Circular Welded Non-Alloy Steel Pipe and Tube From Mexico: Final Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[A-201-805]

Circular Welded Non-Alloy Steel Pipe and Tube From Mexico: Final

Results of Antidumping Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of final results of antidumping duty administrative

Review.

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

SUMMARY: On December 30, 1996, the Department of Commerce (the

Department) published the preliminary results of its administrative

reviews of the antidumping duty order on circular welded non-alloy

steel pipe from Mexico covering exports of this merchandise to the

United States by certain manufacturers. Based on our preliminary review

of these exports during the period November 1, 1994 through October 31,

1995, we found margins for all reviewed companies. We invited

interested parties to comment on the preliminary results. We received

comments and rebuttals from petitioners and from TUNA and Hylsa

(respondents). We have now completed our final results of review and

determine that the results have changed with respect to one respondent.

EFFECTIVE DATE: July 10, 1997.

FOR FURTHER INFORMATION CONTACT: John Drury, Robin Gray or Linda

Ludwig, Enforcement Group III--Office 8, Import Administration,

International Trade Administration, U.S. Department of Commerce, 14th

Street and Constitution Avenue, N.W., Room 7866, Washington, D.C.

20230; telephone (202) 482-0414 (Drury), (202) 482-0196 (Gray), or

(202) 482-3833 (Ludwig).

SUPPLEMENTARY INFORMATION:

Applicable Statute

Unless otherwise indicated, all citations to the Tariff Act of

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

January 1, 1995, the effective date of the amendments made to the Act

by the Uruguay Round Agreements Act (URAA). In addition, unless

otherwise indicated, all references to the Department's regulations are

to Part 353 of 19 CFR (1997).

Background

The Department published an antidumping duty order on circular

welded non-alloy steel pipe and tube from Mexico on November 2, 1992

(57 FR 49453). The Department published a notice of ``Opportunity to

Request an Administrative Review'' of the antidumping duty order for

the 1994/95 review period on November 1, 1995 (60 FR 55541). On

November 29, 1995, respondent Hylsa S.A. de C.V. (``Hylsa'') requested

that the Department conduct an administrative review of the antidumping

duty order on circular welded non-alloy steel pipe and tube from

Mexico. On November 30, 1995, respondent Tuberia Nacional S.A. de C.V.

(``TUNA'') requested that the Department conduct an administrative

review of this order. We initiated this review on December 8, 1995. See

60 FR 44414 (September 15, 1995).

Under section 751(a)(3)(A) of the Act, the Department may extend

the deadline for completion of administrative reviews if it determines

that it is not practicable to complete the review within the statutory

time limit of 365 days. On July 19, 1996, the Department extended the

time limits for preliminary and final results in this case. See

Extension of Time Limit for Antidumping Duty Administrative Reviews, 61

FR 40603 (August 5, 1996).

The Department is conducting this administrative review in

accordance with section 751 of the Act.

Scope of the Review

The review of ``circular welded non-alloy steel pipe and tube''

covers products of circular cross-section, 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, beveled 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. In

accordance with the Final Negative Determination of Scope Inquiry (56

FR 11608, March 21, 1996), pipe certified to the API 5L line pipe

specification, or pipe certified to both the API 5L line pipe

specifications and the less-stringent ASTM A-53 standard pipe

specifications, which fall within the physical parameters as outlined

above, and entered as line pipe of a kind used for oil and gas

pipelines, are outside of the scope of the antidumping duty order.

Imports of these products are currently classifiable under the

following Harmonized Tariff Schedule (HTS) subheadings: 7306.3010.00,

7306.30.50.25, 7306.30.50.32, 7306.30.50.40, 7306.30.50.55,

7306.30.50.85, and 7306.30.50.90. These HTS item numbers are provided

for convenience and customs purposes. The written descriptions remain

dispositive.

Analysis of Comments Received

We invited interested parties to comment on our preliminary results

of the reviews. We received both comments and rebuttals from

petitioners, TUNA, and Hylsa. The

[[Page 37015]]

following is a summary of comments by company.

Hylsa

Comment 1: Stating that Hylsa's responses contained numerous errors

and unverifiable information, petitioners believe that the Department

should base the final results on total facts available under sections

776 and 782 of the Act. Petitioners cite numerous alleged errors and

omissions on the part of Hylsa as support for their contention that the

response as a whole should be rejected and the results based on facts

available. The examples include allegations that Hylsa did not provide

actual dates of payment and thus distorted credit costs; that it failed

to report packing expenses in either market; that it did not properly

report freight charges; that it did not properly match CONNUMs; that

the Department was unable to verify advertising and warranty expenses;

that certain sales traces contained errors; and that comparisons

between actual and theoretical weight were distortive.

In addition, petitioners state that the cost response and the

information found at verification also contained numerous errors,

specifically in the proper allocations and use of costs. The sum of the

errors and the quality of information presented, according to

petitioners, is sufficient for the Department to find that Hylsa failed

to cooperate by not acting to the best of its ability to comply with

the Department's information requests. Petitioners cite Circular Welded

Non-Alloy Steel Pipe from South Africa, 61 FR 24271 at 24274 (May 14,

1996) as precedent to support this course of action.

Hylsa maintains that the verification conducted by the Department

affirmed the overall accuracy of its responses, and that any actual

problems can be easily remedied with minor programming changes. Hylsa

maintains that it has cooperated to the best of its ability to comply

with the Department's requests for information, and that the

application of facts available is not warranted. Hylsa states that,

even if petitioners had been able to demonstrate that Hylsa had not

acted to the best of its ability to comply with the Department's

information requests, section 776(b) of the Act indicates merely that

the Department may make an adverse inference, not that it is obligated

to do so.

DOC Position: We agree with respondent that the final results

should not be based on total facts available. Section 782(e) of the Act

provides that the Department shall not decline to consider information

that is submitted by an interested party and is necessary to the

determination but does not meet all the applicable requirements

established by the Department if: (1) The information is submitted by

the deadline established for its submission; (2) the information can be

verified; (3) the information is not so incomplete that it cannot serve

as a reliable basis for reaching the applicable determination; (4) the

interested party has demonstrated that it acted to the best of its

ability in providing the information and meeting the requirements

established by the Department with respect to the information; and (5)

the information can be used without undue difficulties. Accordingly, in

using the facts available, the Department may disregard information

submitted by a respondent if any of the five criteria has not been met.

While the Department agrees that there are errors and omissions in

Hylsa's responses, we do not believe that the scope and impact of the

errors in question are sufficient to warrant the application of facts

available to the case as a whole. In Circular Welded Non-Alloy Steel

Pipe from South Africa, 61 FR 24271 at 24274 (May 14, 1996), the

Department noted that errors in the sales traces drew into question the

completeness and accuracy of the respondent's remaining sales. The

Department also noted that certain home market and U.S. sales were not

reported, and concluded that ``[t]he misreporting and inaccuracies of

the information were so material and pervasive as to make the responses

unreliable within the meaning of section 782(e)(3) of the Act.'' In

this case, the quantity and value of sales reported are not under

contention. With appropriate corrections, the Department believes that

Hylsa's responses are sufficiently usable for the purpose of margin

calculations. Pursuant to sections 776(a) and 782(d) and (e) of the

Act, the Department will use the facts otherwise available when

necessary. The Department will address each of the comments stated by

petitioners below.

Comment 2: Petitioners contend that the Department should base

Hylsa's home market credit expense on facts available. Petitioners

believe that Hylsa has over-reported or has otherwise distorted home

market credit expense in three different ways. First, petitioners

contend that the calculation of a hypothetical date of payment by Hylsa

for home market sales with multiple payment dates distorts credit

expenses in a hyperinflationary environment. Petitioners believe that

the methodology used by Hylsa is contrary to the Department's

instructions and that Hylsa had the ability to report separate payment

dates without undue burden. Second, petitioners contend that Hylsa

erred in calculating credit expenses by including the IVA (VAT tax) in

the base price for such calculations. In other words, Hylsa included

the VAT tax in the total amount due to them by their customers for the

purposes of calculating the credit expense on each transaction.

Petitioners state that section 773 (a)(6)(B)(iii) requires that the

Department deduct any taxes included in the price of a foreign like

product from normal value so that the Department calculates a tax-

neutral margin. Petitioners cite the Statement of Administrative Action

to the Uruguay Round Agreements Act (``the SAA'') (H. Doc. No. 316

(Vol. 1), 103d Cong., 2d Sess. (1994) at 827) in support of their

contention. Third, petitioners state that the calculation of the credit

expense using a 360-day year for home market sales and a 365-day year

for U.S. sales results in a similar overstatement of home market credit

expenses. Therefore, petitioners believe that the Department should not

deduct home market credit expenses from normal value, nor make a

circumstance-of-sale adjustment, but should deduct corrected U.S.

credit expenses from export price. If the Department does use Hylsa's

reported credit expense, petitioners recommend that the Department

correct for the existing problems by reducing the base rate on which

credit is calculated by the IVA and by applying a credit calculation

based on a 365-day year.

Hylsa answers, first, that it followed the Department's

instructions in the original questionnaire to calculate credit expense

on a transaction-by-transaction basis, and in a supplemental

questionnaire to calculate this expense using monthly interest rates.

Second, Hylsa contends that since it extends credit to its customers on

the IVA amount, it should be used in the credit calculation as the

Department did for the preliminary results. Hylsa cites Certain Fresh

Cut Flowers from Mexico, 56 FR 1794 at 1798 (January 17, 1991) and Shop

Towels from Bangladesh, 57 FR 3996 at 4001 (February 3, 1992) in

support of its position. Third, Hylsa states that it adjusted for the

difference in the 360/365 day credit calculations for home market sales

and that the Department verified that adjustment while examining home

market sales traces. Therefore, in respondent's view, no changes should

be made to the credit calculation methodology used by the Department in

the preliminary determination.

