Certain Welded Carbon Steel Pipes and Tubes From India; Final Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[A-533-502]

Certain Welded Carbon Steel Pipes and Tubes From India; 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.

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SUMMARY: On February 9, 1998, the Department of Commerce published the

preliminary results of administrative review of the antidumping duty

order on certain welded carbon steel pipes and tubes from India. The

review covers two manufacturers/exporters. The period of review is May

1, 1996, through April 30, 1997.

Based on our analysis of the comments received, we have made

changes, including corrections of certain inadvertent programming and

clerical errors, in the margin calculation. Therefore, the final

results differ from the preliminary results. The final weighted-average

dumping margin is listed below in the section entitled ``Final Results

of Review.''

EFFECTIVE DATE: June 16, 1998.

FOR FURTHER INFORMATION CONTACT: Davina Hashmi, at (202) 482-5760, or

Greg Thompson, at (202) 482-0410, of the Import Administration,

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

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 citations to the Department's regulations are

to 19 CFR Part 353 (1997).

Background

On February 9, 1998, the Department of Commerce (the Department)

published the Preliminary Results of Administrative Review of the

Antidumping Duty Order on Certain Welded Carbon Steel Pipes and Tubes

from India, 63 FR 6531. The review covers two manufacturers/exporters.

The period of review (POR) is May 1, 1996, through April 30, 1997. We

invited interested parties to comment on the preliminary results of

review. At the request of one respondent, Rajinder Pipes Ltd. and

Rajinder Steel Ltd. (collectively called ``RSL''), we held a public

hearing on April 6, 1998. The Department has conducted this

administrative review in accordance with section 751 of the Act.

Scope of Reviews

The products covered by this review include circular welded non-

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

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

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

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

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

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

structural or mechanical tubing in certain applications. Standard pipes

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

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

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

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

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

of electrical wiring, such as conduit shells.

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

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

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

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

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

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

redraws, finished scaffolding, and finished rigid conduit.

Imports of the products covered by this review are currently

classifiable under the following Harmonized Tariff Schedule of the

United States (HTSUS) 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,

7306.30.50.90. Although the HTSUS subheadings are provided for

convenience and customs purposes, the written description of the scope

of this proceeding is dispositive.

Changes Since the Preliminary Results

Based on our analysis of comments received, we have made certain

corrections that changed our preliminary results. A discussion of the

arguments raised in the case and rebuttal briefs submitted to the

[[Page 32826]]

Department is contained in the following section entitled, ``Analysis

of Comments Received.''

Analysis of Comments Received

Comment 1: The petitioners argue that the Department should apply

facts available to those selling expenses and costs that could not be

verified due to Rajinder's failure to prepare for verification

properly. Specifically, the petitioners posit that the Department

should disallow the deduction from normal value (NV) certain unverified

home-market (HM) selling expenses and should deduct from the price in

the United States the highest reported expense for certain unverified

U.S. selling expenses.

The petitioners state that, in accordance with sections 776 and

782(i) of the Act and Olympic Adhesive Inc. v. United States (899 F.2d

1565, 1572 (Fed. Cir. 1990)), the Department may disregard respondent's

information if such information cannot be verified and where

manipulation of the margins may occur because a respondent may provide

information selectively that the Department requested. The petitioners

argue that there is no justification for Rajinder's failure to prepare

for verification properly and for the frequent delays the Department

encountered at verification. The petitioners point out that Rajinder

had been given, in advance, an itinerary of the topics to be covered

during verification and posit that Rajinder had ample time to prepare

adequately for the verification. The petitioners also note that

Rajinder has previous verification experience and, therefore, should

have known what was needed and expected.

Finally, the petitioners state that it is Department practice to

make an adverse inference and to apply facts available in cases where

respondent impedes the progress of the review and fails to act to the

best of its ability to comply with the Department's request for

information. The petitioners contend that, in the instant proceeding,

the situation warrants the application of adverse facts available.

Rajinder refutes the petitioners' argument that facts available

should be applied to certain HM and U.S. selling expenses and argues

that the petitioners have distorted the facts as they relate to the HM

verification. Rajinder contends that, although it could have been

better prepared for verification, its lack of preparation does not

warrant the use of facts available, nor does it suggest that Rajinder

in any way has impeded this review or failed to cooperate with the

Department. Rajinder states that, on the contrary, most of the claimed

adjustments were verified with very few discrepancies. Rajinder points

to the verification report as support for the number of tests performed

and the number of adjustments the verifiers examined, most of which had

no discrepancies and some of which had discrepancies that were

disadvantageous to Rajinder.

Rajinder also refutes the petitioners' assertion that it provided

requested information selectively. Rajinder explains that, with respect

to those adjustments that the Department did not examine at

verification, the verifiers were simply not able to cover those topics

in the time allotted for the verification. Rajinder argues that, had it

wanted to select adjustments that it did not want the Department to

verify, it would have selected the large adjustments, not the minor

ones.

Department's Position: We agree with the respondent in part. With

the exception of HM indirect selling expenses and duty drawback (see

comment 4), we have accepted all of Rajinder's submitted information.

Our determination in this regard is consistent with the statute and our

practice. We have concluded, in accordance with section 776(a) of the

Act, that the use of facts available for Rajinder's HM indirect selling

expenses is appropriate because we were unable to verify the accuracy

of the information Rajinder submitted despite numerous requests on our

part to obtain the data. By not providing certain basic verification

documents that were essential to the establishment of the accuracy of

the data submitted, Rajinder did not cooperate to the best of its

ability to comply with our requests for such information. Accordingly,

we are using an adverse inference with respect to this item in full

accordance with law. See section 776(b) of the Act. While we have

determined that Rajinder did not cooperate to the best of its ability

with respect to the HM indirect selling expenses, we do not find that

this undermines the credibility of the other information Rajinder

submitted during this review. See Monsanto Co. v. United States, 698 F.

