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

DEPARTMENT OF COMMERCE

International Trade Administration

[A-201-805]

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

Preliminary Results of Antidumping Duty Administrative Review and

Partial Termination of Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of preliminary results of antidumping duty

administrative review and partial termination of review.

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SUMMARY: In response to requests from two respondents, the Department

of Commerce (``the Department'') is conducting an administrative review

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

and tube from Mexico. This review covers two manufacturers and

exporters of the subject merchandise. The period of review (``POR'') is

November 1, 1995, through October 31, 1996.

With respect to Tuberia Nacional, S.A. de C.V. (``TUNA''), this

review has now been terminated as a result of the withdrawal request

for administrative review by TUNA, the interested party that requested

review of TUNA. We preliminarily determine the dumping margin for Hylsa

S.A. de C.V. (``Hylsa'') to be 7.90 percent during the POR. Interested

parties are invited to comment on these preliminary results. Parties

who submit arguments in this proceeding should also submit with their

arguments (1) A statement of the issues, and (2) a brief summary of the

arguments.

EFFECTIVE DATE: December 8, 1997.

FOR FURTHER INFORMATION CONTACT: Ilissa Kabak 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) 482-0182 (Kabak), or (202) 482-3833 (Ludwig).

SUPPLEMENTARY INFORMATION:

The Applicable Statute

Unless otherwise indicated, all citations to the Tariff Act of

1930, as amended (the Act) are references to the provisions 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 19 C.F.R. Part 353 (April 1, 1997). Where appropriate, we have cited

the Department's new regulations, codified at 19 C.F.R. Part 351 (62

Fed. Reg. 27296, May 19, 1997). While not binding on this review, the

new regulations serve as a restatement of the Department's policies.

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 1995/96 review period on November 4, 1996 (61 FR 56663). On

November 27, 1996, respondents Hylsa and TUNA requested that the

Department conduct an administrative review of the antidumping duty

order on circular welded non-alloy steel pipe and tube from Mexico. We

initiated this review on December 16, 1996. See 61 FR 66017 (December

16, 1996). On February 4, 1997, TUNA requested a withdrawal from the

proceeding.

Pursuant to 19 CFR 353.22(a)(5) of the Department's regulations,

the Department may allow a party that requests an administrative review

to withdraw such request not later than 90 days after the date of

publication of the notice of initiation of the administrative review.

TUNA's request for withdrawal was timely and there were no requests for

review from other interested parties. Therefore, the Department is

terminating this review with respect to TUNA. This notice is in

accordance with section 353.22(a)(5) of the Department's regulations

(19 CFR 353.22(a)(5)).

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

the deadline for issuing a preliminary determination in an

administrative review if it determines that it is not practicable to

complete the preliminary review within the statutory time limit of 245

days. On June 16, 1997, the Department published a notice of extension

of the time limit for the preliminary results in this case to December

2, 1997. See Extension of Time Limit for Antidumping Duty

Administrative Reviews, 62 FR 36488 (July 8, 1997).

The Department is conducting this review in accordance with section

751(a) of the Act.

Scope of the Review

The products covered by these orders are circular welded non-alloy

steel pipes and tubes, 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 pipes and tubes

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

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

systems, air conditioning units, automatic sprinkler systems, and other

related uses, and generally meet ASTM A-53 specifications. Standard

pipe may also be used for light load-bearing applications, such as for

fence tubing, and as structural pipe tubing used for framing and

support members for reconstruction or load-bearing purposes in the

construction, shipbuilding, trucking, farm equipment, and related

industries. Unfinished conduit pipe is also included in these orders.

All carbon steel pipes and tubes within the physical description

outlined above are included within the scope of these orders, except

line pipe, oil country tubular goods, boiler tubing,

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mechanical tubing, pipe and tube hollows for redraws, finished

scaffolding, and finished conduit. Standard pipe that is dual or triple

certified/stenciled that enters the U.S. as line pipe of a kind used

for oil or gas pipelines is also not included in these orders.

Imports of the products covered by these orders are currently

classifiable under the following Harmonized Tariff Schedule (HTS)

subheadings: 7306.30.10.00, 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.

Although the HTS subheadings are provided for convenience and

customs purposes, our written description of the scope of these

proceedings is dispositive.

The POR is November 1, 1995 through October 31, 1996. This review

covers sales of circular welded non-alloy steel pipe and tube by Hylsa.

