Circular Welded Non-Alloy Steel Pipe and Tube From Mexico: Preliminary Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[A-201-805]

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

Preliminary Results of Antidumping Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of Preliminary Results of Antidumping Duty

Administrative Review.

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SUMMARY: In response to requests from two respondents, the Department

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

the antidumping duty order on circular welded non-alloy steel pipe and

tube from Mexico. This review covers two manufacturers and exporters of

the subject merchandise, Tuberia Nacional S.A. de C.V. (TUNA) and Hylsa

S.A. de C.V. (Hylsa). The period of review (POR) is November 1, 1997,

through October 31, 1998.

EFFECTIVE DATE: December 9, 1999.

FOR FURTHER INFORMATION CONTACT: John Drury (TUNA), Charles Rast

(Hylsa), or Linda Ludwig, Enforcement Group III, Office 8, Import

Administration, International Trade Administration, US Department of

Commerce, 14th Street and Constitution Avenue, NW, Room 7866,

Washington, DC 20230; telephone (202) 482-0195, (202) 482-1324, or

(202) 482-3833, respectively.

SUPPLEMENTARY INFORMATION:

The 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 an antidumping duty order on circular

welded non-alloy steel pipe and tube from Mexico on November 2, 1992

(57 FR 49453). The Department published a notice of ``Opportunity to

Request an Administrative Review'' of the antidumping duty order for

the 1997/98 review period on November 12, 1998 (63 FR 63287).

Respondents TUNA and Hylsa requested that the Department conduct an

administrative review of the antidumping duty order on circular welded

non-alloy steel pipe and tube from Mexico. We initiated this review on

December 23, 1998. See 63 FR 71091 (December 17, 1998).

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

the deadline for issuing a preliminary determination in an

administrative review if it determines that it is not practicable to

complete the preliminary review within the statutory time limit of 245

days. On August 12, 1999, the Department published a notice of

extension of the time limit for the preliminary results in this case to

November 30, 1999. See Extension of Time Limit: Circular Welded Non-

Alloy Pipe From Mexico; Antidumping Administrative Review, 64 FR 43982

(August 12, 1999).

[[Page 68996]]

The Department is conducting this review in accordance with section

751(a) of the Act.

Scope of the Review

The products covered by these orders are circular welded non-alloy

steel pipes and tubes, of circular cross-section, not more than 406.4

millimeters (16 inches) in outside diameter, regardless of wall

thickness, surface finish (black, galvanized, or painted), or end

finish (plain end, beveled end, threaded, or threaded and coupled).

These pipes and tubes are generally known as standard pipes and tubes

and are intended for the low pressure conveyance of water, steam,

natural gas, and other liquids and gases in plumbing and heating

systems, air conditioning units, automatic sprinkler systems, and other

related uses, and generally meet ASTM A-53 specifications. Standard

pipe may also be used for light load-bearing applications, such as for

fence tubing, and as structural pipe tubing used for framing and

support members for reconstruction or load-bearing purposes in the

construction, shipbuilding, trucking, farm equipment, and related

industries. Unfinished conduit pipe is also included in these orders.

All carbon steel pipes and tubes within the physical description

outlined above are included within the scope of these orders, except

line pipe, oil country tubular goods, boiler tubing, mechanical tubing,

pipe and tube hollows for redraws, finished scaffolding, and finished

conduit. Standard pipe that is dual or triple certified/stenciled that

enters the U.S. as line pipe of a kind used for oil or gas pipelines is

also not included in these orders.

Imports of the products covered by these orders are currently

classifiable under the following Harmonized Tariff Schedule (HTS)

subheadings: 7306.30.10.00, 7306.30.50.25, 7306.30.50.32,

7306.30.50.40, 7306.30.50.55, 7306.30.50.85, and 7306.30.50.90.

Although the HTS subheadings are provided for convenience and

customs purposes, our written description of the scope of these

proceedings is dispositive.