Supp. 275 281 (CIT 1988). Accordingly, we have calculated Rajinder's

margin using all the data it submitted with the exception of the two

items mentioned above.

As for the petitioners' concerns that Rajinder manipulated the

process, it should be noted that, from the outset of verification, we

selected adjustments out of the order from which they were listed in

the verification outline. In other words, we conducted a ``spot check''

of various expense items which would preclude Rajinder from

``manipulating'' the process and selectively providing information to

certain adjustments. In this manner, we were able to ensure that all

items we selected were covered in time.

Comment 2: The petitioners argue that certain letters Rajinder

submitted to the Department (dated January 13, 14, 15, 20, and 26,

1998) were untimely filed and should be removed from the official

record in this review and not considered by the Department for the

final results of this review. The petitioners also contend that the

verifying officials did not request information contained in the

respective January letters as stated by the respondents. The

petitioners state further that even the first of the series of January

letters (dated January 13, 1998) was submitted beyond the normal seven-

day period for submitting information after the date on which

verification is completed.

Rajinder contends that the January submissions with which the

petitioners take issue should not be removed from the official record.

Rajinder states that the letter dated January 13, 1998, was submitted

at the request of the Department for the purpose of clarifying

Rajinder's calculations for its reported variable costs of manufacture.

Rajinder also states that, in accordance with 19 CFR 353.31(b)(1), the

Department may solicit information from respondents at any time.

Rajinder states further that the letters dated January 14, 15, and 20,

1998, pertain to information contained in Rajinder's Duty Exemption

Entitlement Certificate (DEEC) book which was in the possession of the

Customs Authority at the time of verification. Rajinder contends that,

with respect to the letter dated January 26, 1998, the content of the

letter was already examined at verification and that Rajinder should

not be penalized for submitting a document that was not in existence at

the time of verification. Rajinder points out, however, that, in the

event that the Department rejects the letters dated January 14, 15, 20,

and 26, 1998, that these letters are not necessary to demonstrate the

validity of Rajinder's duty-drawback claim.

Department's Position: In accordance with 19 CFR 353.31(a)(2) we

have rejected the January 14, 15, 20, and 26, 1998, letters because

they were untimely and we did not request the information they

contained. See letters to the respondent's counsel dated February 12,

1998, and April 16, 1998. We accepted Rajinder's January 13 letter

because the information contained in that letter was submitted at our

request.

Comment 3: The petitioners contend that the Department erroneously

found two levels of trade (LOTs) in the HM and argue that the

Department should

[[Page 32827]]

rescind the LOT adjustment it granted Rajinder in the preliminary

results of review. The petitioners argue that Rajinder prevented the

examination of the existence of two HM LOTs at verification, despite

the Department's intention to examine this topic, and therefore, the

information upon which the Department based its findings of two HM LOTs

is unsupported.

The petitioners take issue with the Department's reasoning behind

its categorization of Rajinder's customers into two channels of

distribution and assert that such reasoning does not establish two HM

LOTs. The petitioners argue that, rather than base the determination of

different LOTs in the HM properly on selling activities of the

producer, the Department instead considered the selling functions of

the purchaser. The petitioners also assert that the record does not

support qualitatively or quantitatively the differences in selling

activities and functions made between Channel One (sales to government

agencies, OEMs, and end-users) and Channel Two (sales to local

distributors and trading companies) customers.

In addition, the petitioners assert that, if the Department finds

that two HM LOTs exist, Rajinder has not fulfilled its burden of

providing evidence that established the claimed price differential

between sales at the different LOTs, citing the URAA, the Statement of

Administrative Action (103d Cong. 2d Session, House Doc. 103-316 at 829

(1994)), and Koyo Seiko Co. Ltd. v. United States, 18 ITRD 1867 at 1870

(CIT June 19, 1996). The petitioners point out that the CIT has upheld

the Department's decision to deny respondent's claimed price

differential where a respondent fails to provide such information

(citing NTN Bearing Corp. v. United States, 905 F. Supp. 1083, 1093-4

(Ct. Int'l Trade 1995)).

The petitioners also argue that Rajinder has not demonstrated a

causal link between the reported selling functions and the claimed

differences in price. The petitioners argue further that, on a model-

specific basis, Rajinder's data reveals a highly inconsistent and

disparate pattern of price differences across different models which,

the petitioners assert, cannot be attributed to differences in the

claimed LOTs. The petitioners assert that such disparate price

differences are attributable to premiums that the Indian government is

willing to pay for such merchandise. The petitioners argue further that

an analysis of the weighted-average HM prices of Channels One and Two

sales are not commensurate with the number of selling activities

associated with each LOT. For instance, petitioners argue that, given

the large number of selling activities associated with Channel One

sales, it does not make sense that the HM prices for Channel Two sales

are higher than the HM prices for Channel One sales. The petitioners

state that, because Rajinder has not provided evidence demonstrating a

consistent pattern of price differences attributable to Rajinder's

claimed LOTs, the Department should not grant Rajinder a LOT adjustment

for the final results of review.

Rajinder argues that, contrary to the petitioners' assertion, the

record does support a finding of two HM LOTs. Rajinder refutes the

petitioners' argument that it prevented the Department from examining

LOT information at verification and asserts that the petitioners

mischaracterized the events that took place at verification. Rajinder

notes that, because nearly every adjustment the Department examined at

verification was accurate with no discrepancies found, there is no

reason to question the selling activities listed in Rajinder's selling-

functions chart.

