrue that any end-use certification procedure would be

unworkable. According to petitioner, there is no evidence on the record

of this investigation that an end-use certification program must

require the submission of an end-use certificate by the importer at the

time of importation. Rather, petitioner envisions a program whereby the

end-use certificate travels with the pipe to the ultimate end-user, who

may then send it back up the line of distribution. When final duties

are assessed, the Department may assume that any pipe for which no

certificates can be produced was used in subject applications. Contrary

to MRW's arguments, petitioner maintains that the Department and the

U.S. Customs Service are perfectly capable of administering an order

that includes end use in its scope definition. In the event that

products meeting the [[Page 31980]] physical description of subject

merchandise, but which are not certified to one or more of the covered

specifications are being substituted into one of the listed

applications, the burden would be on the petitioner, other domestic

producers or interested parties, to notify Customs and the Department

with some objective evidence supporting a reasonable belief that

substitution is occurring. However, it is both unnecessary and

inappropriate at this point to engage in debate about the feasibility

and desirability of specific end-use certification procedures.

According to petitioner, the facts and policy considerations relevant

to such a debate are not available on this record, and the selection of

a specific enforcement mechanism is beyond the Department's

responsibilities in this proceeding.

DOC Position. We disagree with respondent's assertion that

including end-use in the scope of the investigation would be unlawful.

The Department has interpreted scope language in other cases as

including an end-use specification. See Ipsco Inc. v. United States,

715 F. Supp. 1104 (CIT 1989). See the ``Scope Issues'' section of this

notice for further discussion on end-use.

Comment 3. MRW contends that the carbon and alloy pipe products

subject to investigation are distinct classes or kinds of merchandise.

MRW asserts that the criteria set out in Diversified Products support a

division between carbon and alloy products. Specifically, MRW argues

that carbon and alloy pipes differ in terms of physical

characteristics, uses, customer expectations and cost. With respect to

physical characteristics, alloy seamless pipes contain higher grade

steel than carbon seamless pipe, and because of their different

chemistries, these products have different performance characteristics.

With respect to end use which, according to respondent, is inherently

tied to physical characteristics, carbon pipe is not as versatile as

alloy steel pipe and is not suited for the more sophisticated

applications, such as operations in high temperature environments.

Respondent asserts that the Department has consistently emphasized the

relationship between physical characteristics and end use in past cases

(e.g., Torrington Co. v. United States, 745 F.Supp. at 726 (CIT 1990)).

In addition, respondent states that customer expectations vary

depending upon the ability of specific merchandise to perform a given

task. With regard to alloy and carbon steel pipe, the ultimate

purchaser does not expect these two types of pipe to be

interchangeable, and is willing to pay more for alloy steel pipe

because it must perform under more adverse conditions than those for

which carbon pipe is suited. With respect to cost, respondent states

that the cost of alloy pipe is higher than that of carbon pipe because

of the more expensive raw materials and production costs incurred in

producing alloy pipe. Finally, with respect to channels of trade,

respondent states that carbon and alloy pipe move in similar channels;

however, this factor is not determinative as to class or kind of

merchandise.

Petitioner maintains that the subject merchandise constitutes a

single class or kind. With respect to MRW's proposal for a split in

class or kind on the basis of material composition, petitioner asserts

that the factual evidence does not support such a division.

Petitioner's state that the application of the criteria employed by the

Department in Diversified Products compels the conclusion that there is

a single class or kind of merchandise. According to petitioner, the

physical characteristics of carbon and alloy pipe represent a single

continuum of product produced with varying chemical compositions to

meet a range of heat, pressure and tensile requirements. According to

petitioner, there is simply no bright dividing line between the

physical characteristics of the products. Petitioner states that the

customer's expectations and use of the product are dictated by the

engineering specification required by the intended application. Because

the majority of all subject seamless pipe is triple-certified, the pipe

may be put to any of the uses that apply to each of the individual

specifications to which it is certified. Petitioner points out that the

vast majority of seamless pipe is sold through the same channel of

trade--distributors. Finally, petitioner adds that because the majority

of seamless pipe is triple-certified, it has identical costs regardless

of the customer to whom it is sold.

DOC Position. We agree with petitioner that the subject merchandise

constitutes a single class or kind for the reasons outlined in the

``Scope Issues'' section of this notice.

Company-Specific Issues

For a number of reasons articulated in its briefs, with which we

concur, petitioner argues that the final determination should be based

on BIA, and that MRW should be found to be uncooperative.

