Notice of Preliminary Determination of Sales at Not Less Than Fair Value: Small Diameter Circular Seamless Carbon and Alloy Steel, Standard, Line and Pressure Pipe from Italy

DEPARTMENT OF COMMERCE

[A-475-814]

Notice of Preliminary Determination of Sales at Not Less Than

Fair Value: Small Diameter Circular Seamless Carbon and Alloy Steel,

Standard, Line and Pressure Pipe from Italy

Agency: Import Administration, International Trade Administration,

Department of Commerce

EFFECTIVE DATE: January 27, 1995.

FOR FURTHER INFORMATION CONTACT: Mary Jenkins or Kate Johnson, Office

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

of Commerce, 14th Street and Constitution Avenue, N.W., Washington,

D.C. 20230; telephone (202) 482-1756 or 482-4929, respectively.

PRELIMINARY DETERMINATION: The Department of Commerce (the Department)

preliminarily determines that small diameter circular seamless carbon

and alloy steel, standard, line and pressure pipe from Italy (seamless

pipe) is not being, nor is likely to be, sold in the United States at

less than fair value, as provided in section 733 of the Tariff Act of

1930, as amended (the Act). The estimated de minimis margins are shown

in the ``Preliminary Margin'' section of this notice.

Case History

Since the notice of initiation published on July 20, 1994, (59 FR

37025), the following events have occurred.

On August 8, 1994, the U.S. International Trade Commission (ITC)

issued an affirmative preliminary injury determination (USITC

Publication 2734, August 1994).

On August 19, 1994, we sent the antidumping questionnaire to

Dalmine S.p.A., TAD USA, Inc., and Dalmine USA, Inc., (collectively

``Dalmine''), because petitioner claimed that Dalmine was the sole

producer of the subject merchandise exported to the United States from

Italy during the period of investigation (POI). In order to determine

if Dalmine accounted for over 60 percent of the exports to the United

States and, accordingly, could be named as the sole respondent, we also

sent an abbreviated version of Section A of the questionnaires to the

following Italian producers named in the petition: Acciaierie e

Tubificio Meridionali SpA, Pietra SpA-Acciaierie Ferriere e Tubifici

(Pietra SpA), Tubicar SpA, Sandvik Italia SpA, and Seta Tubi Srl. On

September 2 and 23, 1994, Dalmine provided volume and value data of

sales of subject merchandise during the POI. Acciaierie e Tubificio

Meridionali, Sandvik Italia and Tubicar SpA informed the Department

that they did not sell subject merchandise to the United States during

the POI. Seta Tubi Srl's antidumping questionnaire was returned to the

Department by the postal service as undeliverable because the address

could not be found. We did not receive a response from Pietra SpA.

However, Pietra SpA sent a facsimile to the U.S. Consulate in Milan in

which it reported a small volume of shipments of the subject

merchandise to the United States from January 1 to March 31, 1994. On

September 27, 1994, we determined that Dalmine S.p.A. (Dalmine) should

be the sole respondent in this investigation because it accounted for

at least 60 percent of the exports of the subject merchandise to the

United States during the POI.

On September 19, 1994, we received a request from Dalmine to

exclude certain ``outlier'' sales from its United States and home

market sales listings. On September 23, 1994, petitioner submitted its

opposition to Dalmine's request. On September 26, 1994, Dalmine

responded to petitioner's September 23, 1994, objections. We requested

additional information from Dalmine concerning the ``outlier'' sales on

September 30, 1994. Based on Dalmine's request, and after considering

all comments received, on November 28, 1994, we informed Dalmine that

it would be exempted from reporting certain ``outlier'' home market and

U.S. sales.

On December 6 and 19, 1994, Dalmine requested that it be exempt

from reporting an insignificant quantity of sales made by related

resellers and sought clarification concerning which of its customers

are ``related parties.'' On December 12 and 22, 1994, we received

comments from petitioner addressing Dalmine's request to exclude

reporting certain related party sales. On January 19, 1995, after

considering the additional request and considering comments, we also

granted Dalmine an exemption from reporting an insignificant quantity

of home market sales made by related resellers. The Department accepted

Dalmine's definition of related party, as described its B and C

responses. Therefore, it was not necessary to provide additional

guidance.

On September 23, 1994, we received Dalmine's response to Section A

of the Department's questionnaire. Responses to Sections B and C of the

questionnaire were submitted on October 7, 1994. On October 11, 1994,

petitioner commented on Dalmine's Section A questionnaire response. On

October 11 and 31, 1994, we received additional comments from

petitioner regarding Dalmine's Sections [[Page 5359]] A, B and C

responses. On November 18, we issued a supplemental questionnaire to

Dalmine. We received a response on December 19, 1994.