In addition, Rajinder argues that both its original and

supplemental questionnaire responses demonstrate that a price

differential at the two claimed LOTs does exist. Rajinder argues

further that it has explained the causal link between the reported

selling functions and the claimed differences in price. Regarding the

petitioners' model-specific analysis, Rajinder notes that this analysis

incorporates sales that took place over a number of months. Rajinder

points out that variances in price differences across different models

over time is a normal phenomenon. Rajinder notes further that its sales

made to the government involve state government agencies which desire

lower prices and therefore would not pay premiums as alleged by the

petitioners.

Rajinder argues that, with respect to the petitioners' assertion

that its HM weighted-average prices are not commensurate with the

number of selling activities associated with each LOT, the petitioners'

analysis is flawed. Rajinder contends that the wrong months and, thus,

the incorrect sales were used in the analysis. Rajinder states that,

because its sales were made in months that have nearly six-month

intervals between the sales compared, it is likely that prices will

vary. Finally, Rajinder argues that the petitioners used net HM prices

which distorted their analysis. Rajinder concludes that, because the

petitioners' analysis is flawed and is therefore invalid, the

Department should maintain its finding of two LOTs in the HM and make a

LOT adjustment for the final results of review.

Department's Position: We disagree with the petitioners. For the

final results of review, we have granted Rajinder a LOT adjustment.

Although we did not specifically examine the issue of LOT at

verification, the record supports Rajinder's claim of two channels of

distribution in the HM. As noted previously, the purpose of

verification is to ensure that a respondent reported the information

the Department requested accurately (see our response to comment 1). In

any given proceeding, the information we request from a respondent can

be extensive. The examination of such information subject to

verification is an extensive process, particularly given that a HM

verification of a company's sales or cost information is normally

conducted within a period of one week or less. The Department,

therefore, cannot examine each and every adjustment that is included in

the verification outline. See Monsanto Co. v. United States, 698 F.

Supp. 275 281 (CIT 1988). In the instant case, Department officials

selected adjustments to examine randomly and Rajinder was never put in

a position to control the Department's verification of its response.

Furthermore, the adjustments we examined at verification were accurate,

with a few minor exceptions. The fact that we did not examine the issue

of LOT does not lead us to question the validity of Rajinder's selling

activities, channels of distribution, or the narrative response

discussing such selling functions.

We also disagree with the petitioners' claim that the record lacks

evidence of two separate LOTs in the HM. In its narrative response,

Rajinder explained that it sells the foreign like product through two

channels of distribution (Channel One and Channel Two). In our

preliminary analysis memorandum, we stated that we grouped Rajinder's

reported customer categories into two channels of distribution for the

following reasons: (1) the level of involvement, selling functions and

expenses for the two categories of customers are significantly

different; (2) a number of OEM and end-user customers are departments

within the Indian government and, therefore, we found that it is

appropriate to place these customers in the same category as state

government agencies; and (3) Channel One customers use merchandise for

their own consumption, whereas Channel Two customers resell the

merchandise purchased from Rajinder. The

[[Page 32828]]

petitioners argue factors two and three do not establish different

LOTs. However, the categorization of such customers into two channels

of distribution does not, in and of itself, establish two different

LOTs. Rather, the three factors emphasize similarities between

different customer types so that they can be placed in categories for

the purpose of determining whether different LOTs exist. Further, while

the significance of the three factors may vary across customer types,

we have determined, based on an analysis of these three factors, that

the customers fall into two distinct groups.

The petitioners' argument that LOT is determined by the selling

activity of the producer, not the selling functions of the purchasers,

is true, but misplaced. In order to determine the LOT of U.S. sales and

comparison sales, we review and compare distribution systems that

include not only selling activities of the producer, but also the class

of its customer (point in the distribution chain). Furthermore, there

is a direct relationship between the classification of a given entity

and the function of that entity. Therefore, as part of our LOT

analysis, we classify the producer's customers (e.g., wholesaler,

retailer) based on the activities they perform in selling the product

under review. We do not, however, consider the selling functions of the

customer when determining whether different LOTs exist.

We have accepted the selling-function chart Rajinder provided as

part of its verified questionnaire response. As we stated in

preliminary results of review, we used six of the listed functions to

make a distinction between selling activities associated with Channels

One and Two: market research, professional services and business

systems development, engineering services, agent coordination, research

and development, and advertising. As the chart that the petitioners

included in their brief shows, there is a marked difference between the

selling functions being performed in the two channels of distribution.

Based on the above factors, we determined that there are two LOTs

in the HM. One of these (Channel Two) is equivalent to the sales made

at the constructed export price (CEP). However, since some of our U.S.

sales matched to the other LOT we reviewed the data to determine if a

LOT adjustment was appropriate.

Sales at the other channel are made at a more advanced level;

therefore, we next determined whether there was a pattern of consistent

price differences between the two HM LOTs and whether a LOT adjustment

was appropriate. The analysis we performed on Rajinder's information

indicated that an adjustment was appropriate. The petitioners' argument

regarding causation is misguided. The statute requires that the price

differences be ``wholly or partly due'' to differences in LOTs; it does

not require a determination of the exact price effect caused by LOT

differences and it would not be possible to do so, given the variety of

market forces that affect the sales price of each transaction we review

(see Antifriction Bearings (Other Than Tapered Roller Bearings) and

Parts Thereof From France et.al: Final Results of Antidumping Duty

Administrative Reviews, 62 FR 2081, 2108 (January 15, 1997) (AFBs)).

