Preliminary Results of Antidumping Duty Administrative Review: Circular Welded Non-Alloy Steel Pipe From the Republic of Korea

DEPARTMENT OF COMMERCE

International Trade Administration

[A-580-809]

Preliminary Results of Antidumping Duty Administrative Review:

Circular Welded Non-Alloy Steel Pipe From the Republic of Korea

AGENCY: International Trade Administration, Import Administration,

Department of Commerce.

ACTION: Preliminary results of antidumping duty administrative review:

circular welded non-alloy steel pipe from the Republic of Korea.

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SUMMARY: In response to requests from interested parties, the

Department of Commerce (the Department) is conducting an administrative

review of the antidumping duty order on circular welded non-alloy steel

pipe from the Republic of Korea. The review covers five manufacturers/

exporters: Dongbu Steel Co., Ltd. (Dongbu), Korea Iron Steel Company

(KISCO), Korea Steel Pipe Co., Ltd. (KSP), Pusan Steel Pipe Co., Ltd.

(PSP), and Union Steel Co., Ltd. (Union). The period of review (the

POR) is April 28, 1992, through October 31, 1993.

We have preliminarily determined that sales have been made below

foreign market value (FMV) by various companies subject to this review.

If these preliminary results are adopted in our final results of this

administrative review, we will instruct U.S. Customs to assess

antidumping duties equal to the difference between the purchase price

(PP) or exporter's sales price (ESP) and the FMV.

We invite interested parties to comment on these preliminary

results. Parties who submit comments in this proceeding are requested

to submit with each argument (1) a statement of the issue and (2) a

brief summary of the argument.

EFFECTIVE DATE: July 9, 1997.

FOR FURTHER INFORMATION CONTACT: Michael Panfeld, Mark Ross, Thomas

Schauer, or Richard Rimlinger, Import Administration, International

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

Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202)

482-4733; facsimile: (202) 482-1290.

SUPPLEMENTARY INFORMATION:

The Applicable Statute

Unless otherwise indicated, all citations to the Tariff Act of

1930, as amended (the Act), are references to the provisions in effect

as of December 31, 1994. In addition, unless otherwise indicated, all

citations to the Department's regulations are to the current

regulations, as codified at 19 CFR part 353 (April 1, 1996).

Background

On November 2, 1992, the Department published in the Federal

Register (57 FR 49,453) the antidumping duty order on circular welded

non-alloy steel pipe from the Republic of Korea. On December 17, 1993,

in accordance with 19 CFR 353.22(c), we initiated an administrative

review of this order for the period April 28, 1992, through October 31,

1993 (58 FR 65,964). The Department is now conducting this

administrative review in accordance with section 751 of the Act.

Scope of Review

The merchandise subject to this review is circular welded non-alloy

steel pipes and tubes, of circular cross-section, not more than 406.4mm

(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-conditioning 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 within the scope of this

review, except 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. Standard

pipe that is dual or triple certified/stenciled that enters the United

States as line pipe of a kind used for oil or gas pipelines is also not

included in this review.

Imports of these products are currently classifiable under the

following Harmonized Tariff Schedule (HTS) subheadings: 7306.30.1000,

7306.30.5025, 7306.30.5032, 7306.30.5040, 7306.30.5055, 7306.30.5085,

and 7306.30.5090. Although the HTS subheadings are provided for

convenience and customs purposes, our written description of the scope

of this proceeding is dispositive.

Product Comparisons

We calculated transaction-specific U.S. prices (USPs) for

comparison to either weighted-average FMVs or constructed values. The

USPs and FMVs were calculated and compared by product characteristics.

For price-to-price comparisons, we compared identical merchandise,

where possible. Where there were no sales of identical merchandise in

the home market to compare to U.S. sales, we made similar comparisons

based on the characteristics listed in our memorandum to file dated

June 24, 1994. If there were no sales of identical or similar

merchandise in the home market to compare to U.S. sales, we compared

USP to constructed value.

