Certain Welded Stainless Steel Pipe From Korea; Final Results of Antidumping Duty Changed Circumstances Review

DEPARTMENT OF COMMERCE

International Trade Administration

[A-580-810]

Certain Welded Stainless Steel Pipe From Korea; Final Results of

Antidumping Duty Changed Circumstances Review

AGENCY: International Trade Administration/Import Administration,

Department of Commerce.

ACTION: Notice of final results of antidumping duty changed

circumstances review.

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SUMMARY: On February 6, 1998, the Department of Commerce (the

Department) published in the Federal Register the preliminary results

of its antidumping duty changed circumstances review on certain welded

stainless steel pipe from Korea (63 FR 6153) to examine whether SeAH

Steel Corporation (SeAH) is the successor to Pusan Steel Pipe (PSP),

the successor to Sammi Metal Products Co. (Sammi), or neither. We have

now completed this review and determine that, for purposes of applying

the antidumping duty law, SeAH is the successor to PSP, and as such,

should be assigned the antidumping deposit rate applicable to PSP.

EFFECTIVE DATE: April 7, 1998.

FOR FURTHER INFORMATION CONTACT: Lesley Stagliano or Maureen Flannery,

Import Administration, International Trade Administration, U.S.

Department of Commerce, 14th Street and Constitution Avenue, N.W.,

Washington D.C. 20230; telephone (202) 482-0648, (202) 482-3020.

SUPPLEMENTARY INFORMATION:

Background

On February 6, 1998, the Department of Commerce (the Department)

published in the Federal Register the preliminary results of its

antidumping duty changed circumstances review on certain welded

stainless steel pipe from Korea (63 FR 6153). We have now completed

this changed circumstances review in accordance with section 751(b) of

the Tariff Act of 1930, as amended (the Act).

Scope of Review

Imports covered by the review are shipments of welded austenitic

stainless steel pipe (WSSP) that meets the standards and specifications

of the American Society for Testing and Materials (ASTM) for the welded

form of chromium-nickel pipe designated ASTM A-312. The merchandise

covered by the scope of this order also includes WSSP made according to

the standards of other nations which are comparable to ASTM A-312.

WSSP is produced by forming stainless steel flat-rolled products

into a tubular configuration and welding along the seam. WSSP is a

commodity product generally used as a conduit to transmit liquids or

gases. Major applications for WSSP include, but are not limited to,

digester lines, blow lines, pharmaceutical lines, petrochemical stock

lines, brewery process and transport lines, general food processing

lines, automotive paint lines and paper process machines. Imports of

WSSP are currently classifiable under the following Harmonized Tariff

Schedules of the United States (HTSUS) subheadings: 7306.40.5005,

7306.40.5015, 7306.40.5040, 7306.40.5065, and 7306.40.5085. Although

these subheadings include both pipes and tubes, the scope of this

review is limited to welded austenitic stainless steel pipes. Although

the HTSUS subheadings are provided for convenience and Customs

purposes, the written description of the scope of this order is

dispositive.

This changed circumstances administrative review covers SeAH and

any parties affiliated with SeAH.

Successorship

According to SeAH, PSP legally changed its name to SeAH on December

28, 1995, which change became effective on January 1, 1996. SeAH claims

that its name change from PSP was a change in name only, and that the

legal structure of the company, its management, and ownership were not

affected by the name change. SeAH also claims that it is a part of a

larger group of related companies, certain members of which had SeAH in

their names prior to January 1, 1996.

In its request for a changed circumstances review, SeAH indicated

that PSP had acquired certain production assets formerly owned by Sammi

Metal Products Co. (Sammi). SeAH asserts that the acquisition, which

occurred more than a year before the name change and was effective

January 3, 1995, is not related to the name change. SeAH claims that

its acquisition of the products and facilities of Sammi is functionally

no different from PSP expanding its existing facilities or contracting

a new manufacturing facility.

Based on the information submitted by SeAH, petitioners have argued

that SeAH is, at a minimum, a hybrid of PSP and Sammi.