Product Comparisons

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

circular welded non-alloy steel pipe and tube product produced by the

respondents, covered by the descriptions in the ``Scope of the Review''

section of this notice, supra, and sold in the home market during the

POR, to be a foreign like product for purposes of determining

appropriate product comparisons to US sales of circular welded non-

alloy steel pipe and tube. Where there were no sales of identical

merchandise in the home market to compare to US sales, we compared US

sales to the next most similar foreign like product on the basis of the

characteristics listed in the Department's December 23, 1998

questionnaire, or to constructed value (CV).

Normal Value Comparisons

To determine whether sales of circular welded non-alloy steel pipe

from Mexico to the United States were made at less than fair value, we

compared the export price (EP) or constructed export price (CEP) to the

normal value (NV), as described in the ``Export Price and Constructed

Export Price'' and ``Normal Value'' sections of this notice, below. In

accordance with section 777A (d)(2) of the Act, we calculated monthly

weighted-average prices for NV and compared these to individual US

transactions.

We have used the date of invoice as the date of sale for all home

market sales made by both TUNA and Hylsa during the POR. For US sales

made by TUNA, we have also used the date of invoice as the date of

sale. For US sales made by Hylsa, we have used the reported purchase

order date as the date of sale because it is the most accurate on the

record. See Analysis Memorandum for Hylsa, dated November 30, 1999.

Export Price and Constructed Export Price

Hylsa

We calculated EP in accordance with section 772(a) of the Act,

because the subject merchandise was sold directly to the first

unaffiliated purchaser in the United States prior to importation. We

based EP on packed prices to unaffiliated customers in the United

States. Where appropriate, we made deductions from the starting price

for foreign inland freight, foreign brokerage and handling, U.S.

brokerage and handling and U.S. customs duties.

Tuna

For TUNA, we analyzed sales made to the United States, and

determined that there are both EP and CEP sales in the United States

during the POR. For certain sales to the United States, we calculated

CEP in accordance with section 772(b) of the Act, because the subject

merchandise was first sold by TUNA's U.S. affiliate (Acerotex) after

having been imported into the United States. We based CEP on packed

prices to unaffiliated purchasers in the United States. Where

appropriate, we made deductions from the starting price for foreign

inland freight, foreign brokerage and handling, U.S. brokerage and

handling, and U.S. customs duties. In accordance with section 772(d)(1)

of the Act, we deducted those selling expenses associated with economic

activities occurring in the United States, including direct selling

expenses (credit costs, warranty expenses), and indirect selling

expenses. For CEP sales, we also made an adjustment for profit in

accordance with section 772(d)(3) of the Act.

We determined that the remaining sales were EP sales based on the

fact that TUNA sold the subject merchandise directly to the

unaffiliated U.S. customer prior to importation, and CEP treatment was

not otherwise indicated. We calculated EP in accordance with section

772(a) of the Act. We based EP on packed prices to unaffiliated

customers in the United States. Where appropriate, we made deductions

from the starting price for foreign inland freight, foreign brokerage

and handling, U.S. brokerage and handling and U.S. customs duties.

Normal Value

Based on a comparison of the aggregate quantity of home-market and

U.S. sales, we determined that the quantity of the foreign like product

sold in the exporting country was sufficient to permit a proper

comparison with the sales of the subject merchandise to the United

States, pursuant to section 773(a) of the Act. Therefore, in accordance

with section 773(a)(1)(B)(i) of the Act, we based NV on the price at

which the foreign like product was first sold for consumption in the

home market.

Sales to affiliated customers for consumption in the home market

which were determined not to be at arm's-length were excluded from our

analysis. To test whether these sales were made at arm's-length, we

compared the prices of sales of comparison products to affiliated and

unaffiliated customers, net of all movement charges, direct selling

expenses, discounts, and packing. Pursuant to 19 CFR 351.403 and in

accordance with our practice, where the prices to the affiliated party

were on average less than 99.5 percent of the prices to unaffiliated

parties, we determined that the sales made to the affiliated party were

not at arm's-length. See Notice of Final Results and Partial Recission

of Antidumping Duty Administrative Review: Roller Chain, Other Than

Bicycle, From Japan, 62 FR. 60472 (November 10, 1997); 62 FR 27295,

27355-56 (May 19, 1997). We

[[Page 68997]]

