Certain Welded Carbon Steel Standard Pipes and Tubes From India: Preliminary Results of New Shipper Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[A-533-502]

Certain Welded Carbon Steel Standard Pipes and Tubes From India:

Preliminary Results of New Shipper Antidumping Duty Administrative

Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of Preliminary Results of Antidumping Duty New Shipper

Administrative Review.

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SUMMARY: In response to requests by Lloyd's Metals & Engineers Ltd.

(Lloyd's) and Rajinder Pipes Ltd. (Rajinder), the Department of

Commerce (the Department) is conducting a new shipper administrative

review of the antidumping duty order on certain welded carbon steel

standard pipes and tubes from India. The period of review (POR) is May

1, 1995 through April 30, 1996. We have preliminarily determined that

sales have been made below the normal value (NV). If these preliminary

results are adopted in our final results of administrative review, we

will instruct the U.S. Customs Service to assess antidumping duties

equal to the difference between the export price (EP) or construed

export price (CEP) and NV. Interested parties are invited to comment on

these preliminary results. Parties who submit argument in this

proceeding are requested to submit with the argument (1) a statement of

the issue and (2) a brief summary of the argument.

EFFECTIVE DATE: May 1, 1997.

FOR FURTHER INFORMATION CONTACT:

Kristie Strecker, Matthew Rosenbaum or Thomas O. Barlow, Import

Administration, International Trade Administration, U.S. Department of

Commerce, 14th Street and Constitution Avenue, NW., Washington, D.C.

20230; telephone (202) 482-4733.

SUPPLEMENTARY INFORMATION:

Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute are

references to the provisions effective January 1, 1995, the effective

date of the amendments made to the Tariff Act of 1930 (the Act) by the

Uruguay Round Agreements Act. In addition, unless otherwise indicated,

all citations to the Department's regulations are to the current

regulations, as amended by the interim regulations published in the

Federal Register on May 11, 1995 (60 FR 25130).

Background

On April 30, 1996, the Department received a request from Lloyd's

for a new shipper review pursuant to section 751(a)(2)(B) of the Act

and section 353.22(h) of the Department's interim regulations. On May

22, 1996, the Department also received a request from Rajinder for a

new shipper review. The petitioner in this case is the Standard Pipe

Subcommittee of the Committee on Pipe and Tube Imports (the

Petitioner).

Section 751(a)(2) of the Act and section 353.22(h) of the

Department's regulations govern determinations of antidumping duties

for new shippers. These provisions state that, if the Department

receives a request for review from an exporter or producer of the

subject merchandise that (1) did not export the merchandise to the

United States during the period of investigation (POI) and, (2) is not

affiliated with any exporter or producer who exported the subject

merchandise during that period, the Department shall conduct a new

shipper review to establish an individual weighted-average dumping

margin for such exporter or producer, if the Department has not

previously established such a margin for the exporter or producer. To

establish these facts, the exporter or producer must include with its

request, with appropriate certification: (i) The date on which the

merchandise was first entered, or withdrawn from warehouse, for

consumption, or, if it cannot certify as to the date of first entry,

the date on which it first shipped the merchandise for export to the

United States; (ii) a list of the firms with which it is affiliated;

and (iii) a statement from such exporter or producer, and from each

affiliated firm, that it did not, under its current or a former name,

export the merchandise during the POI. The requests from Lloyd's and

Rajinder were accompanied by information and certifications

establishing the date on which each company first shipped and entered

subject merchandise, the names of Lloyd's and Rajinder's affiliated

parties, and statements from Lloyd's and Rajinder and their affiliated

parties that they did not, under any name, export the subject

merchandise during the POI. Based on the above information, on June 27,

1996, the Department initiated a new shipper review of Lloyd's and

Rajinder (61 FR 33492). On December 30, 1996, we published an extension

of the time limit for the preliminary results of this review until

April 23, 1997 (61 FR 68713). The Department is now conducting this

review in accordance with section 751 of the Act and section 353.22 of

its regulations.

