Initiation of Antidumping Duty Investigations: Certain Large Diameter Carbon and Alloy Seamless Standard, Line and Pressure Pipe From Japan and Mexico; and Certain Small Diameter Carbon and Alloy Seamless Standard, Line and Pressure Pipe From the Czech Republic, Japan, the Republic of South Africa and Romania

DEPARTMENT OF COMMERCE

International Trade Administration

[A-851-802, A-588-850, A-588-851, A-201-827, A-791-808, A-485-805]

Initiation of Antidumping Duty Investigations: Certain Large

Diameter Carbon and Alloy Seamless Standard, Line and Pressure Pipe

From Japan and Mexico; and Certain Small Diameter Carbon and Alloy

Seamless Standard, Line and Pressure Pipe From the Czech Republic,

Japan, the Republic of South Africa and Romania

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: July 28, 1999.

FOR FURTHER INFORMATION CONTACT: Steven Presing or Kris Campbell at

(202) 482-0194 and (202) 482-3813, respectively; Import Administration,

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

Street and Constitution Avenue, NW, Washington, DC 20230.

Initiation of Investigations

The 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 (``the Act'') by

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

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

references to the provisions codified at 19 CFR part 351 (1998).

The Petitions

On June 30, 1999, the Department of Commerce (``the Department'')

received petitions on large diameter carbon and alloy seamless

standard, line and pressure pipe (``large diameter pipe'') filed in

proper form by U.S. Steel Group, (a unit of USX Corp.-Fairfield

Seamless Pipe Mill), USS/Kobe Steel Company. Also that day, the

Department received petitions on small diameter carbon and alloy

seamless standard, line and pressure pipe (``small diameter pipe'')

filed in proper form from Koppel Steel Corporation, Sharon Tube

company, U.S. Steel Group, USS/Kobe Steel Company and Vision Metals,

Inc.(Gulf States Tube Division). On June 30, 1999, the United Steel

Workers of America joined as co-petitioners in all of the cases. The

Department received supplemental information to the petitions

throughout the 20-day initiation period.

In accordance with section 732(b) of the Act, the petitioners

allege that imports of certain large and small diameter pipe from the

above-mentioned countries are being, or are likely to be, sold in the

United States at less than fair value within the meaning of section 731

of the Act, and that such imports are materially injuring an industry

in the United States.

The Department finds that the petitioners filed these petitions on

behalf of the domestic industry because they are interested parties as

defined in sections 771(9)(C) and (D) of the Act and they have

demonstrated sufficient industry support with respect to each of the

antidumping investigations they are requesting the Department to

initiate (see Determination of Industry Support for the Petitions

below).

Scopes of Investigations

Scope of Large Diameter Investigations

The scope of these investigations includes large diameter seamless

carbon and alloy (other than stainless) steel standard, line, and

pressure pipes produced, or equivalent, to the American Society for

Testing and Materials (``ASTM'') A-53, ASTM A-106, ASTM A-333, ASTM A-

334, ASTM A-335, ASTM A-589, ASTM A-795, and the American Petroleum

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

parameters described below, regardless of application. The scope of

these investigations also includes all products used in standard, line,

or pressure pipe applications and meeting the physical parameters

described below, regardless of specification. Specifically included

within the scope of these investigations are seamless pipes greater

than 4.5 inches (114.3 mm) up to and including 16 inches (406.4 mm) 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.

The seamless pipes subject to these investigations are currently

classifiable under the subheadings 7304.10.10.30, 7304.10.10.45,

7304.10.10.60, 7304.10.50.50, 7304.31.60.50, 7304.39.00.36,

7304.39.00.40, 7304.39.00.44, 7304.39.00.48, 7304.39.00.52,

7304.39.00.56, 7304.39.00.62, 7304.39.00.68, 7304.39.00.72,

7304.51.50.60, 7304.59.60.00, 7304.59.80.30, 7304.59.80.35,

7304.59.80.40, 7304.59.80.45, 7304.59.80.50, 7304.59.80.55,

7304.59.80.60, 7304.59.80.65, and 7304.59.80.70 of the Harmonized

Tariff Schedule of the United States (``HTSUS'').

