Small Diameter Circular Seamless Carbon and Alloy Steel Standard, Line and Pressure Pipe From Germany: Final Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[A-428-820]

Small Diameter Circular Seamless Carbon and Alloy Steel Standard,

Line and Pressure Pipe From Germany: Final Results of Antidumping Duty

Administrative Review

AGENCY: Import Administration, International Trade Administration,

Commerce.

ACTION: Notice of final results of antidumping duty administrative

review.

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SUMMARY: On September 9, 1997, the Department of Commerce (``the

Department'') published the preliminary results of its 1995-96

administrative review of the antidumping duty order on Small Diameter

Circular Seamless Carbon and Alloy Steel Standard, Line and Pressure

Pipe From Germany (62 FR 47446). This review covers one manufacturer/

exporter of the subject merchandise, Mannesmannroehren-Werke AG

(``MRW''), and Mannesmann Pipe & Steel Corporation (``MPS'')

(collectively ``Mannesmann''), for the period January 27, 1995 through

July 31, 1996.

EFFECTIVE DATE: March 18, 1998.

FOR FURTHER INFORMATION CONTACT: Nancy Decker or Hollie Mance, Office

of AD/CVD Enforcement, Group III, Import Administration, International

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

Constitution Avenue, NW, Washington, D.C. 20230; telephone (202) 482-

0196 or 482-0195, respectively.

SUPPLEMENTARY INFORMATION:

Background

On September 9, 1997, the Department published in the Federal

Register the preliminary results of the 1995-96 review (62 FR 47446) of

the antidumping duty order on Small Diameter Circular Seamless Carbon

and Alloy Steel Standard, Line and Pressure Pipe From Germany (60 FR

39704; August 3, 1995).

Under section 751(a)(3)(A) of the Tariff Act of 1930, as amended

(``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

December 31, 1997, the Department extended the time limits for the

final results in this case. See Extension of Time Limit for Antidumping

Duty Administrative Reviews (62 FR 68258). The Department has now

completed this administrative review in accordance with section 751 of

the Act.

Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute are

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

date of the amendments made to the Tariff Act of 1930 by the Uruguay

Round Agreements Act (``URAA''). In addition, unless otherwise

indicated, all references to the Department's regulations are to 19 CFR

Part 353 (April 1, 1997).

Scope of the Order

The scope of this review includes small diameter seamless carbon

and alloy standard, line and pressure pipes (``seamless pipes'')

produced to the American Society for Testing and Materials (``ASTM'')

standards A-335, A-106, A-53, and American Petroleum Institute

(``API'') standard API 5L specifications and meeting the physical

parameters described below, regardless of application. The scope of

this review also includes all products used in standard, line, or

pressure pipe applications and meeting the physical parameters below,

regardless of specification.

For purposes of this review, seamless pipes are seamless carbon and

alloy (other than stainless) steel pipes, of circular cross-section,

not more than 114.3 mm (4.5 inches) in outside diameter, regardless of

wall thickness, manufacturing process (hot-finished or cold-drawn), end

finish (plain end, beveled end, upset end, threaded, or threaded and

coupled), or surface finish. These pipes are commonly known as standard

pipe, line pipe, or pressure pipe, depending upon the application. They

may also be used in structural applications. Pipes produced in non-

standard wall thicknesses are commonly referred to as tubes.

The seamless pipes subject to this review are currently

classifiable under subheadings 7304.10.10.20, 7304.10.50.20,

7304.31.60.50, 7304.39.00.16, 7304.39.00.20, 7304.39.00.24,

7304.39.00.28, 7304.39.00.32, 7304.51.50.05, 7304.51.50.60,

7304.59.60.00, 7304.59.80.10, 7304.59.80.15, 7304.59.80.20, and

7304.59.80.25 of the Harmonized Tariff Schedule of the United States

(``HTSUS'').

The following information further defines the scope of this review,

which covers pipes meeting the physical parameters described above:

Specifications, Characteristics and Uses: Seamless pressure pipes

are intended for the conveyance of water, steam, petrochemicals,

chemicals, oil products, natural gas, and other liquids and gasses in

industrial piping systems. They may carry these substances at elevated

pressures and temperatures and may be subject to the application of

external heat. Seamless carbon steel pressure pipe meeting the ASTM

standard A-106 may be used in temperatures of up to 1000 degrees

Fahrenheit, at various American Society of Mechanical Engineers

(``ASME'') code stress levels. Alloy pipes made to ASTM standard A-335

must be used if temperatures and stress levels exceed those allowed for

A-106 and the ASME codes. Seamless pressure pipes sold in the United

States are commonly produced to the ASTM A-106 standard.

Seamless standard pipes are most commonly produced to the ASTM A-53

specification and generally are not intended for high temperature

service. They are intended for the low temperature and pressure

conveyance of water, steam, natural gas, air and other liquids and

gasses in plumbing and heating systems, air conditioning units,

automatic sprinkler systems, and other related uses. Standard pipes

(depending on type and code) may carry liquids at elevated temperatures

but must not exceed relevant ASME code requirements.

Seamless line pipes are intended for the conveyance of oil and

natural gas or other fluids in pipe lines. Seamless line pipes are

produced to the API 5L specification.

Seamless pipes are commonly produced and certified to meet ASTM A-

106, ASTM A-53 and API 5L specifications. Such triple certification of

pipes is common because all pipes meeting the stringent ASTM A-106

specification necessarily meet the API 5L and ASTM A-53 specifications.

Pipes meeting the API 5L specification necessarily meet the ASTM A-53

specification. However, pipes meeting the A-53 or API 5L specifications

do not necessarily meet the A-106 specification. To avoid maintaining

separate production runs and separate inventories, manufacturers

triple-certify the pipes. Since distributors sell the vast majority of

this product, they can thereby maintain a single inventory to service

all customers.

The primary application of ASTM A-106 pressure pipes and triple-

certified pipes is in pressure piping systems by refineries,

petrochemical plants and chemical plants. Other applications are in

power generation plants (electrical-fossil fuel or nuclear), and in

some oil field uses (on shore and off shore) such as for separator

lines, gathering lines

[[Page 13218]]

and metering runs. A minor application of this product is for use as

oil and gas distribution lines for commercial applications. These

applications constitute the majority of the market for the subject

seamless pipes. However, A-106 pipes may be used in some boiler

applications.

The scope of this review includes all seamless pipe meeting the

physical parameters described above and produced to one of the

specifications listed above, regardless of application, and whether or

not also certified to a non-covered specification. Standard, line and

pressure applications and the above-listed specifications are defining

characteristics of the scope of this review. Therefore, seamless pipes

meeting the physical description above, but not produced to the ASTM A-

335, ASTM A-106, ASTM A-53, or API 5L standards shall be covered if

used in a standard, line or pressure application.

For example, there are certain other ASTM specifications of pipe

which, because of overlapping characteristics, could potentially be

used in A-106 applications. These specifications generally include A-

162, A-192, A-210, A-333, and A-524. When such pipes are used in a

standard, line or pressure pipe application, such products are covered

by the scope of this review.

Specifically excluded from this review are boiler tubing and

mechanical tubing, if such products are not produced to ASTM A-335,

ASTM A-106, ASTM A-53 or API 5L specifications and are not used in

standard, line or pressure applications. In addition, finished and

unfinished oil country tubular goods (``OCTG'') are excluded from the

scope of this review, if covered by the scope of another antidumping

duty order from the same country. If not covered by such an OCTG order,

finished and unfinished OCTG are included in this scope when used in

standard, line or pressure applications. Finally, also excluded from

this review are redraw hollows for cold-drawing when used in the

production of cold-drawn pipe or tube.