[[Page 23761]]

Scope of the Review

The products covered by this review include circular welded non-

alloy steel pipes and tubes, of circular cross-section, with an outside

diameter of 0.372 inch or more but not more than 406.4 millimeters (16

inches) in outside diameter, regardless of wall thickness, surface

finish (black galvanized, or painted), or end finish (plain end,

bevelled end, threaded, or threaded and coupled). These pipes and tubes

are generally known as standard pipe, though they may also be called

structural or mechanical tubing in certain applications. Standard pipes

and tubes are intended for the low-pressure conveyance of water, steam,

natural gas, air and other liquids and gases in plumbing and heating

systems, air-conditioner units, automatic sprinkler systems, and other

related uses. Standard pipe may also be used for light load-bearing and

mechanical applications, such as for fence tubing, and for protection

of electrical wiring, such as conduit shells.

The scope is not limited to standard pipe and fence tubing or those

types of mechanical and structural pipe that are used in standard pipe

applications. All carbon-steel pipes and tubes within the physical

description outlined above are included in the scope of this order,

except for line pipe, oil-country tubular goods, boiler tubing, cold-

drawn or cold-rolled mechanical tubing, pipe and tube hollows for

redraws, finished scaffolding, and finished rigid conduit.

Imports of the products covered by this review are currently

classified under the following Harmonized Tariff Schedule (HTS)

subheadings: 7306.30.10.00, 7306.30.50.25, 7306.30.50.32,

7306.30.50.40, 07306.30.50.55, 7306.30.50.85, and 7306.30.50.90.

Although the HTS subheadings are provided for convenience and customs

purposes, our written description of the scope of this proceeding is

dispositive.

The review covers two producers/exporters. The POR is May 1, 1995

through April 30, 1996.

Level of Trade

To the extent practicable, we determine NV for sales at the same

level of trade as the U.S. sales (either EP or CEP). When there are no

sales at the same level of trade, we compare U.S. sales to home market

(or, if appropriate, third-country) sales at a different level of

trade. The NV level of trade is that of the starting-price sales in the

home market.

For both EP and CEP, the relevant transaction for the level-of-

trade analysis is the sale (or constructed sale) from the exporter to

the importer. While the starting price for CEP is that of a subsequent

resale to an unaffiliated buyer, the construction of the CEP results in

a price that would have been charged if the importer had not been

affiliated. We calculate the CEP by removing from the first resale to

an independent U.S. customer the expenses under section 772(d) of the

Act and the profit associated with these expenses. These expenses

represent activities undertaken by the affiliated importer. Because the

expenses deducted under section 772(d) represent selling activities in

the United States, the deduction of these expenses normally yields a

different level of trade for the CEP than for the later resale (which

we use for the starting price). Movement charges, duties and taxes

deducted under section 772(c) do not represent activities of the

affiliated importer, and we do not remove them to obtain the CEP level

of trade.

To determine whether home market sales are at a different level of

trade than U.S. sales, we examine whether the home market sales are at

different stages in the marketing process than the U.S. sales. The

marketing process in both markets begins with goods being sold by the

producer and extends to the sale to the final user, regardless of

whether the final user is an individual consumer or an industrial user.

The chain of distribution between the producer and the final user may

have many or few links, and each respondent's sales occur somewhere

along this chain. In the United States, the respondent's sales are

generally to an importer, whether independent or affiliated. We review

and compare the distribution systems in the home market and U.S. export

markets, including selling functions, class of customer, and the extent

and level of selling expenses for each claimed level of trade. Customer

categories such as distributor, original equipment manufacturer (OEM),

or wholesaler are commonly used by respondents to describe levels of

trade, but, without substantiation, they are insufficient to establish

that a claimed level of trade is valid. An analysis of the chain of

distribution and of the selling functions substantiates or invalidates

the claimed levels of trade. If the claimed levels are different, the

selling functions performed in selling to each level should also be

different. Conversely, if levels of trade are norminally the same, the

selling functions performed should also be the same. Different levels

of trade necessarily involve differences in selling functions, but

differences in selling functions, even substantial ones, are not alone

sufficient to establish a difference in the levels of trade. A

different level of trade is characterized by purchasers at different

stages in the chain of distribution and sellers performing

qualitatively or quantitatively different functions in selling to them.