In determining whether one company is the successor to another for

purposes of applying the antidumping duty law, the Department examines

a number of factors including, but not limited to, changes in (1)

management, (2) production facilities, (3) suppliers, and (4) customer

base. See, e.g., Brass Sheet and Strip from Canada; Final Results of

Antidumping Duty Administrative Review, (57 FR 20460, May 13, 1992);

Steel Wire Strand for Prestressed Concrete from Japan; Initiation and

Preliminary Results of Changed Circumstances Antidumping Duty

Administrative Review, (55 FR 7759, March 5, 1990); and Industrial

Phosphoric Acid From Israel; Final Results of Antidumping Duty Changed

Circumstances Review (59 FR 6944, February 14, 1994). While no one or

several of these factors will necessarily provide a dispositive

indication of succession, the Department will generally consider one

company to be a successor to a second if its resulting operation is

essentially the same as that of its predecessor. See Brass Sheet and

Strip from Canada; Final Results of Antidumping Duty Administrative

Review, (55 FR 20460, 20461, May 13, 1992). Thus, if the evidence

demonstrates that, with respect to the production and sale of the

subject merchandise, the new company operates as the same business

entity, the Department will assign the new company the cash deposit

rate of its predecessor.

The record in this review, as demonstrated by the following

factors, indicates that SeAH is the successor to PSP for the production

of subject

[[Page 16980]]

merchandise, and is not a successor to Sammi, nor a new hybrid entity.

Analysis of Comments Received

Comment 1

Petitioners argue that it is not the change in name from PSP to

SeAH that supports a finding of changed circumstances but rather the

acquisition of the production operations for WSSP from Sammi in

Changwon, and the closure of the PSP Seoul facility. Consequently,

petitioners state that whether or not PSP ever changed its name, the

fundamental changes in PSP that resulted from acquiring Sammi's WSSP

Changwon facility justify a finding of changed circumstances in this

review. Petitioners point out that the agency must recognize that

although changes in names provide grounds for a changed-circumstances

review, the law does not require that a name change occur in order to

support a finding of changed circumstance. In support of this

statement, petitioners cite Industrial Phosphoric Acid from Israel, (59

FR 6944, 6945, (1994)). Petitioners state that in its preliminary

analysis, the Department erroneously focused on whether there was a

change in factors such as production facilities, customers, suppliers

and management following the name change, not following the

acquisition. Thus, petitioners argue that the Department focused on the

wrong time period with respect to this analysis. Instead of comparing

PSP's operations in 1995 to SeAH's operations in 1996, petitioners

argue that the Department should examine the operations of PSP in 1994

as contrasted with PSP's operations in 1995 and SeAH's operations in

1996.

Respondents maintain that the Department correctly applied the

successorship test used in Brass Sheet and Strip from Canada, (57 FR

20460, 20461, May 13, 1992), Sugar and Syrups from Canada, (61 FR

51275, October 1, 1996), Large Power Transformers from Italy, (52 FR

46806, December 10, 1987), and Industrial Phosphoric Acid from Israel,

(59 FR 6944, February 14, 1994), to the facts of this review in order

to conclude that SeAH's business operation for production of the

subject merchandise was that of its predecessor PSP. Furthermore,

respondents argue that petitioners ignore that the administrative

record includes multiple questionnaire responses which focused on PSP's

acquisition of the Changwon plant and cover over three years of

information regarding PSP and SeAH's (1) management, (2) production

facilities, (3) suppliers, and (4) customer base. In addition,

respondents assert that the Department's conclusion in the Preliminary

Results does indeed address the effects of the plant acquisition.

Department's Position: The Department disagrees with petitioners'

argument that the Department did not inquire about or consider the

successorship factors following the acquisition of the Changwon plant.

While our preliminary results may not have detailed the breadth of our

inquiry, the Department did, in fact, consider the effects of the

acquisition of the Changwon plant including: (1) The changes in

production facilities at the Changwon plant after January 1, 1995. See

August 27, 1997 Response; (2) all documentation pertaining to the

acquisition of the Changwon plant (i.e., contracts, sales agreements,

non-compete agreements, deeds of transfer, meeting notes, articles of

incorporation, etc.); (3) whether Sammi's employees were transferred to

PSP as a result of the acquisition of the Changwon plant. See October

3, 1997 Response; (4) the number of workers that are currently employed

at the Changwon facility, (5) the percentage that the transferred

employees make up of the total employees at the Changwon plant, (6) the

functions that are performed by the ninety employees that were

transferred from Seoul to work in the Changwon facility. See December

2, 1997 Response; (7) the process through which PSP acquired the

Changwon plant, the negotiation process time-line, and all documents

associated with the negotiation, (8) the factory layouts of the Seoul

plant before and after the relocation, as well as the factory layouts

of the Changwon plant before and after PSP acquired it, and (9)

marketing practices and marketing changes after PSP acquired the

Changwon plant. In addition, the Department analyzed information from

1994, 1995 and 1996 with respect to the customers and suppliers of PSP/

SeAH. As a result of the Department's analysis of the effects of the

acquisition of the Changwon plant, the Department stated in its

preliminary results:

We preliminarily find that SeAH is not the successor to Sammi as

suggested by the petitioner. While the plant is a former Sammi

facility, the plant was overhauled and redesigned. Further, none of

Sammi's former managers work for SeAH, with the exception of two plant

managers, who ceased working for Sammi long before the plant

acquisition, and, therefore, were not hired as a result of that

acquisition. PSP's suppliers did not change in a way that would be

attributed to PSP's acquisition of the Changwon plant, and PSP did not

acquire a significant number of new customers or substantial new

business from such customers as a result of the Changwon acquisition.