Although the HTSUS subheadings are provided for convenience and

customs purposes, our written description of the scope of this review

is dispositive.

Fair Value Comparisons

On January 8, 1998, the Court of Appeals for the Federal Circuit

issued a decision in CEMEX v. United States, 1998 U.S. App. LEXIS 163.

In that case, based on the pre-URAA version of the Act, the Court ruled

that the Department may not resort immediately to constructed value

(``CV'') as the basis for foreign market value (now normal value, or

``NV'') when the Department finds home market sales of the identical or

most similar merchandise to be outside the ``ordinary course of

trade.'' This issue was not raised by any party in this proceeding.

However, the URAA amended the definition of sales outside the ordinary

course of trade to include sales below cost. See Section 771(15) of the

Act. Consequently, the Department has reconsidered its practice in

accordance with this court decision and has determined that it would be

inappropriate to resort directly to CV as the basis for NV where the

Department finds foreign market sales of merchandise identical or most

similar to that sold in the United States to be outside the ordinary

course of trade. Instead, the Department will use other sales of

similar merchandise to compare to the U.S. sales if such sales exist.

The Department will use CV as the basis for NV only when there are no

above-cost sales that are otherwise suitable for comparison.

Accordingly, in this proceeding, when making comparisons in accordance

with section 771(16) of the Act, we considered all home market sales of

the foreign like product that were in the ordinary course of trade for

purposes of determining appropriate product comparisons to U.S. sales.

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

made in the ordinary course of trade to compare to U.S. sales, we

compared U.S. sales to sales of the most similar foreign like product

made in the ordinary course of trade, based on the characteristics

listed in Sections B and C of our antidumping questionnaire. Thus, we

have implemented the Court's decision in CEMEX to the extent that the

data on the record permitted.

Analysis of Comments Received

We gave interested parties an opportunity to comment on the

preliminary results of review. The Department received briefs and

rebuttal briefs from petitioner, Gulf States Tube Division of Quanex

Corporation, and the respondent in this case, Mannesmann. At the

request of petitioner, we held a hearing on November 6, 1997. Based on

our analysis of the issues discussed in these briefs, we have changed

these final results of review from those published in our preliminary

results.

Comment 1

Mannesmann maintains that the Department improperly invoked the

special rule for major inputs in section 773(f)(3) of the Act when it

ignored Mannesmann's verified billet costs in calculating the company's

cost of production (``COP''). Mannesmann objects to the Department's

revaluation of major inputs based on one purchase of billets from an

unaffiliated supplier. According to Mannesmann, the Department should

have treated the production of billets by Huttenwerke Krupp Mannesmann

GmbH (``HKM''), an affiliate, as integrated with Mannesmann's

production of seamless pipe. At the hearing as well as at verification,

Mannesmann asserted that HKM is not, in fact, an affiliate in the

traditional sense of the word, but that it is run as a cost center.

Mannesmann points out that the Department conducted a separate

verification of HKM, and that the Department confirmed that HKM sold

billets to two MRW plants, Mannesmannrohr (``MWR'') and

Mannesmannrohren-Werke Sachsen GmbH (``MWS''), at cost, and that the

affiliate had reported accurate and complete cost data.

Mannesmann contends that the Department has no legal basis for

disregarding reported costs and instead applying the major input rule.

Mannesmann argues that this provision has no relevance when the

Department has verified COP data. Mannesmann argues that the Court of

International Trade (``CIT'') has held that, when costs of production

have been provided, ``this part of the statute is inapplicable'' (SKF

USA Inc. and SKF GmbH v. United States, 888 F. Supp. 152, 156 (CIT

1995)). Mannesmann argues that costs are merely being passed along, and

that HKM operates as though it were a division of Mannesmann.

Therefore, according to Mannesmann, section 773(f)(3) of the Act does

not apply. Mannesmann maintains that the purpose of the major input

provision is to allow the Department to use the ``the best available

evidence as to * * * costs of production if the Department has

reasonable grounds to believe or suspect that the transfer price of an

input is less than the cost of producing it.'' In this instance,

Mannesmann holds that the rule has no application if the best available

evidence as to the cost of producing the billets is the verified actual

cost of the affiliate. Mannesmann states that sections 773(f)(2) and

(3) provide that the Department may only disregard ``transfer price''

transactions if, based on the information considered, the transfer

prices do not reflect a fair price. Mannesmann notes that the CIT has

stated that this provision permits Commerce ``to use best evidence

available when it has reasonable grounds to suspect below cost sales''

of a major input have occurred (NSK Ltd. v. United States, 910 F. Supp.

663, 670 (CIT 1995)). Mannesmann further notes

[[Page 13219]]

that the CIT upheld the Department's application of the major input

rule in NSK because NSK failed to provide COP data, and that had NSK

provided cost data, that data would have been the best evidence

available.

According to Mannesmann, the Department had no reasonable basis for

applying an across-the-board percentage price increase on all billets

based on one exceptional purchase of a steel grade that was not sold in

the United States and would not, in any event, be utilized in the

calculation of NV.

Moreover, Mannesmann states that its representatives explained at

verification that MWR and MWS only purchased from unaffiliated

suppliers on occasions when the related party did not produce a

specific grade or purity of steel or when a small volume was ordered.

Mannesmann claims it must go to unaffiliated parties in these instances

and purchase it at a higher price. Therefore, Mannesmann claims that no

adjustment to billet costs is warranted. However, if the Department

makes any adjustments for billet costs, Mannesmann asserts that the

adjustment should be less punitive. Mannesmann maintains that such an

adjustment could only be applied to the relevant steel grade billet,

conforming to SPEC2H 61 and 62, that was sold to Mannesmann by both

affiliated and unaffiliated suppliers. At the hearing, Mannesmann also

proposed a third alternative which it claimed was the most adverse

methodology that could reasonably be applied to this situation.

Mannesmann suggested applying the same adjustment made in the

preliminary results to the billets purchased from unaffiliated parties.

Petitioner argues that the statute plainly allows the Department to

disregard transactions between affiliated parties (1) for any element

of cost for which the transaction price between the parties ``does not

fairly reflect'' the normal market prices under section 773(f)(2) and

(2) where it has reasonable grounds to believe or suspect that a

``major input'' has been provided at less than the COP under section

773(f)(3).

Petitioner states that Mannesmann's citations to NSK and SKF are

misplaced. According to petitioner, NSK dealt with the question of

whether the Department could require a respondent to provide cost

information, not for the proposition that the Department must rely on

cost information to the exclusion of market value information (see NSK,

910 F. Supp. at 669). Petitioner states that in SKF, the court merely

upheld the Department's discretion to apply the COP of the major input

and, contrary to Mannesmann's characterization, did not find that the

Department must apply the COP rather than the transfer price or market

value.

Further, petitioner states that the Department's calculation of

market value was supported by substantial evidence on the record and

supported by law. According to petitioner's reasoning, the Department

sought information ``as to what the amount would have been if the

transaction had occurred between parties who were not affiliated.''

Further, the only information on the record available to the Department

about what the market value would have been if bought from an

unaffiliated producer was a single purchase of billets. This price

difference was used as an adjustment factor for the billets purchased

from the affiliated producer in the preliminary results. Petitioner

states that the Department has discretionary authority to determine the

best evidence available as to market value in a manner that is not

inconsistent with the statute, citing Chevron USA, Inc. v. Natural

Resources Defense Counsil, 467 U.S. 837, 842-43 (1984). Petitioner also

cites Daewoo Elec. Co. v. Int'l Union of Elec., Technical, Salaried and

Mach. Workers, 6 F.3d 1511, 1516 (Fed. Cir. 1993), which petitioner

claims indicates that considerable weight is accorded to the

Department's construction of the statute. According to petitioner,

Commerce's choice of methodology will be upheld absent a showing by

Mannesmann that the methodology was unreasonable. Petitioner claims

that nothing in the record indicates that the chosen methodology was

unreasonable.