DOC Position: We agree in part with petitioners. Concerning the

issue of the

[[Page 37016]]

360/365 days used to calculate credit expense, the worksheet in Exhibit

27 indicates that Hylsa did make the adjustment so that it calculated

credit expense in both markets using the same number of days as the

denominator. As to the inclusion of IVA in the basis for the credit

calculation, while we disagree with petitioners' claims that this is a

tax neutrality issue, the Department believes that the methodology used

by Hylsa is incorrect and should be exclusive of the IVA. Finally, the

Department believes that the calculation of an average date of payment

for home market sales in instances of multiple payments is distortive

and contrary to the instructions of the Department (see discussion

below). Therefore, the Department has used facts available for the

credit expense as outlined below.

Hylsa's statement that the credit expense ``reflects the

opportunity cost when potential revenues from an immediate cash-for-

goods sale are exchanged for receipt of payment after some extended

period'' (Hylsa's March 11 brief at 6) supports the Department's

position on the VAT tax. The collection and payment of the IVA is not a

revenue for the company, but for the government. The calculation of a

credit expense for the company on what is plainly government revenue is

inconsistent with the intent of the adjustment.

In Certain Cut-to-Length Carbon Steel Plate from Brazil, the

Department stated that ``[i]t is not the Department's current practice

to impute credit expenses related to VAT payments. We find that there

is no statutory or regulatory requirement for making the proposed

adjustment.'' Certain Cut-to-Length Carbon Steel Plate from Brazil, 62

FR 18486 at 18488 (April 15, 1997). See also Steel Wire Rope from

Korea, 58 FR 11029 at 11032 (February 23, 1993).

Concerning the reporting of a weighted-average hypothetical date of

payment by Hylsa for certain home market sales, Hylsa has not complied

completely with the Department's requests in this matter. The original

questionnaire states in part that, when calculating credit expense, the

respondent must ``[e]xplain the calculation and any other factors that

affect net credit costs * * * `` (emphasis added). Obviously, multiple

payments will affect net credit costs, especially in economies

experiencing high inflation. Since the Department determined that

Mexico experienced high inflation during the period of review, the

proper reporting of expenses that reflect the effects of inflation is

of paramount importance.

Hylsa did report credit expense on a transaction-specific basis,

and did use monthly interest rates as requested by the Department.

However, Hylsa did not indicate that it received multiple payments

until verification. It was also at verification that Hylsa first

explained its methodology with regard to multiple payments. Of the

three home market sales examined by the Department during verification,

one of these had multiple payment dates. (See Sales Verification

Exhibit 6.) As discovered at verification, Hylsa had the ability to

report each separate payment and calculate a separate credit expense,

but chose not to do so. Given that one-third of the sales traces

examined by the Department contained multiple payments, the potential

for distortion of credit expense using Hylsa's methodology is

significant.

Section 776(b) states that the Department has the authority to use

an adverse inference in selecting from among facts otherwise available

if an interested party has failed to cooperate by not acting to the

best of its ability to comply with a request for information. The

Department believes that the failure to report multiple payments, and

the subsequent calculation of credit expense, constitutes grounds for

the use of adverse facts available under this section. Therefore, as

facts available, we calculated the lowest non-zero reported credit

expense per ton by Hylsa and used this expense in all home market sales

for purposes of calculating normal value. We have not made any

adjustments to the credit expense calculation for U.S. sales for

calculating export price.

Comment 3: Petitioners state that, in accordance with the decision

in the preliminary determination, the Department should not make an

adjustment for a steel supplier rebate.

DOC Position: We agree with petitioners, and have not altered our

decision from the preliminary determination. See Circular Welded Non-

Alloy Steel Pipe from Mexico, 61 FR 68708 at 68710 (December 30, 1996).

Comment 4: Petitioners argue that, to the extent that Hylsa acts as

the importer of record on certain of its U.S. sales of subject

merchandise and/or pays all duties due, the Department should presume

reimbursement under 19 CFR 353.26 and deduct any duties paid by Hylsa

from export price. Petitioners cite section 353.26(a) as applying

directly to Hylsa's responsibilities for the payment of antidumping

duties, stating that ``[w]hen Hylsa pays antidumping duties on its own

behalf it is a producer paying the antidumping duties on behalf of the

importer (itself) within the unambiguous meaning of 19 CFR

353.26(a)(i). There is no requirement in the regulation that the

importer and producer be separate entities.'' In arguing that the

regulation should be applied to non-separate entities, petitioners

state that ``[i]t would be ludicrous to apply the regulation where the

producer and importer are affiliated (i.e., are related closely enough

to be treated as a single entity for the purposes (of) calculating

United States price) but not apply it where the producer and importer

are a single entity in fact.'' Petitioners cite Certain Hot-Rolled Lead

and Bismuth Carbon Steel Products from the United Kingdom, 61 FR 65022

at 65023 (December 10, 1996) (prelim.) (``British Bar'') as

demonstrating that where a producer/exporter and importer are the same

entity, the Department treats them as being ``affiliated'' under the

statutory provision on duty absorption (section 751(a)(4) of the Act).

If a producer/exporter is deemed to be ``affiliated'' with itself for

the purposes of duty absorption, reason petitioners, there is no reason

why the same conclusion cannot be reached for the reimbursement

provision.

Petitioners contend that a requirement that the producer and

importer be separate entities to apply section 353.26 is inconsistent

with both the SAA and Department practice. In citing the SAA,

petitioners concentrate on the statement that Commerce has full

authority to increase duties ``[w]hen an exporter directly pays the

duties due * * *,'' and state that the regulation applies as long as

the producer pays the duties on behalf of the importer. Petitioners

also cite Color Television Receivers from the Republic of Korea, 61 FR

4408 at 4411 (February 6, 1996) as supporting their position.

Petitioners further state that the provisions for duty absorption and

duty reimbursement are separate and do not preclude the Department from

applying section 353.26. Should the Department apply section 353.26,

petitioners urge the Department to deduct the amount of antidumping

duties paid from export price as required by the regulation.

Hylsa counters that when it acts as importer of record, it does

not, under any sense of the word, ``reimburse'' itself or pay the

duties on behalf of another party. In addition, Hylsa states that any

such adjustment must be made against antidumping duties assessed and

reimbursed, rather than against cash deposits of estimated antidumping

duties. Therefore, making any adjustment at this time would be

improper.

[[Page 37017]]

DOC Position: The Department closely analyzed all sales made by

Hylsa to the U.S. during the period of review. In our analysis, we

found that none of the sales where Hylsa acted as its own importer were

sold at less than normal value. Therefore, the issue is moot in this

instance.

Comment 5: Petitioners contend that, as in the preliminary

determination, the Department should not adjust normal value for

additional inland freight. Petitioners believe that the methodology

presented by Hylsa is inaccurate and distortive, given that Hylsa could

not tie specific freight charges to certain sales, that the amount of

total additional inland freight allocated to all home market sales was

questionable due to the non-reporting of certain small freight charges,

and that additional inland freight was allocated to certain home market

sales that would not normally incur freight (e.g., pick-up by the

customer). In addition, petitioners note that the verification report

indicated that it was possible for Hylsa to tie specific freight

charges to specific sales transactions. As a result, petitioners argue

that the Department should not make an adjustment to home market sales.

For the purposes of the cost-price comparison, petitioners believe that

the Department should allocate a minimum amount to all sales where the

reported freight was zero, and increase the overall value of home

market freight by taking the percentage of such sales that had

additional unreported freight, multiplying that by the total freight

charges, and allocating the result over all sales. These extra charges

should be deducted from all home market sales in the cost-price

comparison.

Hylsa contends that while it was possible to tie specific freight

charges to individual sales transactions, the lack of computerized

records of inland freight at the time of the review would have

necessitated a level of preparation that would be unreasonable.

Furthermore, Hylsa asserts that the allocation of additional inland

freight charges to sales that would incur no freight can be corrected

easily by setting the additional inland freight field to zero and

calculating additional freight using the cost methodology advocated by

petitioners in their case brief. Finally, Hylsa states that the

methodology of allocating additional inland freight, using the

corrections mentioned above, is the only reasonable method of making an

adjustment for the freight charges incurred.

DOC Position: We disagree with respondent in part. While the

Department agrees that requiring Hylsa to manually tie specific freight

charges to sales in this proceeding would be an undue burden, due to

the lack of computer records, the problems which still exist with the

data submitted on the record render it impossible to clarify these

freight charges. Even if they could be corrected, there would still be

unacceptable distortions.

As mentioned in the verification report, Hylsa has five separate

categories of freight charges. Additional inland freight was allocated

over all home market sales, regardless of the category of freight

charge. One of the freight categories is for pick-up, which would by

definition not incur a freight charge. Therefore, the allocation of

additional inland freight to these sales is inappropriate. We also note

that the total additional inland freight figure to be allocated is

incorrect, because Hylsa did not take into account certain freight

charges for local delivery sales. While included in Hylsa's calculation

for the total freight, these local delivery charges were not reported

for individual sales. Therefore, the total additional inland freight

figure (total freight incurred by Hylsa minus total freight charged to

customer) is inaccurate. Consequently, we agree with petitioners and

are disallowing the adjustment.

Finally, we note that Hylsa does maintain computer records that

would allow the company to tie freight charges to individual sales, but

that these records are usually destroyed after a short period of time.

The Department intends to examine this issue more closely in future

reviews.

Comment 6: Petitioners argue that the Department should not adjust

normal value for either advertising or warranty expenses. Petitioners

cite the verification report as indicating that the Department was

unable to verify the accuracy of these expenses.