Verification

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

provided by the respondent by using standard verification procedures,

including on-site inspection of the manufacturing facilities of Hylsa,

the examination of relevant sales and financial records, and selection

of original documentation containing relevant information. Our

verification results are outlined in the verification reports, the

public versions of which are available at the Department of Commerce,

in the Central Records Unit (CRU), Room B099.

Product Comparisons

In accordance with section 771(16) of the Act, we considered each

circular welded non-alloy steel pipe and tube product produced by the

respondents, covered by the descriptions in the ``Scope of the Review''

section of this notice, supra, and sold in the home market during the

POR, to be a foreign like product for purposes of determining

appropriate product comparisons to U.S. sales of circular welded non-

alloy steel pipe and tube. Where there were no sales of identical

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

U.S. sales to the next most similar foreign like product on the basis

of the characteristics listed in Appendix VI of the Department's

December 23, 1996, antidumping questionnaire. In making the product

comparisons, we matched each foreign like product based on the physical

characteristics reported by the respondent and verified by the

Department.

The Department's practice is to use a methodology which avoids

distortions due to high inflation in instances where high inflation

existed during the period of review. See, e.g., Notice of Final Results

of Antidumping Duty Administrative Review, Certain Welded Carbon Steel

Pipe and Tube from Turkey 62 Fed. Feg. 61629 (October 2, 1997). In this

case, consistent with our prior practice, we determined that high

inflation existed during the period of review. See Letter to Shearman &

Sterling from the Department (May 7, 1997). In order to take into

account the rate of inflation in Mexico during the POR, we compared

each U.S. sale to sales of the foreign like product in the same month.

Where there were no sales of identical merchandise in the home market

to compare to U.S. sales within the same month, we compared U.S. sales

to the next most similar foreign like product which was sold in the

same month. See Circular Welded Non-Alloy Steel Pipe and Tube from

Mexico: Preliminary Results of Antidumping Duty Administrative Review

61 FR 68708 (December 30, 1996). See also Circular Welded Non-Alloy

Steel Pipe and Tube from Mexico: Final Results of Antidumping Duty

Administrative Review 62 FR 32014 (July 10, 1997) (in which the

Department continued to compare foreign like products and subject

merchandise in this manner).

Fair-Value Comparisons

To determine whether sales of circular welded non-alloy steel pipe

by Hylsa to the United States were made at less than fair value, we

compared the EP to the NV, as described in the ``Export Price'' and

``Normal Value'' sections of this notice. In accordance with section

777A (d)(2) of the Act, we calculated monthly weighted-average prices

for NV and compared these to individual U.S. transactions.

Date of Sale

Hylsa reported the date of the invoice as the date of sale for all

home market and U.S. sales. For the home market co-export rebate sales

with two reported invoice dates (original invoice issue date and

revised invoice issue date), Hylsa reported the revised invoice date as

the date of sale.

Export Price

We used EP as defined in section 772(a) of the Act. We calculated

EP based on prices to unaffiliated customers in the United States.

Where appropriate, we made deductions from the starting price for

foreign inland freight, foreign brokerage and handling, U.S. brokerage

and handling and U.S. customs duties.

Section 776 (a) (2) of the Act provides that ``if an interested

party or any other person--(A) withholds information that has been

requested by the administering authority; (B) fails to provide such

information by the deadlines for the submission of the information or

in the form and manner requested, subject to subsections (c) (1) and

(e) of section 782; (C) significantly impedes a proceeding under this

title; or (D) provides such information but the information cannot be

verified as provided in section 782 (i), the administering authority *

* * shall, subject to section 782 (d), use the facts otherwise

available in reaching the applicable determination under this title.''

In addition, section 776 (b) of the Act provides that, if the

Department finds that 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 may use information that is adverse to

the interests of the party as the facts otherwise available. The

statute also provides that such an adverse inference may be based on

secondary information, including information drawn from the petition.

In this case, the Department has applied partial facts available

for various expenses and adjustments. Based on our verification of

Hylsa's sales responses, we rejected as unverifiable additional foreign

inland freight, additional foreign brokerage fees and additional U.S.

brokerage fees. Although information was provided to the Department,

and the Department attempted to verify this information at the

verification of Hylsa (see Sales Verification Report), the information

could not be verified as provided in section 782(i) of the Act. By not

providing verifiable information for foreign inland freight, foreign

brokerage and U.S. brokerage expenses when such information was

available to Hylsa, we have determined that Hylsa failed to cooperate

by not acting to the best of its ability to comply with a request for

information. Consequently, the use of adverse partial facts available

under section 776(b) of the Act is warranted. We deducted the reported

foreign inland freight, which was paid by the customer and included in

the reported gross unit price. Rather than use reported additional

foreign inland freight, as facts available we further deducted the

highest calculated differential between reported and actual foreign

inland freight charges incurred for five sales reviewed at

verification, (see Analysis Memo). We deducted the reported foreign and

U.S. brokerage charges, which were paid by the

[[Page 64566]]

customer and included in the reported gross unit price. Rather than use

reported additional foreign and U.S. brokerage charges, as facts

available we further deducted the highest calculated differential

between reported and actual foreign and U.S. brokerage charges incurred

for five sales reviewed at verification (see Analysis Memo).

