Oil Country Tubular Goods From Mexico: Preliminary Results of Antidumping Duty Administrative Review and Partial Recission of Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[A-201-817]

Oil Country Tubular Goods From Mexico: Preliminary Results of

Antidumping Duty Administrative Review and Partial Recission of

Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of preliminary results of antidumping duty

administrative review and partial rescission of administrative review.

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SUMMARY: In response to a request from respondents, the Department of

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

antidumping duty order on oil country tubular goods (``OCTG'') from

Mexico. The review covers one manufacturer/exporter of the subject

merchandise to the United States and the period August 1, 1997 through

July 31, 1998. We preliminarily determine that sales of subject

merchandise have not been made below normal value. (``NV''). If these

preliminary results are adopted in our final results of administrative

review, we will instruct U.S. Customs to assess antidumping duties

based on the difference between export price (``EP'') or constructed

export price (``CEP'') and NV.

Interested parties are invited to comment on these preliminary

results. Parties who submit argument in this proceeding are requested

to submit with the argument (1) a statement of the issue and (2) a

brief summary of the argument (no longer than five pages, including

footnotes).

EFFECTIVE DATE: September 9, 1999.

FOR FURTHER INFORMATION CONTACT: John Drury, Nancy Decker or Linda

Ludwig, Import Administration, International Trade Administration, U.S.

Department of Commerce, 14th Street and Constitution Avenue, NW,

Washington, DC 20230; telephone (202) 482-0195 (Drury), (202) 482-0196

(Decker), (202) 482-3833 (Ludwig).

SUPPLEMENTARY INFORMATION:

Applicable Statute

Unless otherwise indicated, all citations to the Tariff Act of

1930, as amended (the Act) are references to the provisions effective

January 1, 1995, the effective date of the amendments made to the Act

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

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

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

Background

The Department published a final determination of sales at less

than fair value for OCTG from Mexico on June 28, 1995 (60 FR 33567),

and subsequently published the antidumping duty order on August 11,

1995 (60 FR 41056). The Department published a notice of ``Opportunity

To Request Administrative Review'' of the antidumping order for the

1997/1998 review period on August 11, 1998 (63 FR 42821). Upon

receiving requests for administrative review from two respondents,

Hylsa S.A. de C.V. (``Hylsa'') and Tubos de Acero de Mexico, S.A.

(``TAMSA''), we initiated a review on September 23, 1998 (63 FR 51893,

September 29, 1998).

On November 2, 1998, Hylsa timely withdrew its request for review.

Therefore, this review has now been terminated as to Hylsa as a result

of the withdrawal of Hylsa's request for review.

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

the deadline for completion of an administrative review if it

determines that it is not practicable to complete the review within the

statutory time limit of 365 days. On April 14, 1999, the Department

extended the time limits for these preliminary results to August 31,

1999. See Oil Country Tubular Goods from Mexico; Extension of Time

Limits for Antidumping Duty Administrative Review (64 FR 24370, May 6,

1999).

Scope of the Review

Imports covered by this review are oil country tubular goods,

hollow steel products of circular cross-section, including oil well

casing, tubing, and drill pipe, of iron (other than cast iron) or steel

(both carbon and alloy), whether seamless or welded, whether or not

conforming to American Petroleum Institute (API) or non-API

specifications, whether finished or unfinished (including green tubes

and limited service OCTG products). This scope does not cover casing,

tubing, or drill pipe containing 10.5 percent or more of chromium. The

OCTG subject to this order are currently classified in the Harmonized

Tariff Schedule of the United States (HTSUS) under item numbers:

7304.20.10.10, 7304.20.10.20, 7304.20.10.30, 7304.20.10.40,

7304.20.10.50, 7304.20.10.60, 7304.20.10.80, 7304.20.20.10,

7304.20.20.20, 7304.20.20.30, 7304.20.20.40, 7304.20.20.50,

7304.20.20.60, 7304.20.20.80, 7304.20.30.10, 7304.20.30.20,

7304.20.30.30, 7304.20.30.40, 7304.20.30.50, 7304.20.30.60,

7304.20.30.80, 7304.20.40.10, 7304.20.40.20, 7304.20.40.30,

7304.20.40.40, 7304.20.40.50, 7304.20.40.60, 7304.20.40.80,

7304.20.50.15, 7304.20.50.30, 7304.20.50.45, 7304.20.50.60,

7304.20.50.75, 7304.20.60.15, 7304.20.60.30, 7304.20.60.45,

7304.20.60.60, 7304.20.60.75, 7304.20.70.00, 7304.20.80.30,

7304.20.80.45, 7304.20.80.60, 7305.20.20.00, 7305.20.40.00,

7305.20.60.00, 7305.20.80.00, 7306.20.10.30, 7306.20.10.90,

7306.20.20.00, 7306.20.30.00, 7306.20.40.00, 7306.20.60.10,

7306.20.60.50, 7306.20.80.10, and 7306.20.80.50.