(63 FR 6155; February 6, 1998)

Thus, the record establishes that the Department thoroughly considered

PSP's acquisition of the Sammi facility and the effect of that

acquisition on PSP's operations.

Comment 2

Petitioners argue that the Department impermissibly shifted focus

of the inquiry to a change in the corporation as a whole rather than a

change solely with respect to production of subject merchandise by

focusing on the change in the name rather than on the acquisition of

Sammi's Changwon facility. Petitioners cite Industrial Phosphoric Acid

from Israel, (59 FR 6945), when arguing that the successor company

question must be resolved ``in terms of the operations that produce the

subject merchandise.'' Petitioners also cite Brass Sheet and Strip from

Canada, (57 FR 20460, 20461, (1992)), which states that ``the point of

comparison is the type of business, not the legal entity itself.''

Moreover, petitioners argue that by focusing on the company name

change, the Department has departed from its legal precedent requiring

that successorship inquiries analyze changes at the level of production

of subject merchandise, not based on an overall corporate entity.

Department's Position: The Department agrees with petitioners that

the focus of the changed circumstances should be the production of

subject merchandise. However, both the name change and the acquisition

of the Sammi facility relate to the production of the subject

merchandise. Thus, the Department correctly considered the name change

as a changed circumstance giving rise to the issue of successorship. As

stated in response to Comment 1, the Department considered both the

name change and the effects of the acquisition of Changwon as they

relate to the successorship factors.

Comment 3

Petitioners argue that the Department has failed to examine whether

SeAH is a hybrid of PSP and Sammi. Petitioners contend that at a

minimum, SeAH must be viewed as a combination of PSP and Sammi with

respect to the production of WSSP and, thus, should be subject to the

``all others'' cash deposit rate. Petitioners assert that the

additional information obtained at verification provides further

support for the conclusion that SeAH is a hybrid of PSP

[[Page 16981]]

WSSP production and Sammi WSSP production.

Although petitioners acknowledge that overhauling of the Changwon

facility may support the Department's conclusion that SeAH is not the

successor to Sammi, petitioners argue that these facts do not support

the conclusion that SeAH is the successor to PSP. Petitioners'

arguments focus on the change in production facilities that since (1)

PSP's WSSP operations were physically relocated from Seoul and

integrated with Sammi production lines, in Sammi's pre-existing

Changwon facility, and (2) SeAH shut down the Seoul facility, SeAH is

not the successor to PSP with respect to WSSP production facilities.

Petitioners argue that the acquisition of raw materials, supplies and

inventory, and retention of certain production lines in addition to

physical facilities at Changwon prove that the resulting WSSP

production at the Changwon facility is now a combination of PSP and

Sammi.

Petitioners argue that evidence on the record indicates that the

production facilities of PSP are not the same as those of SeAH.

Petitioners argue that instead of focusing on the March 26, 1996 shut

down of the WSSP facility in Seoul, the agency focused on differences

that exist at the Changwon facility today in comparison to the Changwon

facility when it was run by Sammi.

Respondents argue that many companies frequently buy equipment,

occasionally expand and/or move their facilities, and sometimes they

increase production and grow. Thus, none of the changes that

accompanied PSP's acquisition of Sammi's Changwon plant were

extraordinary. Respondents note that the only difference between this

case and the normal changes that most companies experience is that PSP

purchased the physical assets of a company that also produced subject

merchandise and had its own company-specific rate. Respondents argue

that there is no difference with respect to equipment purchased from

Sammi or any other source because no equipment nor a specific facility

has an antidumping deposit rate inviolably attached to it. While SeAH's

production facility at Changwon may be a combination of equipment from

Sammi and PSP's Seoul plant, it does not logically follow that in

purchasing the plant and equipment from Sammi that PSP became something

other than itself.

Department's Position: The Department disagrees with petitioners.

The Department considers the acquisition of the Changwon facility and

the above mentioned materials as asset acquisitions and nothing more.