United States Price

For all respondents, we based USP on purchase price, in accordance

with section 772(b) of the Act, when the subject merchandise was sold

to

[[Page 36762]]

unrelated purchasers in the United States prior to importation and

because exporter's sale price (ESP) methodology, in those instances,

was not otherwise indicated.

In addition, for KSP and PSP, where certain sales to the first

unrelated purchaser took place after importation into the United

States, we based USP on ESP, in accordance with section 772(c) of the

Act.

USP was based on the packed f.o.b., c.i.f., or delivered prices to

unrelated purchasers in, or for exportation to, the United States. We

made adjustments, as appropriate, to PP and ESP for movement expenses,

discounts, rebates, and duty drawback.

We made additional deductions from ESP for direct selling expenses

and indirect selling expenses.

For all respondents, we have adjusted for VAT in accordance with

the tax-neutral methodology approved by the Court of Appeals for the

Federal Circuit in Federal-Mogul Corp. v. United States, 63 F.3d 1572

(CAFC 1995). The approved tax-neutral adjustment methodology is based

on the amounts of foreign taxes, rather than the tax rates. We have

thus returned to the Zenith Electronics Corp. v. United States, 900

F.2d 1573 (CAFC 1993) footnote-4 methodology of adding the absolute

amount of the consumption taxes on home market sales to the USP.

Consistent with this methodology, when merchandise exported to the

United States is exempt from the VAT, we have added to USP the absolute

amount of such taxes charged on the comparison sales in the home

market.

With respect to subject merchandise to which value was added in the

United States prior to sale to unrelated U.S. customers, e.g., pipe

that was imported and further processed by U.S. affiliates, we deducted

any increased value in accordance with section 772(e)(3) of the Tariff

Act.

Foreign Market Value

In order to determine whether there were sufficient sales of

standard pipe in the home market to serve as a viable basis for

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

standard pipe to the volume of third-country sales of the same product

in accordance with section 773(a)(1)(B) of the Act. We found that the

home market was viable for sales of standard pipe by all respondents.

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

delivered prices to related or unrelated purchasers in the home market.

Where applicable, we made adjustments for movement expenses,

differences in cost attributable to differences in physical

characteristics of the merchandise, and differences in packing. We also

made adjustments for differences in circumstances of sale in accordance

with 19 CFR 353.56. For comparisons to PP sales, we deducted home

market direct selling expenses and added U.S. direct selling expenses.

For comparisons to ESP sales, we deducted home market direct selling

expenses. We also made adjustments, where applicable, for home market

indirect selling expenses to offset U.S. commissions in PP and ESP

calculations and to offset U.S. indirect selling expenses deducted in

ESP calculations, but not exceeding the amount of U.S. indirect

expenses. For comparisons to both ESP and PP sales, we adjusted for VAT

using the methodology detailed in the ``United States Price'' section

of this notice.

We used sales to related customers only where we determined such

sales were made at arm's length (i.e., at prices comparable to prices

at which respondents sold identical merchandise to unrelated

customers). See 19 CFR 353.45(a). To test whether these sales were made

at arm's length, we compared the gross unit prices of sales to

affiliated and unaffiliated customers net of all movement charges,

direct and indirect selling expenses, and packing. See Final

Determination of Sales at Less Than Fair Value; Certain Cold-Rolled

Carbon Steel Flat Products from Argentina, 58 FR 37062, 37077 (July 9,

1993).

PSP and Dongbu reported sales in the home market of ``overrun''

merchandise (i.e., sales of a greater quantity of pipe than the

customer ordered due to overproduction). Respondents claimed that we

should disregard ``overrun'' sales in the home market as outside the

ordinary course of trade. Section 773(a)(1)(A) of the Act and 19 CFR

353.46(a) provide that FMV shall be based on the price at which such or

similar merchandise is sold in the exporting country in the ordinary

course of trade for home consumption. Section 771(15) of the Act

defines ``ordinary course of trade'' as ``the conditions and practices

which, for a reasonable time prior to the exportation of the

merchandise which is the subject of an investigation, have been normal

in the trade under consideration with respect to merchandise of the

same class or kind.'' See also 19 CFR 353.46(b).