Specifications, Characteristics, and Uses: Large diameter seamless

pipe is used primarily for line applications such as oil, gas, or water

pipeline, or utility distribution systems. 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 A-106

standard 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 A-335 standard must be used if

temperatures and stress levels exceed those allowed for ASTM A-106.

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

[[Page 40826]]

elevated temperatures but must not exceed relevant ASME code

requirements. If exceptionally low temperature uses or conditions are

anticipated, standard pipe may be manufactured to ASTM A-333 or ASTM A-

334 specifications.

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 water well pipe (ASTM A-589) and seamless galvanized pipe

for fire protection uses (ASTM A-795) are used for the conveyance of

water.

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

106, ASTM A-53, API 5L-B, and API 5L-X42 specifications. To avoid

maintaining separate production runs and separate inventories,

manufacturers typically triple or quadruple certify the pipes by

meeting the metallurgical requirements and performing the required

tests pursuant to the respective specifications. 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 or

quadruple certified pipes in large diameters is for use as oil and gas

distribution lines for commercial applications. A more minor

application for large diameter seamless pipes is for use in pressure

piping systems by refineries, petrochemical plants, and chemical

plants, as well as in power generation plants and in some oil field

uses (on shore and off shore) such as for separator lines, gathering

lines and metering runs. These applications constitute the majority of

the market for the subject seamless pipes. However, ASTM A-106 pipes

may be used in some boiler applications.

The scope of these investigations 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 these investigations.

Therefore, seamless pipes meeting the physical description above, but

not produced to the ASTM A-53, ASTM A-106, ASTM A-333, ASTM A-334, ASTM

A-335, ASTM A-589, ASTM A-795, and API 5L specifications 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 ASTM A-106 applications. These specifications generally include

ASTM A-161, ASTM A-192, ASTM A-210, ASTM A-252, ASTM A-501, ASTM A-523,

ASTM A-524, and ASTM A-618. When such pipes are used in a standard,

line, or pressure pipe application, such products are covered by the

scope of these investigations.

Specifically excluded from the scope of these investigations are

boiler tubing and mechanical tubing, if such products are not produced

to ASTM A-53, ASTM A-106, ASTM A-333, ASTM A-334, ASTM A-335, ASTM A-

589, ASTM A-795, and API 5L specifications and are not used in

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

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

the scope of these investigations, 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.

Scope of Small Diameter Investigations

The scope of these investigations includes small diameter seamless

carbon and alloy (other than stainless) steel standard, line, and

pressure pipes and redraw hollows produced, or equivalent, to the

American Society for Testing and Materials (``ASTM'') A-53, ASTM A-106,

ASTM A-333, ASTM A-334, ASTM A-335, ASTM A-589, ASTM A-795, and the

American Petroleum Institute (``API'') 5L specifications and meeting

the physical parameters described below, regardless of application. The

scope of these investigations also include all products used in

standard, line, or pressure pipe applications and meeting the physical

parameters described below, regardless of specification. Specifically

included within the scope of these investigations are seamless pipes

and redraw hollows, less than or equal to 4.5 inches (114.3 mm) 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.

The seamless pipes subject to these investigations are currently

classifiable under the subheadings 7304.10.10.20, 7304.10.50.20,

7304.31.30.00, 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 HTSUS.

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 A-

106 standard 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 A-335 standard

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

ASTM A-106. 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. If exceptionally

low temperature uses or conditions are anticipated, standard pipe may

be manufactured to ASTM A-333 or ASTM A-334 specifications.

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 water well pipe (ASTM A-589) and seamless galvanized pipe

for fire protection uses (ASTM A-795) are used for the conveyance of

water.

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

106, ASTM A-53, API 5L-B, and API 5L-X42 specifications. To avoid

maintaining separate production runs and separate inventories,

manufacturers typically triple or quadruple certify the pipes by

meeting the metallurgical requirements and performing the required

tests pursuant to the respective specifications. 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 or

quadruple certified pipes is in pressure

[[Page 40827]]

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 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, ASTM A-106 pipes may be used in some boiler applications.