Although the hybrid issue may not be detailed in the preliminary

results, the Department addressed it in its analysis of the management,

production facilities, customers and suppliers. We collected and

analyzed PSP/SeAH information regarding these factors for 1994, 1995,

and 1996. After reviewing these four factors, the Department determined

that with the purchase of the Changwon plant, PSP remained PSP.

Contrary to petitioners' argument, the Department's findings did

resolve the hybrid issue. Specifically, we found that (1) PSP did not

change into a new corporate entity, (2) the management team remained

the same, and (3) even though PSP's production facility changed with

the acquisition of the Changwon plant and the relocation of the Seoul

facility, the new Changwon facility came under the PSP corporate

structure. With the exception of the acquisition of the new facility,

PSP (and hence SeAH) continued to operate essentially as it had prior

to the acquisition. Subsumed in the Department's conclusion that SeAH

operates essentially the same as PSP is the conclusion that it is not a

hybrid operation.

Comment 4

Petitioners claim that although SeAH has attempted to focus on the

fact that it did not ``transfer'' production workers from Sammi's

Changwon facility as part of its contractual agreements, the agency

didn't ask whether there was a contractual agreement to transfer

workers. In addition, petitioners argue that the agency incorrectly

focused on whether the number of people employed at the Changwon plant

changed after PSP changed its name to SeAH and not whether the number

of people in Changwon's facility changed after PSP acquired Changwon

and shifted employees from Seoul to Changwon. Moreover, petitioners

state that the agency fails to contrast the number of newly-hired

workers with the number of transferred workers.

Respondents contend that the number of newly-hired employees and

the proportion of total workers at Changwon that these employees

represent are stated on the record.

Department's Position: At verification, the Department analyzed the

original contract to buy the Changwon plant and found no evidence of an

agreement to transfer workers from Sammi to PSP. Moreover, as mentioned

in the preliminary determination, at verification the Department looked

at personnel files of current SeAH employees at the Changwon plant and

found only one new hire who had worked for Sammi prior to 1989, and for

an unaffiliated entity between 1989 and 1996, before coming to

Changwon. There was no evidence that any other employees had worked for

Sammi. Thus, the Department finds no reason to suspect that any

Changwon employees were transferred to PSP. As this issue contains

proprietary information, refer to the Memorandum to the File from

Lesley Stagliano, dated March 30, 1998 for further information.

Comment 5

Petitioners argue that facts on the record contradict the agency's

conclusion that SeAH is the successor to PSP with respect to the

domestic customer base. Petitioners cite SeAH as stating ``that the

majority of its customers are small customers'' and ``that it is likely

that most of its (SeAH's) new smaller customers were customers of

Sammi.'' Based on these two statements, petitioners assert that SeAH's

operations in Changwon served not only the home market customer base of

PSP but also the home market customer base of Sammi, thus, proving that

SeAH is not the successor to PSP.

Respondents maintain that the Department's findings regarding the

change in customers was correct. Respondents argue that with Sammi's

disappearance from the market, the new small customers would be just as

likely to seek material from any of the several other producers of

subject merchandise in Korea.

Department's Position: At verification, the Department did not find

any evidence of customer lists or contracts transferring customers from

Sammi to PSP. We believe PSP's addition of customers who were former

customers of Sammi is a normal consequence of Sammi's departure from

the market. For further discussion of this issue, refer to the

Memorandum to the File from Lesley Stagliano, dated March 30, 1998.

Comment 6

Petitioners state that SeAH has never submitted for the record

either PSP's or SeAH's list of United States customers even though the

Department asked SeAH to report data on ``all'' customers, see Request

for Information from SeAH Steel Corp., dated July 24, 1997, question

12. Petitioners assert that because the focus of a changed-

circumstances review is on whether the company (PSP) that was subject

to the antidumping finding by the Department in its original order is

the same as the company (SeAH) now requesting successorship status, it

is critical that the Department examine the U.S. customer base, for it

was on the basis of

[[Page 16982]]

U.S. sales to U.S. customers at particular prices that the dumping

findings were made. Furthermore, petitioners state that the weighted-

average margins resulting from the case reflect that Sammi accounted

for the majority of U.S. sales of WSSP from Korea; therefore,

petitioners argue that as the only other exporter of WSSP to the United

States previously identified, SeAH is now supplying Sammi's former U.S.

customer base. Thus, petitioners conclude that SeAH is not the

successor to PSP.