Hylsa acts as importer of record on its U.S. sales and thereby pays

all antidumping duty deposits. During the course of this proceeding,

petitioners requested that the Department examine the issue of

reimbursement where the producer/exporter is the importer of record.

Section 353.26 of the Department's regulations states that ``[i]n

calculating the United States price, the Secretary will deduct the

amount of any antidumping duty which the producer or reseller: (i)

[p]aid directly on behalf of the importer; or (ii) [r]eimbursed to the

importer.'' 19 CFR 353.26(a)(1). It has been our practice that separate

corporate entities must exist as producer/reseller and importer in

order to invoke the regulation. In the present case, the U.S. importer

of record, Hylsa, is also the same corporate entity that produces and

exports the subject merchandise. In such a case, there is no separate

company or separate U.S. subsidiary, wholly owned or otherwise, that

acts as the importer of record. Rather, the importer and exporter are

one and the same corporate entity. In this case, there can be no

payment made to, or on behalf of, the importer within the meaning of

the regulation. In accordance with our practice, the Department

interprets its reimbursement regulation as inapplicable in this case.

However, we will consider this issue further for the final results, and

we invite comments on this issue.

Normal Value

Based on a comparison of the aggregate quantity of home-market and

U.S. sales, we determined that the quantity of the foreign like product

sold in the exporting country was sufficient to permit a proper

comparison with the sales of the subject merchandise to the United

States, pursuant to section 773(a) of the Act. Therefore, in accordance

with section 773(a)(1)(B)(i) of the Act, we based NV on the price at

which the foreign like product was first sold for consumption in the

home market, in the usual commercial quantities and in the ordinary

course of trade, including sales that benefitted from co-export rebates

and short-length discounts.

Sales to affiliated customers in the home market which were

determined not to be at arm's-length were excluded from our analysis.

To test whether these sales were made at arm's-length, we compared the

starting prices of sales of comparison products to affiliated and

unaffiliated customers, net of all movement charges, direct selling

expenses, discounts, and packing. Pursuant to 19 CFR 353.45(a) and in

accordance with our practice, where the prices to the affiliated party

were on average less than 99.5 percent of the prices to unaffiliated

parties, we determined that the sales made to the affiliated party were

not at arm's-length. See Notice of Final Results and Partial Recission

of Antidumping Duty Administrative Review: Roller Chain, Other Than

Bicycle, From Japan 62 FR 60472 (November 10, 1997). We included those

sales that passed the arm's length test in our analysis (see 19 CFR

353.45(a)).

Where appropriate, in accordance with 773(a)(6)(A) of the Act, we

deducted credit expenses, warranties, advertising, insurance, packing,

and certain discounts, and we added interest revenue. The Department

discovered certain discrepancies and inconsistencies with Hylsa's

freight data which rendered the data unverifiable or unreliable within

the meaning of section 782(e) of the Act. At verification, the

Department examined additional inland freight reported by Hylsa.

Despite the Department's efforts, the data provided by Hylsa could not

be verified. In accordance with section 782(e) of the Act, we rejected

as unverifiable additional inland freight (see Sales Verification

Report). Therefore, we denied adjustment for reported additional inland

freight. Furthermore, due to discrepancies found as a result of

verification and in accordance with section 782(e) of the Act, we

disallowed deduction of inland freight expenses reported for co-export

rebate sales made during 1996. The Department also found

inconsistencies concerning the allocation of both early payment

discounts and interest revenue for late payments (see Sales

Verification Report). Therefore, consistent with section 782 (e) of the

Act, we denied deductions from the reported price for early payment

discounts allocated to sales to which interest revenue was also

allocated.

We increased NV by U.S. packing costs in accordance with section

773(a)(6)(A) of the Act and decreased NV by home market packing costs

in accordance with section 773(a)(6)(B) of the Act. We made adjustments

to NV for differences in cost attributable to differences in physical

characteristics of the merchandise, pursuant to section

773(a)(6)(C)(ii) of the Act.

