Initiation of Antidumping Duty Investigation: Circular Seamless Stainless Steel Hollow Products From Japan

DEPARTMENT OF COMMERCE

International Trade Administration

[A-588-853]

Initiation of Antidumping Duty Investigation: Circular Seamless

Stainless Steel Hollow Products From Japan

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: November 19, 1999.

FOR FURTHER INFORMATION CONTACT: Charles Riggle or Constance Handley at

(202) 482-0650 and (202) 482-0631, respectively; Import Administration,

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

Street and Constitution Avenue, NW, Washington, D.C. 20230.

Initiation of Investigation

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 Petition

On October 26, 1999, the Department of Commerce (``the

Department'') received a petition on circular seamless stainless steel

hollow products from Japan filed in proper form by Altx, Inc., American

Extruded Products, PMAC Ltd, DMV Stainless USA, Inc., Salem Tube Inc.,

Sandvik Steel Co. International Extruded Products LLC and the United

Steel Workers of America, AFL-CIO/CLC. On November 9, 1999,

Pennsylvania Extruded Company (Pexco) joined as a co-petitioner in the

case. The Department received supplements to the petition on November

9, 10, and 12, 1999.

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

allege that imports of circular seamless stainless steel hollow

products from Japan 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 this petition 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 the

antidumping investigation they are requesting the Department to

initiate (see Determination of Industry Support for the Petition

below).

Scope of Investigation

The scope of this investigation covers seamless stainless hollow

products, including pipes, tubes, redraw hollows, and hollow bars, of

circular cross section, containing 10.5 percent or more by weight

chromium, regardless of production process, outside diameter, wall

thickness, length, industry specification (domestic, foreign or

proprietary), grade or intended use. Common specifications for the

subject seamless stainless steel hollow products include, but are not

limited to, ASTM-A-213, ASTM-A-268, ASTM-A-269, ASTM-A-270, ASTM-A-271,

ASTM-A-312, ASTM-A-376, ASTM-A-498, ASTM-A-511, ASTM-A-632, ASTM-A-731

ASTM-A-771, ASTM-A-789, ASTM-A-790, ASTM-A-826 and their proprietary or

foreign equivalents.

The merchandise covered by this petition is found in the Harmonized

[[Page 63286]]

Tariff Schedule of the United States (HTSUS) subheadings 7304.10.50.20,

7304.10.50.50, 7304.10.50.80, 7304.41.30.05, 7304.41.30.15,

7304.41.30.45, 7304.41.60.05, 7304.41.60.15, 7304.41.60.45,

7304.49.00.05, 7304.49.00.15, 7304.49.00.45, 7304.49.00.60. Although

HTSUS subheadings are provided for convenience and customs purposes,

the written description of the merchandise is dispositive. Excluded

from the scope of the investigation are finished oil country tubular

goods certified to American Petroleum Institute (``API'') standard 5CT

or 5D. Also excluded are hollow drill bars and rods, classifiable under

7228.80 of the HTSUS.

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

petitioners to ensure that the scope in the petition 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 December 13, 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, D.C. 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 determination.

Determination of Industry Support for the Petition

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

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\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).

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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.

After the filing of the petition, we received comments from U.S.

redrawers and from Sumitomo Metal Industries, Ltd. (Sumitomo), a

Japanese producer of the subject merchandise, requesting that for the

purposes of determining industry support, the Department define hot-

finished pipe and cold-drawn pipe as separate like products. These

parties contend that hot-finished and cold-drawn pipe are made by

different companies with different equipment and sold for different

uses.

In addition, Sumitomo argues that while the ordinary uses for pipe

and tubing can be met by the hot-rolling process, there are uses such

as heat exchange, hydraulics, instrumentation, and subsea control and

service, which demand greater accuracy, higher physical properties,

better surfaces, thinner walls and smaller diameters that require cold-

drawing methods. Therefore, both the U.S. redrawers and Sumitomo

requested that the Department poll producers of hot-finished and cold-

drawn pipe and tube separately to determine if the petitioners have

adequate industry support for both types of products.