included those sales that passed the arm's-length test in our analysis

(see 19 CFR 351.403; 62 FR at 27355-56). For TUNA, we used sales from

TUNA directly to unaffiliated customers, and from affiliated resellers

to the first unaffiliated customer, as the basis for determining normal

value. See TUNA Analysis Memorandum, dated November 30, 1999. For

Hylsa, we excluded from our analysis downstream sales made by

affiliated customers because of their small volumes. See Memorandum to

the File, dated October 20, 1999.

Where appropriate, in accordance with section 773(a)(6)(A) of the

Act, we deducted credit expenses, warranties, advertising, insurance,

packing, and certain discounts, and we added interest revenue.

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

allocated to 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 the stages of marketing and

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

functions substantiates or invalidates the claimed LOTs.

Hylsa

For sales made by Hylsa during the POR, the record shows that sales

in both markets were made at the same LOT. In the U.S. market, Hylsa

sold to unaffiliated industrial end-users and distributors. In the home

market, Hylsa sold to unaffiliated industrial end-users, distributors,

and employees. Based on Hylsa's questionnaire responses, selling

functions performed for customers in either market generally did not

vary according to customer category or channel of distribution.

Accordingly, we preliminary find that all sales in the home market and

the U.S. market were made at the same level of trade, and we are not

making a LOT adjustment.

TUNA

Our analysis of the data submitted by TUNA indicates that sales to

the United States were made through two channels of distribution, and

sales in the home market were through multiple channels of

distribution. Furthermore, there were differences in selling functions

between certain types of customers in both markets, depending upon the

channel of distribution. All sales in the home market to unaffiliated

parties were to end users. Conversely, sales in the United States were

to distributors.

An examination of the selling functions in both markets indicates

that TUNA performs a ``core'' of selling functions in the home market

for all customers. These functions include inventory maintenance,

salesman visits to customers, and technical services. Depending upon

the channel of distribution, TUNA also performs additional selling

functions for certain customers in the home market. TUNA provides just

in time (JIT), and other specialized services to one channel of trade,

which are not provided to any other home market customers. In a

separate channel of trade, TUNA performs additional selling functions,

related principally to affiliated resellers, which allows the resellers

to perform selling functions for their unaffiliated customers. The

selling functions provided by TUNA in this channel of trade are unique.

Based on our analysis, we preliminarily determine that there are

three levels of trade in the home market. Those sales receiving JIT and

other specialized services constitute one level of trade. Downstream

sales through affiliates receive a unique set of selling functions and

thus constitute a separate level of trade. All other sales in the home

market constitute a third level of trade, in which there exists only

the ``core'' selling functions.

In the United States, we preliminarily determine that there are two

separate levels of trade. These correspond to EP and CEP sales,

respectively. For CEP sales, we found minimal selling functions

performed by TUNA for its U.S. affiliate. Accordingly, the CEP is at a

different LOT than any of those HM LOTs. For EP sales, we found that

TUNA performs certain selling functions consistent with the ``core''

functions performed for sales in the home market. Therefore, the

selling functions are the same, and we preliminarily determine that EP

sales in the U.S. are at the same level of trade as those sales in the

home market which do not receive JIT services, or services provided on

downstream sales (i.e. the third level of trade in the home market).

Section 773(a)(7)(A) of the Act directs us to make an adjustment

for differences in LOTs where such differences affect price

comparability. For CEP, because there is insufficient data to perform

an analysis of the affect on price comparability, and each home market

LOT is more advanced than the CEP LOT, the Department must make a CEP

offset. Therefore, regarding those sales

[[Page 68998]]

to the United States which are classified as CEP sales, in accordance

with section 773(a)(7)(B) of the Act, a CEP offset is warranted.

As we have determined that TUNA's home market sales at the third

LOT are at the same level of trade as the EP sales in the United

States, we have made no LOT adjustment when TUNA's EP sales matched

sales at this LOT. See TUNA Analysis Memorandum, dated November 30,

1999.