Hylsa argues that Verification Exhibit 25 demonstrates that the

expenses were calculated accurately and that the Department verified

their accuracy.

DOC Position: We agree with petitioners. Hylsa prepared

verification Exhibit 25 and submitted it late on the last day of

verification. As stated in the verification report, ``[t]he

verification team sampled the calculation of advertising and warranty

for this sale. After attempting to calculate advertising and warranty

expenses, the company indicated that it could not reconcile the amounts

reported for this transaction. Company officials submitted a hand-

written calculation sheet which they stated showed the correct

calculation for these expenses.'' (Sales Verification Report, sales

trace at 20.) The verifiers did not have sufficient time to check the

accuracy and completeness of the worksheet. Therefore, we are

disallowing these adjustments.

Comment 7: Petitioners assert that the Department must adjust all

home market sales prices and adjustments for A-500 pipe to a

theoretical weight basis for comparison to the U.S. price. Petitioners

point to the verification report as affirming the fact that Hylsa made

sales of A-500 pipe in one market on a theoretical weight basis and in

the other on an actual weight basis. Since the variance between actual

and theoretical weight could be as much as ten percent, petitioners

advocate a specific adjustment based on the actual size of the pipe

sold in the home market.

Hylsa counters that petitioners assume that all pipe sold in the

home market is undersized, and that petitioners wish to penalize Hylsa

for information that it does not have on actual weights. In fact, Hylsa

states that pipe sold in the home market can be undersized or oversized

and still be within tolerance specifications. Therefore, no adjustment

should be made.

DOC Position: We disagree with petitioners. Hylsa is correct in

stating that the tolerances for A-500 pipe allow for both the under-

and over-statement of weight on a theoretical basis. Information on the

record is insufficient to indicate that Hylsa systematically produces

pipe which is undersized. Consequently, we are not making any

adjustment.

Comment 8: Petitioners assert that the Department must use facts

available for both U.S. and home market packing expenses. Petitioners

note that, while Hylsa claims that it uses only three straps for

packing a bundle of merchandise, the verification team observed

identical merchandise with different numbers of straps per bundle.

Petitioners also refer to Hylsa's U.S. product brochure, which

indicates that a bundle of pipe could have between six and eight straps

(see April 22, 1996 Section A questionnaire response, Exhibit 18).

Finally, petitioners state that Hylsa had the ability to calculate

actual packing costs. As facts available, petitioners advocate that the

Department calculate one packing cost for three straps for home market

sales, and a separate one for eight straps for U.S. sales.

Hylsa states that it could not report a separate packing cost for

different types of pipe. Regardless of the number of straps per bundle,

Hylsa maintains that the costs of packing for both the home and U.S.

markets are identical. Hylsa questions the observations of the

[[Page 37018]]

verification team, and states that the problem was not brought to the

attention of company officials. Therefore, Hylsa maintains that there

are a number of scenarios that could disprove the observations of the

team. Such scenarios include the possibility that the bundles may have

been wrapped with less than the normal number of straps while the pipes

were still in process, or that the pipes were bundled with fewer straps

than should have been used. Finally, Hylsa notes that the number of

straps per bundle is eight only when the bundle in question is double-

length pipe. Since the cost of packing is the same in both markets,

Hylsa continues to maintain that no further adjustment is necessary.

DOC Position: We agree with petitioners in part. As noted in the

sales verification report at 31, Hylsa stated that ``[i]n all

instances, each bundle of pipes is supposed to have three straps.

However, during the plant and storage facility tour, we noted that two

bundles of identical merchandise had different types of packing. One

bundle had three straps, while a second one had five. Company officials

had no explanation as to why this difference existed.'' On the other

hand, the U.S. product brochure indicates that six straps per bundle

are used for normal lengths of pipe for ASTM A-53 and A-500 (Hylsa

April 22 Sec. A response, Exhibit 18 at 7 and 20) (``Hylsa uses high

strength galvanized metal straps, 1.25 in (31.8 mm) wide. Single

Length: 6 Straps (double straps on each end and 2 single straps

distributed at the middle)''). Eight straps are used for double

lengths, according to the brochure. We also note that the brochure

states that A-500 is oiled and wrapped in paper. Information on the

record therefore indicates that the number of straps (and possibly

other packing materials) is different depending upon the market. Since

the number of straps is different, it is reasonable to assume that

labor and materials costs will be greater with the greater number of

straps. Therefore, total packing costs for each market are different.

Section 776(b) states that the Department has the authority to use

an adverse inference in selecting from among facts otherwise available

if an interested party has failed to cooperate by not acting to the

best of its ability to comply with a request for information. The

Department believes that the failure to report packing costs for both

markets constitutes grounds for the use of adverse facts available

under this section. Therefore, in accordance with section 776(b) of the

Act, the Department has examined cost verification Exhibit 19 and taken

the total historical peso figures for all cost centers involved in

packing, summed the total, and divided it by the total production of

pipe and tube as derived from sales Exhibit 19. The result is a per-ton

peso cost, which we have applied as adverse facts available to home

market sales and doubled for U.S. market sales.

Comment 9: Petitioners believe that the Department should make a

circumstance-of-sale adjustment for certain differences in discounts

between the U.S. and Mexico under 19 CFR 353.56. The differences, argue

petitioners, are clearly attributable to the differences between the

two markets with respect to the higher rates of interest in Mexico and

the attendant higher cost of carrying accounts receivable.

Hylsa states that petitioners assume that discounts are adjustments

to a price which has already been determined, while in reality they

determine the actual price. Hylsa cites previous Department rulings

that categorized discounts as reductions in the prices paid by

consumers, and not circumstances-of-sale adjustments. In particular,

Hylsa points to Industrial Belts from Italy, 57 FR 8295 (March 9, 1992)

to support its position.

DOC Position: We agree with respondent, and have not made any

circumstance-of-sale adjustments for differences in discounts. As

Industrial Belts from Italy states, ``[c]ash discounts represent

reductions in the price paid by the customer; they are not circumstance

of sale adjustments.'' (57 FR 8295, Comment 3). The CIT decision in

Mantex v United States, 841 F. Supp. 1290 at 1300 (CIT 1993) also

supports this position: ``This Court has consistently interpreted the

``directly related'' standard (under section 353.56(a)(1)) to require

(an interested party) to show the item for which the claim a COS

adjustment accounts for the differences in the prices of the sales

under review. In other words, to be entitled to a COS adjustment, an

(interested party) must demonstrate a `` `causal link' * * * between

the differences in circumstances of sale and the differential between

United States price and foreign market value''.'' Petitioners have not

established this link.

Comment 10: Petitioners believe that the Department should not

compare U.S. sales to home market sales which received the co-export

rebate, and that the Department may exclude such sales because they are

not sold for consumption in the exporting country and/or are not made

within the ordinary course of trade. As proof, petitioners cite the

nature of the co-export rebate program that these sales are neither

home market sales nor sales within the ordinary course of trade. The

fact that the price is lower for such sales, conditioned upon export of

a non-subject product, is evidence enough that these sales are not

normal home market sales and should be excluded.

Specifically, petitioners argue that the program is not a rebate at

all, but a separate price list for customers that prove they have

exported the transformed product to the U.S. Therefore, the co-export

price is not ``the price at which the foreign like product is first

sold * * * for consumption in the exporting country'' within the

section 773(a)(1)(B)(i) of the Act. Petitioners reason that since the

statute does not define `consumption in the exporting country, the

Department may give that phrase meaning at its discretion within the

antidumping law. In citing Chevron U.S.A. v. Natural Resources Defense

Council, 467 U.S. 837, 842-43 (1984), petitioners argue that the

meaning of ``consumption in the exporting country'' is ambiguous and

that the Department should not apply a rigid and unchanging set of

criteria to each and every case when deciding whether or not a product

is ``consumed'' in the exporting country. Rather, the Department should

examine each case and set of circumstances with the intention of

upholding the purpose of the antidumping statute, which is to prevent

injurious price discrimination on sales to the U.S. from foreign

countries.

Alternatively, petitioners argue that co-export sales were not made

in the ordinary course of trade. In defining ordinary course of trade

as ``the conditions and practices, which for a reasonable period of

time prior to the exportation of subject merchandise, have been normal

in the trade under consideration with respect to merchandise of same

class or kind,'' petitioners assert that the normal practice for

Hylsa's sales of standard pipe is to provide different prices for the

same product in the foreign market based upon subsequent re-export of a

transformed product. Petitioners further outline a set of criteria for

consideration of whether standard pipe is outside of the ordinary

course of trade based on the criteria that the Department used in

Laclede Steel Co. v. United States, Slip Op. 95-144 (CIT, August 11,

1995), 17 ITRD 2184 at 2187. That case involved sales of circular

welded non-alloy steel pipe from Korea. Those criteria included

differences in prices, profit, the number of customers who purchase

[[Page 37019]]

the product, the types of assurances given to these customers, the

basis of how the merchandise is sold, whether the end-users of the

merchandise are different from other sales, the quantity and size of

the sales, the percentage of such sales to all sales in the home

market, and the type of markings. According to petitioners, the co-

export rebate sales differ in price, the percentage of home market

sales, profitability, and the number of customers. Additionally,

petitioners propose that dual invoicing and the recording of such sales

on the ledgers separate from other domestic sales means that the

bookkeeping system is different for these sales.

Finally, petitioners state that even if the Department does not

consider these sales to be outside of the ordinary course of trade, it

has the authority under 19 CFR Sec. 353.44(b) or (c) to exclude sales

from consideration if their inclusion would not serve the purposes of

the antidumping statute. It then states, without further elaboration,

that the exclusion of co-export sales would be consistent with the

statute in this case.