Petitioner refutes each of Mannesmann's three arguments as to why

the choice of methodology was unreasonable. First, petitioner states

that to base the adjustment upon a small volume purchase was, in fact,

appropriate. Petitioner asserts that the Department is directed by the

statute to use the ``information available'' to determine market value

and that the information chosen was the only information available.

Petitioner concludes that there are no more favorable or detrimental

options available to the Department.

Second, petitioner contends that the fact that the grade used to

calculate the adjustment factor was not sold in the U.S. does not

invalidate the Department's chosen methodology. Petitioner asserts that

there is no evidence on the record to suggest that another quantity

would have not also shown a similar price differential.

Third, petitioner argues that, even though actual cost data has

been provided, that is irrelevant to a determination of what an arm's-

length market price from an unaffiliated supplier would be. Petitioner

cites section 773(f)(2), which they claim requires a determination of

the market value in addition to the COP. Furthermore, petitioner states

that the major input rule in section 773(f)(3) allows the Department to

use the producer's actual cost only where ``such cost is greater than

the amount that would be determined for such input under paragraph

(2),'' which is the market value.

Petitioner concludes that the Department should continue to value

billets purchased from its affiliate at the highest of COP, transfer

price, or market value. Petitioner states that the Department's use of

market value, when it was higher than cost, was consistent with the

statutory directive.

Department's Position

The Department agrees with petitioner and maintains its position as

stated in the preliminary determination. We disagree with Mannesmann's

assertion that the Department improperly invoked the special rule for

major inputs. Sections 773(f)(2) and (3) of the Act specify the

treatment of transactions between affiliated parties for purposes of

reporting cost data (for use in determining both COP and CV) to the

Department. Section 773(f)(2) indicates that the Department may

disregard such transactions if the amount representing that element

(the transfer price) does not fairly reflect the amount usually

reflected (typically the market price) in the market under

consideration (where the production takes place). Under these

circumstances, the Department may rely on the market price to value

inputs purchased from affiliated parties.

Section 773(f)(3) indicates that, if transactions between

affiliated parties involve a major input, then the Department may value

the major input based on the COP if the cost is greater than the amount

(higher of transfer price or market price) that would be determined

under 773(f)(2). Section 773(f)(3) applies if the Department ``has

reasonable grounds to believe or suspect that an amount represented as

the value of such input is less than the COP of such input.'' The

Department generally finds that such ``reasonable grounds'' exist where

it has initiated a COP investigation of the subject merchandise.

Because a COP investigation was conducted in this case, the

Department requested in its Supplemental Section D questionnaire that

Mannesmann provide COP information for the billet rounds.

[[Page 13220]]

That cost information was provided by the affiliated party and was

verified. In accordance with sections 773(f)(2) and (3), we used the

highest of transfer price, COP or market value to value the billets.

The Department disagrees with Mannesmann's claim that it had no

reasonable basis to apply an across-the-board percentage price increase

on all billets based upon one exceptional purchase of a steel grade

that was not sold in the United States. Market price information was

requested in the Section D questionnaire for any purchases of the

identical input from unaffiliated suppliers, but Mannesmann did not

respond to this portion of the questionnaire. In the second

Supplemental D questionnaire response at question 4, Mannesmann made a

specific claim regarding purchases of inputs from affiliated and

unaffiliated parties. (See proprietary Final Analysis Memo; March 9,

1998) At verification the Department attempted to verify this claim by

examining Mannesmann's purchases of billets in one sample month. We

discovered one such purchase in this month, and utilized this purchase

price as market value. (See Cost Verification Report at V.5.B.3)

Further, as there is no other information on the record, we have used

this information as facts available to determine market values for

other types of billets.

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.

The use of adverse facts available is appropriate. Therefore, for

the final results, as adverse facts available, we have continued to

apply this market value adjustment to all purchases from affiliated

suppliers.

Comment 2

Mannesmann states that the Department improperly rejected its claim

for a startup adjustment pursuant to section 773(f)(1)(c) of the Act in

its preliminary results in spite of the fact that it met the statutory

requirement for this adjustment. Mannesmann states that it

substantially retooled the push bench operations at Zeithain, and that

production levels were substantially limited by technical factors

associated with the initial phase of commercial production. According

to Mannesmann, when the statutory criteria are fulfilled, the

Department must make a startup adjustment. Mannesmann cites Notice of

Preliminary Determination of Sales at Less Than Fair Value: Static

Random Access Memory Semiconductors From Taiwan, 62 FR 51442, 51447-48

(Oct. 1, 1997), as a case in which the startup adjustment was

preliminarily granted when the ``threshold criteria'' of the statute

were met.

The Department's denial, in Mannesmann's view, is not supported by

the record and the Department's Preliminary Analysis Memorandum of

September 2, 1997 indicates that the Department misunderstood the

evidence Mannesmann submitted to support its claim.

According to Mannesmann, the Department incorrectly equated the

push bench machine with the push bench operation. Mannesmann states

that the push bench operations encompass much more than one machine as

implied by the Department. Mannesmann states that the Department's Cost

Verification Report documents and describes the substantial investments

made by Mannesmann in retooling and replacing the push bench operation

at Zeithain (see Cost Verification Exhibit Z-4).

In addition, Mannesmann contends that it documented and the

Department verified that a substantial percentage of the total fixed

assets at the Zeithain mill consisted of push bench operations. See

Supplemental Section D Response at 12, and Exhibit D-6; Cost

Verification Exhibit Z-25.

Mannesmann claims that record evidence clearly documents the

reduced productivity of the push bench operations during the startup

period. In Mannesmann's opinion, the Department's conclusion that

production and manufacturing activity levels were substantially the

same during 1995 and the claimed startup period in 1996 is erroneous.

According to Mannesmann, the machine operating time shown in Exhibit 5

of the Department's Cost Verification Report is not a measure of actual

operating time and, therefore, does not provide an accurate factual

basis of productivity. Instead, Mannesmann states that the Department

must evaluate the efficiency of the plant measured in output over a

given time period in order to gauge accurately the impact of retooling

the push bench operations. Mannesmann points out that the Efficiency

Comparison Table provided at the Zeithain cost verification documents

the clear drop in productivity during the first seven months of 1996,

compared to production in 1995. See Cost Verification Exhibit Z-25.

Mannesmann refers to a graph which they included in their brief as an

illustration of the substantial lower production efficiency of the push

bench operations during the startup period when new and retooled

equipment was being brought on line.

Moreover, Mannesmann points out that it has met the requirement

that a company is entitled to a startup adjustment if it properly

identifies the technical problems encountered during startup that

resulted in reduced productivity. See Statement of Administrative

Action (``SAA'') accompanying the URAA, H.R. Rep. No. 103-316 (1994) at

168 (838).

Mannesmann concludes that the investment at the Zeithain mill has

been substantial, and the startup problems well-documented.

Accordingly, Mannesmann believes that the Department must grant it the

requested adjustment in the final results of this review.

Petitioner counters that Mannesmann's investment amounts to a much

smaller portion of total assets for the period of review (``POR'') than

it claims. Petitioner maintains that section 773(f)(1)(c)(ii)(I) makes

clear that a substantial investment is not enough to trigger the

adjustment; the substantial adjustment must result in a new production

facility. According to petitioner, there is no evidence to indicate how

much of the additional expenditures were part of ongoing improvements

to the existing facility.

