Notice of Final Determination of Sales at Less Than Fair Value: Certain Carbon Steel Butt-Weld Pipe Fittings From France

DEPARTMENT OF COMMERCE

International Trade Administration

[A-427-813]

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

Certain Carbon Steel Butt-Weld Pipe Fittings From France

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: February 27, 1995.

FOR FURTHER INFORMATION CONTACT: Penelope Naas or Gary Bettger, Office

of Countervailing Investigations, Import Administration, International

Trade Administration, U.S. Department of Commerce, 14th Street and

Constitution Avenue, NW, Washington, DC 20230; telephone (202) 482-3534

or 482-2239, respectively.

Final Determination

We determine that certain carbon steel butt-weld pipe fittings from

France are being 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 margin is shown in the ``Suspension of

Liquidation'' section of this notice.

Case History

Since the publication of the preliminary determination in the

Federal Register on October 4, 1994 (59 FR 50565), the following events

have occurred:

On October 5, 1994, pursuant to Sec. 353.20(b)(1) of the

Department's regulations, Interfit, S.A. (``Interfit''), requested that

the final determination in this case be postponed. On November 14,

1994, the Department published in the Federal Register a notice

postponing the publication of the final determination in this case no

later than February 16, 1995 (59 FR 56461).

From October 10 through October 14, 1994, we verified the responses

of Interfit at its offices in Maubeuge, France and Starval in Marly La

Ville, France, respectively. On October 17, 1994, we conducted a

verification of related party and certain other issues at Vallourec

Group Headquarters in Boulogne-Bilancourt, France. During the period of

December 20 to 21, 1994, we verified the responses of Interfit, Starval

and Vallourec Inc. in Houston, Texas. From December 12 to December 16,

1994, we verified Interfit's cost of production data at its offices in

Maubeuge.

On January 23, 1995, and on January 30, 1995, petitioner and

respondent submitted case and rebuttal briefs to the

[[Page 10539]] Department. On February 1, 1995, the Department held a

public hearing in this investigation.

Scope of the Investigation

The products covered by this investigation are certain carbon steel

butt-weld pipe fittings having an inside diameter of less than fourteen

inches (355 millimeters), imported in either finished or unfinished

condition. Pipe fittings are formed or forged steel products used to

join pipe sections in piping systems where conditions require permanent

welded connections, as distinguished from fittings based on other

methods of fastening (e.g., threaded, grooved, or bolted fittings).

Butt-weld fittings come in a variety of shapes which include

``elbows,'' ``tees,'' ``caps,'' and ``reducers.'' The edges of finished

pipe fittings are beveled, so that when a fitting is placed against the

end of a pipe (the ends of which have also been beveled), a shallow

channel is created to accommodate the ``bead'' of the weld which joins

the fitting to the pipe. These pipe fittings are currently classifiable

under subheading 7307.93.3000 of the Harmonized Tariff Schedule of the

United States (``HTSUS''). Although the HTSUS subheading is provided

for convenience and Customs purposes, our written description of the

scope of this investigation is dispositive.

Period of Investigation

The period of investigation (``POI'') is September 1, 1993, through

February 28, 1994.

Fair Value Comparisons

To determine whether Interfit's sales for export 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.

Regarding level of trade, Interfit reported that it sells only to

distributors in the United States and the home market.

We made revisions to Interfit's reported data, where appropriate,

based on findings at verification.

United States Price

Because Interfit's U.S. sales of certain carbon steel butt-weld

pipe fittings were made to an unrelated distributor in the United

States prior to importation, and the exporter's sales price methodology

was not indicated by other circumstances, we based USP on the purchase

price (``PP'') sales methodology in accordance with section 772(b) of

the Act.

We calculated Interfit's USP sales based on packed, c.i.f., duty

paid, landed prices to unrelated customers in the United States. We

made deductions, where appropriate, for foreign inland freight, foreign

brokerage, marine insurance, ocean freight, U.S. brokerage, U.S.

duties, and rebates. Reported U.S. duties were adjusted based on

information collected at verification.

We made an adjustment to USP for value-added tax (``VAT'') assessed

on comparison sales in France in accordance with our practice, pursuant

to the Court of International Trade (``CIT'') decision in Federal-

Mogul, et al. v. United States, 834 F. Supp. 1391. See, Preliminary

Antidumping Duty Determination: Color Negative Photographic Paper and

Chemical Components from Japan (59 FR 16177, 16179, April 6, 1994), for

an explanation of this tax methodology.