On October 21 and 31, and November 17, 1994, we received comments

and rebuttal comments on the issues of scope and class or kind of

merchandise from interested parties, pursuant to the Department's

invitation for such comments in its notice of initiation.

On October 27, 1994, the Department received a request from

petitioner to postpone the preliminary determination until January 19,

1995. On November 18, 1994, we published in the Federal Register (59 FR

59748), a notice announcing the postponement of the preliminary

determination until not later than January 19, 1995, in accordance with

19 C.F.R. 353.15(c) and (d).

Scope of Investigation

For purposes of this investigation, seamless pipes are seamless

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

section, not more than 114.3mm (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.

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 multiple-stenciled

seamless pipe meeting the physical parameters described above and

produced to one of the specifications listed above, whether or not also

certified to a non-covered specification. Standard, line and pressure

applications are defining characteristics of the scope of this

investigation. Therefore, seamless pipes meeting the physical

description above, but not produced to the A-106, A-53, or API 5L

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

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 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,

mechanical tubing and oil country tubular goods except when used in a

standard, line or pressure pipe application. 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

In our notice of initiation we identified two issues which we

intended to consider further. The first issue was whether to consider

end-use a factor in defining the scope of these investigations.1

The second issue was whether the seamless pipe subject to this

investigation constitutes more than one class or kind of merchandise.

In addition to these two issues, interested parties have raised a

number of other issues regarding whether certain products should be

excluded from the scope of this investigation. These issues are

discussed below.

\1\Various parties in this investigation, as well as in the

concurrent investigations involving the same product from Argentina,

Italy, and Germany have raised issues and made arguments. For

purposes of simplicity and consistency across investigations, we

will discuss all of these issues in this notice.

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Regarding the end-use issue, interested parties have submitted

arguments about whether end-use should be maintained as a scope

criterion in this investigation. After carefully considering these

arguments, we have determined that, for purposes of this preliminary

determination, we will continue to include end-use as a scope

criterion. We agree with petitioner that pipe products identified

[[Page 5360]] as potential substitutes used in the same applications as

products meeting the requisite ASTM specifications may fall within the

same class or kind, and within the scope of any order issued in this

investigation. However, we are well aware of the difficulties involved

with requiring end-use certifications, particularly the burdens placed

on the Department, the U.S. Customs Service, and the parties. We will

strive to simplify any procedures used in this regard. We will,

therefore, carefully consider any comment on this issue for purposes of

our final determination.

Regarding the class or kind issue, although respondents propose

dividing the scope of this investigation into two classes or kinds of

merchandise, they do not agree on the merchandise characteristics that

will define the two classes. The respondents in the Brazilian and

German investigations argue that the scope should be divided into two

classes or kinds based on the material composition of the pipe--carbon

versus alloy. The respondent in the Argentine investigation argues that

the scope should be divided into two classes or kinds of merchandise

based on size. Petitioner maintains that the subject merchandise

constitutes a single class or kind.

We have considered the class or kind comments of the interested

parties and have 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) the ultimate use of the merchandise; (3) the expectations of the

ultimate purchasers; (4) the channels of trade; and (5) cost.

We note that certain differences exist between the physical

characteristics of the various products (e.g., size, composition). In

addition, there appear to be cost differences between the various

products. However, the information on record is not sufficient to

justify dividing the class or kind of merchandise. The record on

ultimate use of the merchandise and the expectations of the ultimate

purchasers indicates that there is a strong possibility that there may

be overlapping uses because any one of the various products in question

may be used in different applications (e.g., line and pressure pipe).

Also, based upon the evidence currently on the record, we determine

that the similarities in the distribution channels used for each of the

proposed classes of merchandise outweigh any differences in the

distribution channels.

In conclusion, while we recognize that certain differences exist

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

find that the similarities are more significant. Therefore, for

purposes of this preliminary determination, we will continue to

consider the scope as covering one class or kind of merchandise. This

preliminary decision is consistent with past cases concerning steel

pipe products. (See e.g., Final Determination of Sales at Less Than

Fair Value: Circular Welded Non-Alloy Steel Pipe From Brazil et. al.,

57 FR 42940, September 17, 1992). However, a number of issues with

respect to class or kind remain to be clarified. We will provide the

parties with another opportunity to submit additional information and

argument for the final determination. For a complete discussion of the

parties' comments, as well as the Department's analysis, see memorandum

from Gary Taverman, Acting Director, Office of Antidumping

Investigations to Barbara Stafford, Deputy Assistant Secretary for

Investigations, dated January 19, 1995.