Petitioner also rejects Mannesmann's reliance on productivity in

terms of tons per hour as a measure of limited production levels rather

than reliance on total volume of production as stated in section

773(f)(1)(c)(ii) of the Act: ``the administering authority shall

consider factors unrelated to startup operations that might affect the

volume of

[[Page 13221]]

production processed * * *'' Petitioner maintains that the statute and

the regulations are concerned with reaching commercial production

levels and, in petitioner's view, Mannesmann had operated at commercial

production levels.

Petitioner agrees with the Department's finding that the record

does not show that production and manufacturing activity were

significantly different during the alleged startup period and the same

period in the previous year. Therefore, the Department should continue

to deny Mannesmann's requested startup adjustments for these final

results.

Department's Position

The Department agrees with petitioner that Mannesmann did not

adequately demonstrate its eligibility for a startup adjustment. Under

section 773(f)(1)(C)(ii) of the Act, Commerce may make an adjustment

for startup costs only if the following two conditions are satisfied:

(1) A company is using new production facilities or producing a new

product that requires substantial additional investment, and (2)

production levels are limited by technical factors associated with the

initial phase of commercial production. Here, neither prong of the test

has been satisfied.

Mannesmann did not construct new production facilities or produce a

new product. This case is thus unlike Gray Portland Cement and Clinker

From Mexico: Final Results of Antidumping Duty Administrative Review,

62 FR 17148, 17162 (April 9, 1997) or Notice of Final Determination of

Sales at Less Than Fair Value: Static Random Access Memory

Semiconductors From Taiwan, 63 FR 8909, 8930 (February 23, 1998), in

which respondents constructed entirely new facilities. Mannesmann could

not demonstrate the ``substantially complete retooling of an existing

plant,'' as required in the SAA at 166(836). The SAA states that

``substantially complete retooling involves the replacement or

equivalent rebuilding of nearly all production machinery.'' In Notice

of Final Determination of Sales at Not Less Than Fair Value: Collated

Roofing Nails From Korea, 62 FR 51420, 51425 (October 1, 1997), the

Department denied a startup adjustment where the ``substantially

complete retooling'' requirement was not met. Because the respondent

``merely relocated its production facility without replacing or

rebuilding nearly all of its machinery, and the record evidence does

not show that the relocation involved a substantial investment in

connection with the revamping or redesigning of collated roofing nails,

the first condition for the startup adjustment is not satisfied.''

Similarly, record evidence of the fixed asset expenditures in this case

does not demonstrate that the 1996 push-bench replacement represented a

``substantially complete retooling.'' The level of its investment which

was reviewed by the Department, while substantial, does not reach the

level where it could be classified as a complete retooling of the

plant. Further, the Department has viewed the push-bench during the

plant tour and has reviewed the plant layouts which were submitted in

the Supplemental Section D questionnaire response to gain further

understanding of the push-bench operation. While Mannesmann did work on

a number of machines within the push-bench operation, in many cases,

Mannesmann only replaced or rebuilt part of the machine (see page 19 of

the Sales Verification Report). This did not result in the replacement

or equivalent rebuilding of nearly all production machinery, and

coupled with the level of investment, leads us to conclude that

Mannesmann does not meet the criteria for new production facilities.

As stated in Collated Roofing Nails From Korea, 62 FR at 51426,

``because [respondent] does not meet the requirements outlined in the

first prong of the start-up provision, the Department is not required

to address whether or not [respondent's] production levels were limited

by technical factors associated with the initial phase of commercial

production''. The Department did, however, review evidence on the

record whereby Mannesmann attempted to demonstrate that production

levels at the Zeithain mill were substantially limited by technical

factors during the startup period. The Department has fully reviewed

the productivity, machine operating time, and efficiency data presented

by Mannesmann in responses and at verification for all of 1995 and

1996. While productivity and efficiency decreased from 1995 to 1996 as

shown in Cost Verification Exhibit Z-25, this decline was not

substantial enough to indicate that Mannesmann was unable to produce in

commercial quantities. Further, the decline in productivity occurred

throughout the year and not only during the alleged startup period.

Thus, we could not correlate the demonstrated decline in productivity

with the installation of the push-bench operation. Therefore, due to

the fact that neither the substantial retooling nor the reduced

productivity requirements has been adequately supported, we have

disallowed the startup adjustment.

Comment 3

Mannesmann claims that it has provided evidence on the record to

support its claimed offset to financial expenses from short-term

interest income. It states that the Preliminary Analysis Memorandum

indicates that the Department wrongly denied the offset because it

presumed that Mannesmann's reported financial income was from long-term

investment. According to Mannesmann, this presumption is inaccurate.

According to Mannesmann, its consolidated financial statements and

annual reports show that income from long-term loans and investments is

separately listed and distinguished from short-term interest and

investments. Mannesmann states that the amount of income earned from

working capital is, by definition, related to manufacturing and sales

operations, and cites a case in which this methodology was accepted

(Notice of Final Results of Antidumping Duty Administrative Reviews:

Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts

Thereof From France, et al., 60 FR 10900, 10925 (Feb. 28, 1995)).

Mannesmann states that its financial statements were verified for

accuracy and completeness, and that the data reported in those

financial statements should be used to calculate a short-term interest

income offset in the reported financial expense.

Further, Mannesmann states that the CIT has held that short-term

interest does not need to be exclusively related to the merchandise

subject to review in order to qualify as an offset to interest expense

(Timken Co. v. United States, 852 F. Supp. 1040, 1047-48 (CIT 1994)).

Accordingly, Mannesmann concludes that the Department must allow the

short-term interest income offset in the calculation of financial

expense because it was derived from its verified financial statements,

and it is related to the ordinary course of business.

Petitioner states that the Department properly denied the interest

income offset in computing financial expense. Petitioner asserts that,

because Mannesmann did not provide a requested schedule to support its

claim that the interest income was, in fact, short-term in nature, the

offset should be denied. It is petitioner's contention that, because

the account title ``other interest and similar income'' does not

describe the long or short-term nature of the account amount, that one

cannot conclude that it is short-term in nature. Thus, petitioner urges

the Department to

[[Page 13222]]

continue to deny the interest income offset in its final results.

Department's Position

We agree with Mannesmann. For these final results, the Department

has allowed the short-term interest income offset which Mannesmann

claimed in its calculation of financial expense. Although a schedule

which specifically supported this amount was not provided at

verification, we have concluded through further review of the financial

statements that the income is short-term in nature. Interest income

appears in two line items in the disclosure of interest income and

expense. One of the line items indicates that it is long-term in

nature, and the other line item, which has a general description that

does not specifically indicate that it is short-term, can reasonably be

assumed to be short-term interest income.

We agree that the financial statements were verified and have been

audited, thus providing a reliable basis for interest expense

calculation. Further, we agree that the short-term interest income does

not need to be exclusively related to the merchandise subject to review

in order to qualify as an offset to interest expense.

Comment 4

Mannesmann objects to the Department's application of the highest

duty reported to all U.S. sales as adverse facts available, when there

were only minor differences between the U.S. duty reported and the

verified amounts. At verification the Department examined the duty paid

on more than half of total U.S. sales and found only minor

discrepancies which, according to Mannesmann, were the result of

allocation and rounding methodologies.