Redraw hollows are any unfinished pipe or ``hollow profiles'' of

carbon or alloy steel transformed by hot rolling or cold drawing/

hydrostatic testing or other methods to enable the material to be sold

under ASTM A-53, ASTM A-106, ASTM A-333, ASTM A-334, ASTM A-335, ASTM

A-589, ASTM A-795, and API 5L specifications.

The scope of these investigations 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 these investigations.

Therefore, seamless pipes meeting the physical description above, but

not produced to the ASTM A-53, ASTM A-106, ASTM A-333, ASTM A-334, ASTM

A-335, ASTM A-589, ASTM A-795, and API 5L specifications 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 ASTM A-106 applications. These specifications generally include

ASTM A-161, ASTM A-192, ASTM A-210, ASTM A-252, ASTM A-501, ASTM A-523,

ASTM A-524, and ASTM A-618. When such pipes are used in a standard,

line, or pressure pipe application, such products are covered by the

scope of these investigations.

Specifically excluded from the scope of these investigations are

boiler tubing and mechanical tubing, if such products are not produced

to ASTM A-53, ASTM A-106, ASTM A-333, ASTM A-334, ASTM A-335, ASTM A-

589, ASTM A-795, and API 5L specifications and are not used in

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

and unfinished OCTG are excluded from the scope of these

investigations, 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.

Although the HTSUS subheadings are provided for convenience and

customs purposes, our written description of the merchandise under

investigation is dispositive.

During our review of the petitions, we discussed the scope with the

petitioners to ensure that the scope in the petitions accurately

reflects the product for which the domestic industry is seeking relief.

Moreover, as discussed in the preamble to the Department's regulations

(62 FR 27323), we are setting aside a period for parties to raise

issues regarding product coverage. The Department encourages all

parties to submit such comments by August 10, 1999. Comments should be

addressed to Import Administration's Central Records Unit at Room 1870,

U.S. Department of Commerce, 14th Street and Constitution Avenue, NW,

Washington, DC 20230. The period of scope consultations is intended to

provide the Department with ample opportunity to consider all comments

and consult with parties prior to the issuance of the preliminary

determinations.

Determination of Industry Support for the Petitions

Section 732(b)(1) of the Act requires that a petition be filed on

behalf of the domestic industry. Section 732(c)(4)(A) of the Act

provides that a petition meets this requirement if the domestic

producers or workers who support the petition account for: (1) At least

25 percent of the total production of the domestic like product; and

(2) more than 50 percent of the production of the domestic like product

produced by that portion of the industry expressing support for, or

opposition to, the petition.

Section 771(4)(A) of the Act defines the ``industry'' as the

producers of a domestic like product. Thus, to determine whether the

petition has the requisite industry support, the statute directs the

Department to look to producers and workers who produce the domestic

like product. The International Trade Commission (``ITC''), which is

responsible for determining whether ``the domestic industry'' has been

injured, must also determine what constitutes a domestic like product

in order to define the industry. While both the Department and the ITC

must apply the same statutory definition regarding the domestic like

product (section 771(10) of the Act), they do so for different purposes

and pursuant to separate and distinct authority. In addition, the

Department's determination is subject to limitations of time and

information. Although this may result in different definitions of the

like product, such differences do not render the decision of either

agency contrary to the law.\1\

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

\1\ See Algoma Steel Corp. Ltd., v. United States, 688 F. Supp.

639, 642-44 (CIT 1988); High Information Content Flat Panel Displays

and Display Glass from Japan: Final Determination; Rescission of

Investigation and Partial Dismissal of Petition, 56 FR 32376, 32380-

81 (July 16, 1991).

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

Section 771(10) of the Act defines the domestic like product as ``a

product that is like, or in the absence of like, most similar in

characteristics and uses with, the article subject to an investigation

under this title.'' Thus, the reference point from which the domestic

like product analysis begins is ``the article subject to an

investigation,'' i.e., the class or kind of merchandise to be

investigated, which normally will be the scope as defined in the

petition.