Regarding the additional issues concerning exclusion of certain

products, one party requests that the Department specify that multiple-

stencilled seamless pipe stencilled to non-subject standards is not

covered. Furthermore, this party argues that the scope language should

be clarified so that it specifically states that only standard, line,

and pressure pipe stencilled to the ASTM A-106, ASTM A-53 or API-5L

standards are included, and that we clarify the meaning of ``mechanical

tubing.'' In addition, this party requests that the Department exclude

unfinished oil country tubular goods, ASTM A-519 pipe (a type of

mechanical tubing) and mechanical tube made to customer specifications

from the scope of this investigation.

Another party requests that the Department specifically exclude

hollow seamless steel products produced in non-pipe sizes (known in the

steel industry as tubes), from the scope of this investigation.

Because we currently have insufficient evidence to make a

determination regarding these requests, we are not yet in a position to

address these concerns. Therefore, for purposes of this preliminary

determination, we will not exclude these products from the scope of

this investigation. Once again, we will collect additional information

and consider additional argument before the final determination.

Period of Investigation

The POI is January 1, 1994, through June 30, 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. We made fair value comparisons on this basis. In

accordance with the Department's standard methodology, we first

compared identical merchandise. Referencing Appendix V of our

questionnaire, Dalmine states that the specifications for the

merchandise exported to the United States are identical to the

specifications for the merchandise sold in the home market. Dalmine

further claims that triple-stencilled merchandise sold in the U.S.

market is identical to single-stencilled merchandise sold in the home

market. We have accepted Dalmine's assertions for purposes of this

preliminary determination. Where there were no sales of identical

merchandise in the home market to compare to U.S. sales, or where,

according to respondent, comparisons of similar merchandise would

result in differences-in-merchandise adjustments exceeding 20 percent,

we made comparisons on the basis of constructed value (CV) because

there was no comparable merchandise sold in the home market based on

the criteria in Appendix V to the antidumping questionnaire, on file in

Room B-099 of the main building of the Department.

Fair Value Comparisons

To determine whether sales of seamless pipe from Dalmine to the

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

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

the ``United States Price'' and ``Foreign Market Value'' sections of

this notice. In accordance with 19 C.F.R. 353.58, we made comparisons

at the same level of trade, where possible.

United States Price

We based USP on purchase price (PP), in accordance with section

772(b) of the Act, because the subject merchandise was sold to

unrelated purchasers in the United States before importation and

because exporter's sales price methodology was not otherwise indicated.

We calculated PP based on packed FOB U.S. port prices to unrelated

customers. In accordance with section 772(d)(2)(A) of the Act, we made

deductions, where appropriate, for foreign inland freight, ocean

freight, [[Page 5361]] U.S. brokerage, marine insurance, and U.S.

import duty.

We also made an adjustment to USP for the value-added tax (VAT)

paid on the comparison sales in Italy in accordance with our practice,

pursuant to the Court of International Trade's (CIT) decision in

Federal-Mogul Corp. and the Torrington Co. v. United States, Slip Op.

93-194 (CIT) October 7, 1993). (See Final Determination of Sales at

less Than Fair Value: Calcium Aluminate Cement, Cement Clinker and Flux

from France, 59 FR 14136, March 25, 1994).

Foreign Market Value

In order to determine whether there were sufficient sales of

subject merchandise in the home market to serve as a viable basis for

calculating FMV, we compared the volume of home market sales of

seamless pipe to the volume of third country sales of seamless pipe in

accordance with section 773(a)(1)(B) of the Act. Based on this

comparison, we found that the volume of home market sales was greater

than five percent of the aggregate volume of third country sales.

Therefore, we determined that Dalmine had a viable home market with

respect to sales of seamless pipe during the POI.

In accordance with 19 C.F.R. 353.46, we calculated FMV based on ex-

factory or delivered prices charged to unrelated and, where

appropriate, to related customers in Italy. We compared related party

prices using the test set forth in Appendix II to the Final

Determination of Sales at Less than Fair Value; Certain Cold-rolled

Carbon Steel Flat Products from Argentina, 58 FR 37062 (July 9, 1994),

and used in our FMV calculation those sales made to related parties

that were at arm's-length. We made deductions, where appropriate, for

discounts.