Given that the Department verified the reliability and accuracy of

MPS' accounting system and record keeping (see U.S. Sales Verification

Report at 14-16), Mannesmann believes the Department should use the

duty data reported by Mannesmann for its final results. However, if the

Department chooses to adjust the reported duty amounts, Mannesmann

suggests that the Department add to the reported duty for all sales the

weighted average or difference between what was reported and what was

verified. Mannesmann believes this approach would result in a ``fair

comparison,'' the basic purpose of the URAA. According to Mannesmann,

the punitive approach of adverse facts available is unwarranted.

Mannesmann contends that the use of adverse facts available under

these circumstances is contrary to the purposes of the Act, the SAA and

established principles of dumping law. According to Mannesmann, the

Department's apparent rationale for choosing a punitive margin rate was

that certain sales trace documents in the home market were not

photocopied and provided promptly enough. Mannesmann reiterates that

they were subject to four and a half weeks of verification at different

locations, during which time the Department had every opportunity to

check the accuracy and completeness of the data submitted by the

Mannesmann companies. It is their contention that the Department simply

has no grounds to allege that Mannesmann has in any way been

``uncooperative.'' According to Mannesmann, the assertion that

Mannesmann has been uncooperative in any aspect of the administrative

review is contradicted by the factual record. Mannesmann argues that

the initial threshold for applying facts available, let alone adverse

facts available, is high. The Department is only authorized to use

adverse inferences in extreme situations, such as when it 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, in Mannesmann's

view. Mannesmann states that it did not engage in any activity during

the course of this administrative review that could even remotely be

characterized as uncooperative behavior deserving of adverse

inferences. Further, they claim that they have fully complied with the

Department's requests for information and they state that there is

ample information on the record that allows the Department to use more

accurate evidence as ``facts available'' than to apply facts available

based on adverse inferences. Mannesmann asserts that the Department is

under a legal obligation to use the most accurate information available

to make ``fair comparisons'' and obtain an accurate dumping margin.

Mannesmann concludes that the Department should base its calculations

for the final results on the factual evidence available in the records

of this review.

Petitioner argues that the application of facts available in this

case is justified because Mannesmann was unable to verify the

correctness of the reported duty amounts and did not have the

information to provide corrections to many of the sales. In addition,

petitioner maintains that correcting each of Mannesmann's sales

listings to account for these errors would have caused undue difficulty

to the Department.

Concerning Mannesmann's complaint that the application of the

highest duty constitutes adverse facts available out of proportion with

the discrepancies found, petitioner states that the choice of the facts

available is discretionary, and that both the Department's old and new

regulations permit the use of other information submitted by the

respondent as facts available. See 19 CFR 353.37(b) and 19 CFR

351.308(c) (62 FR 27296; May 19, 1997). Petitioner argues that the use

of adverse facts available is thus warranted in this case.

Department's Position

We agree in part with both Mannesmann and petitioner. In this case,

Mannesmann incorrectly reported U.S. duty for the majority of the U.S.

sales examined at verification (see U.S. Sales Verification Report at

21). In determining whether U.S. duty was properly reported, we summed

total U.S. duty paid on the entry we were examining and compared it to

total U.S. duty reported in the applicable observations. For several of

the entries (comprising numerous sales observations), we found that the

total U.S. duty across the associated observations was underreported.

This indicates that errors exist which are more pervasive than can be

explained by rounding or allocation methodologies. In addition, the

company could not recreate or explain the allocation methodologies used

in its submission.

For the sales for which we were able to verify that duty was

correctly reported, we are using the reported duty amounts for these

final results. For all other sales, we have applied as adverse facts

available one of two duty rates, depending upon product classification.

We applied the highest reported duty amount for carbon products to all

sales of carbon products, and we applied the highest reported U.S. duty

amount for alloy products to all sales of alloy products (see Final

Analysis Memorandum of March 9, 1998). While the Department has broad

discretion on the use of facts available (see Silicomanganese from

Brazil: Final Results of Antidumping Duty Administrative Review, 62 FR

37869, 37874 (July 15, 1997) and Allied Signal Aerospace Co. v. United

States, 996 F.2d 1185, 1191 (Fed. Cir. 1993)), we determined that it

was appropriate to consider the differences in value and duty rates for

the two classes of products in our choice of facts available.

By not providing verifiable information for U.S. duties when such

information was available to Mannesmann, we have determined that

Mannesmann failed to cooperate by not acting to the best of its ability

to comply

[[Page 13223]]

with a request for information. Therefore, the use of adverse facts

available is appropriate (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, 61739 (Final, Nov. 19, 1997)).

Comment 5

Mannesmann maintains that the adverse assumptions made by the

Department about its U.S. sales data are not justified. Mannesmann

states that in its attempt to accurately reflect its normal business

practices in reporting U.S. sales data, it was necessary to allocate

certain movement expenses between subject and nonsubject merchandise.

Moreover, Mannesmann notes that it reported the actual inland freight

it was charged by its German affiliate, MH. These costs, however, often

differed slightly from the actual costs MH paid to outside unaffiliated

suppliers for services. As a result, slight discrepancies occurred

between the U.S. freight data submitted and the expenses reviewed at

verification.

Mannesmann also objects to the Department's use of the highest

reported amounts for foreign inland freight as partial facts available.

Although Mannesmann reported the amounts it is charged and actually

pays its affiliate for transportation, at verification the Department

was unable to tie these amounts to third-party payments by MH because

Mannesmann does not receive these third-party invoices, but simply pays

MH based on MH's allocation of freight charges.

Mannesmann argues the Department should use the amounts reported

or, alternatively, a freight amount that reflects the amounts verified

at Mannesmann, such as the higher of the reported amount or the average

of all foreign inland freight reported for each mill. In any case,

Mannesmann holds that the Department should not make a freight amount

adjustment where it is reported as zero. Further, Mannesmann states

that the use of adverse facts available is not appropriate.

Petitioner points out that this same inability to provide the

required information occurred in the original investigation and

prompted the Department to apply best information available (``BIA'')

(see Notice of Final Determination of Sales at Less Than Fair Value:

Small Diameter Circular Seamless Carbon and Alloy Steel Standard, Line

and Pressure Pipe from Germany, 60 FR 31980 (June 19, 1995)) (``German

seamless pipe LTFV final''). In petitioner's view, in the instant case

Mannesmann's failure even to attempt to provide payment records for

sample sales at verification constitutes a failure to cooperate with

the Department and justifies the use of adverse facts available.

Department's Position

We agree with petitioner. By not providing verifiable information

for inland freight, including actual payment records, when such

information was available to Mannesmann, we have determined that

Mannesmann failed to cooperate by not acting to the best of its ability

to comply with a request for information.

Mannesmann reported foreign inland freight in two fields: (1) Plant

to border and (2) border to port. We examined one sale in which one of

these fields was zero. The freight reported in the other field was

explained to include all freight from plant to port, but it was

incorrectly reported. Therefore, since the freight amounts reported

were inaccurate or could not be supported, we are continuing to apply

facts available. However, in these final results, we are using the

highest reported inland freight amount in each freight field by mill.

We realize that the mills are located hundreds of miles apart, and

therefore, there could very likely be differences in the cost of

freight from plant to port between the two plants. We were able to

verify production by mill, and the mill source reported for each sale.

Comment 6

Mannesmann maintains that the Department should not deduct indirect

selling expenses (DINDIRSU and RINDIRSU) (i.e., amounts related to

selling expenses incurred in the country of manufacture) from export

price (``EP'')/constructed export price (``CEP'') because these fields

do not contain expenses ``which result from, and bear a direct

relationship to, selling activities in the United States.'' See SAA at

153 (823). Mannesmann cites Gray Portland Cement and Clinker From

Mexico: Final Results of Antidumping Duty Administrative Review, 62 FR

17148, 171167 (April 9, 1997); Roller Chain, Other Than Bicycle, From

Japan: Final Results of Antidumping Duty Administrative Review, 61 FR

64322, 64326 (December 4, 1996); and Notice of Final Determination of

Sales at Less Than Fair Value: Certain Pasta From Italy, 61 FR 30326,

30352 (June 14, 1996). Mannesmann concludes that the Department should

correct its final calculations to conform with the statute and the

clear dictates of the SAA and not subtract these two fields from the

U.S. price.