There are two domestic like products, one for small diameter pipe

and one for large diameter pipe. These domestic like products, as

referred to in the petitions, are the domestic like products defined in

the ``Scopes of Investigation'' section, above. The Department has no

basis on the record to find the petitioners' definition of the domestic

like product to be inaccurate. The Department, therefore, has adopted

the domestic like product definition set forth in the petitions.

Moreover, the Department has determined that the petitions (and

subsequent amendments) and supplemental information obtained through

the Department's research contain adequate evidence of industry

support; therefore, polling is unnecessary (see Attachment to the

Initiation Checklist, Re: Industry Support, July 20, 1999). For both

large and small diameter, the petitioners established industry support

representing over 50 percent of total production of the domestic like

product. Accordingly, the Department determines that these petitions

are filed on behalf of the domestic industry within the meaning of

section 732(b)(1) of the Act.

Export Price and Normal Value

The following are descriptions of the allegations of sales at less

than fair value upon which the Department's decision to initiate these

investigations is based.

The petitioners, in determining normal value (``NV'') for Japan,

Mexico and South Africa relied upon price data contained in

confidential market research reports filed with the

[[Page 40828]]

Department. At our request, the petitioners arranged for the Department

to contact the authors of the reports to verify the accuracy of the

data, the methodology used to collect the data, and the credentials of

those gathering the market research. The Department's discussions with

the authors of the market research reports are summarized in Memorandum

to the File: Re--Foreign Market Research Reports, dated July 20, 1999.

For a more detailed discussion of the deductions and adjustments

relating to home market price, U.S. price and factors of production and

sources of data for each country named in the petition, see Initiation

Checklist, dated July 20, 1999. Should the need arise to use as facts

available under section 776 of the Act any of this information in our

preliminary or final determinations, we may re-examine the information

and revise the margin calculations, if appropriate.

Czech Republic

The petitioners based EP on a U.S. price for a sale to an

unaffiliated purchaser, and calculated net U.S. price by subtracting

from gross price unloading and wharfage charges, international shipping

charges, U.S. customs duties, and an industry standard U.S. trading

company mark-up.

The petitioners noted that the Department has never had occasion to

determine whether the Czech Republic is a non-market economy (NME)

country to the extent that sales or offers for sale of the foreign like

product in the Czech Republic do not permit calculation of NV under 19

CFR 351.404. In previous investigations, however, the Department has

determined that Czechoslovakia, the predecessor of both the Slovak

Republic and the Czech Republic, was an NME. See e.g., Carbon Steel

Wire Rod from Czechoslovakia; Preliminary Negative Countervailing Duty

Determination, 49 FR 6773 (February 23, 1984). In accordance with

section 771(18)(C)(i) of the Act, the presumption of NME status remains

in effect until revoked by the Department. The presumption of NME

status for the Czech Republic has not been revoked by the Department

and, therefore, remains in effect for purposes of the initiation of

this investigation. Accordingly, pursuant to section 773(c) of the Act,

the petitioners constructed NV of the product based on factors of

production valued in a surrogate market economy country. In the course

of this investigation, all parties will have the opportunity to provide

relevant information related to the issues of the Czech Republic's NME

status and the granting of separate rates to individual exporters. See

e.g., Final Determination of Sales at Less Than Fair Value: Silicon

Carbide from the PRC, 59 FR 22585 (May 2, 1994).

The petitioners selected Brazil as the most appropriate surrogate

market economy. The petitioners stated that: (1) Brazil is ranked third

in proximity to the Czech Republic with respect to a similar per capita

GNP; (2) Brazil is a significant producer of the subject merchandise;

and (3) the petitioners have been able to secure detailed financial

statements for Brazil's major seamless pipe producer. The petitioners

believe Brazil is the most appropriate surrogate market economy because

it is a significant producer of comparable merchandise (in accordance

with section 773(c)(4) of the Act). Based on the information provided

by the petitioners, we believe their use of Brazil as a surrogate

country is appropriate for purposes of initiation of this

investigation.