On November 12, 1999, the petitioners submitted rebuttal comments,

stating that with the addition of Pexco, the largest U.S. domestic

producer of the subject merchandise, as a petitioner, the petition has

clearly been filed on behalf of the U.S. domestic industry whether

circular seamless stainless steel hollow products are treated as a

single like product, or as two distinct like products.

For purposes of this initiation, we are adopting the domestic like

product definition set forth in the petition. Seamless stainless steel

hollow products are made along a continuum of sizes and grades, with a

degree of substitution of one type of product for another along the

continuum. While we recognize that certain differences exist between

the products in the proposed like product groupings, we find that the

similarities are more significant. For example, all products in the

proposed like product groupings share characteristics, such as chemical

composition, that make them suitable for uses in pressurized,

corrosive, high-temperature environments. Moreover, Sumitomo

acknowledged in its November 10, 1999, submission (at 11) that no

particular general application is always the exclusive domain of either

hot-finished or cold-finished products.

With regard to the assertion that hot-finished and cold-drawn

hollow products are manufactured by different companies and with

different equipment, given the time constraints placed on the

Department, our industry support analysis focuses on the factors

specified in section 771(10) of the Act, i.e., physical characteristics

and uses of the domestic like product. Moreover, as stated above, based

on the evidence available, we find that the similarities outweigh the

differences between these products.

Further, several steel cases support our conclusion that hot-

finished and cold-drawn products are treated appropriately as a single

like product by the Department. See e.g. 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, 64 FR 40825 (July 28, 1999); Final Determination of Sales at

Less Than Fair Value; Stainless Steel Hollow Products from Sweden, 52

FR 37810 (October 9, 1987); Small Diameter Circular Seamless Carbon and

Alloy Steel Standard, Line and Pressure Pipe From Germany: Final

Results of Antidumping Duty Administrative Review, 63 FR 13217 (March

18, 1998) and Stainless Steel Bar From Japan: Final Results of

Antidumping

[[Page 63287]]

Administrative Review, 64 FR 36333 (July 6, 1999). The facts of this

case do not justify departure from our large body of established

precedent.

Because the petitioners did not account for more than 50 percent of

the domestic production at the time the petition was filed, we polled

the industry as directed in 732(c)(4)(D) of the Act. While certain

domestic producers 2 expressed opposition to the petition,

the entry of Pexco on November 9, 1999, as a petitioner now means that

the petitioners account for more than 50 per cent of total production

of the domestic like product. As such, they have established the

requisite level of industry support. See Attachment to the Initiation

Checklist, Re: Industry Support, November 15, 1999.

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\2\ These producers are principally redrawers who import,

directly or indirectly, at least some of their inputs from Japan.

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Sumitomo argued further that the Department should have gathered

U.S. production data for the period July 1, 1998, through June 30,

1999, rather than calendar year 1998 data, for purposes of its industry

support analysis because this period would reflect the most recent

state of the industry. With regard to Sumitomo's argument as to the use

of 1998 production data, we note that, pursuant to 19 CFR

351.203(e)(1), the Department has discretion in defining the 12-month

period for which production will be measured. In this case, we believe

that the calender year 1998, which was used in the petition for the

purposes of demonstrating industry support, is representative and

consistent with Department practice. See e.g., Initiation Checklist for

the Petitions Covering Certain Cold-Rolled Carbon Steel Flat Products

from Argentina, Brazil, South Africa, Slovakia, Indonesia, Japan,

Thailand, Taiwan, Venezuela, the People's Republic of China, Turkey,

and Russia, dated June 14, 1999, and Initiation Checklist for the

Petition Covering Solid Agricultural Grade Ammonium Nitrate from The

Russian Federation, dated June 21, 1999.