Petitioner holds that Mannesmann's claim that the selling expense

must be incurred in the U.S. market in order to be deducted from CEP is

not supported by the statute. According to petitioner, the phrase ``in

the United States'' is a reference to the location of the affiliated

seller and not an attempt to limit the deduction to selling expenses

incurred in the United States. If such a limitation were intended,

petitioner states that the phrase ``in the United States'' would have

occurred immediately after the phrase ``generally incurred'' in section

772(d)(1) of the Act.

Department's Position

We agree in part with both Mannesmann and petitioners. The indirect

selling expenses incurred in Germany (RINDIRSU and DINDIRSU) are

associated both with sales of the merchandise from the producer/

exporter to the affiliated importer in the United States and with sales

from the affiliated importer to unaffiliated customers. See German

Sales Verification Report at 11-12, U.S. Sales Verification Report at

Exhibit 11, and Mannesmann's Section A Questionnaire Response at 24. As

we explained in Gray Portland Cement and Clinker From Mexico, 62 FR at

17167-68, we do not believe that section 772(d) of the Act requires us

to deduct selling expenses not associated with economic activities

occurring in the United States. See SAA at 153 (823). Accordingly, we

do not treat expenses associated with the sale of the merchandise from

the producer/exporter to the affiliated importer as U.S. selling

expenses.

Applying this practice here, we have deducted RINDIRSU (associated

with MRW's selling activities), but not DINDIRSU (associated with MH's

selling activities), from Mannesmann's CEP. We noted at verification

that MRW worked directly with unaffiliated U.S. customers in the

development of certain specifications. While MRW also incurred selling

expenses associated with sales to MPS, the affiliated U.S. importer,

the record nevertheless supports the deduction of RINDIRSU from CEP

given MRW's involvement with unaffiliated U.S. customers. See U.S.

Sales Verification Exhibit 20. MH's selling expenses, however, mainly

relate to transactions between MRW and MPS. For these reasons, we

believe that it is reasonable to deduct RINDIRSU, but not DINDIRSU, as

indirect selling expenses.

Comment 7

Mannesmann claims that the Department, in calculating the margin

for the preliminary results, assumed all products designated as low

temperature

[[Page 13224]]

in MPS' list were subject merchandise and incorrectly treated A-333

pipe used in low temperature applications as covered products.

Mannesmann states that at verification it provided the Department with

a printout of all sales in the three MPS material classes that could

possibly contain subject merchandise and noted why some sales were not

on the sales database. The Department spot-checked unreported

merchandise on the list and, according to Mannesmann, asked no further

questions. See U.S. Sales Verification Exhibits 15 and 16.

Mannesmann maintains that since A-333 is a specialized low

temperature pipe and more expensive than pipe used in standard, line

and pressure pipe applications, it would make no economic sense for a

customer to order the specialized low temperature pipe for a less

exacting specification. Mannesmann also notes that A-333 pipe is not

tested to perform at all levels of service required of A-106 pipe, and

would not customarily be substituted for A-106 applications. According

to Mannesmann, the Department erroneously assumed all products

designated as low temperature in MPS' list were subject merchandise.

Mannesmann explains that A-333 pipe is only covered by the scope of the

antidumping duty order if such pipe is used in standard, line or

pressure pipe applications. Mannesmann emphasizes that all A-333

invoices reviewed by the Department during verification confirmed that

MPS' sales of A-333 pipe were for low temperature applications only.

Mannesmann claims that the Department did not question nor voice

dissatisfaction with its spot-check of the invoices at verification. In

Mannesmann's view, the Department was obligated to provide it with some

notice at verification that the company's explanations did not satisfy

the Department.

Mannesmann states that the confusion concerning whether A-333 pipe

is covered by the antidumping order illustrates the difficulties

inherent in having end-use as a scope criterion. See Scope Inquiry on

Certain Circular Welded Non-Alloy Steel Pipe and Tube from Brazil, the

Republic of Korea, Mexico and Venezuela, 61 FR 11608 (March 21, 1996).

Mannesmann also claims that the Department decided in the original

investigation that no end-use certification would be required ``until

such time as petitioner or other interested parties provide a

reasonable basis to believe or suspect that substitution is occurring''

and that certifications would only be required for those products ``for

which evidence is provided that substitution is occurring.'' See German

seamless pipe LTFV final at 31975-6. Mannesmann argues that the

Department cannot assume that normally non-subject merchandise has been

utilized for standard, line, or pressure pipe purposes without some

evidence on the record to support such an assumption. Indeed, according

to Mannesmann all available evidence on the record is to the contrary

and the Department cannot as a matter of law include sales of non-

subject A-333 merchandise in its margin calculation.

Moreover, Mannesmann objects to the Department's application of the

margin rate from the initial investigation to sales of low temperature

merchandise. Mannesmann claims that section 776(c) of the Act requires

the Department to corroborate any secondary information used as facts

available from independent sources reasonably at its disposal.

Mannesmann states that the SAA makes clear that the Department ``will

satisfy [itself] that the secondary information to be used has

probative value.'' See SAA at 200 (870). Mannesmann notes that it

submitted information in the original investigation explaining why the

margin calculated in the petition and chosen by the Department as BIA

should not have been used. Mannesmann argues that petitioner's

calculations cannot be corroborated as required by the Act, and

applying the margin from the petition would be directly contrary to the

URAA. According to Mannesmann, in Fresh Cut Flowers From Mexico;

Preliminary Results of Antidumping Duty Administrative Review, 60 FR

49567, 49568 (September 26, 1995), the Department rejected the highest

rate from the previous review as BIA because it was not representative.

Mannesmann argues that the Department should not use adverse facts

available to calculate a margin on non-subject A-333 low-temperature

products. Mannesmann claims that it fully cooperated with the

Department and the standard for applying adverse facts available is

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

Final Results of Antidumping Duty Administrative Review, 62 FR 37014,

37019-20 (July 10, 1997); Porcelain-on-Steel Cooking Ware from the

People's Republic of China; Final Results of Antidumping Duty

Administrative Review, 62 FR 32757, 32 758 (June 17, 1997).

Petitioner argues that the Department properly applied facts

available to A-333 pipe that Mannesmann did not report in its U.S.

sales listing. Petitioner notes that Mannesmann unilaterally determined

that these sales were not within the scope of the order and the

Department did not learn about such sales until verification.

Petitioner notes that the scope of the order specifically includes

A-333 pipe when ``such pipes are used in a standard, line or pressure

pipe application.'' In petitioner's view, Mannesmann did not provide

the Department with any information on the use of A-333 products at

verification and the Department was unable to verify that these

products were not used in covered applications. Petitioner claims that

Mannesmann should have raised any doubts about the scope of the order

and its reporting requirements, as it is the Department who determines

what information is to be provided in a dumping review, not the

respondent. See Ansaldo Componenti, S.p.A. v. United States, 628

F.Supp. 198, 205 (CIT 1992). According to petitioner, respondents

cannot be allowed to make unilateral decisions about the information to

be provided when ambiguity exists. In Persico Pizzamiglio, S.A. v.

United States, 18 CIT 299, 303-304 (1994), petitioner points out that

the CIT held that application of BIA was appropriate because the

responding party had a duty to resolve the issue with the Department

prior to submitting its response.