Comment 4: Rajinder argues that the Department's denial of its

claimed duty-drawback adjustment is unreasonable. Rajinder contends

that it met both parts of the Department's test: (a) Whether the import

duty and rebate are directly linked to, and dependent upon, one

another; and (b) whether the company claiming the adjustment can show

that there were sufficient imports of the imported raw materials to

account for the drawback received on the exported product. Rajinder

contends further that, for the purpose of satisfying part one of the

Department's two-part test, it provided record evidence demonstrating

how the import duty and the duty drawback are related to one another.

Rajinder indicates that it explained on the record how India's Advanced

Licensing system operates and that India's duty-exemption schemes are

well known by the Department and points to several administrative

reviews involving Indian companies that subscribe to India's Advanced

Licensing system. In addition, Rajinder indicates that it provided both

the duty-drawback calculation methodology it used to calculate the

adjustment and the respective advanced licenses under which it could

import raw materials free of duty, provided such materials were used in

the production of the exported product.

Rajinder points to the verification report and accompanying

exhibits as evidence of its eligibility for exemption from customs

duties. Rajinder states that the advanced licenses state explicitly

that the respective materials would be ``eligible'' for exemption from

customs duties and that the underlying licenses are replete with the

term ``Duty Exemption.'' Rajinder contends that the verification team

did not indicate that additional information was necessary to satisfy

part one of the Department's two-part test. Rajinder also argues that

it supplemented the record with the very information that prompted the

Department to deny the claimed duty-drawback adjustment for the Final

Results of the New Shippers Antidumping Duty Administrative Review 62

FR 47632, (September 10, 1997).

Rajinder contends further that it satisfied part two of the

Department's two-part test. Rajinder points to the verification report

and accompanying exhibits which it asserts demonstrate that it imported

sufficient amounts of hot-rolled coil and steel to qualify for duty

drawback. Rajinder refers to the check marks and notations on the

verification exhibits that the Department's verifiers made which,

Rajinder asserts, is an indication that the Department verified the

quantities of hot-rolled coil Rajinder imported.

Rajinder argues that the Department misstated the purpose of

Rajinder's January 20, 1998, submission of Rajinder's DEEC book.

Rajinder indicates that, in the preliminary analysis memorandum, the

Department stated that the purpose of submitting the DEEC book was to

provide evidence that sufficient imports of raw materials were received

for the final exported product. Rajinder contends that, contrary to the

Department's statement regarding the purpose of the DEEC book, the

actual purpose of submitting this book was merely to corroborate the

data already on the record. Rajinder argues that the relevant

verification exhibit already demonstrates the sufficiency of import

quantities.

Rajinder states that it submitted the DEEC book for the record

because the Department requested it at verification. Rajinder points

out that it explained to the verifiers that only the completed DEEC

book, which was at that time in the possession of the Indian Customs

Service, would satisfy the additional information they sought.

The petitioners contend that the Department denied Rajinder's

claimed duty-drawback adjustment correctly because Rajinder failed to

meet either part of the Department's two-part test. The petitioners

assert that, despite the fact that Rajinder was on notice from the New

Shippers Review as to the information necessary to demonstrate its

claimed duty-drawback adjustment adequately, Rajinder missed the

opportunities to supplement the record with the necessary information.

The petitioners point out that, throughout this review, the Department

informed Rajinder of its need to provide additional information to

satisfy the two-part test. The petitioners state, however, that in

accordance with the

[[Page 32829]]

Department's regulations and practice, Rajinder failed to provide the

necessary evidence to satisfy the requirements of its claimed duty

drawback, citing Nachi-Fujikoshi v. U.S., 890 F. Supp. 1008, 1015

(1992).

The petitioners argue that the fact that the Department recognizes

India's Advanced Licensing scheme is irrelevant to the instant case.

The petitioners contend that Rajinder merely provided a general

description of the Advanced Licensing scheme and that the possession of

the advanced licenses alone does not demonstrate the linkage between

the import duty and the drawback.

The petitioners indicate their support for the Department's

decision to require Rajinder to provide historical documentation

demonstrating how Rajinder received advanced licenses and satisfied the

requirements of those licenses. The petitioners point out that the

advanced licenses stipulate the submission of quarterly reports to the

government of India and that such reports should provide detail of the

goods imported against the licenses. The petitioners assert that such

reports or other similar documentation demonstrating that Rajinder

fulfilled the obligations of the advanced license could have been

submitted as proof of entitlement to the claimed duty drawback. The

petitioners explain further that, because importation of raw materials

may occur before or after exportation, historical records documenting

how the program was applied to a specific company and product are

necessary to demonstrate linkage. The petitioners contend that the

advanced licenses alone do not serve as proof that the drawback was

received, but instead establish the right to import raw materials.

The petitioners argue that Rajinder also failed to satisfy the

second part of the Department's two-part test. With respect to the

verification exhibit with which Rajinder claims the Department was

satisfied, given the check marks placed on it, the petitioners assert

that the check marks are merely indications that the numbers on the

respective worksheets reconciled with the reported figures. The

petitioners also argue that the record does not demonstrate adequately

that the amount of steel coil Rajinder claims to have imported

qualified for duty-free status under the advanced license.

In addition, the petitioners argue that, even if the Department

permits Rajinder's steel duty-drawback adjustment, it should deny

Rajinder's claim for the zinc duty-drawback adjustment. The petitioners

argue that Rajinder did not import zinc during the POR and, instead,

used the calculation it provided in the previous New Shippers Review.

The petitioners contend that the zinc information submitted in January

constitutes new information, which was illegible and should have been

submitted prior to verification if Rajinder desired due consideration

of the information. The petitioners contend further that Rajinder has

not provided any evidence that the imports of zinc met the Department's

two-part test. Specifically, the petitioner states that Rajinder did

not provide any evidence that sufficient quantities of zinc were

imported to cover the zinc incorporated into the pipe or that

qualifying inputs of zinc were made within twelve months of the date of

issuance of its advanced licenses.