When we compare U.S. sales to home market sales at a different

level of trade, we make a level-of-trade adjustment if the difference

in levels of trade affects price comparability. We determine any effect

on price comparability by examining sales at different levels of trade

in a single market, the home market. Any price effect must be

manifested in a pattern of consistent price differences between home

market sales used for comparison and sales at the equivalent level of

trade of the export transaction. To quantify the price differences, we

calculate the difference in the average of the net prices of the same

models sold at different levels of trade. We use the average difference

in net prices to adjust NV when NV is based on a level of trade

different from that of the export sale. If there is no pattern of

consistent price differences, the difference in levels of trade does

not have a price effect and, therefore, no adjustment is necessary.

The statute also provides for an adjustment to NV when NV is based

on a level of trade different from that of the CEP if the NV level is

more remote from the factory than the CEP and if we are unable to

determine whether the difference in levels of trade between CEP and NV

affects the comparability of their prices. This latter situation can

occur where there is no home market level of trade equivalent to the

U.S. sales level or where there is an equivalent home market level but

the data are insufficient to support a conclusion on price effect. This

adjustment, the CEP offset, is identified in section 773(a)(7)(B) and

is the lower of the following:

The indirect selling expenses on the home market sale, or

The indirect selling expenses deducted from the starting

price in calculating CEP.

The CEP offset is not automatic each time we use CEP. The CEP

offset is made only when the level of trade of the home market sale is

more advanced than the level of trade of the U.S. (CEP) sale and there

is not an appropriate basis for determining whether there is an effect

on price comparability.

In this review, Rajinder reported two channels of distribution in

the home market: (1) sales to government

[[Page 23762]]

agencies, which include sales made to original equipment manufacturers

(OEMs) and end-users (Channel One); and (2) sales made to local

distributors, which include sales made to trading companies (Channel

Two). We found that the two home market channels differed significantly

with respect to selling activities. The level of selling activities

with respect to Channel One was much greater than that with respect to

Channel Two. Channel One activities included strategic and economic

planning, market research, computer, legal, accounting, audit and

business systems development, engineering services, inventory, agent

coordination, and delivery arrangement. Channel Two activities

consisted of only advertising. The Channel One sales, therefore,

constitute a more advanced level of trade. Based on these differences

and other factors such as the point in the chain of distribution where

the relevant selling expenses occurred, we found that the two home

market channels constituted two different levels of trade.

Rajinder reported only CEP sales in the U.S. market. The CEP sales

were based on sales made by the exporter to the U.S. affiliate through

one channel of distribution which was to a local distributor. The

single selling activity associated with these sales was inventory

maintenance. Hence, we determined these sales constitute a single level

of trade.

To determine whether sales in the comparison market were at a

different level of trade than CEP sales, we examined whether the CEP

and comparison sales were at different stages in the marketing process.

We made this determination on the basis of a review of the distribution

system in the two markets, including selling functions, class of

customer, and the level of selling expenses for each type of sale. In

Rajinder's Channel Two level of trade for the home market, as noted

above, we found that the selling activity included only advertising

while that for the CEP level of trade consisted only of inventory

maintenance. While these selling functions differ, as explained above,

differences in selling functions, even substantial ones, are not alone

sufficient to establish a difference in the level of trade. In the

present case, there is a single selling function in both the U.S. and

home market channel of distribution and the selling expenses incurred

with respect to both of these channels of distribution were comparable.