Hylsa counters that the merchandise is clearly sold for consumption

in the home market, and that such consumption occurs (i.e., a

transformation of the product) prior to exportation. Hylsa also

maintains that other aspects of the sales, such as the quality

assurance, size of pipe, etc., are the same as other home market sales.

Finally, Hylsa notes that this program has been in existence for some

time and that the Department verified it during the original

investigation without making any further adjustments. Therefore, these

are ordinary home market sales and should be used in the calculation.

DOC Position: The Department closely analyzed all sales made by

Hylsa to the U.S. and in the home market during the period of review.

In our analysis, we found that none of the co-export sales by Hylsa in

the home market were used for the purposes of calculating normal value.

Specifically, they did not occur in the same months as the U.S. sales

and were not used for matching purposes. Therefore, the issue is moot

in this instance.

Comment 11: Petitioners state that, due to its finding that Mexico

experienced high inflation during the period of review, the Department

must compare U.S. sales to home market sales made in the same month.

DOC Position: We agree with petitioners and have correspondingly

adjusted the programming to compare U.S. sales to home market sales

made in the same month.

Comment 12: Petitioners note that the home market database for

Hylsa shows certain sales that are outside of the reporting window.

Petitioners request that the Department exclude these sales from its

analysis.

Hylsa notes that these are all co-export rebate sales, and that, in

following the guidelines set forth by the Department, the first invoice

date is reported as well as the second invoice date. Hylsa explains

that it is for this reason that these sales appear to be outside of the

reporting window. Hylsa argues that the actual date of sale is the

second invoice date, which is within the reporting window; therefore

the sales should not be excluded.

DOC Position: We agree with respondent. The Department has

consistently set the date of sale as the date when all terms of the

sale are finalized. Due to the nature of the co-export rebate program,

certain items (e.g. freight) might be modified or changed at the time

that the second invoice is issued. Therefore, we are not excluding

these sales on the basis of the date of the original invoice.

Comment 13: Hylsa states that the unit prices which it reported for

U.S. sales are net of movement charges. Therefore, respondent argues

that the Department should not deduct these charges a second time.

Hylsa indicates that its questionnaire response of June 24, 1996, for

this, the third administrative review, makes plain that the unit price

on U.S. sales listings is net of movement charges. It also points to

documents observed at verification, which indicate that the invoice

format breaks out the movement expenses. Hylsa provides an equation in

its case brief which it states proves that the gross unit price is

reported net of movement charges.

Petitioners note that the record is unclear, but that Hylsa's

responses strongly suggest that movement charges are included in the

unit price. Petitioners in particular point to Hylsa's May 30, 1996

submission as making statements in two instances that, in effect, the

gross unit prices of the U.S. sales were not net of movement charges.

While petitioners acknowledge that one verification exhibit seems to

indicate that the unit price is net of movement expenses, it also

stated that just because ``a single sale (Verification Exhibit 30)

appears to be listed without freight charges * * *'' does not mean that

the Department should assume that all other U.S. sales have the same

circumstances.

DOC Position: We reviewed Hylsa's questionnaire responses, the

verification report and the accompanying exhibits, and both Hylsa's and

petitioners' briefs on the issue. We can find no record of a June 24,

1996 submission by Hylsa for this review, as it references in its March

3, 1997 brief. There is, however, a June 24, 1996 submission for the

first and second reviews. Furthermore, an examination of Hylsa's May

30, 1996 submission for this review presents an unclear picture. In

describing the gross unit price for the U.S. sales, Hylsa stated that

the gross unit price ``[r]epresents the invoiced price to the customer

for one meter of material.''

At verification, the Department examined two sales by Hylsa to the

United States. Only one of these sales shows U.S. inland freight

charges on the invoice. As Hylsa noted in its March 3, 1997 brief, the

gross unit price reported to the Department for this one sale is net of

U.S. movement charges.

For these final results, the Department will not deduct U.S.

movement expenses for this single U.S. sale. Otherwise, the Department

will not deviate from its methodology in the preliminary results of

review of deducting inland freight charges from all of Hylsa's U.S.

sales where the reported terms of sale indicated that freight was

included in the price paid by the customer. This methodology is

consistent with Hylsa's statements on the record that the gross unit

price is the priced for one meter of pipe invoiced to the customer, and

with the terms of sale reported to the Department.

Comment 14: Petitioners argue that, since Hylsa did not report

packing costs for either market, and U.S. packing costs are

significantly different from those in the home market, the Department

should assign additional packing costs to constructed value on a facts

available basis. Barring the assignment of additional packing costs,

petitioners maintain that the Department should base the entire

constructed value figures on facts available. As previously stated,

petitioners rely in part on the observations of the verification team

as written in the verification report and on Hylsa's product brochure

to note that the difference between packing costs in the U.S. and home

market could be as great as 8/3 (eight straps used for bundling as

opposed to three). Petitioners also assert that Hylsa was able to

calculate packing costs, but chose not to do so. Finally, petitioners

state that all sales that must be compared to constructed value should

receive the original investigation rate as facts available.

Hylsa asserts, first, that it was not possible to calculate packing

for each individual product. Second, Hylsa states

[[Page 37020]]

that the Department's verification team did not raise the issue of

apparently identical merchandise with different straps and that it was

thus unable to substantiate whether the bundles in question were indeed

the same merchandise or in the same stage of production. Regardless,

Hylsa states that only the total aggregate cost of packing is important

to them and that there is no difference between the packing methods

used for identical merchandise sold in both markets. In addition, Hylsa

states that its brochure indicates that eight straps are used only for

bundles of double-length pipe. Finally, Hylsa states that the

Department can calculate normal value by using packed home-market

prices to compare to a packed U.S. price since the two packing costs

are identical.

DOC Position: We agree with petitioners. As partial adverse facts

available, we have calculated an average per-ton cost of packing in the

home market (as discussed in comment 8 above) and doubled it in the

U.S. market for the purposes of calculating both normal value and

export price. Rather than having no packing cost for the U.S., we have

included a figure that is twice that of the calculated packing cost in

the home market. For Cost of Production (``COP'') and Constructed Value

(``CV''), since the cost of packing is already incorporated indirectly

into the RCOM and CVCOP figures, we have not added additional packing

to the TOTCOM but have added half of the PACKU costs to CV to reflect

the doubling of packing costs in the United States.

Comment 15: Petitioners state that, since Hylsa did not report all

freight costs, or assign the freight costs properly when it had the

means to do so, the Department should base the entire cost-price

comparison on facts available and assume that all home market sales

were made at less than the cost of production. Barring this action,

petitioners believe that the Department should assign a minimum freight

cost to certain home market sales and increase the overall freight

charges by the percentage of home market sales with additional

unreported freight and deduct this from all home market sales.

Hylsa maintains that while it is able to assign freight accurately

on a transaction-specific basis, to do so would be labor intensive and

would not be a reasonable reporting option. In addition, Hylsa believes

that ``minor'' adjustments by the Department to the reported additional

inland freight charges will correct many of the extant problems.

DOC Position: As stated above, we agree with petitioners in part.

While we agree with Hylsa that assigning additional inland freight

accurately on a transaction-specific basis would be an undue burden for

this review, we believe that the reporting of all inland freight is

distortive for the reasons cited in comment 5 above. As noted in the

sales verification report (at 19), Hylsa had the ability to accurately

report certain types of freight unrelated to the additional inland

freight. In particular, the company did not report freight charges for

local delivery. Therefore, as adverse facts available, we are

increasing the movement expenses deducted from home market sales in the

cost/price comparison by a minimum freight charge where the reported

freight charge was zero for local delivery sales.

Comment 16: Petitioners argue that respondent's cost and

constructed values should be rejected as not properly capturing

accurate costs for the period. Petitioners cite a number of alleged

problems in support of their argument. First, petitioners state that

Hylsa did not calculate monthly costs of production properly. Rather

than calculating the costs based on the cost of iron ore through to the

finished pipe production, which petitioners believe is the proper

method of calculating said costs, petitioners allege that Hylsa used

the cost of coil transferred from the flat-rolled division and built

its cost calculation from that point. Petitioners note that this does

not represent a fully loaded monthly cost of production.

Second, petitioners maintain that the adjustments to the monthly

cost of the flat coil products were based on average annual data,

rather than monthly replacement costs, and thus result in a mis-

allocation of costs. Third, petitioners argue that Hylsa did not

correctly calculate the costs for iron ore purchased from affiliated

suppliers. Petitioners cite a loss made by one supplier in one month of

1995 and the effects of inflation.

Fourth, petitioners argue that Hylsa did not include scrap costs in

raw materials but rather in overhead. Petitioners assert that this

means that the coil cost adjustments in Appendix D-10 of the November

5, 1996 submission are not being applied to a fully yielded material

cost. Fifth, petitioners note that all costs were based on a single

average monthly coil cost (for all characteristics and grades of coil),

which, the petitioners assert, means Hylsa's cost are distorted since

thinner coil used for thinner pipe costs more than thicker coil for

thicker pipe.

Sixth, petitioners maintain that the flat products division

allocated all indirect costs in 1995 based on budgeted direct costs for

that year. Petitioners note that budgeted costs for 1995 were based on

the actual costs for 1994. Petitioners point out that actual direct

costs for 1995 were available at the time Hylsa submitted its section D

response. Petitioners maintain that Hylsa should have allocated

indirect steelmaking and rolling costs using its actual direct costs

for 1995, and that the failure to use these figures distorts the

reported costs, but it is impossible to determine how much.

Finally, petitioners believe that the allocation of product-

specific costs in the tubular products division by tonnage, rather than

by processing time or some other manner that acknowledges the extra

time needed to produce small diameter pipe, distorts the tube

processing costs. The sum of these errors and omissions, according to

petitioners, materially distorts the reported costs of production and

constructed value figures to the point that it renders them unusable

for the final results. Therefore, the Department should assign to Hylsa

the margin from the original investigation.