Petitioner states that the cost differential between A-333 and A-

106 pipe would make substitution possible. Petitioner rejects

Mannesmann's contention that Exhibit 28 provides an indication that the

material was used for low-temperature service outside the scope of the

order. Petitioner contends that invoices merely show the product was

tested to meet low-temperature uses, but do not establish that the pipe

was actually used in that way. Petitioner states that Mannesmann was

obligated to fully report all sales of subject merchandise; it is not

incumbent on the Department to prove that Mannesmann's A-333 sales were

used for covered applications. Petitioner argues that, due to

Mannesmann's lack of adequate preparation for verification, Mannesmann

cannot reasonably expect the Department to have spent additional time

chasing down information on A-333 sales--information that Mannesmann

was obligated to provide in its questionnaire response.

Concerning Mannesmann's complaint that the Department cannot use

the rate from the petition as the facts available margin because the

rate cannot be corroborated, petitioner maintains that section 776 of

the Act requires corroboration of the information only ``to the extent

practicable.'' Moreover,

[[Page 13225]]

the SAA at 200 (870) specifically provides that ``the fact that

corroboration may not be practicable in a given circumstance, will not

prevent the Department from applying adverse inferences.'' Petitioner

points out that since Mannesmann's responses were unusable for purposes

of the final determination (see German seamless pipe LTFV final at

31978), they are equally unusable for purposes of corroborating the

final results of this review. Petitioner argues that the use of adverse

facts available is appropriate due to Mannesmann's unilateral decisions

about what information to provide to the Department.

Department's Position

We agree with Mannesmann. While it is true that the scope of this

order specifically includes A-333 pipe when such pipes ``are used in a

standard, line or pressure pipe application,'' the Department decided

in the original investigation that no end-use certification would be

required ``until such time as petitioner or other interested parties

provide a reasonable basis to believe or suspect that substitution is

occurring'' and that certifications would only be required for those

products ``for which evidence is provided that substitution is

occurring.'' See German seamless pipe LTFV final at 31975-6. Petitioner

has not provided the Department with any information which provides us

a reasonable basis to believe or suspect that A-333 pipe is being used

for standard, line or pressure applications in the context of this

review. In the absence of such information, we are considering

Mannesmann's U.S. sales of A-333 pipe to be non-subject merchandise for

these final results.

Comment 8

Mannesmann asserts that if there is a difference between the actual

functions performed by sellers at the different levels of trade in the

two markets and the difference affects price comparability, the

Department is required to make a level of trade (``LOT'') adjustment

pursuant to section 773(a)(7)(A) of the Act.

Mannesmann maintains that during the POR it made sales in the home

market at two distinct levels of trade, to end-users and to

distributors. According to Mannesmann, the Department examined in

detail documents demonstrating that products sold to end-users for

special projects required different market research, quality control,

delivery services, customer-specific R&D, engineering services, and

communications services than products sold to distributors. According

to Mannesmann, the fact that it devotes significantly greater resources

to one of the two sales levels confirms that sales to end-users and

distributors constitute separate levels of trade.

Mannesmann also claims that sales in the U.S. market also occur at

these two different levels of trade. Mannesmann states that the

Department verified its dedication of substantial resources and

technicians' time to maintain close quality control over special

project pipes manufactured for a major U.S. customer. In Mannesmann's

view, sales of commodity-type pipes to distributors do not require such

close collaboration or extensive customer-specific R&D and engineering

services.

Mannesmann references the statistical analysis provided to the

Department in Exhibit A-7 of its Supplemental Section A response as

evidence that the price of the identical control number sold to a

distributor is on average less than the prices to end-users.

Mannesmann concludes that the Department, pursuant to section

773(a)(7)(A) of the Act, must make an LOT adjustment to account for the

differences in selling functions in the two markets. Alternatively,

Mannesmann states that if the Department determines that its U.S. sales

were CEP sales, the Department must make a CEP offset adjustment

because the home market LOT is at a more advanced stage of distribution

than the LOT of the CEP sales (see Certain Welded Carbon Standard Steel

Pipes and Tubes from India; Final Results of New Shippers Antidumping

Duty Administrative Review, 62 FR 47632 (September 10, 1997)).

Petitioner argues that Mannesmann failed to substantiate its claim

that the two levels of trade in each market were different. Petitioner

additionally notes that LOT was never discussed at the U.S.

verification due to Mannesmann's lack of preparation in other areas

(see U.S. Sales Verification Report at 29) and no information was

provided at the home market verification to substantiate Mannesmann's

claim of differences in selling functions (see German Sales

Verification Report at 42).

Petitioner also points out that since Mannesmann did not provide in

its response or at verification any of the data from its statistical

analysis at Exhibit A-7, its claim of a pattern of consistent price

differences is unsubstantiated and unverified.

According to petitioner, contrary to Mannesmann's claim, a CEP

offset is not appropriate unless the Department finds more than one

LOT. Therefore, in petitioner's view, Mannesmann's failure to establish

the existence of two levels of trade renders a LOT adjustment under

section 773(a)(7)(A) or a CEP offset under section 773(a)(7)(B)

inappropriate.

Department's Position

We agree with petitioner. In determining whether separate levels of

trade actually existed in the U.S. and home markets, we examined

Mannesmann's marketing stages, reviewing the chains of distribution,

customer categories and selling functions reported in the home market

and in the United States. We agree with petitioner that Mannesmann did

not substantiate its claims relating to differences in LOT.

As we stated in our preliminary results, Mannesmann's questionnaire

response indicated that it provided higher levels of support to end-

users than to distributors, but Mannesmann did not explain what

distinguished high from low support or support these claims at

verification. At verification, when we asked about differences in LOT,

Mannesmann merely provided an organization chart. Mannesmann provided

no documentation, as requested in the sales verification outline,

regarding claimed differences or the extent of any differences in

selling functions for sales to end-users versus distributors and

between sales to its home market customers and the CEP LOT. We

determined for the preliminary results that sales within each market

and between markets are not made at different levels of trade. Of

necessity, the burden is on a respondent to demonstrate that its

categorizations of LOT are correct. Respondent must do so by

demonstrating that selling functions for sales at allegedly the same

level are substantially the same, and that selling functions for sales

at allegedly different LOTs are substantially different. Mannesmann has

not satisfied its burden in this case, and therefore the Department is

not required to address whether prices at the allegedly different home

market levels of trade resulted in a pattern of consistent price

differences. Accordingly, for these final results, we continue to

determine that Mannesmann's sales were at a single LOT in both markets.

We are not granting Mannesmann a LOT adjustment or a CEP offset.

Comment 9

Although the Department's questionnaire, consistent with the new

regulations, states that invoice date is generally to be considered the

date of sale, petitioner holds that, in this case, the order

confirmation date is more

[[Page 13226]]

appropriate than the shipment date as the date of sale. Petitioner

claims that the Department's choice of shipment date for sale date is

not in accordance with its past practice or its statement of current

policy. Petitioner notes that, until recently, the Department's

practice has been to require respondents to report the U.S. date of

sale based on the date on which the material terms of the sale between

the buyer and the seller were established. See Final Determination of

Sales at Less Than Fair Value: Certain Forged Steel Crankshafts from

the Federal Republic of Germany, 52 FR 28170, 28175 (July 28, 1987).

Petitioner points out that although the new regulations indicate a

preference for the invoice date, the Department recognizes that the

terms of sale may change or remain negotiable from the time of the

initial agreement.