Department's Position: For both steel and zinc, we agree with the

petitioners that Rajinder has not satisfied either part of our test.

While Rajinder is correct in stating that we found the figures in the

verification exhibits we reviewed to be accurate, the figures did not

establish a direct link between the import duty and the drawback

Rajinder claimed it received. Based on our understanding of the system,

as explained at verification, the imported goods may enter free of

duties, but the company must prove to Indian Customs that the goods

were used in a product that was or will be exported or the importer of

the goods will be liable for the foregone duty. This is why we

requested documentation from the DEEC book. Without such information

there is no established link between the import duty and the drawback.

Inasmuch as Rajinder knew that it would not have the documents needed

to establish this link at verification, Rajinder should have explained

to us in advance that we would not be able to review such documents

until after verification. Rajinder's arguments concerning part two of

the test are irrelevant since both parts of the test must be met in

order to receive the adjustment.

Comment 5: Rajinder contends that the model-match methodology that

the Department employed in the preliminary results is inaccurate and

does not provide a fair comparison between U.S. and HM models. Rajinder

argues that it provided the Department with the best possible matches

between HM and U.S. models sold during the POR subject to the

Department's model-match hierarchy set forth in the Department's

original questionnaire. Rajinder argues, however, that the Department

disregarded its own hierarchical model-match methodology and instead

grouped certain models into ``families'' based on the model's nominal

pipe size. Rajinder contends that the Department's family model-match

methodology is unfair because it includes models that are not the most

similar to the products sold to the United States.

Rajinder also points out that the Department did not provide an

explanation as to why its family model-match methodology provides

better results and the Department did not explain why it did not use

the model matches Rajinder provided in its response. Rajinder asserts

further that grouping models into families has never been employed in

other standard pipe and tube cases and was not the approach employed in

the previous New Shippers Review in which Rajinder participated. In

addition, Rajinder asserts that the Department's model-match

methodology does not provide the most similar comparisons and is

contrary to antidumping law and to the CIT's ruling that comparisons

should be based on the most similar merchandise, absent identical

merchandise sold in either the home or U.S. markets (citing Torrington

Co. v. United States, 881 F. Supp. 622, 634 (Ct. Int'l Trade 1995)).

In addition, Rajinder argues that the Department is using only one

physical attribute, the nominal pipe size, as the basis for model

matching and is disregarding another significant attribute, wall

thickness, which, in the Department's model-match hierarchy, is one of

the most important factors next to nominal pipe size. Rajinder asserts

that matching models using only the nominal pipe size rather than

including wall thickness as an important criterion by which to find the

most similar matches produces an apples-to-oranges comparison.

Rajinder asserts further that the Department apparently selected HM

models as matches to U.S. models based on size of the difference-in-

merchandise adjustments associated with the selected models. Rajinder

contends that differences in costs are not physical characteristics and

that such figures should not be relied upon for the purpose of matching

models. Moreover, Rajinder argues that the HM models that the

Department selected as matches to U.S. models did not produce the

smallest difference-in-merchandise adjustments.

Rajinder also points out that pipes sold in India are categorized

by light, medium, and heavy pipe which is reflective of the wall

thickness. Rajinder explains that the uses of the pipes are a direct

determinant of whether light,

[[Page 32830]]

medium, or heavy pipe is necessary. Rajinder explains further that a

light pipe cannot be compared with a medium pipe, as was done in the

preliminary results.

For the above-mentioned reasons, Rajinder argues that the

Department should use the models that Rajinder selected as the most

similar HM models to the models sold in United States for the final

results of review.

The petitioners claim that the Department's model-match methodology

is not unreasonable and is not contrary to the statute. The petitioners

assert that there is no reason for the Department to alter its approach

for the final results of review. The petitioners argue that, in

accordance with section 771(16) of the Act, the HM models the

Department selected as potential matches meet the definition of foreign

like product. The petitioners also argue that, although this model-

match methodology deviates from that employed in other standard pipe

cases, the Department has wide discretion in determining model matches

in antidumping cases (citing Torrington Co. v. United States, 881 F.

Supp. 622 at 634 (Ct. Int'l Trade 1995); (Smith-Corona v. United

States, 713 F. 2d 1568, 1571 (Fed Cir. 1983), cert. denied, 465 U.S.

1022(1984)). The petitioners explain that the Department's methodology

selects the most similar models that match as closely as possible the

five physical characteristics in the hierarchy, classifies models into

families on the basis of nominal pipe size, and selects the models that

produce the smallest difference-in-merchandise adjustment. The

petitioners point out that selecting model matches on the basis of

difference-in-merchandise takes into account a combination of physical

characteristics and, moreover, it is in accordance with section 771

(16)) of the Act, which calls for finding the closest possible match.

The petitioners contend that, although the Department's model-match

methodology is different from the methodology employed in the previous

New Shippers Review and other pipe cases, the use of this methodology

in the instant case does not preclude it from being a reasonable model-

matching approach. The petitioners contend further that, while

controversy has arisen in the antifriction bearings proceedings

regarding the family model-match methodology, such controversy is

irrelevant given that the methodology was approved by the Court of

International Trade, citing Torrington Co. v. United States, 881 F.

Supp. 622 (CIT 1995). The petitioners note that the Department's model

matching meets the statutory goal of matching products with the most

similar characteristics.

The petitioners also rebut Rajinder's claim that the Department

disregarded wall thickness that Rajinder claims to be the most

important factor. The petitioners point out that determining whether

certain characteristics are more important over others has been an

ongoing controversial topic between the Department and certain domestic

interested parties and various respondents in other proceedings. The

petitioners note that the Department's methodology takes into account a

combination of physical characteristics, including wall thickness.