Respondent counters by stating that, contrary to petitioners'

claims, Hylsa began its calculation with the Flat Product division's

actual costs of manufacturing steel coil in each month. The

calculation, according to Hylsa, was based on the actual amounts paid

by the Flat Products division for raw materials inputs in the current

month, as well as actual fabrication costs incurred in the month.

Respondent notes that G&A and exchange gains and losses on purchases

were added to get a fully loaded cost of manufacturing for coil for the

month. Once this cost is transferred to the tubular products division,

respondent notes that it is used as the basis for calculating the

reported cost of materials for pipe production, as well as to determine

the scrap loss at each production stage. In summary, the respondent

asserts that the calculation is based on all actual costs incurred by

Hylsa starting with raw materials purchased from outside suppliers.

Respondent also counters that the costs of a raw material supplied

by an affiliate have been properly calculated. Respondent notes that

one affiliated iron ore supplier was profitable throughout the period

and for all of 1995. Respondent notes that there was a loss in only one

month and that the loss was not due to unrealistically low transfer

prices but an unscheduled disruption of production. Respondent goes on

to point out that the suppliers unit costs were 50 percent above

average during that month, since fixed costs were allocated over a

small quantity. Respondent argues that the

[[Page 37021]]

Department has held that fixed costs should be calculated in a manner

to avoid disruption of production quantities. The respondent cites Gray

Portland Cement and Clinker from Mexico, 58 FR 47253 at 47256

(September 8, 1993) and Gray Portland Cement and Clinker from Japan, 56

FR 12156 at 12165 (March 22, 1991). Respondent argues that the

Department should examine whether the affiliate recovered its costs

over an extended period of time rather than base the affiliates

profitability on one distortive month. Since the affiliate earned a

profit on eleven of the twelve months in the POR and for the year as a

whole, respondent argues that there is no reason to disregard the

transfer prices reported by Hylsa.

Respondent also states that it properly calculated the scrap cost

based on actual cost of steel coil obtained from the flat products

division. Respondent notes that it calculated the scrap loss amount for

each process by applying the percentage scrap loss rate to the adjusted

steel coil costs. The result is ``fully yielded materials costs.'' The

fully yielded cost of actual material was reported in direct materials

costs, the respondent notes, while the fully yielded cost of materials

lost during production was included in the overhead costs of the

appropriate process and allocated to products as they passed through

the production process.

Finally, respondent states that it used the normal accounting

system and normal cost calculations for both the Tubular (regarding

allocation based on tonnage rather than time) and Flat Rolled

(regarding differentiation of coil costs by size of coil and allocation

of certain overhead costs by standard percentages) divisions in

calculating its reported costs. Respondent refers to section 773(f)(1)

of the Act as evidence that the statute generally directs the

Department to use a company's normal cost accounting system, and to

Erasable Programmable Read-Only Memories from Japan, 51 FR 39680, 39688

(October 30, 1986) as evidence that the Department is generally

reluctant to deviate from a company's normal system.

Respondent argues that it in no way hid or mis-described the

methodologies used in its normal cost calculations. In closing,

respondent notes that its normal accounting system does not result in

the amount of distortion that petitioners suggest. Respondent notes its

product-specific cost calculation does allocate overhead based on

tonnage; however, the pipe sizes in each process are limited.

Respondent argues that Hylsa does not assign the same pipe forming

costs to all sizes of pipe. Respondent contends that each forming mill

is a separate process and each handles a limited range of pipe sizes.

DOC Position: We disagree with petitioners that Hylsa's COP and CV

should be rejected. We address each of petitioners comments below.

We found that Hylsa did report the actual cost of manufacturing

coil by the flat products division and not the transfer price. It

adjusted the cost of coil manufacturing by the flat product division's

exchange loss, its G&A, and another loss adjustment from a related

supplier, since these items were not included in the flat product

division's COM.

Second, while the above-mentioned exchange loss and G&A adjustments

to COM for coil were based on annual rather than monthly data, the data

were taken from constant currency financial statements. G&A is a period

expense, so using an entire year eliminates seasonal fluctuations.

Moreover, the respondent's use of constant currency financial

statements in determining the G&A expense ratio neutralizes the effects

of inflation in the calculation.

Regarding the adjustments for loss by an iron ore producing

affiliate, we asked the respondent to report the higher of the transfer

price, market price or cost for all major inputs obtained from

affiliated parties (including iron ore). The respondent used transfer

price with one adjustment for loss. The loss adjustment was based on a

constant currency financial statement, which takes into account the

effects of inflation. The respondent noted that another supplier's loss

in one month was caused by an unscheduled disruption.

We have asked for monthly reporting in this case to account for the

effects of inflation. We have taken reported conversion costs and

indexed them to the end of the period, weight-averaged them, and then

indexed the average unit cost for each product back to the month in

question. This approach accounts for inflation and smooths out the

conversion costs over the reporting period. We therefore have allowed

Hylsa to apply the same approach to the loss adjustment by the

affiliated supplier. Since the constant currency financial statements

indicate no loss for the year, we are not making an adjustment.

With respect to the issue of scrap cost accounting, the scrap used

as input to the coil manufacturing process would be reported in direct

materials. The scrap yield costs (less related revenue) were reported

in variable overhead. The scrap yield percentage at the first stage was

divided by cumulative yield and multiplied by the adjusted input coil

costs (direct materials costs). The result was reported in variable

overhead.

Regarding the accounting for various costs, it is the Department's

practice to calculate costs based on the records of the producer if

such records are kept in accordance with the GAAP of the producing

country and reasonably reflect the costs associated with the production

of the merchandise. See New Minivans from Japan, 57 FR 21937, Comment

21 (``The Department typically allows individual respondent companies

to report the production costs of subject merchandise as valued under

their normal accounting methods and following GAAP of their home

country.'') At verification, the Department verified Hylsa's cost

methodology and, based on the information on the record, found that it

was in accordance with Mexican GAAP.

We found at verification that Hylsa's pipe and tube division keeps

in its records one cost for hot-rolled coil. Hylsa's flat product

division's reported costs were based on its accounting system.

Therefore, the allocation of indirect costs is based on Hylsa's books

kept in the normal course of business. Regarding allocation of product-

specific costs on the basis of tonnage rather than time, based on the

information on the record, we found that Hylsa's methodology was in

again accordance with Mexican GAAP. In all three cases, we found no

evidence that this methodology materially distorts the production costs

for sales during this period of review. However, we intend to continue

to examine these issues closely in future reviews.

The respondent also used surface area to allocate zinc costs. Once

again, the Department normally calculates costs based on the records of

the producer if such records are kept in accordance with the GAAP of

the producing country and reasonably reflect the costs associated with

the production of the merchandise.

For the above-mentioned reasons, the Department agrees with

respondent and has used the submitted cost of production figures

Comment 17: Petitioners argue that the Department should reject

Hylsa's COP/CV response as unverified. Petitioners state that at the

outset of verification Hylsa submitted a revised cost database that

allegedly corrected errors. Petitioners note that this database did not

correct an error in production quantities identified by the Department

at verification. Petitioners state that the Department could not

[[Page 37022]]

verify the first database, after which Hylsa submitted another database

which also corrected other un-described minor errors. Petitioners argue

that it is the Department's policy not to accept ``substantially new''

information at verification. Petitioners cite as precedent Circular

Welded Carbon Steel Pipes and Tubes from Thailand, 51 FR 3384, 3386

(January 27, 1986). Petitioner note that the Department's regulations

state that new factual information will not be accepted more than 180

days after the initiation of the review. Petitioners assert that the

Department should therefore base the final results on facts available.

Respondent counters that its errors were not intentional and do not

call into question the integrity of Hylsa's response. Respondent notes

that the product specific cost calculation, used to calculate

individual pipe product costs, was not operational during 1995 because

of a change in Hylsa's accounting system. Respondent asserts that to

report costs to the Department Hylsa had to convert the product

specific cost calculation to work with new accounting numbers on the

new system, in place of old accounting numbers, and that this matching

process took a lot of effort. Respondent notes that for a variety of

reasons Hylsa was unable to completely check all account conversions

before verification. Respondent goes on to note that some minor

mistakes were discovered and promptly brought to the Department's

attention. The respondent further argues that in the end it was able to

provide corrected cost calculations. Respondent cites Ferrosilicon from

Brazil, 59 FR 732, 736 (January 6, 1994) as precedent for accepting

corrections to errors ``as long as those errors are minor and do not

exhibit a pattern of systematic misstatement of fact.''

DOC Position: We disagree with petitioners that Hylsa's cost

response should be rejected as unverified. The practice of the

Department is to accept minor corrections at the start of verification.

When we received the first revised database at the outset of

verification, Hylsa noted that it contained all minor error corrections

which were due mainly to the account number conversion as cited by

respondent above.

The Department accepted a revised database (fixing the first and

second set of minor errors, as well as the production quantity error)

from the respondent, since the first and second set of errors were

minor in nature and the production quantity error appeared to be

inadvertent. In Ferrosilicon from Brazil, the Department found that the

respondents mistakes found during the course of the investigation, when

taken as a whole, did not support a claim of respondent's non-

cooperation. The Department also stated in that case that it followed

its practice of correcting errors found at verification as long as

those errors are minor and do not exhibit a pattern of systemic

misstatement of fact. Therefore in the present case, we are continuing

to use Hylsa's revised cost database.