Foreign Market Value

In order to determine whether there was a sufficient volume of

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

FMV, we compared the volume of home market sales of subject merchandise

to the volume of third country sales of subject merchandise, in

accordance with section 773(a)(1)(B) of the Act. On this basis, we

determined that the home market was viable.

In its May 13, 1994, response, Interfit reported that all home

market sales were made to distributors, three of which were related to

Interfit. Based on information verified in this investigation, we do

not consider Interfit's indirect minority interest in Hardy-Tortauax

(``H-T'') and Trouvay & Cauvin (``T&C'') to be a sufficient basis to

determine that the parties are ``related,'' as defined in section

771(13) of the Act and 19 CFR 353.45(b). See, the Department's

concurrence memorandum from the preliminary determination (September

26, 1994, at page 3). However, with respect to the third related

distributor, Starval, we determined that its relationship to Interfit

(e.g., 100 percent common ownership) satisfies the definition of a

related party.

Therefore, we compared Interfit's prices to Starval with Interfit's

prices to unrelated parties using the arm's length test as set forth in

Appendix II to 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 determined that the sales made to Starval

were not at arm's length. Accordingly, we requested and received

Starval's sales to unrelated customers in the home market. While

verifying Starval's sales response, we found that several sales had

been reported a number of times. This rendered Starval's home market

database unusable for purposes of the final determination. Thus, we

have disregarded a small portion of Interfit's home market sales and

used sales made by Interfit directly to unrelated parties.

Cost of Production

Petitioner alleged that Interfit made home market sales during the

POI at prices below the cost of production (``COP''). Based on

petitioner's allegation, we concluded that we had reasonable grounds to

believe or suspect that sales were made below COP. In the course of

this investigation, we gathered and verified data on production costs.

For purposes of the preliminary determination, because Interfit's

cost data was incomplete and submitted too late for consideration, as

best information available (``BIA''), we made an adverse assumption

that all home market sales were below the COP and based foreign market

value on constructed value (``CV''). We then calculated the CV using

Vallourec's transfer prices. We stated that we would verify whether

those prices were at arm's length.

For the final determination, however, we have reviewed and analyzed

respondents COP data. In accordance with our standard practice, we

asked Interfit to provide cost data for inputs produced by related

parties. Interfit failed to provide data on the cost of pipe, a major

input, produced by its related supplier, Vallourec. Therefore, we have

valued the input on the basis of BIA and used the resulting COP to test

home market sale prices. As BIA we adjusted the transfer prices for the

input upward by the average difference between petitioner's acquisition

cost of pipe, as reported in the petition, and the transfer price

Interfit pays to its supplier.

In order to determine whether home market prices were below the COP

within the meaning of section 773(b) of the Act, we performed a

product-specific cost test, in which we examined whether each product

sold in the home market during the POI was priced below the COP of that

product. We calculated COP based on the sum of Interfit's cost of

materials, fabrication, general expenses, and packing, in accordance

with 19 CFR 353.51(c). For each product, we compared this sum to the

home market unit price, net of movement expenses, rebates and selling

expenses. We made changes, where appropriate, to submitted COP data, as

[[Page 10540]] discussed above and in the Interested Party Comments

section of this notice, below.

In accordance with section 773(b) of the Act, we also examined

whether the home market sales of each product were made at prices below

their COP in substantial quantities over an extended period of time,

and whether such sales were made at prices that would permit recovery

of all costs within a reasonable period of time in the normal course of

trade.

For each product where less than ten percent, by quantity, of the

home market sales during the POI were made at prices below the COP, we

included all sales of that model for the computation of FMV. For each

product where ten percent or more, but less than 90 percent, of the

home market sales during the POI were priced below the COP, we

disregarded from the calculation of FMV those home market sales which

were priced below the COP, provided that the below-cost sales of that

product were made over an extended period of time. Where we found that

more than 90 percent of respondent's sales were at prices below the

COP, and such sales were over an extended period of time, we

disregarded all sales of that product.

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

an extended period of time, in accordance with section 773(b)(1) of the

Act, we compared the number of months in which below-cost sales

occurred for each product to the number of months in the POI in which

that product was sold. If a product was sold in three or more months of

the POI, we did not exclude below-cost sales unless there were below-

cost sales in at least three months during the POI. When we found that

sales of a product only occurred in one or two months, the number of

months in which the sales occurred constituted the extended period of

time; i.e., where sales of a product were made in only two months, the

extended period of time was two months, where sales of a product were

made in only one month, the extended period of time was one month. (See

Preliminary Results and Partial Termination of Antidumping Duty

Administrative Reviews: Tapered Roller Bearings, Four Inches or Less in

Outside Diameter, and Components Thereof, From Japan (58 FR 69336,

69338, December 10, 1993).