We analyzed the following criteria to determine whether ``overrun''

sales differ from other sales of commercial pipe: (1) Ratio of overrun

sales to total home market sales; (2) number of overrun customers

compared to total number of home market customers; (3) average price of

an overrun sale compared to average price of a commercial sale; (4)

profitability of overrun sales compared to profitability of commercial

sales; and (5) average quantity of an overrun sale compared to the

average quantity of a commercial sale. Based on our analysis of these

criteria and on an analysis of the terms of sales, we found certain

overrun sales to be outside the ordinary course of trade. This analysis

is consistent with the analysis sustained by the Court of International

Trade in Laclede Steel Co. v. United States, Slip. Op. 94-144 (1995).

For a more detailed description of our analysis, see the preliminary

results analysis memoranda which are on file in the Central Records

Unit (room B-099 of the Main Commerce Building).

Petitioners have contended that political contributions or other

monetary payments (known as ttuk kap) are a normal part of doing

business in Korea and can account for large sums. Petitioners have

urged that the Department determine whether respondents or their

affiliates made such payments and how such payments were treated in the

companies' accounting systems.

We have completed a limited number of verifications and have found

that none of the firms we verified maintained accounts identified

specifically for either so-called ttuk kap payments or for political

contributions. Moreover, based on the accounting and financial records

that we examined, we found no evidence of incomplete expense reporting

from the firms in question.

Cost of Production

Because we found home market sales below the cost of production by

KSP and PSP in the less-than-fair-value (LTFV) investigation, we

concluded that reasonable grounds exist to believe or suspect that

these companies made home market sales during the POR at prices below

the cost of production, and we therefore initiated cost investigations.

See Import Administration Policy Bulletin Number 94.1 dated March 25,

1994. In addition, based on allegations submitted by petitioners in

connection with this administrative review, we have decided to

investigate whether sales of subject merchandise made by Dongbu and

Union were made at prices below the cost of production. See Memorandum

to Marie Parker dated April 22, 1994, and Memorandum to Marie Parker

dated April 25, 1994.

[[Page 36763]]

A. Calculation of COP

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

and fabrication employed in producing the subject merchandise, plus

amounts for selling, general and administrative expenses and packing

costs in accordance with section 773(b) of the Act. We relied on the

home market sales and COP information provided by respondents in their

questionnaire and supplemental responses.

As in the LTFV investigation of this case, we requested that all

sales and cost data be reported on a weight basis. In the LTFV segment

of this proceeding, respondents reported various per-unit prices and

costs on several bases: actual weight, theoretical weight, and standard

actual weight. In this review, we requested that respondents report all

costs, prices, and adjustments on a theoretical-weight basis because

that is the basis on which U.S. sales were made. We did this in order

to ensure that we calculated costs and expenses in a consistent manner.

The petitioners have contended that information used by the respondents

to derive all three weight bases is inaccurate and systematically

understates the cost of production of subject merchandise.

In response to the petitioners' arguments, we requested sale and

cost data on a length basis rather than a weight basis for each 1'',

2'', and 4'' diameter pipe. These sizes represent the largest-volume

U.S. sales made by the respondents during the POR. Respondents did not

report actual length for these items but simply calculated length by

applying a factor based on the reported weight, contending that they do

not maintain records on an actual-length basis. Petitioners continue to

object to respondents' methodology.

For these preliminary results, we have used the weight figures

supplied by respondents for our dumping comparisons because we have no

evidence that the weight figures respondents supplied result in

understated cost figures. Furthermore, through the cost verification we

have conducted thus far, we have not found understated costs. See Union

Steel Co., Ltd., cost verification report dated June 2, 1997. This

issue will also be examined at the cost verifications of KSP and PSP

which, as discussed below, will be conducted after publication of these

preliminary results.