Although the HTSUS subheadings are provided for convenience and

customs purposes, our written description of the scope of this

proceeding is dispositive.

Period of Review

The review covers the period August 1, 1997 through July 31, 1998.

The Department is conducting this review in accordance with section 751

of the Act, as amended.

Product Comparisons

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

products produced by the respondents, covered by the description in the

Scope of the Review section, above, and sold in the home market during

the period of review (POR), to be foreign like products for purposes of

determining appropriate product comparisons to U.S. sales. Where there

were no sales of identical merchandise in the home market to compare to

U.S. sales, we compared U.S. sales to the most similar foreign like

product on the basis of the characteristics listed in the Department's

October 16, 1998 questionnaire, or to constructed value (``CV'').

Normal Value Comparisons

To determine whether sales of the subject merchandise by TAMSA were

made at less than NV, we compared the CEP to the NV, as described in

the CEP and NV sections of this notice, below. In accordance with

section 777A(d)(1)(A)(i) of the Act, we compared CEPs to weight-

averaged NVs.

United States Price

In its response to the Department, TAMSA claimed that its sales to

the United States were EP sales. After careful examination of the

record, and

[[Page 48984]]

based upon our analysis using the three-pronged test defined below, the

Department has preliminarily determined to treat TAMSA's U.S. sales as

CEP sales, as defined in section 772(b) of the Act. See Analysis

Memorandum for TAMSA for a further discussion.

Pursuant to section 772(a) and (b) of the Act, an EP sale is a sale

of merchandise for export to the United States made by a foreign

producer or exporter outside the United States prior to importation. A

CEP sale is a sale made in the United States before or after

importation by or for the account of the exporter/producer or by a

party affiliated with the exporter or producer. In determining whether

the sales activity of a U.S. affiliate rises to such a level that CEP

methodology is warranted, the Department has examined the following

criteria: (1) whether the merchandise was shipped directly from the

manufacturer to the unaffiliated U.S. customer (rather than being

introduced into the inventory of the U.S. affiliate), (2) whether this

was a customary commercial channel between the parties involved, and

(3) whether the function of the U.S. affiliate is limited to that of a

``processor of sales-related documentation'' and a ``communication

link'' with the unaffiliated U.S. buyer. See, e.g., Certain Corrosion-

Resistant Carbon Steel Flat Products and Certain Cut-to-Length Carbon

Steel Plate From Canada: Final Results of Antidumping Duty

Administrative Review (``Canadian Steel''), 63 Fed. Reg. 12725, 12738

(March 16, 1998).

In the Canadian Steel case, the Department clarified its

interpretation of the third prong of this test, as follows. ``Where the

factors indicate that the activities of the U.S. affiliate are

ancillary to the sale (e.g., arranging transportation or customs

clearance, invoicing), we treat the transactions as EP sales. Where the

U.S. affiliate has more than an incidental involvement in making sales

(e.g., solicits sales, negotiates contracts or prices) or providing

customer support, we treat the transactions as CEP sales.'' Id.

Our examination of the record with respect to this administrative

review indicates that the fact pattern for sales to the United States

is substantially identical to the pattern for sales in the previous

administrative review. In Oil Country Tubular Goods From Mexico: Final

Results of Antidumping Duty Administrative Review, 64 FR 13962 (March

23, 1999), the Department stated in part:

As an initial matter, the selling agreement between TAMSA and

Siderca Corp. is quite clear with respect to the services that

Siderca Corp. performs. Siderca Corp. is the exclusive selling agent

for TAMSA products in the United States and other parts of the

world, and has certain rights affecting the price for any sales

under the agreement. In exchange for providing marketing and selling

functions, and for providing other services, such as paying for

brokerage and importer duties, Siderca Corp. is entitled to receive

compensation under the agreement. The record indicates that Siderca

Corp. did receive, in connection with this sale, the compensation

provided for under the agreement.