MRW disagrees and argues that the Department's verification report

does not offer a balanced assessment of the verification. MRW states

that the Department verified the accuracy of its reported sales

information and that the discrepancies found at verification were

minor. Furthermore, respondent argues that the minor discrepancies

detailed in the verification report should be evaluated in the context

of the vast majority of data that tied exactly to source documentation.

Respondent states that the minor discrepancies found at verification do

not affect the Department's ability to perform its antidumping

analysis.

Respondent states that the delays in providing information

requested by the Department at verification were a result of the manner

in which its records are kept in the ordinary course of business. MRW

cites to Nippon Pillow Block Sales Co. v. United States, 820 F. Supp.

1444, 1449 (CIT 1993), and Fresh Cut Roses from Colombia (Final) 60 FR

6980, 7009 (February 6, 1995) as examples of Department policy that

respondents cannot be penalized because of the way their records are

kept.

Regarding its failure to include the costs of one of its plants in

its reported difmer costs, MRW states the manner in which it reported

difmer costs is reasonable given that this plant is a newly acquired

facility located in the former German Democratic Republic, which was a

non-market economy until recently. Furthermore, MRW states that it is

extraordinarily difficult to calculate actual, verifiable costs for a

plant that has operated under a planned economy and that it is

appropriate to use the surrogate costs of a plant in the Federal

Republic of Germany to perform antidumping calculations.

DOC Position. We agree with petitioner that the magnitude and

nature of the problems found at verification require that we base MRW's

margin on BIA. (See Best Information Available (BIA) section of this

notice).

We disagree with respondent's assertion that it is being penalized

for the way its records are kept. We must hold all respondents to a

basic standard of accuracy and completeness at verification while

taking into account the limitations existing with respect to the

respondent's sales and cost accounting systems. We require all

respondents, regardless of record keeping systems, to prepare for

verification in such a manner that the Department's questions can be

answered within a specified period of time. To this end, we supply all

respondents with an outline which specifies the type of documentation

that needs to be available at verification. MRW did not have the

necessary documentation readily available, which prevented us from

verifying its response. Most [[Page 31981]] significantly, respondents

are expected to be forthcoming in their responses to the Department's

requests for information. In this case, respondent failed to report

fundamental information--cost data relating to one of its plants

producing subject merchandise. In other words, respondent withheld

information critical to verification and thus BIA is required.

Other Comments

Petitioner and respondent made additional comments on various

charges and adjustments contained in MRW's home market and U.S. sales

listings. However, since we are basing our final determination on BIA,

we consider these comments to be moot.

Continuation of Suspension of Liquidation

In accordance with section 733(d)(1) of the Act, 19 USC

1673b(d)(1), we directed the Customs Service to suspend liquidation of

all entries of seamless pipe from Germany, as defined in the ``Scope of

Investigation'' section of this notice, that are entered, or withdrawn

from warehouse, for consumption on or after January 27, 1995.

Pursuant to the results of this final determination, we will

instruct the Customs Service to require a cash deposit or posting of a

bond equal to the estimated final dumping margin, as shown below for

entries of seamless pipe from Germany that are entered, or withdrawn

from warehouse, for consumption on or after the date of publication of

this notice in the Federal Register. The suspension of liquidation will

remain in effect until further notice.

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

Margin

Manufacturer/producer/exporter percent

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

Mannesmannrohren-Werke AG..................................... 58.23

All Others.................................................... 58.23

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

ITC Notification

In accordance with section 735(d) of the Act, we have notified the

ITC of our determination. The ITC will make its determination whether

these imports materially injure, or threaten injury to, a U.S. industry

within 45 days of the publication of this notice. If the ITC determines

that material injury or threat of material injury does not exist, the

proceeding will be terminated and all securities posted as a result of

the suspension of liquidation will be refunded or canceled. However, if

the ITC determines that material injury or threat of material injury

does exist, the Department will issue an antidumping duty order.

Notification to Interested Parties

This notice serves as the only reminder to parties subject to

administrative protective order (APO) in these investigations of their

responsibility covering the return or destruction of proprietary

information disclosed under APO in accordance with 19 CFR 353.34(d).

Failure to comply is a violation of the APO.

This determination is published pursuant to section 735(d) of the

Act (19 USC 1673(d)) and 19 CFR 353.20.

Dated: June 12, 1995.

Susan G. Esserman,

Assistant Secretary for Import Administration.

[FR Doc. 95-14938 Filed 6-16-95; 8:45 am]

BILLING CODE 3510-DS-P