For the NV calculation, the petitioners based the factors of

production, as defined by section 773(c)(3) of the Act (raw materials,

labor, and energy), for small diameter pipe on the same basic billet

round input used by the petitioners, adjusted to reflect unit factor

costs in the surrogate. The petitioners asserted that detailed

information is not available regarding the Czech producers' actual

usage rates. Thus, the petitioners have assumed, for purposes of the

petition, that Czech producers of subject merchandise use the same

basic billet round input as the petitioners. Specifically, the

petitioners have used one U.S. producer's factors of production through

the heating, piercing, rolling, and finishing of a billet round into

finished pipe.

In accordance with section 773(c)(4) of the Act, the petitioners

valued factors of production, where possible, on reasonably available,

public surrogate country data. The petitioners estimate Czech

producers' unit factor cost for billet rounds by utilizing Brazilian

import/export statistics as published in the 1997 reports of the United

Nations Statistical Division. Labor was valued using a regression-based

wage rate for the Czech Republic provided by the Department in

accordance with 19 CFR 351.408(c)(3). This value was multiplied by the

usage rate of the U.S. steel company to calculate total cost of labor.

Electricity rates were taken from Energy, Prices and Taxes, Fourth

Quarter 1998. The petitioners determine depreciation for Czech

producers by drawing from the 1997 annual report of a major Brazilian

producer of seamless pipe. In addition, petitioners have calculated

selling, general and administrative expenses as well as a net financial

expense based on expenses reported in the 1998 financial statements of

Brazil's major pipe producer. The necessary financial information to

determine factory overhead (including all indirect labor, materials,

and utilities) was not available for the major pipe producer in Brazil.

The Brazilian producer's financial statements group all direct and

indirect costs into cost of goods sold, and provide no means by which

to segregate these items. Therefore, the petitioners instead utilized

the financial statements of a South African pipe producer and relied

upon the factory overhead incurred by this producer as a surrogate for

the Czech Republic. (South Africa, like Brazil, is at a level of

economic development comparable to that of the Czech Republic.) In

determining an amount of profit for constructed value, the petitioners

could not use Brazil's major pipe producer as a surrogate because this

producer reported a net loss in 1998. Therefore, the petitioners have

used the financial statements of two Brazilian steel companies, neither

of which produce pipe, to estimate a profit percentage to be used as

surrogate for the Czech producer. However, given that the petitioners

did not capture correctly the Brazilian producers' profit, we

recalculated the profit rate and the overall estimated dumping margins

accordingly. See Memorandum to the File: Re--Recalculation of Brazilian

Surrogate Profit Rate, dated July 20, 1999.

Based on the information provided by the petitioners, we believe

that their surrogate values represent information reasonably available

to the petitioners and are acceptable for purposes of initiation of

this investigation.

Based on comparisons of EP to NV, calculated in accordance with

section 773(c) of the Act, the estimated dumping margins for small

diameter pipe from the Czech Republic range from 161.18 to 167.42

percent.

Japan (Both Large and Small Diameter Pipe)

For both small and large diameter pipe, the petitioners based EP on

a price quote from a Japanese trading company to an unaffiliated

customer.

The petitioners calculated a net U.S. price by subtracting

estimated costs for the trading company mark-up, foreign inland

freight, brokerage and port charges, international freight, unloading

and wharfage, U.S. movement, U.S. discount and U.S. customs duties.

NV is based upon prices for products which are identical to the

products used

[[Page 40829]]

as the basis for the U.S. price. The petitioners calculated the net ex-

factory price by deducting foreign movement charges. In addition, the

petitioners deducted domestic packing expenses, added U.S. packing

expenses and adjusted for differences in credit expenses between the

U.S. and Japanese market.

In addition, the petitioners provided information demonstrating

reasonable grounds to believe or suspect that large and small diameter

pipe sold in the home market were made at prices below the fully

absorbed cost of production (``COP''), within the meaning of section

773(b) of the Act, and requested that the Department conduct a country-

wide sales-below-cost investigation.

Pursuant to section 773(b)(3) of the Act, COP consists of the cost

of manufacturing (``COM''), selling, general, and administrative

expenses (``SG&A'') and packing. To calculate COP, petitioners based

COM on their own production experience, adjusted for known differences

between costs incurred to produce certain seamless pipe products in the

United States and in Japan using market research and publicly available

data.