Interfit provided no indication that its below cost sales were at

prices that would permit recovery of all costs within a reasonable

period of time and in the normal course of trade. (See, section

773(b)(2); 19 U.S.C. 1677b(b)(2)).

Constructed Value

Where all home market sales of a product were disregarded, we based

FMV on CV. We calculated CV based on the sum of the adjusted cost of

materials, fabrication, general expenses, U.S. packing costs and

profit. We adjusted the cost of materials as discussed in the

Interested Party Comments section of this notice, below. In accordance

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

greater of Interfit's reported general expenses or the statutory

minimum of ten percent of the cost of manufacture (``COM''), as

appropriate, and (2) for profit, we used the statutory minimum of eight

percent of the sum of COM and general expenses.

Price-to-Price Comparisons

For price-to-price comparisons, we calculated FMV based on ex-

factory or delivered prices, inclusive of packing to home market

customers. We deducted rebates, where appropriate. We also deducted

home market packing costs and added U.S. packing costs in accordance

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

In light of the Court of Appeals for the Federal Circuit's decision

in Ad Hoc Committee of AZ-NM-TX-FL Producers of Gray Portland Cement V.

United States, 13 F. 3d 398 (Fed. Cir., January 5, 1994), the

Department can no longer deduct home market movement charges from FMV

pursuant to the Department's inherent power to fill in gaps in the

antidumping statute. Instead, we adjust for direct movement expenses

under the circumstance-of-sale provision of 19 CFR 353.56(a).

Accordingly, in the present case, we deducted post-sale home market

movement charges from the FMV under the circumstance-of-sale provision

of 19 CFR 353.56(a). This adjustment included home market inland

freight and insurance.

For both price-to-price comparisons and comparisons to CV, we made

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

credit expenses, pursuant to 19 CFR 353.56(a)(2). In calculating U.S.

credit expense, we used the respondent's cost of borrowing in U.S.

dollars during the POI. In instances where Interfit had not reported a

shipment and/or payment date, we recalculated Interfit's reported

credit expense.

We have not made a deduction for direct selling expenses reported

by respondent because we determined that these expenses (product

liability and inventory carrying costs) are, in fact, indirect selling

expenses. However, we have deducted indirect selling expenses, capped

by the commissions paid to Vallourec Inc., a related party in the U.S.

market. For the preliminary determination, we did not recognize these

commissions because we did not have an appropriate benchmark against

which to test whether the commission arrangement was at arm's length.

However, we verified that Interfit pays the same commissions to both

related and unrelated parties, with the exception of a single unrelated

party that receives a higher rate. In LMI-La Metalli Industriale,

S.p.A. v. United States, 912 F.2d 455, 459 (Fed. Cir. 1990) (LMI), the

CAFC indicated that related party commissions can and should be

adjusted for if the commissions are at arm's length and are directly

related to the sales under review. Because the vast majority of

commissions to related and unrelated parties are at a single rate, we

find these conditions are met in this case. Therefore, we deducted

indirect expenses incurred for home market sales up to the amount of

the U.S. commission. We then added the U.S. commission to the FMV or

CV, as appropriate.

We adjusted for VAT in the home market in accordance with our

practice. (See the United States Price section of this notice, above.)

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 CFR 353.60.

Final Negative Determination of Critical Circumstances

Petitioner alleged that critical circumstances exist with respect

to imports of pipe fittings from France. In our preliminary

determination, pursuant to section 733(e)(1) of the Act and 19 CFR

353.16, we analyzed the allegation using the Department's standard

methodology. Because no additional information has been submitted since

the preliminary determination, the Department performed the same

analysis as explained in its preliminary finding. Based on this

analysis, the Department determines, in accordance with section

735(a)(3) of the Act, that critical circumstances do not exist with

respect to imports of certain carbon steel butt-weld pipe fittings from

France.

Verification

As provided in section 776(b) of the Act, we verified information

provided by the respondent using standard verification procedures,

including the [[Page 10541]] examination of relevant sales, cost and

financial records, and selection of original source documentation. The

public versions of the January 10, 1995, verification reports are

available in the Central Unit located in room B-99 of the Department's

main building, the Herbert C. Hoover building.