Comment 18: Petitioners assert that Hylsa misreported G&A expenses

by reporting the G&A only for the Tubular Products division rather than

the company as a whole. Petitioners cite to the Cost Verification

report at 2 and 36-37. The petitioners note that Hylsa did this even

though Hylsa claims that for coil cost reporting purposes the Tubular

and Flat Product divisions are not separate entities. Petitioners argue

that it is the Department's policy to use the G&A for the entire

operating entity. Petitioners believe that G&A has thus been

misreported, and asserts that if the Department does not base the final

results on facts available, it should adjust G&A costs based on the

reported unconsolidated G&A for Hylsa and corporate charges from the

parent companies.

Hylsa counters that it reported G&A expenses on a ``layered''

calculation that allocated G&A expenses for each company and division

over the sales to which those G&A expenses related. Hylsa argues that

petitioners' argument mis-describes Hylsa's G&A calculation and is also

contrary to the Department's established practice.

Hylsa states that there may have been some confusion due to the

fact that the allocated G&A expenses of the Flat Products division were

not included in the G&A expenses reported in the original cost

submission. However, Hylsa states that the G&A expenses related to the

Flat Products division were included in the cost of the coil produced

and subsequently included into the Tubular Products division's cost of

materials. Furthermore, Hylsa states that the Department has never held

that G&A expenses at all levels of a corporation should be lumped

together and allocated over the total cost of goods sold.

Hylsa asserts that the Department has routinely adopted a layered

approach in the past that allocates G&A expenses at each corporate

level over the cost of goods sold at the same level, citing Flat Panel

Displays from Japan, 56 FR 32376, 32398-99 (July 16, 1991) as an

example. Therefore, Hylsa argues that there is no basis for rejecting

the G&A calculation.

DOC Position: We agree with petitioners that an adjustment to

Hylsa's G&A is necessary. In the preliminary results of this review, we

calculated an adjusted G&A as follows: Hylsa's unconsolidated G&A less

corporate charges from Hylsa's parents, divided by Hylsa's

unconsolidated cost of goods sold; plus a portion of the two parent

companies' G&A (as calculated by Hylsa). We allowed the deduction of

corporate charges from Hylsa's G&A since we were separately including a

portion of each parent's G&A into the calculation. The Department's

questionnaire stated that G&A expenses relate to the activities of the

company as a whole rather than to the production process alone. It also

stated that Hylsa should include an amount for administrative services

performed on the company's behalf by its parent company. For these

reasons, we are continuing to make the adjustment, as describe above,

that we made in the preliminary results of this review.

Comment 19: Petitioners argue that Hylsa did not report costs for

adding lead to the galvanizing pot and for amortized costs of replacing

the pot. Therefore, the petitioners assert that an appropriate

adjustment to the reported galvanizing costs in COP and CV is

necessary.

DOC Position: We agree with petitioners that respondent did not

include these costs. In the preliminary results of this review, we made

an adjustment to variable overhead in COP and CV to account for these

costs. We have continued to make this adjustment in this final

determination.

Comment 20: Petitioners maintain that the Department must adjust

the July 1995 costs for capitalized fixed costs for Plant 2.

Specifically, petitioners believe that Hylsa did not include any fixed

costs for this plant due to it being in a start-up period. Therefore,

the Department should substitute fixed costs for a period at the end of

the start-up period in accordance with section 773(f)(1)(C)(iii) of the

Act. Otherwise, July 1995 costs are understated.

Hylsa responds that it reported the July 1995 costs according to

its normal accounting practices and Mexican GAAP. Under the statute,

the Department is required to use the costs as recorded in a

respondent's normal accounting records. Since Hylsa reported the costs

using its normal accounting records, there should be no adjustment.

Finally, Hylsa argues that the revision advocated by petitioners would

have an ``insignificant'' effect upon the Department's calculation.

However, should the Department decide to apply December 1995 costs

to

[[Page 37023]]

the July coils, Hylsa believes that the Department should restate the

nominal December costs to eliminate the effects of inflation.

DOC Position: We agree with petitioners. It is the Department's

practice to calculate costs based on the records of the producer if

such records are kept in accordance with the GAAP of the producing

country and reasonably reflect the costs associated with the production

of the merchandise. In this case, the costs to produce the merchandise

for July are not fully reflected in reported costs, since no fixed

costs are reported for plant #2 in July. After a further review of

verification exhibits, we have found that products were also sourced

from plant #2 in other months as well and no fixed costs were reported

for those months either. The first month for which fixed costs are

reported by Hylsa is in December.

While this practice appears to conform with Mexican GAAP, we

determine that it does not reasonably reflect the costs associated with

production of the subject merchandise. Since this is the only

information we have as to the fixed costs of plant #2, we have used the

December unit fixed costs as a surrogate for July and other months for

which no fixed costs were reported. Even if the effect of this

adjustment is insignificant as respondent argues, we are still making

the adjustment to ensure that all costs are reasonably reflected. In

agreement with respondent, we have indexed these costs back to each

applicable month by the CPI, which is used in other indexing throughout

this review. The increase in unit coil costs in each month was then

further yielded by the flat products division's exchange loss and G&A

and the further loss adjustment made by Hylsa. The total increase in

coil costs after other yields was added to the reported cost of

manufacturing.

TUNA

Comment 21: As with Hylsa, petitioners argue that the Department

should presume reimbursement on the part of TUNA to Acerotex, since the

two parties are affiliated and TUNA apparently exercises control over

the operations of Acerotex. Additionally, petitioners state that

Acerotex has virtually no other function in U.S. sales other than to

post the cash deposit for estimated antidumping duties. In return for

this function, Acerotex receives a commission that is far less than the

amount of cash deposits posted. Because mechanisms for reimbursement

exist and the fact that TUNA can exercise control over Acerotex (and

thus manipulate prices in such away that the result would be

circumvention) petitioners argue that the Department should collapse

the two entities into one for the purposes of reimbursement analysis

and presume reimbursement. Petitioners cite Color Television Receivers

from the Republic of Korea, 61 FR 4408 at 4411 (February 6, 1996) in

support of their contention.

TUNA states that the Department did a thorough examination of

Acerotex's books and found no evidence of reimbursement or an agreement

to reimburse. TUNA further states that presuming reimbursement based on

affiliation or what might happen in the future is improper as a matter

of law. In addressing Korean TVs, TUNA states that the citation does

not support petitioners' position but in fact supports its contention

that the Department cannot presume reimbursement.

DOC Position: We agree with respondent. Section 353.26 of the

Department's regulations requires the Department to deduct from United

States price (now EP or CEP) the amount of any antidumping duty paid,

or reimbursed, by the producer or exporter, thereby increasing the

amount of the duty ultimately collected. 19 CFR 353.26(a) (1996). The

Department has interpreted this regulation as applying regardless of

whether the importer is affiliated to the producer or exporter.

As the Department stated in Korean TVs, however, ``[t]his does not

imply that foreign exporters automatically will be assumed to have

reimbursed related U.S. importers for antidumping duties by virtue of

the relationship between them.'' 61 FR at 4411. The regulation requires

``evidence beyond mere allegation that the foreign manufacturer either

paid the antidumping duty on behalf of the U.S. importer, or reimbursed

the U.S. importer for its payment of the antidumping duty.'' Federal-

Mogul Corp., 918 F. Supp. at 393 (citing Torrington Co. v. United

States, 881 F. Supp. 622, 631 (CIT 1995)).

In the present review, we found no evidence of inappropriate

financial intermingling between TUNA and Acerotex. The Department

verified that Acerotex is responsible for all cash deposits.

Petitioners are correct that Acerotex had established a general ledger

provision in its accounting records with respect to antidumping duties.

However, we found no evidence that this account was in any way related

to reimbursement of these duties.

In Korean TVs, the Department specifically stated that it would not

presume reimbursement between affiliated parties absent a clear and

irrefutable reimbursement agreement between them. The Department found

neither evidence of an agreement between TUNA and Acerotex for

reimbursement of antidumping duties, nor the actual reimbursement of

these duties between the two affiliated parties. Collapsing the two

companies together for the purposes of reimbursement, as petitioners

advocate, would be contrary to past practice. While the Department does

sometimes ``collapse'' affiliated parties for purposes of the margin

calculation, the Department has consistently treated such parties as

separate entities when examining the question of reimbursement.

Consequently, we are not presuming reimbursement.

Comment 22: Petitioners state that the Department must compare U.S.

sales to home market sales made in the same month, due to the effects

of high inflation.

TUNA states that, should the Department index for sales that are

not within the same month, it should use the index used in indexing

costs and also index the VCOM used to calculate the DIFFMER adjustment.

DOC Position: We agree with petitioners, and have adjusted the

programming accordingly. See also Comment 11. Because we matched each

U.S. sale to home market sales in the same month, all VCOM and DIFFMER

figures properly reflect costs for that month. Therefore, we are not

making any further adjustment.

Comment 23: Petitioners state that the Department should reaffirm

its preliminary determination and not grant a level-of-trade

adjustment. Petitioners state that the Department was correct in

finding that there was not a ``consistent'' price differential between

home market sales at different levels of trade. While there may have

been differences, they varied greatly from month to month and did not

indicate a consistent pattern of price differentials over the entire

POR, even adjusting for inflation.

TUNA argues that petitioners are incorrect and that information in

its case brief demonstrates that there is in fact a consistent price

difference based on different levels of trade.

DOC Position: We agree with petitioners. While we found that two

distinct levels of trade exist, our analysis does not show a pattern of

consistent price differences between the two levels. In fact, the

differences fluctuate greatly from month to month. Therefore, we are

not changing our position from the preliminary results of review.

Comment 24: Petitioners argue that the Department's position in the

[[Page 37024]]

preliminary determination of excluding home market sales with missing

or negative values from consideration was incorrect. Instead,

petitioners argue that such sales should be based on facts available.