Cost-of-Production Analysis

Because the Department disregarded sales below cost for both Hylsa

and TUNA in the comparison market during the last completed segment of

the proceeding, we initiated a cost of production analysis in

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

analysis as described below.

A. Calculation of COP

We calculated the COP based on the sum of Hylsa's and TUNA's cost

of materials and fabrication for the foreign like product, plus amounts

for home-market selling, general, and administrative expenses

(``SG&A''), and packing costs in accordance with section 773(b)(3) of

the Act. We relied on the submitted COPs for TUNA, except as follows.

Our analysis of the most recently submitted data by TUNA indicated that

certain home market sales were not assigned a cost. As facts available,

we assigned an average cost, by size and finish, to sales which might

match to United States sales. We will request supplemental information

on these certain home market sales and consider responsive submission

prior to the publication of the final determination.

For Hylsa, we adjusted COPs to reflect similar physical

characteristics for certain products. We subsequently weight-averaged

the reported costs by control number. See Hylsa Analysis Memorandum.

B. Test of Home-Market Prices

We used the respondents' weighted-average COPs for the period

November 1, 1997 through October 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, discounts, and rebates.

C. Results of COP Test

In accordance with section 773(b)(2)(C), where less than 20 percent

of Hylsa's and TUNA's sales of a given product were at prices less than

the COP, we do not disregard any below-cost sales of that product

because we determine that the below-cost sales were not made in

``substantial quantities.'' Where 20 percent or more of a TUNA's and

Hylsa's sales during the POR were at prices less than the COP, we

determine 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. Furthermore, because we compared prices to POR

average COPs, we determined that below-cost prices do not 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 such

below-cost sales of TUNA and Hylsa. Where all contemporaneous sales of

comparison products were disregarded, we calculated NV based on CV.

D. Calculation of CV

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

based on the sum of TUNA's and Hylsa's cost of materials, fabrication,

SG&A, U.S. packing costs, interest expenses as reported in the U.S.

sales database and 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.

Currency Conversion

For purposes of the preliminary results, we made currency

conversions in accordance with section 773A of the Act, based on the

official exchange rates in effect on the dates of the U.S. sales as

certified by the Federal Reserve Bank of New York. Section 773A(a) of

the Act directs the Department to use a daily exchange rate in order to

convert foreign currencies into U.S. dollars, unless the daily rate

involves a ``fluctuation.'' In accordance with the Department's

practice, we have determined as a general matter that a fluctuation

exists when the daily exchange rate differs from a benchmark by 2.25

percent. See, e.g., Certain Stainless Steel Wire Rods from France;

Preliminary Results of Antidumping Duty Administrative Review, 61 FR

8915, 8918 (March 6, 1998), and Policy Bulletin 96-1: Currency

Conversions, 61 FR 9434 (March 8, 1996). The benchmark is defined as

the rolling average of rates for the past 40 business days. When we

determine a fluctuation exists, we substitute the benchmark for the

daily rate.

Preliminary Results of the Review

As a result of this review, we preliminarily determine that the

following weighted-average dumping margin exists:

Circular Welded Non-Alloy Steel Pipes and Tubes

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

Weighted-

average

Producer/Manufacturer/Exporter margin

(percent)

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

TUNA......................................................... 1.92

Hylsa........................................................ 10.38

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

The Department will disclose to any party to the proceeding, within

ten days of publication of this notice, the calculations performed (19

CFR 351.224). 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 dividing the total

dumping margins calculated for the U.S. sales to the importer by the

total entered value of these sales. This rate will be used for the

assessment of antidumping duties on all entries of the subject

[[Page 68999]]

merchandise by that importer 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 circular welded-non-alloy steel pipe 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(c), 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 36.62%, 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: November 30, 1999.

Richard W. Moreland,

Acting Assistant Secretary for Import Administration.

[FR Doc. 99-31983 Filed 12-8-99; 8:45 am]

BILLING CODE 3510-DS-P