In addition, Siderca Corp. played the primary role in generating

this sale by bringing the customer to TAMSA. The record shows that

Siderca Corp. has a longstanding working relationship with the

United States customer, is in frequent contact with that customer,

and that sales of other TAMSA products to this and other customers

occur because of these contacts. Conversely, TAMSA itself appears to

have little, if any, contact outside of Mexico with regard to the

sale of its products in the United States. Indeed, under the terms

of the agreement, TAMSA is precluded from soliciting or negotiating

sales directly in the United States. The agreement places the rights

and responsibilities of selling and marketing TAMSA products in the

United States squarely on Siderca Corp.

Based on this fact pattern, it appears that, * * * the sale to

the United States of subject merchandise was within the framework of

the agreement between TAMSA and Siderca Corp. Evidence on the record

indicates that, consistent with its rights and responsibilities

under the selling agreement, Siderca Corp. maintained contacts with

the United States customer and, through these contacts, was able to

match that customer's requirements with subject merchandise

available from TAMSA. The fact that Siderca Corp. may not have fully

exercised its rights with regards to price negotiation, deferring to

TAMSA with respect to the final approval, neither negates the

substance and importance of the agreement nor diminishes the

importance of Siderca Corp.'s role in arranging this sale. Simply

put, under the current agreement, it appears that TAMSA would be

precluded from seeking sales in the United States directly. Sales of

TAMSA products in the United States must, as a condition of the

agreement, begin with Siderca Corp. The fact that Siderca Corp.

performed other functions as specified in the agreement, even if

these were ancillary services, and received compensation according

to the terms of the agreement, reinforces the conclusion that

Siderca Corp.'s activities under the agreement were the primary

factors in creating the sale to the United States.

Based on our examination of the record, the selling agreement between

TAMSA and its U.S. affiliate (Siderca Corp.) has not changed.

Furthermore, Siderca Corp. has longstanding ties to the United States

customer and is in frequent contact with that customer concerning sales

of TAMSA products worldwide. Conversely, TAMSA does not communicate

directly with the customer and, under the agreement, appears to be

precluded from contacting United States customers. Based on these

facts, it is clear that the U.S. affiliate has more than an incidental

involvement in making these sales. Since the sales in question do not

meet the third prong of the test for indirect EP sales described above,

we need not consider the other two prongs. Based on our analysis, we

are treating TAMSA's U.S. transactions as CEP sales.

We based CEP on the delivered price to unaffiliated customers in

the United States. We made adjustments, where applicable, for movement

expenses (U.S. inland freight, U.S. brokerage and handling expenses,

and U.S. customs duties), credit expenses, and other selling expenses

that were associated with economic activity in the United States, in

accordance with section 772(d) of the Act. Finally, we made an

adjustment for CEP profit in accordance with section 772(d)(3) of the

Act.

Normal Value

In order to determine whether there were sufficient sales of OCTG

in the home market (``HM'') to serve as a viable basis for calculating

NV, we compared the volume of home market sales of subject merchandise

to the volume of subject merchandise sold in the United States, in

accordance with section 773(a)(1)(C) of the Act.

TAMSA's aggregate volume of HM sales of the foreign like product

was greater than five percent of its aggregate volume of U.S. sales of

the subject merchandise. Therefore, for TAMSA, we have based NV on HM

sales. We made adjustments to NV for HM inland freight, discounts,

credit expenses, warehousing expenses, packing, and warranty expenses.

Cost of Production Analysis

Because the Department disregarded sales below cost for TAMSA in

the comparison market during the last completed segment of the

proceeding, we initiated a cost of production (``COP'') analysis in

accordance with section 773(b) of the Act. We conducted the COP

analysis as described below.

A. Calculation of COP

In accordance with section 773(b)(3) of the Act, we calculated the

weighted-average COP, by model, based on the sum of the cost of

materials, fabrication and general expenses, and packing costs. We

relied on the submitted COPs.