To calculate SG&A and financial expenses, petitioners relied upon

the fiscal year 1998 audited financial statements of a Japanese steel

producer. Based upon the comparison of the adjusted prices of the

foreign like product in the home market to the calculated COP of the

product, we find reasonable grounds to believe or suspect that sales of

the foreign like product were made below the COP within the meaning of

section 773(b)(2)(A)(i) of the Act. Accordingly, the Department is

initiating a country-wide cost investigation.

Pursuant to sections 773(a)(4), 773(b) and 773(e) of the Act,

petitioners also based NV for sales in Japan on constructed value

(``CV''). For this initiation, we are accepting CV as the appropriate

basis for NV. The petitioners calculated CV using the same COM, SG&A

and financial expense figures used to compute Japanese home market

costs. Consistent with section 773(e)(2) of the Act, the petitioners

also added to CV an amount for profit. Profit was based upon a Japanese

producer's fiscal year 1998 financial statements. We adjusted the CV

for differences in circumstances of sales by subtracting home market

credit expenses and adding U.S. credit and packing expenses.

The margin calculations based on price to CV, as revised, indicate

dumping margins ranging from 74.17-106.07 percent for small diameter

pipe and 64.00-107.80 percent for large diameter pipe. The estimated

dumping margins, based on price-to-price comparisons range from 50.42-

51.07 percent for small diameter pipe and 50.21-53.52 percent for large

diameter pipe.

Mexico

The petitioners based EP on an offer for sale of a range of

products from a distributor which is affiliated with the one known

Mexican producer.

The petitioners calculated a net U.S. price by deducting estimated

values for U.S. inland freight, U.S. port charges, customs duty, ocean

freight, insurance, foreign inland freight, loading and warehousing

charges.

With respect to NV the petitioners obtained gross unit prices for

products offered for sale in Mexico which are identical to those sold

in the United States. The petitioners deducted from the gross price

foreign inland freight charges and domestic packing expenses, added

export packing expenses and adjusted for differences in U.S. and

Mexican credit expenses.

The estimated dumping margins in the petition based on a comparison

of TAMSA's U.S. and home market prices range from 26.07-27.42 percent.

Romania

The petitioners based EP on U.S. price offers for sale to an

unaffiliated purchaser. Because the offers were from trading companies

to unrelated purchasers in the United States prior to importation of

the merchandise, the petitioners treated the sales as export price (EP)

sales.

To determine net U.S. price, the petitioners deducted from gross

price U.S. port charges including unloading and wharfage, international

shipping charges, U.S. Customs duties, and a trading company mark-up.

With respect to NV, the petitioners assert that Romania is an NME

country and pursuant to 19 U.S.C. 1677(18)(C)(i) (section 771(18)(C)(i)

of the act), ``any determination that a foreign country is a nonmarket

economy country shall remain in effect until revoked by the

administering authority.'' Because Romania's status as an NME has not

been revoked, the petitioners' allocation is based upon a nonmarket

economy analysis. In previous investigations, the Department has

determined that Romania is an NME. See e.g., Antifriction Bearings

(Other than Tapered Roller Bearings) and Parts Thereof from France,

Germany, Italy, Japan, Romania, Singapore, Sweden, and United Kingdom,

64 FR 8790, 8796 (February 23, 1999) (Preliminary Results) and Tapered

Roller Bearings and Parts Thereof From Romania, 63 FR 36390 (July 6,

1998) (Final Results). In accordance with section 771(18)(C)(i) of the

Act, the presumption of NME status remains in effect until revoked by

the Department. The presumption of NME status for Romania has not been

revoked by the Department and, therefore, remains in effect for

purposes of the initiation of this investigation. Accordingly, the NV

of the product is based on factors of production valued in a surrogate

market economy country in accordance with section 773(c) of the Act. In

the course of this investigation, all parties will have the opportunity

to provide relevant information related to the issues of Romania's NME

status and the granting of separate rates to individual exporters. See

e.g., Final Determination of Sales at Less Than Fair Value: Silicon

Carbide from the PRC, 59 FR 22585 (May 2, 1994).