Level of Trade

In accordance with section 773(a)(1)(B) of the Act, to the extent

practicable, we determine NV based on sales in the comparison market at

the same level of trade (``LOT'') as the EP or CEP transaction. The NV

LOT is that of the starting-price sales in the comparison market or,

when NV is based on constructed value (``CV''), that of the sales from

which we derive selling, general and administrative (``SG&A'') expenses

and profit. For EP, the U.S. LOT is also the level of the starting-

price sale, which is usually from exporter to importer. For CEP, it is

the level of the constructed sale from the exporter to the importer.

To determine whether NV sales are at a different LOT than EP or

CEP, we examine stages in the marketing process and selling functions

along the chain of distribution between the producer and the

unaffiliated customer. If the comparison-market sales are at a

different LOT, and the difference affects price comparability, as

manifested in a pattern of consistent price differences between the

sales on which NV is based and comparison-market sales at the LOT of

the export transaction, we make an LOT adjustment under section

773(a)(7)(A) of the Act. Finally, for CEP sales, if the NV level is

more remote from the factory than the CEP level and there is no basis

for determining whether the difference in the levels between NV and CEP

affects price comparability, we adjust NV under section 773(a)(7)(B) of

the Act (the CEP offset provision). See Notice of Final Determination

of Sales at Less Than Fair Value: Certain Cut-to-Length Carbon Steel

Plate from South Africa, 62 FR 61731 (November 19, 1997).

In its questionnaire responses, Hylsa stated that there were no

differences in its selling activities by customer categories within

each market. In order to confirm independently the absence of separate

levels of trade within or between the U.S. and home markets, we

examined Hylsa's questionnaire responses for indications that Hylsa's

functions as a seller differed qualitatively or quantitatively among

customer categories. Where possible, we further examined whether each

selling function was performed on a substantial portion of sales.

Hylsa sold to end-users in the U.S. market. In the home market,

Hylsa sold to local distributors and end-users. Hylsa performed

essentially the same selling functions for sales to all its home-market

customers, as well as to U.S. customers. Thus, our analysis of the

questionnaire response leads us to

[[Page 64567]]

conclude that sales within or between each market are not made at

different levels of trade. Accordingly, we preliminarily find that all

sales in the home market and the U.S. market were made at the same

level of trade. Therefore, we have not made a level of trade adjustment

because all price comparisons are at the same level of trade and an

adjustment pursuant to section 773(a)(7)(A) is not appropriate.

Cost-of-Production Analysis

Petitioners alleged, on April 4, 1997, that Hylsa sold circular

welded non-alloy steel pipes and tubes in the home market at prices

below COP. Based on these allegations, in accordance with 773(b) of the

Act, the Department determined, on May 6, 1997, that it had reasonable

grounds to believe or suspect that Hylsa had sold the subject

merchandise in the home market at prices below the COP. See Letter to

Shearman and Sterling (May 7, 1997) and Decision Memorandum (May 6,

1997). We therefore initiated a cost investigation with regard to Hylsa

in order to determine whether the respondent made home-market sales

during the POR at prices below their COP within the meaning of section

773(b) of the Act. Before making any fair-value comparisons, we

conducted the COP analysis described below.

A. Calculation of COP

We calculated the COP based on the sum of Hylsa's cost of materials

and fabrication for the foreign like product, plus amounts for home-

market selling, general, and administrative expenses (``SG&A''), and

packing costs in accordance with section 773(b)(3) of the Act. Based on

our verification of the cost response submitted by Hylsa, we adjusted

the reported COP to reflect certain adjustments to the cost of

manufacturing and general and administrative expenses (see Analysis

Memo).

B. Test of Home-Market Prices

We used the respondent's weighted-average COP, as adjusted (see

above), for the period August 1, 1995, through November 30, 1996. We

compared the weighted-average COP figures to home-market sales of the

foreign like product as required under section 773(b) of the Act. In

determining whether to disregard home-market sales made at prices below

the COP, we examined whether (1) within an extended period of time,

such sales were made in substantial quantities, and (2) such sales were

made at prices which permitted the recovery of all costs within a

reasonable period of time. On a product-specific basis, we compared the

COP to the home-market prices (not including VAT), less any applicable

movement charges, discounts, and rebates.