Moreover, both the CEP sales and the Channel Two home market sales were

to the same customer category, distributors.

Based upon this evidence, we have concluded that the differences

between the channels of distribution for the CEP and Channel Two home

market sales are not sufficient to constitute different levels of

trade. Therefore, to the extent possible, we have used the Channel Two

sales for comparison purposes in our analysis without making a level-

of-trade adjustment.

However, for certain CEP sales we found that sales of identical

matches took place only at the Channel One level of trade. Therefore,

we matched these U.S. sales to sales at the Channel One level of trade.

However, because we have not been able to determine the extent of any

pattern of consistent price differences between sales at Channels One

and Two, we have not made a level-of-trade adjustment. Instead, for

purposes of these preliminary results, we have applied a CEP-offset

adjustment in accordance with section 773(a)(7)(B) of the Act. Prior to

the completion of our final results we will further examine the record

concerning this issue.

Lloyd's reported two channels of distribution in the home market:

(1) Sales to OEMs and end-users; and (2) sales to local distributors.

We found that in both home market channels of distribution Lloyd's

selling activities included the following: strategic and economic

planning; market research; computer, legal, accounting, audit and/or

systems development assistance; personnel training, personnel exchange,

and manpower assistance program; engineering services; technical

programs; advertising; packing; and inventory maintenance. Therefore,

we concluded that the selling activities associated with all home

market sales were the same and we determined that these two channels of

distribution constitute one level of trade.

Lloyd's made one EP sale to an unaffiliated customer through a

single channel of distribution (sale made to a trading company).

Respondent stated that this EP sale had many of the same selling

functions as the home market level of trade described above. Therefore,

based upon this information, we have determined that the level of trade

for the EP sale is the same as that in the home market, and we have

made no level-of-trade adjustment.

Product Comparisons

In accordance with section 777A(d)(2) of the Act, we calculated for

Lloyd's and Rajinder transaction-specific EPs and CEPs for comparison

to monthly weighted-average NVs. We compared EP or CEP sales to sales

in the home market of identical merchandise.

Export Price

For Lloyd's, we calculated EP in accordance with section 772(a) of

the Act, because the subject merchandise was sold directly to the first

unaffiliated purchaser in the United States prior to importation and

CEP methodology was not otherwise warranted based on the facts of this

review.

We calculated EP based on packed, C.&F. prices to unaffiliated

customers in the United States. We made deductions for domestics inland

freight, insurance, brokerage, and ocean freight in accordance with

section 772(c)(2) of the Act. We made additions for duty drawback,

where applicable, in accordance with section 772(c)(1)(B) of the Act.

No other adjustments were claimed or allowed.

Constructed Export Price

For Rajinder, we based our margin calculation on CEP as defined in

section 772(b) of the Act because the subject merchandise was first

sold in the United States to a person not affiliated with Rajinder

after importation by Rajinder International Incorporated (RII), a

seller affiliated with Rajinder.

We calculated CEP based on ex-warehouse prices from RII to the

unaffiliated purchasers. We deducted inland freight, insurance,

brokerage and warehousing from the price pursuant to section 772(c)(2)

of the Act. We also deducted an amount from the price for the following

expenses, in accordance with section 772(d)(1) of the Act, that related

to economic activity in the United States: commissions, direct selling

expenses, including credit expenses, and indirect selling expenses,

including inventory carrying costs. In accordance with section

772(d)(3) of the Act, we also deducted from the price an amount for

profit to arrive at the CEP. We added duty drawback to the starting

price in accordance with section 772(c)(1)(B) of the Act.