B. Test of Home Market Prices

To determine if sales below cost had been made over an extended

period of time, we compared the number of months in which sales below

cost had occurred for a particular model to the number of months in

which the model was sold. If the model was sold in three or fewer

months, we did not find that below-cost sales were made over an

extended period of time unless there were sales below cost of that

model in each month. If a model was sold in more than three months, we

did not find that below-cost sales were made over an extended period of

time unless there were sales below cost in at least three of the months

in which the models were sold.

Since none of the respondents has submitted information indicating

that any of its sales below cost were at prices which would have

permitted ``recovery of all costs within a reasonable period of time in

the normal course of trade,'' within the meaning of section 773(b)(2)

of the Act, we cannot reasonably conclude that the costs of production

of such sales were recovered within a reasonable period.

C. Results of COP Test

In accordance with section 773(b) of the Act, in determining

whether to disregard home market sales made at prices below the cost of

production, we examined whether such sales were made in substantial

quantities over an extended period of time. When less than 10 percent

of the home market sales of a particular model were at prices below the

cost of production, we found that substantial quantities of such sales

were not made and did not disregard any sales of that model. When 10

percent or more, but not more than 90 percent, of the home market sales

of a particular model were determined to be below cost, we determined

that substantial quantities of such sales were made and excluded the

below-cost home market sales from our calculation of FMV, provided that

these below-cost sales were made over an extended period of time. When

more than 90 percent of the home market sales of a particular model

were made below cost over an extended period of time, we disregarded

all home market sales of that model from our calculation of FMV and

used CV. As a result, we disregarded below-cost sales when the

conditions described above were met.

We found that KSP, PSP, Dongbu, and Union all made sales below cost

in substantial quantities over an extended period of time. We therefore

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

the basis for determining FMV in accordance with section 773(b) of the

Act.

Constructed Value

We calculated CV in accordance with section 773(e) of the Act. We

included the cost of materials, fabrication, general expenses, profit,

and packing. To calculate CV we used: (1) Actual general expenses, or

the statutory minimum of ten percent of the cost of materials and

fabrication, whichever was greater; (2) actual profit or the statutory

minimum of eight percent of the cost of materials, fabrication, and

general expenses, whichever was greater; and (3) packing costs for

merchandise exported to the United States. Where appropriate, we made

adjustments to CV, in accordance with 19 CFR 353.56, for differences in

circumstances of sale. For comparisons to PP sales, we deducted home

market direct selling expenses and added U.S. direct selling expenses.

For comparisons to ESP sales, we deducted home market direct selling

expenses. We also made adjustments, where applicable, for home market

indirect selling expenses to offset U.S. commissions in PP and ESP

calculations. For comparisons involving ESP transactions, we made

further deductions for CV for indirect selling expenses in the home

market, capped by the indirect selling expenses incurred on ESP sales

in accordance with 19 CFR 353.56(b)(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.

Verification

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

provided by certain respondents using standard verification procedures,

including on-site inspection of the manufacturer's facilities, the

examination of relevant sales and financial records, and selection of

original documentation containing relevant information. Our

verification results are outlined in the public versions of the

verification reports. Though we have not yet verified the sales data

reported by KSP nor the cost data reported by either KSP or PSP we will

verify this data prior to completion of the final results. Because we

will not verify this information until after the preliminary results

are issued, we have extended the comment period for KSP-specific and

PSP-specific comments from interested parties to July 25, 1997.

Rebuttals to these comments will be due on August 1, 1997. We are doing

this so that all parties will have the opportunity to comment on these

verifications.

[[Page 36764]]

Preliminary Results of Review

As a result of our review, we preliminarily determine the weighted-

average dumping margins (in percent) for the period April 28, 1992,

through October 31, 1993 to be as follows:

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

Margin

Company (percent)

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

Dongbu Steel Co., Ltd....................................... 3.37

Korea Iron Steel Company.................................... 8.20

Korea Steel Pipe Co., Ltd................................... 14.13

Pusan Steel Pipe Co., Ltd................................... 11.21

Union Steel Co., Ltd........................................ 0.76

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

Parties to this proceeding may request disclosure within 5 days of

the date of publication of this notice. Any interested party may

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

notice. A hearing, if requested, will be held at 10 AM on August 4,

1997 in room 1412 in the main Commerce Department building.