Finally, Sumitomo stated that 1998 production by Al Tech, whose

seamless pipe production facility was later purchased by the petitioner

Altx, should not be considered for purposes of determining industry

support. The petitioners claimed that the inclusion of Al Tech's 1998

production is appropriate because the equipment employed in 1998 to

produce the like product is now operated by Altx. We note that this is

a moot point because, with the entry of Pexco as a petitioner, the

inclusion of Al Tech's production is not necessary for the petitioners

to demonstrate adequate industry support.

Export Price and Normal Value

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

relied upon price data contained in a confidential market research

report filed with the Department. At our request, the petitioners

arranged for the Department to contact the authors of the report 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 discussion with the authors of the market research reports

is summarized in Memorandum to the File: Re: Foreign Market Research

Reports, dated November 2, 1999.

The petitioners based EP on affidavits of U.S. price offerings for

seamless stainless steel hollow products manufactured by Sumitomo,

Nippon, and Sanyo during January through April 1999. The petitioners

selected seamless stainless hollow products with specifications

commonly exported to the United States. In the absence of more

definitive information, the petitioners refer to the date of the offer

as the date of sale. The affidavits with the sales price offers reflect

the prices offered to an unaffiliated customer.

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

estimated costs for shipment from the factory in Japan to the port of

export, and Japanese trading company commissions, from the sales price.

For a more detailed discussion of the deductions and adjustments

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

sources of data, see Initiation Checklist, dated November 15, 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.

As further explained below in the ``Initiation of Cost

Investigation'' section, the petitioners provided information

demonstrating reasonable grounds to believe or suspect that sales of

seamless stainless steel hollow products 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. 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, the petitioners based COM on their own

production experience, adjusted for known differences between costs

incurred to produce seamless stainless steel hollow 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.

When we find that sales in the home market are made at prices below

cost, we compare EP to constructed value 3 (``CV''). The

margin calculations based on price to CV comparisons, indicate dumping

margins ranging from 30.86-156.81 percent. The estimated dumping

margins, based on price-to-price comparisons, range from 11.72-49.17

percent.

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\3\ Pursuant to section 773(e) of the Act, the constructed value

is the sum of (1) the cost of materials and fabrication of the

subject merchandise, (2) selling, general, and administrative

expenses and profit in the foreign market, and (3) the cost of

packing for exportation to the United States.

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

believe that imports of circular stainless steel hollow products from

Japan are being, or are likely to be, sold at less than normal value.

Initiation of Cost Investigation

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

petitioners provided specific factual 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 a country-wide

sales-below-COP investigation in connection with the requested

antidumping investigation for Japan. The Statement of Administrative

Action accompanying the URAA, H.R. Doc. 103-412 (``SAA''), states that

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

exporters or producers. SAA at 833. 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

[[Page 63288]]

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

investigation.

Allegations and Evidence of Material Injury and Causation

The petition alleges that the U.S. industry producing the domestic

like products is 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 income, (5) employment,

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

utilization, (10) ability to raise capital and (11) cash flow.

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, November 15, 1999).

Initiation of Antidumping Investigation

Based upon our examination of the petition on circular seamless

stainless steel hollow products from Japan, we find that the petition

meets the requirements of section 732 of the Act. Therefore, we are

initiating an antidumping duty investigation to determine whether

imports of circular seamless stainless steel hollow products from Japan

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 Petition

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

public version of the petition has been provided to the representatives

of Japan. 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 December 10, 1999, whether

there is a reasonable indication that imports of circular seamless

stainless steel hollow products from Japan are causing material injury,

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

ITC determination will result in the investigation being terminated;

otherwise, this investigation will proceed according to statutory and

regulatory time limits.

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

Dated: November 15, 1999.

Joseph A. Spetrini,

Acting Assistant Secretary for Import Administration.

[FR Doc. 99-30282 Filed 11-18-99; 8:45 am]

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