In light of the Court of Appeals for the Federal Circuit's (CAFC)

decision in Ad Hoc Committee of AZ-NM-TX-FL Producers of Gray Portland

Cement v. United States, 13 F.3d 398 (Fed. Cir. 1994), the Department

no longer can deduct home market movement charges from FMV pursuant to

its inherent power to fill in gaps in the antidumping statute. Instead,

we will adjust for those expenses under the circumstance-of-sale

provision of 19 C.F.R. 353.56(a) and the exporter's sales price offset

provision of 19 C.F.R. 353.56(b)(2), as appropriate. Accordingly, in

the present case, we deducted post-sale home market movement charges

from FMV under the circumstance-of-sale provision of 19 C.F.R.

353.56(a). This adjustment included home market foreign inland freight.

Pursuant to 19 C.F.R. 353.56(a)(2), we made further circumstance-

of-sale adjustments, where appropriate, for differences in credit

expenses, warranties and product liability expenses between the U.S.

and home market. For home market sales with missing shipment and

payment dates, we recalculated credit expenses using an average number

of credit days. For those sales missing only payment dates, we

recalculated credit expenses using the date of our preliminary

determination. We deducted home market commissions and added U.S.

indirect selling expenses capped by the amount of home market

commissions. We added interest revenue, where appropriate.

We also deducted home market packing and added U.S. packing costs,

in accordance with section 773(a)(1) of the Act.

We adjusted for VAT in accordance with our practice. (See, the

``United States Price'' section of this notice, above.)

For sales for which Dalmine had with no comparable merchandise sold

in the home market for comparison to its U.S. product, we based FMV on

CV. We calculated CV based on the sum of the cost of materials,

fabrication, general expenses, U.S. packing costs and profit. In

accordance with section 773(e)(1)(B)(i) of the Act, we included the

greater of respondent's reported general expenses or the statutory

minimum of ten percent of the cost of manufacturing (COM), as

appropriate. For profit, we used the statutory minimum of eight percent

of the sum of COM and general expenses. We made circumstance-of-sale

adjustments, where appropriate, for differences in credit expenses and

product liability and warranty, pursuant to 19 C.F.R. 353.56(a)(2).

Currency Conversion

We made currency conversions based on the official exchange rates

in effect on the dates of the U.S. sales as certified by the Federal

Reserve Bank of New York. See 19 C.F.R. 353.60(a).

Verification

As provided in section 776(b) of the Act, we will verify the

information used in making our final determination.

Preliminary Margins

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Manufacturer/producer exporter Margin percent

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Dalmine S.p.A.................................... 0.28 de minimis.

All others....................................... 0.28 de minimis.

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ITC Notification

In accordance with section 733(f) of the Act, we have notified the

ITC of our determination. If our final determination is affirmative,

the ITC will determine whether imports of the subject merchandise are

materially injuring, or threaten material injury to, the U.S. industry

before the later of 120 days after the date of the preliminary

determination or 45 days after our final determination.

Public Comment

In accordance with 19 C.F.R. 353.38, case briefs or other written

comments in at least ten copies must be submitted to the Assistant

Secretary for Import Administration no later than March 10, 1995, and

rebuttal briefs no later than March 15, 1995. In accordance with 19

C.F.R. 353.38(b), we will hold a public hearing, if requested, to give

interested parties an opportunity to comment on arguments raised in

case or rebuttal briefs. Tentatively, the hearing will be held on March

20, 1995, at 2:00 p.m., at the U.S. Department of Commerce, Room 1414,

14th Street and Constitution Avenue, N.W., Washington, D.C. 20230.

Parties should confirm by telephone the time, date, and place of the

hearing 48 hours before the scheduled time.

Interested parties who wish to request a hearing must submit a

written request to the Assistant Secretary for Import Administration,

U.S. Department of Commerce, Room B-099, within ten days of the

publication of this notice in the Federal Register. Request should

contain: (1) The party's name, address, and telephone number; (2) the

number of participants; and (3) a list of the issues to be discussed.

In accordance with 19 C.F.R. 353.38(b), oral presentation will be

limited to issues raised in the briefs.

This determination is published pursuant to section 733(f) of the

Act (19 U.S.C. 1673b(f)) and 19 C.F.R. 353.15(a)(4).

Dated: January 19, 1995.

Susan G. Esserman,

Assistant Secretary for Import Administration.

[FR Doc. 95-2108 Filed 1-26-95; 8:45 am]

BILLING CODE 3510-DS-P