Normal 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 NV,

we compared Lloyd's and Rajinder's volume of home market sales of the

foreign like product to the volume of its U.S. sales of the subject

merchandise, in accordance with section 773(a)(1)(C) of the Act. Since

both Lloyd's and Rajinder's aggregate volume of home market sales of

the foreign like product was greater than five percent of its aggregate

volume of its U.S. sales of the subject merchandise, we determined that

the home market was viable. Therefore, in

[[Page 23763]]

accordance with section 773(a)(1)(B)(i), we based NV on the prices at

which the foreign like products were first sold for consumption in the

exporting country.

Home market prices were based on the packed, ex-factory or

delivered prices of identical merchandise to unaffiliated purchasers in

the home market. Where applicable, we made adjustments for differences

in packing and for movement expenses in accordance with sections

773(a)(6) (A) and (B) of the Act. For comparison to EP, we made

circumstance-of-sale (COS) adjustments in accordance with section

773(a)(6)(C)(iii) of the Act by deducting home market direct selling

expenses and adding U.S. direct selling expenses. For comparisons to

CEP, we made COS adjustments by deducting home market direct selling

expenses.

We based NV on the price at which the foreign like product was

first sold for consumption in the exporting country, in the usual

commercial quantities, in the ordinary course of trade and at the same

level of trade as the EP or CEP, to the extent practicable, in

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

No other adjustments were claimed or allowed.

Cost of Production Analysis

Based on allegations made by Petitioner, we had reasonable grounds

to believe or suspect that sales of both Lloyd's and Rajinder in the

home market were made at prices below the cost of producing the

merchandise. As a result, we initiated an investigation to determine

whether Lloyd's and Rajinder made home market sales during the POR at

prices below its cost of production (COP) within the meaning of section

773(b) of the Act.

A. Calculation of COP

We calculated the COP based on the sum of the costs of materials

and fabrication employed in producing the foreign like product, plus

amounts for home market selling, general and administrative expenses

(SG&A) and packing costs in accordance with section 773(b)(3) of the

Act. We relied on the home market sales and COP information provided by

Lloyd's and Rajinder in their questionnaire responses.

B. Test of Home Market Prices

We tested whether home market sales of pipes and tubes were made at

prices below COP within an extended period of time in substantial

quantities and whether such prices permitted recovery of all costs

within a reasonable period of time. We compared model-specific COPs to

the reported home market prices less any applicable movement charges,

rebates, and direct selling expenses.

C. Results of COP Test

Pursuant to section 773(b)(2)(C)(i) of the Act, where less than 20

percent of a respondent's sales of a given product were at prices less

than COP, we did not disregard any below-cost sales of that product

because we determined that the below-cost sales were not made in

``substantial quantities.'' Where 20 percent or more of a respondent's

sales of a given product during the POR were at prices less than the

COP, we disregarded the below-cost sales where such sales were found to

be made at prices which would not permit the recovery of all costs

within a reasonable period of time (in accordance with section

773(b)(2)(D) of the Act). Where we disregarded all contemporaneous

sales of the comparison product based on this test, we calculated NV

based on CV, in accordance with section 773(a)(4) of the Act.

We found that, for certain pipe and tube products, more than 20

percent of Lloyd's home sales were sold at below the COP. Further, we

did not find that the prices for these sales provided for the recovery

of costs within a reasonable period of time. We therefore excluded

these sales from our analysis and used the remaining sales as the basis

for determining NV in accordance with section 773(b)(1) of the Act.

For Rajinder, we found that the below-cost sales accounted for less

than 20 percent of its sales (on a model-specific basis). Therefore, we

did not disregard any of Rajinder's below-cost sales.

Verification

As provided in section 782(i) of the Act, we verified information

provided by the respondents using standard verification procedures,

including on-site inspection of the manufacturers' facilities, the

examination of relevant sales and financial records, and selection of

original documentation containing relevant information. We verified

Lloyd's responses to the Department's questionnaires from March 24 to

March 28, 1997, at the sales office in Bombay, India. We verified

Rajinder's responses from March 31 to April 2, 1997, at its factory in

Kanpur, India. Our verification results are outlined in the

verification reports, the public versions of which are available in the

Central Records Unit of the Department of Commerce, room B-099.