Issues raised in the hearing will be limited to those raised in the

respective briefs and rebuttal briefs. Briefs from interested parties

regarding Dongbu, KISCO, Union, and general comments may be submitted

not later than 30 days from the date of publication of these

preliminary results, and rebuttal briefs, limited to the issues raised

in the respective case briefs, may be submitted not later than 37 days

from the date of publication of these preliminary results. As noted

above, KSP-specific and PSP-specific comments and rebuttals are due on

July 25, 1997 and August 1, 1997, respectively. Parties who submit

briefs or rebuttal briefs in this proceeding are requested to submit

with each argument (1) a statement of the issue and (2) a brief summary

of the argument. The Department will subsequently publish the final

results of this administrative review, including the results of its

analysis of issues raised in any written briefs or hearings.

Furthermore, the following deposit requirements will be effective

upon publication of the final results of review for all shipments of

subject merchandise entered, or withdrawn from warehouse, for

consumption on or after the date of publication, as provided by section

751(a)(1) of the Tariff Act: (1) The cash deposit rates for the

reviewed companies will be the rates determined in the final results of

review; (2) for previously investigated companies not listed above, 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 or the original LTFV investigation, but the

manufacturer is, the cash deposit rate will be the rate 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 4.80 percent, the ``All Others'' rate made effective by

the amended final determination of the LTFV investigation published on

November 3, 1995 (see Circular Welded Non-Alloy Steel Pipe from Korea:

Notice of Final Court Decision and Amended Final Determination, 60 FR

55833 (November 3, 1995)).

The Department shall determine, and the Customs Service shall

assess, antidumping duties on all appropriate entries. Because the

inability to link sales with specific entries prevents entry-by-entry

assessments, we will calculate wherever possible an exporter/importer-

specific assessment rate.

With respect to PP sales for these preliminary results, we divided

the total dumping margins for the reviewed sales (calculated as the

difference between FMV and USP) for each importer by the total volume

sold to that importer during the POR. We will direct Customs to assess

the resulting per-ton dollar amount against each ton of merchandise in

each of that importer's entries during the review period. Although this

will result in assessing different percentage margins for individual

entries, the total antidumping duties collected for each importer for

the review period will approximately equal the total dumping margins.

For ESP sales, we divided the total dumping margins for the

reviewed sales by the total entered value of those reviewed sales for

each importer. We will direct Customs to assess the resulting

percentage margin against the entered Customs values for the subject

merchandise on each of that importer's entries during the review

period. While the Department is aware that the entered value of sales

during the POR is not necessarily equal to the entered value of entries

during the POR, use of entered value of sales as the basis of the

assessment rate permits the Department to collect a reasonable

approximation of the antidumping duties which would have been

determined if the Department had reviewed those sales of merchandise

actually entered during the POR. See Antifriction Bearings (Other Than

Tapered Roller Bearings) and Parts Thereof From France, Germany, Italy,

Japan, Singapore, Sweden, and the United Kingdom; Final Results of

Antidumping Duty Administrative Reviews and Partial Termination of

Administrative Reviews, 61 FR 66,472 (December 17, 1996).

This notice also serves as a reminder to importers of their

responsibility under 19 CFR 353.26 to file a certificate regarding the

reimbursement of antidumping duties prior to liquidation of the

relevant entries during 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 administrative review and this notice are in accordance with

section 751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1)) and 19 CFR

353.22.

Dated: June 16, 1997.

Robert S. LaRussa,

Acting Assistant Secretary for Import Administration.

[FR Doc. 97-17953 Filed 7-8-97; 8:45 am]

BILLING CODE 3510-DS-P