Interested Party Comments

Comment 1

Petitioner contends that Interfit willfully refused, on four

separate occasions, to provide from its related party, Vallourec

Industries (``Vallourec''), the actual cost of producing carbon steel

pipe, a major input in the production of the subject merchandise.

Petitioner argues that by repeatedly refusing to respond to the

Department's requests for this information, Interfit has not allowed

the Department to properly conduct this investigation. Therefore, the

Department should apply adverse best information available (``BIA'') in

the final determination. Petitioner notes that the BIA approach

employed at the preliminary determination (i.e., the assumption that

all home market sales are below COP) rewards Interfit for its failure

to cooperate. Accordingly, as BIA, the Department should use the margin

reported for France in the petition or, in the alternative, the highest

non-aberrational margin calculated for Interfit in the preliminary

determination.

Interfit argues that it informed the Department that it was willing

to accept the consequences of not supplying the cost information, as

this task would have required Interfit to provide cost information from

four separate related manufacturing units. Thus, Interfit is prepared

to accept a BIA finding that all home market sales were below COP.

DOC Position

In light of Interfit's cooperation in this investigation, we

disagree with petitioner's argument that the Department should use

total BIA in the form of the margin reported for France in the

petition, or the highest non-aberrant margin calculated for Interfit in

the preliminary determination. Our use of partial BIA is adequate

because it allows us to draw an adverse assumption only with respect to

the information that Interfit failed to provide. Because we were able

to perform a BIA cost test, we have adequately ensured that Interfit

does not benefit from its failure to provide information. Therefore,

total BIA is unnecessary.

Comment 2

Regarding the constructed value, petitioner contends that the

prices from Vallourec to Interfit for carbon steel pipe do not satisfy

the statutory requirements outlined in section 773(e)(2). According to

petitioner, section 773(e)(2) requires Interfit to demonstrate that:

(1) It has sales to unrelated customers in the market under

consideration (i.e., France); (2) the prices to those unrelated

customers are for pipe that was ``identical or demonstrably comparable

to the pipe used by Interfit;'' and (3) the prices that Interfit pays

Vallourec are at arm's length. By its own admission, Interfit cannot

satisfy the first two elements of the statute, because it concedes that

``Vallourec sells no similar pipe to unrelated customers in France.''

With respect to the third element, according to petitioner, the

Department's verification of the prices charged by Vallourec to

Interfit and to other unrelated customers demonstrate that the prices

to Interfit are preferential.

Thus, petitioner argues that the Department should disregard the

transfer prices and use the actual cost of producing the input supplied

by Vallourec (carbon steel pipe). However, because Interfit repeatedly

refused to provide Vallourec's actual cost of producing carbon steel

pipe, the Department is prevented from determining CV and conducting a

complete investigation. Therefore, the Department should apply best

information available (``BIA'') in the final determination. In

particular, the Department should use the margin reported for France in

the petition or, in the alternative, the highest non-aberrational

margin calculated for Interfit in the preliminary determination.

Lastly, Petitioner argues that even if the Department determines

that transfer prices between Vallourec and Interfit are at arm's

length, the Department has ``reasonable grounds to believe or suspect''

that the transfer price of the carbon steel pipe is less than the cost

of producing the pipe. Petitioner contends that several factors in this

investigation provide the Department with ``reasonable grounds to

believe or suspect'' that Interfit purchased the pipe from Vallourec at

less than the COP. Most notably, petitioner claims Interfit did not

provide evidence that Vallourec's price for the pipe was above the cost

of producing such pipe, even though the information was requested by

the Department numerous times.

Petitioner thus argues that, because the Department has

``reasonable grounds to believe or suspect'' that pipe is being sold at

less than COP, even if the transfer prices are accepted under section

773(e)(2), those prices cannot be used in determining CV. Rather, the

Department should apply adverse BIA in the final determination, as

detailed above.

Interfit claims that the prices it pays to Vallourec reflect the

market value (i.e., they are arm's length prices) and therefore, in

accordance with section 773(e)(2), should be used for purposes of

calculating constructed value. To substantiate its claim that the

transfer prices between Vallourec and Interfit are arm's length,

Interfit has provided the Department with prices of similar pipe sold

to unrelated customers in the European Union (``E.U.''). Interfit

argues that, because ``the E.U. is a fully integrated market, with no

barriers to trade between its members,'' these sales are, in fact, in

the same market (i.e., the market under consideration). Interfit also

contends that the term ``merchandise under consideration'' includes

both similar and identical merchandise, not only identical merchandise.