For the NV calculation, the petitioners assert that Indonesia is

the most suitable among the potential surrogates, because: (1) It is

the most significant producer of comparable merchandise among those

countries economically similar to Romania; and (2) the financial

statements of the leading Indonesian steel producer are available (in

contrast, the petitioners state that financial statements are not

reasonably available with respect to steel producers in Egypt, Algeria,

and the Philippines, other countries economically comparable to

Romania). Egypt, Algeria, and the Philippines have a higher

comparability ranking by per capita GNP than Indonesia as calculated

from data from the World Bank, World Development Report 1998/99.

However, the petitioners assert that none of those potential surrogates

(including Indonesia) is a significant producer of the subject

merchandise. The petitioners point to Antifriction Bearings from

Romania, in which the Department made clear that the surrogate need not

be a significant producer of the identical merchandise. The petitioners

further assert that the Department has used surrogate countries which

did not produce merchandise identical to the subject merchandise. They

cite Sebacic Acid from the PRC, in which the Department chose India as

the surrogate for China despite the fact that India did not produce the

subject merchandise. Accordingly, the petitioners submit that for the

purpose of identifying a surrogate, steel in general may be considered

``comparable'' to seamless pipe. Indonesia is the most significant

steel manufacturer, producing over 3.8 million MT of crude steel. Based

on the

[[Page 40830]]

information on the record, we believe that the petitioners' use of

Indonesia as a surrogate country is appropriate for the purposes of

initiation.

For the NV calculation, the petitioners based the factors of

production, as defined by section 773(c)(3) of the Act (raw materials,

labor, and energy), for small diameter carbon and alloy seamless

standard, line, and pressure pipe on Indonesian import statistics.

Since none of the principal Romanian producers are integrated steel

producers (i.e., they do not make their own steel from raw materials,

rather they purchase billet rounds from other countries), the

petitioners have used the factors of production of a U.S. steel

producer for the heating, piercing, rolling, and finishing of a billet

round into finished pipe.

In accordance with section 773(c)(4) of the Act, the petitioners

valued factors of production, where possible, on reasonably available,

public surrogate country data. For the purposes of determining

Indonesian unit factor costs, the petitioners utilize the most recent

information reasonably available and substitute such costs for those of

the U.S. producer. The petitioners use company specific data in the

form of financial statements from an Indonesian steel producer to

calculate depreciation, factory overhead, SG&A, financial expense, and

profit. Labor was valued using a regression-based wage rate for Romania

provided by the Department in accordance with 19 CFR 351.408(c)(3).

This value was multiplied by the usage rate of the U.S. steel company

to calculate total cost of labor. For electricity, the usage rate of

the U.S. steel company was used. Petitioners valued electricity using

the rates for Indonesia as published in a news article. For natural

gas, petitioners applied the usage rate of the U.S. steel company in

conjunction with the Indonesian unit factor cost for natural gas, as

determined from the financial statement of YPF, a large Indonesian

provider of natural gas.

The estimated dumping margins in the petition are based on a

comparison of U.S. price and constructed value. These comparisons

reveal estimated dumping margins ranging from 30.83--42.36 percent.

South Africa

The petitioners used prices from two sources as the basis for EP.

For two sizes of pipe, they used prices from a price list for South

African products obtained from a trading company. For a third size of

pipe, petitioners provided a price quote for South African pipe from an

international trading company to an unaffiliated U.S. customer.

The petitioners calculated a net U.S. price by subtracting

estimated costs for domestic inland freight, international freight,

loading and wharfage and U.S. customs duty.

NV is based upon prices for products offered for sale in South

Africa which are identical to the products used as the basis for the

U.S. price. The petitioners calculated NV by subtracting estimated

costs for inland freight. Additionally, the petitioners made

adjustments for differences in credit and packing.

The estimated dumping margins in the petition range from 36.82-

43.51 percent.