Respondents state that PSP/SeAH sells the vast majority of its

subject merchandise in the domestic market, and that petitioners have

no basis for claiming that ``SeAH is now supplying Sammi's former U.S.

customer base.'' Moreover, respondents argue that Sammi did not, and

could not, transfer its U.S. customers to PSP. In addition, respondents

contend that it is unreasonable to assume that, among all of the

potential suppliers to the U.S. customer, both domestic and foreign,

that all of Sammi's former customers would choose PSP/SeAH.

Department's position: As noted above, PSP purchased only Sammi's

production assets. PSP did not succeed to any rights or obligations

Sammi had with its U.S. or domestic customers. With Sammi's absence

from the market, it is natural that U.S. customers would seek business

from other suppliers of subject merchandise in order to fill the void

that was created. Further, as noted by respondents, PSP's/SeAH's U.S.

sales consist of a small percentage of the total sales of WSSP, a fact

admitted by petitioners as well.

Comment 7

Petitioners disagree with the agency's conclusion that the changes

in suppliers were not ``significant''.

Department's Position: The Department maintains its position that

the changes in suppliers were not significant. For further elaboration

of the Department's position, as it contains proprietary information,

refer to the Memorandum to the File from Lesley Stagliano, dated March

30, 1998.

Comment 8

Petitioners argue that the Department incorrectly focused on the

change in management following the name change and not on the

acquisition of Changwon. In addition, petitioners assert that

respondents' statement that ``management dictates and controls the

production of subject merchandise, and, most important, sets prices''

is an unfounded overemphasis of just one factor and that production

facilities, suppliers, and customers are relevant factors as well.

Respondents argue that not only did the Department address the

issue of management specifically with respect to the Changwon

acquisition, but that it also analyzed management on a corporate-wide

level. Consequently, respondents state that the Department verified all

of the information pertaining to the period before and after the

acquisition of Sammi's Changwon plant, and that such information is

reflected in the verification report. Respondents quote the

Department's verification report which states that there were ``no

significant organizational changes after the acquisition of the

Changwon plant.'' See Verification Report at 5.

Department's Position: The Department agrees with respondents. The

Department did address the relevant changes in management. In the

Memorandum to Joseph Spetrini from Edward Yang, dated January 29, 1998,

the Department states, ``[a]ll of the managers of the Changwon plant

were transferred from PSP plants after the January 1, 1995 acquisition

of the Changwon plant.'' In addition, the Department states, ``(t)he

headquarters for the sales and marketing division remained at the head

office in Seoul, and very little changed with respect to the

individuals holding these management positions.'' See Preliminary

Results, (63 FR 6154). In its analysis, the Department specifically

looked at the period following the acquisition as well as the name

change with respect to management. Thus, the Department maintains its

original position in the preliminary results regarding this issue.

Comment 9

Petitioners argue that SeAH attempted to circumvent the antidumping

duty laws by combining operations with another company (Sammi) subject

to a higher dumping rate, but nonetheless continued to produce and

export subject merchandise to the United States without divulging this

information and relying instead on the lower (PSP's) rate.

Respondents argue that PSP could in no way improve its position

vis-a-vis the applicable cash deposit rate by purchasing Sammi's

Changwon plant, a company with a higher deposit rate than PSP.

Furthermore, respondents argue that for PSP to try to circumvent the

antidumping order by purchasing the production facilities of the

company with the highest cash deposit rate, when PSP already had the

lowest cash deposit rate of any company subject to the antidumping

order, would defy logic.

Department's position: The Department disagrees with petitioners.

Petitioners cite to no evidence on the record to support their

contention. The Department has thoroughly reviewed the facts on the

record and did not find that Respondent has intentionally attempted to

mislead the Department.

Final Results of the Review

After reviewing the comments received, we determine that SeAH is

the successor to PSP for antidumping duty cash deposit purposes.

SeAH will, therefore, be assigned the PSP antidumping deposit rate

of 2.67 percent.

The following deposit requirements will be effective upon

publication of this notice of final results of administrative review

for all shipments of the subject merchandise entered, or withdrawn from

warehouse, for consumption on or after the publication date as provided

by section 751(a)(2)(c) of the Act: The case deposit rate for the

reviewed company will be as outlined above.

These deposit rates, when imposed, shall remain in effect until

publication of the final results of the next administrative review.

This notice serves as a final reminder to importers of their

responsibility under 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 determination is issued and published in accordance with

section 777(i)(1) of the Act and 19 CFR 353.22(f).

Dated: March 30, 1998.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 98-8973 Filed 4-6-98; 8:45 am]

BILLING CODE 3510-DS-P