With respect to the arm's length nature of these sales, Interfit argues

that information submitted in this investigation demonstrates that the

prices Vallourec charges Interfit are comparable to the prices charged

to unrelated customers for almost identical pipe. Moreover, the pipe

sold to Vallourec's unrelated customers includes additional processing

costs which are not included in the pipe sold to Interfit. These

additional costs would more than account for the difference in price.

Thus, pursuant to section 773(e)(2), Interfit claims that the

Department should use the transfer prices in calculating CV.

With respect to section 773(e)(3), Interfit claims that this

section contains a presumption that transfer prices are valid for

purposes of calculating CV unless the Department has ``reasonable

grounds to believe or suspect'' that they are below COP. To support its

claim, Interfit cites Al Tech Specialty Steel Corporation v. United

States, 575 F.Supp. 1277, 1282 (C.I.T. 1983); FMC Corp. v. United

States, 3 F.3d 424 (CAFC 1993); and Antifriction Bearings (Other Than

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

Germany, 54 FR 18992, 19020, Comment 4 (1989). Therefore, where

constructed value is concerned, petitioner, not respondent, must first

provide evidence that the transfer prices are below COP; a simple

allegation by petitioner is not sufficient. Interfit also argues that

its failure to provide evidence that the transfer prices were

[[Page 10542]] above COP does not imply that they were below cost.

Interfit claims that the concurrence memorandum from the

preliminary determination (September 26, 1994, at page 3) and a

November 15, 1994 letter from the Department to the counsel for

Interfit, led the company to believe that the transfer prices would be

used so long as they were determined to be at arm's length. Interfit

assumed that if the Department had at that time ``reasonable grounds''

to believe that the pipe was sold to Interfit at less than the COP, the

Department would have stated that cost was an issue.

DOC Position

The fact that Interfit failed to provide evidence that Vallourec's

price for the input pipe was above the cost of producing the pipe,

despite numerous requests from the Department for this information,

provides the Department with ``reasonable grounds to believe or

suspect'' that the transfer prices paid by Interfit were less than

Vallourec's cost of production. Therefore, in computing the CV, we have

valued the pipe on the basis of the BIA used to calculate COP for the

home market sales below cost test. Because the transfer prices have

been disregarded in accordance with section 773(e)(3) of the Act, we do

not need to address the issue of whether the transfer prices satisfy

the criteria under section 773(e)(2). The Department's preliminary

determination expressly noted that whether the transfer prices were at

arm's length would be examined at verification. In addition, the

Department continued to pursue data that would confirm that the

transfer prices are above COP. See, Supplemental/Deficiency Section D

Questionnaire (November 15, 1994), Section D Verification Agenda

(December 5, 1994), Fax to Counsel for Interfit (December 8, 1994), and

Section D Verification Report (January 12, 1995). Therefore, contrary

to Interfit's claims, the question of cost remained an issue.

Suspension of Liquidation

In accordance with section 735(c)(4) of the Act, we are directing

the U.S. Customs Service to continue to suspend liquidation of all

entries of butt-weld pipe fittings from France, as defined in the

``Scope of Investigation'' section of this notice, that are produced

and sold by Interfit and that are entered, or withdrawn from warehouse,

for consumption on or after October 4, 1994.

The Customs Service shall require a cash deposit or the posting of

a bond equal to the estimated weighted-average amount by which the

foreign market value of the subject merchandise exceeds the United

States price as shown below. The suspension of liquidation will remain

in effect until further notice. The weighted-average dumping margins

are as follows:

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

Margin

Manufacturer/producer/exporter (percent)

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

Interfit, S.A.............................................. 32.58

All Others................................................. 32.58

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

ITC Notification

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

ITC of our determination.

Notice to Interested Parties

This notice also serves as the only reminder to parties subject to

administrative protective order (APO) of their responsibility

concerning the return or destruction of proprietary information

disclosed under APO in accordance with 19 CFR 353.35(d). Failure to

comply is a violation of the APO.

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

Act (19 U.S.C. 1671(d)).

Dated: February 16, 1995.

Barbara R. Stafford,

Acting Assistant Secretary for Import Administration.

[FR Doc. 95-4724 Filed 2-24-95; 8:45 am]

BILLING CODE 3510-DS-P