Initiation of Cost Investigations

As noted above, pursuant to section 773(b) of the Act, the

petitioners provided information demonstrating reasonable grounds to

believe or suspect that sales in the Japanese home market were made at

prices below the fully absorbed COP and, accordingly, requested that

the Department conduct country-wide sales-below-COP investigations in

connection with the requested antidumping investigations for Japan. The

Statement of Administrative Action (``SAA''), of the URAA, states that

an allegation of sales below COP need not be specific to individual

exporters or producers. SAA at 833 (1994). The SAA at 833 states that

``Commerce will consider allegations of below-cost sales in the

aggregate for a foreign country, just as Commerce currently considers

allegations of sales at less than fair value on a country-wide basis

for purposes of initiating an antidumping investigation.''

Further, the SAA provides that ``new section 773(b)(2)(A) retains

the current requirement that Commerce have `reasonable grounds to

believe or suspect' that below cost sales have occurred before

initiating such an investigation. `Reasonable grounds' * * * exist when

an interested party provides specific factual information on costs and

prices, observed or constructed, indicating that sales in the foreign

market in question are at below-cost prices.'' Id. Based upon the

comparison of the adjusted prices from the petition for the

representative foreign like products to their costs of production, we

find the existence of ``reasonable grounds to believe or suspect'' that

sales of these foreign like products in Japan were made below the COP

within the meaning of section 773(b)(2)(A)(i) of the Act. Accordingly,

the Department is initiating the requested country-wide cost

investigations.

Fair Value Comparisons

Based on the data provided by the petitioners, there is reason to

believe that imports of small and large diameter pipe from the above-

referenced countries are being, or are likely to be, sold at less than

fair value.

Allegations and Evidence of Material Injury and Causation

The petitions allege that the U.S. industry producing the domestic

like products are being materially injured, and is threatened with

material injury, by reason of the individual and cumulated imports of

the subject merchandise sold at less than NV. The petitioners explained

that the industry's injured condition is evident in the declining

trends in (1) U.S. market share, (2) average unit sales values, (3)

share of domestic consumption, (4) operating profits, (5) employment,

(6) output, (7) sales, (8) return on investment, (9) capacity

utilization, (10) hours worked, and (11) wages paid.

The allegations of injury and causation are supported by relevant

evidence including U.S. Customs import data, lost sales, and pricing

information. The Department assessed the allegations and supporting

evidence regarding material injury and causation and determined that

these allegations are supported by accurate and adequate evidence and

meet the statutory requirements for initiation (see Attachments to

Initiation Checklist, Re: Material Injury, July 20, 1999).

Initiation of Antidumping Investigations

Based upon our examination of the petitions on large and small

diameter pipe, we find that the petitions meet the requirements of

section 732 of the Act. Therefore, we are initiating antidumping duty

investigations to determine whether imports of certain small diameter

carbon and alloy seamless standard, line and pressure pipe from the

Czech Republic, Japan, the Republic of South Africa and Romania, and

certain large diameter carbon and alloy seamless standard, line and

pressure pipe from Japan and Mexico are being, or are likely to be,

sold in the United States at less than fair value. Unless this deadline

is extended, we will make our preliminary determinations no later than

140 days after the date of this initiation.

Distribution of Copies of the Petitions

In accordance with section 732(b)(3)(A) of the Act, a copy of the

public version of each petition has been provided to the

representatives of the Czech Republic, Japan, Mexico, Romania and the

Republic of South

[[Page 40831]]

Africa. We will attempt to provide a copy of the public versions of

each petition to each exporter named in the petition, as appropriate.

International Trade Commission Notification

We have notified the ITC of our initiations, as required by section

732(d) of the Act.

Preliminary Determinations by the ITC

The ITC will determine, by no later than September 3, 1999, whether

there is a reasonable indication that imports of certain small diameter

carbon and alloy seamless standard, line and pressure pipe from the

Czech Republic, Japan, the Republic of South Africa and Romania, and

certain large diameter carbon and alloy seamless standard, line and

pressure pipe from Japan and Mexico are causing material injury, or

threatening to cause material injury, to a U.S. industry. A negative

ITC determination for any country will result in the investigation

being terminated with respect to that country; otherwise, these

investigations will proceed according to statutory and regulatory time

limits.

This notice is published pursuant to section 777(i) of the Act.

Dated: July 20, 1999.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 99-19307 Filed 7-27-99; 8:45 am]

BILLING CODE 3510-DS-P