Petitioner states that, in this case, the order confirmation

established the terms of sale. In petitioner's view, there is no

information on the record from Mannesmann indicating that the terms of

the U.S. sales change between the date of the order confirmation and

the date of shipment. Petitioner notes that Mannesmann reported the

order confirmation date as date of sale.

Moreover, since the Department has determined that Mannesmann's

U.S. sales are CEP sales, petitioner holds that it is more appropriate

to use the order confirmation date because the date of export from the

German producer is somewhat arbitrary. Petitioner notes that the

Department has stated its preference to use dates other than the date

of shipment for date of sale See Notice of Final Rule, 62 FR 27296,

27349 (May 19, 1997).

Petitioner states that any delay between the order confirmation

date and the shipment date should not affect price analysis because

Germany does not suffer from hyperinflation. Even more significant,

according to petitioner, is the fact that the Department's goal is to

compare prices that have been set in the same contemporaneous period,

and by using the order confirmation date for U.S. sales and the invoice

date for home market sales, the terms of sale in the two relevant

markets would have been set in the same month. Petitioner concludes

that it is clear that, in the preliminary results, the Department

incorrectly chose to align the dates of shipment rather than the dates

the terms of sale were set.

Mannesmann terms petitioner's arguments regarding the proper U.S.

and home market dates of sale without merit. It maintains that,

consistent with the Department's preferred approach, it used the

invoice date as the date of sale when reporting home market sales

because the terms of the sale and the quantity are often not finally

fixed until the invoice is generated (see Section A Response at 23).

Since the Department did not permit Mannesmann to report the invoice

date as the U.S. date of sale (the Mannesmann invoice is issued post-

shipment in Germany), Mannesmann maintains that the Department's

determination to use the shipment date as the U.S. date of sale is

entirely appropriate.

Given that several months often elapse between order confirmation

date and shipment date, Mannesmann agrees that the shipment date for

U.S. sales is most comparable to the home market invoice date because

it most closely corresponds to the invoice date. Mannesmann notes that

the Department has utilized shipment date as date of sale, rather than

the order or order confirmation date, when the shipment date most

closely corresponded to the invoice date. See Certain Internal-

Combustion Industrial Forklift Trucks from Japan; Final Results of

Antidumping Duty Administrative Review, 62 FR 34216, 34227 (June 25,

1997). Mannesmann argues that the Department has also used shipment

date as date of sale when there was a potential for the terms of sale

to change. Mannesmann claims that the Department reviewed numerous

change orders in this case, making shipment date the most logical

choice for the U.S. date of sale. See Final Determination of Sales at

Less Than Fair Value: Industrial Nitrocellulose From the Federal

Republic of Germany, 55 FR 21058, 21059 (May 22, 1990). Mannesmann

further states that the Department has used the shipment date as the

date of sale when a respondent utilized this date for purposes of its

financial reporting. Mannesmann claims that, in the normal course of

business, it generates invoices on the date of shipment and that this

date is used for purposes of recording sales and financial accounting

in both markets.

Mannesmann also rejects petitioner's argument that any price

analysis would not be affected by the time interval between order

confirmation date and shipment because Germany does not suffer from

``hyperinflation.'' Mannesmann states that many other factors (e.g.,

market price fluctuations, a new competitor, a movement in exchange

rates) can have substantial impact on the price analysis over the

period of several months.

Department's Position

We agree with Mannesmann. Although we recognize that the

Department's practice is normally to use the invoice date (see

Memorandum from Susan G. Esserman, ``Date of Sale Methodology Under New

Regulations,'' March 29, 1996), we are continuing to use shipment date

as the date of sale for U.S. sales for these final results. As we

explained in the preliminary results, 62 FR at 47448, our questionnaire

to Mannesmann stated that in no case could the date of sale be later

than the date of shipment. The invoice date for each of Mannesmann's

U.S. sales was later than the shipment date. Further, at verification

we observed changes in U.S. terms of sale after the order confirmation

date. See U.S. Sales Verification Exhibits 20, 21. We are thus

satisfied that the date of shipment best reflects the date on which the

material terms of Mannesmann's U.S. sales were established. This is

also consistent with our preference of using comparable events in

establishing the date of sale in both markets. As we also noted in the

preliminary results, we used invoice date (which is the same as date of

shipment) as date of sale in the home market. We are continuing to do

so for the final results. See Notice of Preliminary Determination of

Sales at Less Than Fair Value and Postponement of Final Determination:

Fresh Tomatoes From Mexico, 61 FR 56608, 56611 (Nov. 1, 1996) (``We

based date of sale on shipment date to avoid the potential for

distortion of cost and price comparisons that occur when there is a

significant lag time between date of shipment and date of invoice

within the same market and/or between the two markets.'').

Comment 10

Petitioner maintains that Mannesmann did not report any warehousing

expenses associated with those sales the Department discovered at

verification to be in inventory. If the information on warehousing is

not available, petitioner believes the Department should make an

adjustment to CEP based on the facts available pursuant to section 776

of the Act. If the Department does not have sufficient information to

make a facts available determination as to warehousing expenses,

petitioner believes the margin for the affected sales should be based

entirely on facts available.

Mannesmann counters that no adjustments to the reported sales data

were necessary to account for warehousing expenses because none were

incurred (see Sections B and C Response at 43).

[[Page 13227]]

For those observations specifically noted by petitioner, Mannesmann

points out that complete documentation for these sales was provided to

the Department at verification and a review of these documents

confirmed the absence of warehousing expenses.

Department's Position

We agree in part with Mannesmann and with petitioner. We have no

evidence that Mannesmann incurred warehousing expenses and we did not

ask about them at verification. Mannesmann's brief indicates that if

they had warehousing expenses, they would have appeared on the

unloading invoice in the sales trace package. However, we do know the

merchandise arrived in the U.S. and did not get sold until a later

date. Therefore, while we cannot prove the existence of warehousing

expenses, we agree with petitioner that these sales remained in

inventory for a period of time. Therefore to account for this fact, we

have calculated inventory carrying costs for these final results (see

Final Analysis Memorandum of March 9, 1998).

Results of Review

We determine that the following weighted-average margin exists:

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

Margin

Manufacturer/exporter Period of review (percent)

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

Mannesmann.............................. 1/27/95-7/31/96 22.12

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

The Department shall determine, and the Customs Service shall

assess, antidumping duties on all appropriate entries. Individual

differences between EP/CEP and NV may vary from the percentage 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 small diameter circular seamless carbon and alloy steel

standard, line and pressure pipe from Germany, within the scope of the

order, entered, or withdrawn from warehouse, for consumption on or

after the publication date, as provided by section 751(a)(1) of the

Act: (1) The cash deposit rate for the reviewed company will be the

rate listed above; (2) for previously reviewed or investigated

companies not listed above, the rate will continue to be the company-

specific rate published for the most recent period; (3) if the exporter

is not a firm covered in this review, or the original LTFV

investigation, but the manufacturer is, the cash deposit rate will be

the rate established for the most recent period for the manufacturer of

the merchandise; and (4) for all other producers and/or exporters of

this merchandise, the cash deposit rate of 57.72 percent, the all-

others rate, established in the LTFV investigation, shall remain in

effect until publication of the final results of the next

administrative review.

We will calculate importer-specific ad valorem duty assessment

rates based on the entered value of each entry of subject merchandise

during the POR.

Notification of Interested Parties

This notice 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 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 19 CFR 353.34(d). Timely written 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. Timely

written notification of the return/destruction of APO materials or

conversion to judicial protective order is hereby requested.

This administrative review and notice are in accordance with

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

353.22.

Dated: March 9, 1998.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 98-7017 Filed 3-17-98; 8:45 am]

BILLING CODE 3510-DS-U