In addition, the petitioners argue that differences in cost are

reflective of differences in physical characteristics which is the

premise behind the difference-in-merchandise adjustments. The

petitioners also contend that, despite whether the pipe is light,

medium, or heavy, all of the products used for comparison purposes have

the same end use--the conveyance of gases and liquids and light

structural uses. The petitioners argue that the Department's

hierarchical approach to matching models that are most similar as set

forth in its original questionnaire arbitrarily assigned a level of

importance to certain characteristics and did not take into account

differences in physical characteristics. The petitioners assert that a

change in any one of the characteristics included in the hierarchy

causes changes in other characteristics included in the hierarchy. The

petitioners explain that a change in wall thickness can alter the

thickness as well as the costs associated with end and surface finish,

both of which are characteristics included in the hierarchy.

The petitioners point out that, under the hierarchical approach,

the Department would, in ascending order, find matches at the highest

level of the hierarchy and would, thereby, disregard any changes in

characteristics at the lower levels as a result of finding a match at

the higher level. The petitioners argue that, in essence, this approach

may find matches at higher levels within the hierarchy with a higher

difference-in-merchandise even though another match might yield a lower

adjustment.

The petitioners argue that Rajinder has not provided evidence that

the differences in wall thickness and the claimed specialized uses of

the different wall thicknesses yield differences in market values. The

petitioners therefore argue that, for the foregoing reasons, the

Department should maintain the model-match methodology it used in the

preliminary margin calculations for the final results of review.

Department's Position: We agree with Rajinder in part. We agree

that we should alter the model-match methodology from what we used in

the preliminary results, but we do not agree that we should

automatically accept the matches that Rajinder suggested in its

response. In the preliminary results, we matched each U.S. model to a

``family'' of home-market models.

Sections 771(16)(B) and (C) of the Act define foreign like product

merchandise as identical products or products in the following two

categories:

(B) Produced in the same country and by the same person as the

merchandise which is the subject of the investigation, like that

merchandise in component material or materials and in the purposes

for which used and approximately equal in commercial value to that

merchandise.

(C) Produced in the same country and by the same person and of

the same general class or kind as the merchandise which is the

subject of the investigation, like that merchandise in the purposes

for which used, and which the administering authority determine may

reasonably be compared with that merchandise.

In accordance with section 771(16) of the Act, we modified our matching

methodology and applied the criteria as follows. We did not consider

grade and finish since those categories were the same for all HM

models. The remaining criteria are size, wall thickness, and end

finish. For size, we agree with the respondent, as we did in the

preliminary results, that the U.S. models should be matched to HM

models with a size of 32 mm or 40 mm. Each of the U.S. models fell

between two HM models with essentially equivalent differences in wall

thickness. For these four models, we reviewed the end finishes. All of

these models had the same end finish, so that was not a determinant.

This left two possible HM matches for each U.S. model. For these final

results, unlike the preliminary results, we compared the variable cost

of manufacture for all of these products and matched those products

with the smallest differences (see analysis memorandum dated May 20,

1998).

Comment 6: The petitioners argue that the Department should not

make a deduction from NV for Rajinder's reported HM credit expenses.

The petitioners assert that, based on Rajinder's methodology for

calculating credit expenses, one cannot discern the invoice against

which payment was being made because these expenses were not calculated

on an order-or product-specific basis. The petitioners

[[Page 32831]]

also note that Rajinder used an arbitrary method for determining

payment dates based on whether a certain customer owed Rajinder more or

less than fifty percent of its outstanding balance which, the

petitioners argue, does not correlate to a customer's actual payment

history. The petitioners suggest that the Department use instead a

customer-specific average credit period as it has done in the past with

cases in which a respondent's system utilized revolving accounts rather

than rely upon any arbitrary method for determining payment dates.

The petitioners also argue that Rajinder did not provide a reliable

HM short-term interest rate. The petitioners note that, at

verification, Rajinder provided the Department with statements from two

of its banks that specify the short-term interest rate charged to

Rajinder. However, the petitioners point out that Rajinder received a

number of short-term loans from various financial institutions and that

the interest rates charged by the two banks are not representative of

the interest rates incurred on the short-term loans that Rajinder has

outstanding with the various other financial institutions. The

petitioners assert that Rajinder is therefore manipulating the interest

rate used in the credit expense calculation by providing the interest

rates selectively. The petitioners argue that, because the cost of

working capital is fungible, the Department should calculate an average

short-term interest rate from all short-term loans Rajinder has

outstanding with the various financial institutions. In addition, the

petitioners contend that, because Rajinder has failed to provide the

Department with information necessary to calculate an average short-

term interest rate, the Department should disallow an adjustment to NV

for credit expenses.

Rajinder argues that credit expenses were verified with very few

discrepancies and notes that the few discrepancies the Department found

were disadvantageous to Rajinder. Rajinder argues, therefore, that

because the credit expense calculation was verified and found to be

accurate there is no reason to deny an adjustment to NV for this

expense. Rajinder also refutes the petitioners' assertion that Rajinder

used an arbitrary method to calculate its HM credit expenses. Rajinder

points out that the calculation methodology was reasonable and

consistent with the manner in which Rajinder's customers remit payment.

Rajinder also states that petitioners' suggested methodology is only

one of several methodologies that can be used to calculate credit

expenses. Rajinder also argues that, if the Department rejects

Rajinder's reported HM credit expenses, it should provide Rajinder with

an opportunity to use a different method.