[[Page 48985]]

B. Test of Home Market Prices

We used respondent's weighted-average COP for the period August 1,

1997 to July 31, 1998. We compared the weighted-average COP figures to

home market sales of the foreign like product as required under section

773(b) of the Act. In determining whether to disregard home-market

sales made at prices below the COP, we examined whether (1) within an

extended period of time, such sales were made in substantial

quantities, and (2) such sales were made at prices which permitted the

recovery of all costs within a reasonable period of time. On a product-

specific basis, we compared the COP to the home market prices, less any

applicable movement charges, rebates, and discounts.

C. Results of COP Test

Pursuant to section 773(b)(2)(C), where less than 20 percent of

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

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

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

quantities.'' Where 20 percent or more of respondent's sales of a given

product during the POR were at prices less than the COP, we determined

such sales to have been made in ``substantial quantities'' within an

extended period of time in accordance with section 773(b)(2)(B) of the

Act. Because we compared prices to POR-average costs, we also

determined that such sales were also not made at prices which would

permit recovery of all costs within a reasonable period of time, in

accordance with section 773(b)(2)(D) of the Act; therefore, we

disregarded the below-cost sales.

D. Calculation of CV

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

based on the sum of TAMSA's cost of materials, fabrication, SG&A,

including interest expenses, and U.S. packing costs, as reported and a

calculated profit. In accordance with section 773(e)(2)(A) of the Act,

we based SG&A and profit on the amounts incurred and realized by the

respondent in connection with the production and sale of the foreign

like product in the ordinary course of trade, for consumption in the

foreign country.

Level of Trade

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

extent practicable, we determine NV based on sales in the comparison

market at the same level of trade (LOT) as the EP or CEP transaction.

The NV LOT is that of the starting price sales in the comparison market

or, when NV is based on CV, that of the sales from which we derive

selling, general and administrative expenses and profit. For EP, the

U.S. LOT is also the level of the starting price sale, which is usually

from the exporter to the importer. For CEP, it is the level of the

constructed sale from the exporter to the importer.

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

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

along the chain of distribution between the producer and the

unaffiliated customer. If the comparison market sales are at a

different LOT, and the difference affects price comparability, as

manifested in a pattern of consistent price differences between the

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

the export transaction, we make a LOT adjustment under section

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

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

for determining whether the differences in the levels between NV and

CEP affects price comparability, we adjust NV under section

773(A)(7)(B) of the Act (the CEP offset provision). (See e.g., Notice

of Final Determination of Sales at Less Than Fair Value: Certain Cut-

to-Length Carbon Steel Plate from South Africa, 62 FR 61731 (November

19, 1997).)

As the Department explained in Gray Portland Cement and Clinker

from Mexico: Final Results of Antidumping Duty Administrative Review

(``Cement from Mexico''), 62 FR 17156 (April 9, 1997), for both EP and

CEP the relevant transaction for the LOT analysis is the sale from the

exporter to the importer. While the starting price for CEP is that of a

subsequent resale to an unaffiliated buyer, the construction of the CEP

results in a price that would have been charged by the exporter to the

importer if the importer had not been affiliated. We calculate the CEP

by removing from the first resale to an unaffiliated U.S. customer the

expenses referenced in section 772(d) of the Act and the profit

associated with these expenses. These expenses represent activities

undertaken by the affiliated importer in making the sale to the

unaffiliated customers. Because the expenses deducted under section

772(d) of the Act are incurred for selling activities in the United

States, the deduction of these expenses may yield a different LOT for

the CEP than for the later resale (which we use for the starting

price). Movement charges, duties, and taxes deducted under section

772(c) of the Act do not represent activities of the affiliated

importer, and we do not remove them to obtain the price on which the

CEP LOT is based.

To determine whether some or all home market sales are at a

different LOT than U.S. sales, we examined both the chain of

distribution and the selling functions in both markets. An analysis of

the chain of distribution and of the selling functions substantiates or

invalidates the claimed LOTs. Our analysis revealed that while all

sales in the home market were in the same chain of distribution, there

were substantial differences in selling functions between certain types

of customers.

Some of the home market sales were made on a Just In Time (``JIT'')

basis. As in the prior review, the Department preliminarily determines

that the infrastructure required to support the selling functions

involving JIT sales results in these sales being made at a different

LOT than non-JIT sales. Some sales in the home market, which would

match to the U.S. sale, were not made on a JIT basis. The Department

examined the selling functions provided by TAMSA to these customers to

determine if these sales were at the same LOT as sales to the United

States.