C. Results of COP Test

In accordance with section 773(b)(2)(C), where less than 20 percent

of Hylsa's sales of a given product were at prices less than the COP,

we do not disregard any below-cost sales of that product because we

determine that the below-cost sales were not made in ``substantial

quantities.'' Where 20 percent or more of a Hylsa's sales during the

POR were at prices less than the COP, we determine such sales to have

been made in ``substantial quantities'' within an extended period of

time in accordance with section 773(b)(2)(B) of the Act, and not at

prices which would permit recovery of all costs within a reasonable

period of time, in accordance with section 773(b)(2)(D) of the Act.

Therefore, we disregarded such below-cost sales of Hylsa. Where all

contemporaneous sales of a comparison product were disregarded, we

calculated NV based on CV.

D. Calculation of CV

In accordance with section 773(e) of the Act, we calculated CV

based on the sum of Hylsa's cost of materials, fabrication, SG&A, U.S.

packing costs, interest expenses as reported in the U.S. sales database

and profit. As noted above, we recalculated Hylsa's COM and general and

administrative expenses based on our verification results. In

accordance with section 773(e)(2)(A) of the Act, we based SG&A and

profit on the amounts incurred and realized by the respondent in

connection with the production and sale of the foreign like product in

the ordinary course of trade, for consumption in the foreign country.

For selling expenses, we used the weighted-average home market selling

expenses. Where we compared CV to EP, we added the lesser of home

market commissions or U.S. indirect selling expenses to CV.

Currency Conversion

For purposes of the preliminary results, we made currency

conversions based on the official exchange rates in effect on the dates

of the U.S. sales as certified by the Federal Reserve Bank of New York.

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

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

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

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

a fluctuation exists when the daily exchange rate differs from a

benchmark by 2.25 percent. See Cut-to-Length Steel Plate from Belgium:

Preliminary Results of Antidumping Duty Administrative Review, 62 FR

48213 (citing Certain Stainless Steel Wire Rods from France:

Preliminary Results of Antidumping Duty Administrative Review, 61 FR

8915 (March 6, 1996)). The benchmark is defined as the rolling average

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

exists, we substitute the benchmark for the daily rate.

Preliminary Results of the Review

As a result of this review, we preliminarily determine that the

following weighted-average dumping margin exists:

Circular welded non-alloy steel pipes and tubes

Producer/Manufacturer/Exporter................................ Hylsa

Weighted-Average Margin....................................... 7.90%

Parties to this proceeding may request disclosure within five days

of publication of this notice. Any interested party may request a

hearing within 10 days of publication. Any hearing, if requested, will

be held 44 days after the date of publication, or the first working day

thereafter. Interested parties may submit case briefs and/or written

comments no later than 30 days after the date of publication. Rebuttal

briefs and rebuttals to written comments, limited to issues raised in

such briefs or comments, may be filed no later than 37 days after the

date of publication of this notice. The Department will publish a

notice of the final results of the administrative review, including its

analysis of issues raised in any written comments or at a hearing, not

later than 120 days after the date of publication of this notice.

The following deposit requirements will be effective upon

publication of the final results of this antidumping duty review for

all shipments of circular welded non-alloy steel pipe from Mexico,

entered, or withdrawn from warehouse, for consumption on or after the

publication date, as provided by section 751(a) of the Tariff Act: (1)

The cash deposit rate for the reviewed company will be that established

in the final results of review; (2) for exporters not covered in this

review, but covered in the LTFV investigation or previous review, the

cash deposit rate will continue to be the company-specific rate from

the LTFV investigation or the most recent previous review; (3) if the

exporter is not a firm covered in this review, a previous review, or

the

[[Page 64568]]

original LTFV investigation, but the manufacturer is, the cash deposit

rate will be the rate established for the most recent period for the

manufacturer of the merchandise; (4) the cash deposit rate for all

other manufacturers or exporters will continue to be 36.62 percent, the

``All Others'' rate in the LTFV investigation. These requirements, when

imposed, shall remain in effect until publication of the final results

of the next administrative review.

We will calculate importer-specific duty assessment rates as a per

ton unit value for EP sales. To calculate the per ton unit value for

assessment, we summed the margins on U.S. sales with positive margins,

and then divided this sum by the total entered tonnage of all U.S.

sales.

This notice serves as a preliminary reminder to importers of their

responsibility under 19 CFR 353.26 to file a certificate regarding the

reimbursement of antidumping duties prior to liquidation of the

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

requirement could result in the Secretary's presumption that

reimbursement of antidumping duties occurred and the subsequent

assessment of double antidumping duties.

This administrative review and notice are published in accordance

with section 751(a)(1) of the Act and 19 CFR 353.22.

Dated: December 2, 1997.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 97-32064 Filed 12-5-97; 8:45 am]

BILLING CODE 3510-DS-P