Currency Conversion

For purposes of the preliminary results, 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.

Section 773A(a) of the Act directs the Department to use a daily

exchange rate in order to convert foreign currencies into U.S. dollars,

unless the daily rate involves a ``fluctuation.'' In accordance with

the department's practice, we have determined as a general matter that

a fluctuation exists when the daily exchange rate differs from a

benchmark by 2.25 percent. The benchmark is defined as the rolling

average of rates for the past 40 business days. When we determine a

fluctuation exists, we substitute the benchmark for the daily rate.

Preliminary Results of the Review

As a result of our comparisons of CEP and EP with NV, we

preliminarily determine that the following weighted-average dumping

margins exist for the period May 1, 1995 through April 30, 1996:

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

Manufacturer/exporter Margin

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

Lloyd's Metals and Engineers Ltd.............................. 0.00

Rajinder Pipes Ltd............................................ 0.00

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

Interested parties may request disclosure within 5 days of the date

of publication of this notice and may request a hearing within 10 days

of publication. Any hearing, if requested, will be held as early as

convenient for the parties but not later than 34 days after the date of

publication or the first business day thereafter. Case briefs from

interested parties may be submitted not later than 20 days after the

date of publication. Rebuttal briefs, limited to issues raised in the

case briefs, may be filed not later than 27 days after the date of

publication. The Department will issue the final results of this new

shipper administrative review, including the results of its analysis of

issues raised in any such written comments or at a hearing, within 90

days of publication of these preliminary results.

Upon completion of this new shipper review, the Department will

issue appraisement instructions directly to the Customs Service. The

results of this review shall be the basis for the assessment of

antidumping duties on entries of merchandise covered by this review and

for future deposits of estimated duties.

Furthermore, upon completion of this review, the posting of a bond

or security in lieu of a cash deposit, pursuant to

[[Page 23764]]

section 751(a)(2)(B)(iii) of the Act and section 353.22(h)(4) of the

Department's interim regulations, will no longer be permitted and,

should the final results yield a margin of dumping, a cash deposit will

be required for each entry of the merchandise.

The following deposit requirements will be effective upon

publication of the final results of this new shipper antidumping duty

administrative review for all shipments of certain welded carbon steel

standard pipes and tubes from India entered, or withdrawn from

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

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

the reviewed companies will be those established in the final results

of this new shipper administrative review; (2) for exporters not

covered in this review, but covered in previous reviews or the original

less-than-value (LTFV) investigation, the cash deposit rate will

continue to be the company-specific rate published for the most recent

period; (3) if the exporter is not a firm covered in this review,

previous reviews, or the original LTFV investigation, but the

manufacturer is, the cash deposit rate will be that established for the

most recent period for the manufacturer of the merchandise; and (4) the

cash deposit rate for all other manufacturers or exporters will

continue to be 7.08 percent, the all-others rate established in the

LTFV investigation (51 FR 17384, May 12, 1986).

These requirements, when imposed, shall remain in effect until

publication of the final results of the next administrative review.

This notice serves as a preliminary reminder to importers of their

responsibility under 19 CFR 353.36 to file a certificate regarding the

reimbursement of antidumping duties prior to liquidation of the

relevant entries during this review period. Failure to comply with this

requirement could result in the Secretary's presumption that

reimbursement of antidumping duties occurred and the subsequent

assessment of double antidumping duties.

This new shipper administrative review and notice are in accordance

with section 751(a)(2)(B) of the Act (19 U.S.C. 1675(a)(2)(B)) and

Section 19 CFR 353.22(h) 1996.

Dated: April 23, 1997.

Robert S. LaRussa,

Acting Assistant Secretary for Import Administration.

[FR Doc. 97-11381 Filed 4-30-97; 8:45 am]

BILLING CODE 3510-DS-M