Petitioners believe that the verification of TUNA uncovered numerous

small errors and omissions, which in their totality compel the use of

facts available.

TUNA responds that the Department's treatment of home market sales

with missing or negative values is consistent with past practice and

reasonable. Therefore, no changes should be made. TUNA notes that the

sales disregarded are those with zero values in the QTYH and GRSUPRH

fields, and that the total number of sales under consideration is

seven; an extremely small number in comparison to the entire home

market data set. Finally, of the seven with missing values, TUNA notes

that none of these was used in the calculation of normal value.

Therefore, petitioners' statement that it was impossible to state what

prejudicial effect these sales would have is incorrect.

DOC Position: We agree with respondent. While the Department did

discover small errors and omissions during verification, most of these

were corrected easily and do not merit, in our opinion, the use of

facts available (except as otherwise noted). Finally, the seven sales

in question were not used in the calculation of normal value since they

did not match in the month of a U.S. sale and thus have no impact on

the margin. Therefore, this issue is moot.

Comment 25: TUNA contends that the Department erred in conducting a

sales-below-cost investigation. The basis for this error, according to

TUNA, is that petitioners' request was untimely. TUNA takes issue with

the Department's August 7, 1996 decision memorandum regarding the

initiation of this cost investigation, particularly with the

Department's decision that TUNA's initial section A, B and C responses

were both untimely and incomplete and therefore the 120-day deadline

for filing a below-cost allegation did not apply (19 CFR 353.31(c)(1)).

TUNA contends that its responses were timely and complete, and that

they were filed prior to the allegation of sales below cost. Finally,

TUNA states that petitioners failed to preserve their right to submit a

cost allegation by failing to submit an extension request prior to the

expiration of the 120-day deadline.

Petitioners claim that the Department properly initiated a sales-

below-cost investigation. First, petitioners state that the cost

investigation has already proven the validity of the initial

allegation. Second, petitioners state that portions of the filing made

by TUNA occurred subsequent to the expiration of the 120-day deadline.

Using TUNA's logic, petitioners claim, any respondent that delays its

filing until after the expiration of the 120-day time limit is immune

from a below-cost investigation.

DOC Position: We agree with petitioners that its allegation was not

untimely. As stated in our cost initiation memorandum of August 8,

``[w]ith respect to the respondent's claim that petitioners''

allegation was untimely filed, we note that TUNA's questionnaire

response was not received until after the 120-day deadline for COP

allegations set out by 19 CFR 353.31(c)(ii).'' The Department's

established practice in such situations is to use its discretion in

determining what constitutes a reasonable time limit for making a sales

below cost allegation. See Certain Forged Steel Crankshafts From the

United Kingdom, 60 FR 52150 at 52153 (Oct. 5, 1995). See also

Memorandum from Linda Ludwig to Richard Weible, August 8, 1996 at 3).

Therefore, the cost investigation was properly initiated.

Comment 26: TUNA asserts that the Department erred in disregarding

certain below-cost sales without first determining whether all costs

were recovered ``within a reasonable period of time.'' TUNA states that

the margin program used by the Department had no test for determining

recovery of costs, and that the Department should include program

language that will perform the test and account for inflationary

effects.

Petitioners state that the Department properly applied the test in

the margin calculation program, and has already accounted for the

effects of inflation by having monthly historical costs indexed to

December, summed, averaged, then indexed back by month.

DOC Position: We disagree with respondent. As we stated in our

preliminary results, ``[w]here 20 percent or more of a respondent's

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

COP, we found that sales of that model were made in `substantial

quantities' within an extended period of time, in accordance with

sections 773(b)(2) (B) and (C) of the Act, and were not at prices which

would permit recovery of all costs within a reasonable period of time,

in accordance with section 773(b)(1)(B) of the Act.''

Section 773(b)(2)(D), cited by TUNA in its case brief, states the

following: ``Recovery of costs.--If prices which are below the per unit

cost of production at the time of sale are above the weighted average

per unit cost of production for the period of investigation or review,

such prices shall be considered to provide for recovery of costs within

a reasonable period of time.'' This section therefore defines

``reasonable period of time'' as outlined in section 773(b)(1)(B) as

being the period of review or investigation.

In a non-inflationary economy, the Department calculates a single

weight-average cost of production per product for the entire POR. By

inference, any sales which are below the per unit cost of production at

the time of sale would remain below the weighted average per unit cost

of production for the POR, since the cost of production would not

change over the POR. The only time that the cost of production might

change within the same POR is in cases where a respondent has provided

multiple costs of production per product within a single POR. In such

instances, sales below the per unit cost of production for one reported

cost period might be above the average per unit costs for the entire

POR.

In this case, TUNA did report multiple per unit costs for the same

product. Specifically, in accordance with instructions from the

Department, TUNA reported monthly per unit costs for each product due

to the effects of high inflation. However, as noted by petitioners, the

Department did index each of these per unit costs for inflation and

then calculated a weight-average, per unit cost for the POR as it would

normally do in a non-inflationary review. Therefore, the Department has

already compared individual home market sales to a weighted average

cost for the entire POR. Thus, as explained above, we have performed a

recovery of cost test which takes into account the effects of

inflation. For these reasons, no further test is necessary.

Comment 27: Petitioners state that the COP and CV in the final

results should be based on facts available, saying that problems found

at verification render TUNA's cost and CV data unusable. Petitioners

note that TUNA allocated finishing line costs on the basis of weight,

since TUNA claimed that finishing takes the same time regardless of the

diameter for each pipe, since each has the same length. Petitioners

argue that this proposition is wrong. The petitioners assert that while

each individual pipe may have the same length, pipe of different

diameters have different total lengths per ton and a different number

of pieces per ton. Therefore, the petitioners assert that smaller

diameter pipe will require more finishing time and expense. Petitioners

argue that despite the fact that the

[[Page 37025]]

Department found all costs are being absorbed on a macro basis, those

costs are being allocated inaccurately in a way that benefits TUNA and

prejudices an accurate dumping margin calculation. The petitioners note

the same problem exists for threading line expenses. The petitioners

argue that TUNA originally claimed that it allocated these costs by

time, but now states that such an allocation is not possible because

time is not recorded by diameter. Petitioners assert that TUNA could

have allocated threading time over the total number of pieces threaded,

which would have provided a more accurate allocation than weight.

Petitioners further state that varnishing line allocations were also

based on weight and suffer the same defect as threading and finishing

allocations. The petitioners argue that the amount of time it takes to

varnish a particular type of pipe depends on either the number of

pieces varnished or the surface area of the pipe, further arguing that

an allocation based on number of pieces varnished would be the most

accurate.

Petitioners further assert that TUNA rounded zinc consumption,

which may have caused an under-or over-allocation of galvanizing costs.

In addition, petitioners note that when the Department found that it

could not reconcile TUNA's reported packing costs with those in the

sales response, TUNA revised the cost exhibit to match the figures in

the sales response. The petitioners argue that TUNA incorrectly based

its packing labor on historical rather than indexed replacement costs.

Also, petitioners argue that TUNA indexed coil prices using the

consumer price index rather than the wholesale price index. Petitioners

assert that since wholesale prices were growing faster than consumer

prices during the period, the use of the consumer price index tends to

understate the indexed monthly costs. The petitioners argue that the

Department generally prefers the wholesale or producer price indices

for costs other than labor costs. The petitioners assert that if the

Department does not base the final results on the facts available, it

should re-index costs using the wholesale price index.

The petitioners assert that these problems are not insignificant

and seriously prejudice the calculation of COP and CV. The petitioners

argue that the Department should determine that the necessary

information is not on the record and that COP and CV could not be

completely verified as a result, and therefore the petitioners further

assert that the Department should base its final results on facts

available pursuant to sections 776(a) and 782(e) of the Act.

TUNA asserts that, except for a few minor errors, the Department

verified the accuracy of the reported information. TUNA states that use

of weight-based allocations of fabrication expenses is reasonable and

has been used by the Department in the past. TUNA cites Certain Welded

Stainless Steel Pipes from Taiwan, 57 FR 53705 (November 12, 1992), in

which, TUNA notes, the Department allocated direct labor and factory

overhead costs based on the relative weight of each pipe. TUNA asserts

that the Department concluded that allocating fabrication expenses

equally over production tonnage was a reasonable allocation base

because these costs are primarily a function of tonnage, not steel type

or size. TUNA further notes that in its final determination in Pipe

from Taiwan, the Department stated that such an allocation did not

materially affect the cost calculation because labor and factory

overhead represented a small part of the total cost of production. TUNA

also cites Welded Stainless Steel Pipe from Malaysia, 59 FR 4023 at

4026-27 (January 28, 1994), in which the Department determined that

allocation of processing costs was reasonable. TUNA argues that the

Department's conclusion in past proceedings that a weight-based

allocation is reasonable applies equally in this review. TUNA notes

that the cases cited are also for welded pipe. TUNA also notes that the

costs involved represent a small part of both the total processing

costs and total cost of production.

Furthermore, TUNA argues that there is no evidence that the use of

weight-based allocations is distortive. TUNA further notes that its

methodology is used in its normal course of business. TUNA argues that

the unsupported theory that allocating fabrication expenses might be

distortive does not provide a legitimate basis for rejecting its

methodology. TUNA cites The Timken Company v. United States, 809 F.

Supp. 121, 124 (CIT 1992), in which the court rejected petitioner's

argument that respondent's allocation methodology should be rejected

because petitioner offered no evidence to show that Koyo's information

was unreliable, nor had petitioners offered any data more probative

than Koyo's. In addition TUNA notes that the fact that there might be

other equally valid ways to allocate fabrication expenses does not

provide a legitimate basis for rejecting TUNA's verified response. TUNA

also asserts that the Court of International Trade has stated that

allocation is necessarily an inexact science and is simply a way to

estimate costs incurred by the firm to manufacture the product. Such

costs vary even among firms in the same industry (Floral Trade Council

v. United States, 822 F. Supp. 766, 722 (CIT 1993)).