In Stainless Steel Sheet and Strip in Coils from the United

Kingdom, Preliminary Determination of Sales at Less than Fair Value and

Postponement of Final Determination, 64 FR 85 (January 4, 1999), the

Department determined that some of the items listed by respondent were

not selling functions relevant to the Department's LOT analysis because

they did not characterize significant services provided to customers.

Based on this analysis, we conclude that customer solicitation is not a

selling function. Therefore, we are disregarding this item in our LOT

analysis.

Of the remaining 13 selling functions listed by TAMSA, all but one

were provided in both the home market and the United States to non-JIT

customers. Only customer visits are listed by TAMSA as a selling

function provided in the home market, but not in the United States.

However, TAMSA does not quantify or otherwise describe the nature of

these visits. Given the absence of evidence, we preliminarily determine

that the actual differences in selling functions in connection with

sales to non-JIT customers in the home market, and sales to the United

States, are relatively minor.

Based on this determination, we preliminarily determine that sales

to home market customers which do not receive JIT services are at the

same level of trade as CEP sales. As a result, we have based our margin

analysis on the

[[Page 48986]]

comparison of CEP sales to these non-JIT home market sales.

Because we have preliminarily determined that there are sales in

the home market at the same level of trade as the sale to the United

States, and because we have used only these same LOT sales as matching

in calculating the margin, we are not making an LOT adjustment or a CEP

offset.

Preliminary Results of Review

We preliminarily determine that the following margins exist for the

period August 1, 1997 through July 31, 1998:

TAMSA--0.00%

Parties to this proceeding may request disclosure within five days

of publication of this notice and any interested party may request a

hearing within 30 days of publication. Any hearing, if requested, will

be held 37 days after the date of publication, or the first working day

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

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

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

such briefs or comments, may be filed no later than 35 days after the

date of publication. The Department will publish the final results of

this administrative review, which will include the results of its

analysis of issues raised in any such written comments or at a hearing,

within 120 days after the publication of this notice.

The Department shall determine, and Customs shall assess,

antidumping duties on all appropriate entries. The Department will

issue appraisement instructions directly to Customs. The final results

of this review shall be the basis for the assessment of antidumping

duties on entries of merchandise covered by the determination and for

future deposits of estimated duties. For duty assessment purposes, we

calculated an importer-specific assessment rate by taking the dumping

margin calculated for the U.S. sale to the importer and dividing this

amount by the total entered value of the sale. This specific rate

calculated will be used for the assessment of antidumping duties on the

entry of the subject merchandise during the POR.

Furthermore, the following deposit requirements will be effective

upon completion of the final results of these administrative reviews

for all shipments of OCTG from Mexico entered, or withdrawn from

warehouse, for consumption on or after the publication date of the

final results of these administrative reviews, as provided by section

751(a)(1) of the Act: (1) The cash deposit rate for reviewed firms will

be the rate established in the final results of administrative review,

except if the rate is less than 0.50 percent, and therefore, de minimis

within the meaning of 19 CFR 351.106(d)(1), in which case the cash

deposit rate will be zero; (2) for merchandise exported by

manufacturers or exporters not covered in this review but covered in

the original less-than-fair-value (LTFV) investigation or a previous

review, the cash deposit will continue to be the most recent rate

published in the final determination or final results for which the

manufacturer or exporter received a company-specific rate; (3) if the

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

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

that established for the manufacturer of the merchandise in the final

results of these reviews, or the LTFV investigation; and (4) if neither

the exporter nor the manufacturer is a firm covered in this or any

previous review or the original fair value investigation, the cash

deposit rate will be 23.79%, the ``all other'' rate from the original

investigation.

This notice also serves as a preliminary reminder to importers of

their responsibility under 19 CFR 351.402(f)(2) to file a certificate

regarding the reimbursement of antidumping duties prior to liquidation

of the relevant entries during this review period. Failure to comply

with this requirement could result in the Secretary's presumption that

reimbursement of antidumping duties occurred and the subsequent

assessment of double antidumping duties.

This administrative review and notice are in accordance with

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

Dated: August 31, 1999.

Richard W. Moreland,

Acting Assistant Secretary for Import Administration.

[FR Doc. 99-23433 Filed 9-8-99; 8:45 am]

BILLING CODE 3510-DS-P