Rajinder contends further that the short-term interest rate was

verified and found to be accurate. Rajinder argues that it did not

select the interest rate to be used in the calculation and there is

nothing on the record or in the verification report or accompanying

exhibits to suggest that it is unrepresentative of its short-term cost

of borrowing. Rajinder notes that high interest rates are common in

India, given the rate of inflation and devaluation. Rajinder asserts

that, for the final results of review, the Department should accept

Rajinder's credit expense calculation including the short-term interest

rate used in the calculation.

Department's Position: We agree with Rajinder. Rajinder calculated

credit periods based on the manner in which its payment system

operates. Many companies have revolving lines of credit for their

customers. Despite the fact that such a system may make it difficult to

tie specific sales to subsequent payments from the customer,

calculation of average credit periods based on such a system is not

unreasonable. In fact, as the verification report alludes, Rajinder's

reported figures generally erred on the conservative side.

We have also accepted Rajinder's reported interest rate. Rajinder

did not, as the petitioners suggest, supply the verifiers with

interest-rate information selectively for two of its bank loans. The

verifiers reviewed all of Rajinder's outstanding loans (short-and long-

term) and traced the short-term loans to entries in the general ledger

and Rajinder's financial statements showing outstanding balances and

payments. In addition, the verifiers randomly chose two of the loans

and reviewed all of the supporting documentation from which the

interest rates were drawn. The interest rate charged on the two loans

reviewed by the Department in detail corresponded with the rate

Rajinder used in its calculation of credit expenses.

Comment 7: Rajinder contends that, while the Department deducted

U.S. selling expenses from U.S. prices, it failed to deduct HM indirect

selling expenses from NV, creating an apples-to-oranges comparison.

Rajinder states that, for the final results of review, the Department

should deduct HM indirect selling expenses subject to the amount

permissible under the CEP-offset provision.

The petitioners refute Rajinder's argument that HM indirect selling

expenses should be deducted from NV. The petitioners argue that,

because the Department made a LOT adjustment which accounts for

differences in selling expenses, including indirect selling expenses,

the Department cannot make a CEP offset for HM indirect selling

expenses. The petitioners point out that, if the Department compared

sales at the same LOT, a CEP offset could not be performed (citing

Antidumping Duties, Final Rule, 62 FR 27296, 27372 (May 19, 1997)).

Department's Position: The statute directs us to adjust NV for HM

indirect selling expenses where we are not able to make a LOT

adjustment. See sections 773(a)(7)(A)(i) and (ii) and section

773(a)(7)(B) of the Act. Since we made a LOT adjustment to NV for the

final results of review, we may not deduct HM indirect selling expenses

from NV as an offset to U.S. indirect selling expenses.

Comment 8: The petitioners argue that, for the final results of

review, the Department should not make a deduction from NV for

Rajinder's claimed HM indirect selling expenses.* The petitioners

contend that Rajinder has not documented these selling expenses

adequately and has not clarified its calculation of how it allocated

such expenses to black and galvanized pipe, despite the Department's

request for additional information in its supplemental questionnaire.

The petitioners also argue that company officials provided conflicting

information on this subject at verification.

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

* Given the lack of clarity from both parties, we assume the

comments in this section are referring to the use of indirect-

selling expenses as the commission offset.

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

Rajinder argues that there is no basis for disallowing a deduction

from NV for these selling expenses merely because they were not

verified. Rajinder notes that, for those expenses that were examined,

the Department found such expenses to be reported accurately. Rajinder

argues that it did respond to the Department's request for additional

information in its supplemental questionnaire response by providing a

breakdown of the expenses attributable to HM indirect selling expenses,

including worksheets demonstrating the calculation of pipe based on the

weight and type of the pipe.

Department's Position: As discussed in our response to Comment One,

we have not accepted Rajinder's HM

[[Page 32832]]

indirect selling expenses. Therefore, this argument is moot.

Comment 9: The petitioners contend that the Department should

revise the CEP-profit ratio calculated in the preliminary results of

review. The petitioners assert that the cost of goods sold (total costs

minus the change in inventory) should be subtracted from the total

revenues because only those products that were sold generated revenue.

The petitioners point out that incorporating this change into the

calculation will increase the CEP-profit ratio considerably.

Rajinder refutes the change in the numerator of the CEP-profit

ratio that the petitioners propose, arguing that profit is the

difference between revenue and expenses which includes the cost for

inventory that has not yet been sold. Rajinder contends, however, that

the CEP-profit ratio is overstated because the Department deducted an

amount for imputed expenses incorrectly. Rajinder also points out that

the Department deducted an incorrect figure for ``Total Costs'' which

erroneously yields a profit, instead of a loss, for the period.

Department's Position: We agree with both the petitioners and

Rajinder in part. We agree that the cost of goods sold should be

subtracted from the total revenue (see Calculation of Profit for

Constructed Export Price Transactions Policy Bulletin, dated September

4, 1997). The calculations that we performed added the change-in-

inventory figure to the total revenue after deducting the total costs.

This calculation produces the same results that the petitioners

suggest.

We also agree with Rajinder that we made some arithmetic errors in

the calculation. We have corrected these errors (see analysis

memorandum, dated May 20, 1998).

Comment 10: Rajinder argues that the Department incorrectly

included imputed credit expenses and inventory carrying costs in the

CEP-profit calculation.

The petitioners agree with Rajinder that the CEP-profit calculation

is incorrect and provide suggested changes to correct the calculation.