Concerning zinc, TUNA maintains that any distortion created by the

rounding of its zinc consumption is immaterial. TUNA notes that there

is no evidence to conclude that consumption was systematically rounded

up or down and that rounding caused any inaccuracy. TUNA argues that

even in the worst case scenario the effect on materials costs per

metric ton would be negligible.

TUNA argues that petitioners misinterpret the verification of its

packing expenses. TUNA asserts that it based its packing costs on

historical costs after conferring with the Department. As to the

inflation indices, TUNA states that the index used is the same as that

used under Mexican GAAP to prepare annual financial statements and the

same as it uses in the ordinary course of business. In addition, TUNA

asserts that petitioners have no evidence that its index is inaccurate.

DOC Position: We disagree with the petitioners' contention that the

methodologies used by TUNA to prepare its COP/CV responses warrant

wholesale rejection of those responses and the use of facts available.

Section 776(a)(1) of the Act states that if necessary information is

not available on the record, the Department ``[s]hall, subject to

section 782(d), use the facts otherwise available in reaching the

applicable determination under this title.''

We conducted numerous tests, described in our cost verification

report, which supported the overall reasonableness of the reported

data. Since TUNA's reported costs are in general reliable, we find that

the application of total facts available is not warranted. Below, we

discuss each of the points raised by petitioners as enumerated above.

Regarding the allocation of finishing line, threading line, and

varnishing line costs on the basis of weight, we agree with respondent.

In this instance, the costs at issue represent only a small portion of

the total production cost of the subject merchandise. Thus, there is no

evidence on the record of this review that would suggest that TUNA's

normal allocation method would materially distort costs in this review

period. Moreover, the Department's December 17, 1996, cost verification

report indicates that adequate records of time by diameter were not

kept by TUNA for threading and varnishing and, therefore,

[[Page 37026]]

it was not possible for the company to allocate costs in the manner

suggested by petitioners. Accordingly, we find TUNA's allocation

methodology is reasonable in light of the specific circumstances of

this case.

With regard to zinc consumption, we agree with respondent. Even if

the zinc consumption was overestimated as petitioner contends, the

effect on the company's total zinc material costs would be negligible.

With regard to the packing labor being reported on a historical

basis, we disagree with petitioners. For purposes of cost, the packing

labor is deducted from other costs and reported separately in a packing

field. When this deduction is made, the other conversion costs are on a

historical basis (reported in the currency value of the month in which

they are incurred); therefore, the packing labor must also be on a

historical basis for a proper deduction.

Finally, regarding the use of the consumer price index for indexing

coil costs, we agree with respondent. We found that TUNA uses the

consumer price index in its normal course of business and it is

required by Mexican GAAP to prepare constant currency financial

statements. As such, the consumer price index has been used throughout

the response for materials costs, conversion costs, G&A, and interest.

We do not find it unreasonable to use the index accepted by Mexican

GAAP to index costs in this case.

Comment 28: Petitioners state that the Department should adjust

July 1995 materials cost for a credit that did not relate to raw

materials purchases, as it did in the preliminary determination.

DOC Position: We agree with petitioners and have continued to make

the adjustment that we made in the preliminary results of this review.

Comment 29: Petitioners note that TUNA amortized major maintenance

and shutdown costs over the remainder of the year and that, at

verification, TUNA provided a reallocation of those costs to months in

which they were incurred. The petitioners urge that the Department use

reallocated costs if it relies on TUNA's submitted costs for the final

results.

DOC Position: We agree with petitioners. TUNA submitted a revised

cost database (containing the reallocated major maintenance and

shutdown costs to the months in which they were incurred) after

verification and before the preliminary results. We used the

reallocated costs in our preliminary results of review and have

continued to use them in this final results of review.

Comment 30: Petitioners state that the Department should base G&A

on TUNA's G&A, rather than the rate for all group companies. The

petitioners note that for the preliminary results, the Department

calculated a revised G&A percentage, and petitioners assert the

Department should apply this rate in the final results as well.

DOC position: We agree with petitioners and, as in the preliminary

results of this review, have continued to use the revised G&A (for TUNA

only) percentage.

Comment 31: Petitioners assert that TUNA recorded all foreign

exchange rate gains and losses as part of financing costs and was

unable to differentiate foreign exchange gains and losses on raw

materials purchases from other types of foreign exchange gains and

losses. Therefore, petitioners state that all exchange rate gains and

losses should be excluded from the calculation of interest expense.

TUNA contends that it properly accounted for exchange rate gains

and losses in the interest expense calculation. TUNA points to the cost

verification report as affirming that it had excluded gains or losses

relating to receivables from the interest expense calculation, citing

cost verification Exhibit 37 as illustrating how gains and losses

relating to carrying receivables were excluded from the calculation.

TUNA notes that it removed from the total net interest expense the

gain/loss in monetary position and on foreign exchange related to

accounts receivable. TUNA concludes that petitioners have apparently

misinterpreted the line item ``exchange (gain) loss customers'' as

representing all foreign exchange gains and losses, not just those

associated with receivables. TUNA notes that petitioners' argument is

therefore based on erroneous analysis and should be disregarded.

DOC Position: We disagree with petitioners that all exchange rate

gains and losses should be excluded from the calculation of interest

expense.

It is the Department's normal practice to distinguish between

exchange gains and losses from sales transactions and exchange gains

and losses from purchase transactions. Accordingly the Department does

not include exchange gains and losses on accounts receivable. The

Department includes, however, foreign exchange gains and losses on

financial assets and liabilities in its COP and CV calculation where

they are related to the company's production. Financial assets and

liabilities are directly related to a company's need to borrow money,

and we include the cost of borrowing in our COP and CV calculations.

See, e.g., Small Diameter Circular Seamless Carbon and Alloy Standard,

Line and Pressure Pipe from Italy, 60 FR 31981 at 31991 (June 19,

1995). Also, it is the Department's normal practice that foreign

exchange gains and losses on the purchase of raw materials used in

production of subject merchandise relate directly to the acquisition of

input materials and should be included in the cost of manufacture. See,

e.g., Silicomanganese from Venezuela, 59 FR 55436 (November 7, 1994).

In the present case, TUNA has excluded from reported costs exchange

gains/losses related to customers, i.e. those related to accounts

receivable or sales transactions. It included exchange gains/losses

related to purchase of raw materials as part of interest expense rather

than cost of manufacturing, because it does not distinguish between

exchange gains and losses on raw materials and exchange gains and

losses on other payables in its normal course of business. Since the

company did not include exchange gains and losses on accounts

receivable / sales in its reported costs and since it cannot

distinguish exchange gains and losses related to raw materials from

those related to other payables, we have made no adjustment to

respondent's interest expense calculation.

Comment 32: Petitioners state that since all of TUNA's costs appear

to be presented on a theoretical weight basis, the Department should

not make an adjustment to reported costs for differences between actual

and theoretical weight. The petitioners note that TUNA could not state

definitely whether the reported costs were based on actual or

theoretical weights, finally settling on claiming that it had reported

costs on an actual weight basis and presented a conversion factor. The

petitioners note that TUNA did not document its conclusion with

records. The petitioners assert that the record reveals costs were

allocated on a theoretical weight basis. The petitioners note that

while the unit costs were based on actual costs of acquisition,

allocations were based on nominal dimensions of the pipe produced.

Therefore, the petitioners assert such allocation is based on

theoretical weight.

DOC Position: We agree with petitioners. While unit costs were

based on actual costs of acquisition, allocations were often made on

nominal dimensions of the pipe produced. Therefore, we have not made

any adjustment.

[[Page 37027]]

Final Results of the Review

As a result of this review, we determine that the following

weighted-average dumping margins exist:

Circular Welded Non-Alloy Steel Pipes and Tubes

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

Weighted-

Producer/manufacturer/exporter average

margin

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

Hylsa...................................................... 2.99

TUNA....................................................... 1.77

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

The Department shall determine, and the Customs Service shall

assess, antidumping duties on all appropriate entries. Individual

differences between United States price and foreign market value may

vary from the percentages stated above. The Department will issue

appraisement instructions directly to the Customs Service. Furthermore,

the following deposit requirements will be effective upon publication

of this notice of final results of review for all shipments of circular

welded carbon steel pipe from Mexico entered, or withdrawn from

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

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

rates for the reviewed company will be the rate for that firm as stated

above; (2) for previously reviewed or 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 less than fair value

(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) if neither the exporter nor

the manufacturer is a firm covered in this review, the cash rate will

be 36.00 percent. This is the ``all others'' rate from the LTFV

investigation. These deposit requirements, when imposed, shall remain

in effect until publication of the final results of the next

administrative review.

This notice serves as a final reminder to importers of their

responsibility under Sec. 353.26 of the Department's regulations 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 notice also serves as a reminder to parties subject to

administrative protective order (APO) of their responsibility

concerning the disposition of proprietary information disclosed under

APO in accordance with Sec. 353.34(d) of the Department's regulations.

Timely notification of return/destruction of APO materials or

conversion to judicial protective order is hereby requested. Failure to

comply with the regulations and the terms of an APO is a sanctionable

violation.

This administrative review and notice are in accordance with Sec.

751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and Sec. 353.22.

Dated: June 30, 1997.

Robert S. LaRussa,

Acting Assistant Secretary for Import Administration.

[FR Doc. 97-18114 Filed 7-9-97; 8:45 am]

BILLING CODE 3510-DS-P