Department's Position: We disagree with both the respondent and the

petitioners. The suggested approaches blur the definition of U.S.

expenses, as defined in section 772(f)(2)(B) of the Act, and U.S.

selling expenses, as defined in sections 772(d)(1) and (2). As we

discussed in AFBs at 2126, sections 772(f) (1) and 772(f)(2)(D) of the

Act state, the per-unit profit amount shall be an amount determined by

multiplying the total actual profit by the applicable percentage (ratio

of total U.S. expenses to total expenses). Specifically, the Act

defines ``total actual profit'' as the total profit earned by the

foreign producer, exporter, and affiliated parties described in

subparagraph (C) with respect to the sale of the merchandise for which

total expenses are determined under such subparagraph. In accordance

with the statute, we base the calculation of the total actual profit

used in calculating the per-unit profit amount for CEP sales on actual

revenues and expenses recognized by the company. In calculating the

per-unit cost of the U.S. sales, we have included net interest expense.

Therefore, we do not need to include imputed interest expenses in the

``total actual profit'' calculation since we have already accounted for

actual interest in computing this amount under section 772(f)(1) of the

Act.

When we allocated a portion of the actual profit to each CEP sale,

we have included imputed credit and inventory carrying costs as part of

the total U.S. expense allocation factor. This methodology is

consistent with section 772(f)(1) of the Act, which defines ``total

United States Expense'' as the total expenses described under sections

772(d)(1) and (2). Such expenses include both imputed credit and

inventory carrying costs. See Certain Stainless Wire Rods from France,

61 FR 47874, 47882 (September 11, 1996).

Comment 11: Rajinder contends that, in the Department's

recalculation of HM imputed credit expenses, excise taxes should not be

deducted because the amount of credit extended to the customer is

inclusive of excise tax.

The petitioners contend that the Department should continue to

exclude Rajinder's excise taxes in the calculation of Rajinder's HM

imputed credit expense calculation because, to do otherwise, is

inconsistent with and contrary to both Department policy and practice.

The petitioners contend further that, because the taxes are ultimately

rescinded to the government as revenue, it does not serve the purpose

of the adjustment to price for imputed credit expenses.

Department's Position: We have not deducted excise taxes in the

recalculation of HM imputed credit expense. This tax is included in the

price Rajinder charged to the customer and is paid to the government

when the goods are removed from the factory. Therefore, the amount of

the tax is an imputed credit expense brought on by the sale of the pipe

and, as such, is appropriate to include in the interest expense

calculation.

Comment 12: Rajinder contends that the Department matched certain

U.S. sales transactions to the incorrect HM sales transactions.

Specifically, Rajinder argues that the Department inadvertently defined

a certain computer variable, which it used for matching purposes, by

the date of payment. Rajinder argues that, for the final results of

review, the Department should define the variable as the sale date.

Department's Position: We agree with Rajinder and have corrected

this clerical error.

Comment 13: Rajinder contends that, despite the Department's

inclusion of language in the program to change the sale dates of

certain U.S. sales transactions, the computer output demonstrates that

such changes were not implemented. Rajinder requests that the

Department make such changes for the final results of review.

The petitioners agree with Rajinder that changes to the sale dates

are appropriate and provide suggestions for those changes.

Department's Position: We agree and have corrected this error for

the final results (see analysis memorandum, dated May 20, 1998).

Comment 14: Rajinder contends that the Department inadvertently

failed to make corrections to its reported HM shipment dates as

presented at the outset of verification. Rajinder requests that the

Department make these changes for the final results of review because

corrections to the shipment date ultimately affect HM prices.

Department's Position: We agree with respondent and have made the

necessary changes for the final results of review.

Final Results of Review

As a result of our analysis of the comments received and the

correction of certain inadvertent clerical errors, we find that the

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

1997:

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

Percentage

Manufacturer/Exporter margin

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

RSL........................................................ 31.13

Lloyd's Metals & Engineers*................................ 0.00

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

*This firm made no shipments of subject merchandise to the United States

during the instant POR. Rate is from the last segment of the

proceeding in which the firm had shipments/sales.

Assessment Rates

The Department shall determine, and the Customs Service shall

assess, antidumping duties on all appropriate entries. For CEP sales,

we divided the total dumping margins for the reviewed sales by the

total entered value of those

[[Page 32833]]

reviewed sales for each importer/customer. We will direct Customs to

assess the resulting percentage margin against the entered Customs

values for the subject merchandise on each of the importer's/customer's

entries during the review period. While the Department is aware that

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

the entered value of entries during the POR, use of entered value of

sales as the basis of the assessment rate permits the Department to

collect a reasonable approximation of the antidumping duties which

would have been determined if the Department had reviewed those sales

of merchandise actually entered during the POR.

To calculate the cash deposit rate for each exporter, we divided

the total dumping margins for each exporter by the total net value (EP

or CEP) for that exporter's sales of subject merchandise in the United

States during the review period. The following deposit requirements

will be effective for shipments of subject merchandise entered, or

withdrawn from warehouse, for consumption on or after the publication

date of these final results of administrative review, as provided by

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

reviewed companies will be the rates outlined 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, a prior 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) the cash deposit rate for all other

manufacturers or exporters will continue to be 7.08 percent, the ``All

Others'' rate made effective by the final determination of sales at

LTFV, as explained in the 1995/96 New Shippers Review of this order.

See Certain Welded Carbon Steel Pipes and Tubes from India; Final

Results of New Shippers Antidumping Duty Administrative Review, 62 FR

47632, 47644 (September 10, 1997).

These deposit requirements shall remain in effect until publication

of the final results of the next administrative review.

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

administrative protective orders (APO) of their responsibility

concerning the return or destruction of proprietary information

disclosed under APO in accordance with 19 CFR 353.34(d)(1). Timely

written notification of the 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 determination is issued and published in accordance with

sections 751(a)(1) and 777(i)(1) of the Act.

Dated: June 8, 1998.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 98-15873 Filed 6-15-98; 8:45 am]

BILLING CODE 3510-DS-P