Oil Country Tubular Goods From Mexico: Final Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[A-201-817]

Oil Country Tubular Goods From Mexico: Final Results of

Antidumping Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of final results of antidumping duty administrative

review.

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SUMMARY: On September 11, 1998, the Department of Commerce (the

Department) published the preliminary results of its administrative

review of the antidumping duty order on oil country tubular goods

(``OCTG'') from Mexico covering exports of this merchandise to the

United States by certain manufacturers (Oil Country Tubular Goods from

Mexico; Preliminary Results of Administrative Review (``Mexican

OCTG''), 63 FR 48599). Based on our preliminary review of these exports

during the period August 1, 1996 through July 31, 1997, we found no

margins for either reviewed company. We invited interested parties to

comment on the preliminary results. We received comments and rebuttals

from petitioners and from respondent with respect to Tubos de Acero de

Mexico, S.A. (``TAMSA''). No comments were received from either party

with respect to the other reviewed manufacturer, Hylsa S.A. de C.V.

(``Hylsa'') . We have now completed our final results of review and

determine that the results have not changed for either respondent.

EFFECTIVE DATE: March 23, 1999.

FOR FURTHER INFORMATION CONTACT: John Drury, or Linda Ludwig,

Enforcement Group III--Office 8, Import Administration, International

Trade Administration, U.S. Department of Commerce, 14th Street and

Constitution Avenue, NW Room 7866, Washington, DC. 20230; telephone

(202) 482-0195 (Drury), or (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

[[Page 13963]]

19 CFR part 351 (62 FR 27296, May 19, 1997).

Background

The Department of Commerce 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 of Commerce published a notice

of ``Opportunity To Request Administrative Review'' of the antidumping

order for the 1996/1997 review period on August 4, 1997 (62 FR 41925).

Upon receiving requests for administrative review from two respondents,

Hylsa and TAMSA, we published a notice of initiation of the review on

September 25, 1997 (62 FR 50292).

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 March 19, 1998, the Department

extended the time limit for the preliminary results to August 31, 1998.

See Oil Country Tubular Goods from Mexico; Extension of Time Limits for

Antidumping Duty Administrative Review (63 FR 14422, March 25, 1998).

On January 11, 1999, the Department extended the time limit for the

final results until March 10, 1999. See Oil Country Tubular Goods from

Mexico; Extension of Time Limits for Antidumping Duty Administrative

Review (64 FR 3065, January 20, 1999).

Duty Absorption

On October 2, 1997, Maverick Tube Corporation, Lone Star Steel

Company, and IPSCO Tubulars, Inc. requested that the Department

determine, with respect to Hylsa, whether antidumping duties had been

absorbed during the POR. On October 23, 1997, North Star Steel Ohio

requested that the Department determine, with respect to TAMSA, whether

antidumping duties had been absorbed during the POR. Section 751(a)(4)

of the Act provides for the Department, if requested, to determine

during an administrative review initiated two or four years after the

publication of the order whether antidumping duties have been absorbed

by a foreign producer or exporter, if the subject merchandise is sold

in the United States through an affiliated importer. Because this

review was initiated two years after the publication of the order, we

have made a duty absorption determination in this segment of the

proceeding.

In this case, both TAMSA and Hylsa sold to the United States

through importers that are affiliated within the meaning of section

751(a)(4) of the Act. We determine that there is no dumping margin for

either TAMSA's sales or Hylsa's sales during the POR. Since we have

determined that there are no dumping margins for the respondents with

respect to their U.S. sales, we also determine that there is no duty

absorption with respect to those sales.

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.

The Department has determined that couplings, and coupling stock,

are not within the scope of the antidumping duty order on OCTG from

Mexico. See Letter to Interested Parties; Final Affirmative Scope

Decision, August 27, 1998.

Period of Review

The review covers the period August 1, 1996 through July 31, 1997.

The Department is conducting this review in accordance within section

751 of the Act, as amended.

Analysis of Comments Received

We invited interested parties to comment on our preliminary results

of the reviews. We received both comments and rebuttals from

petitioners and TAMSA. Because there were no comments concerning our

preliminary results with respect to Hylsa, all comments below pertain

to TAMSA. The following is a summary of comments.

Comment 1

Petitioners argue that TAMSA should not be granted a constructed

export price (``CEP'') offset, as TAMSA neither requested such an

adjustment nor provided information to the Department necessary to

analyze whether a CEP offset was warranted. Indeed, since TAMSA claimed

that its sales were at similar levels of trade, and that the sale to

the United States was an export price (``EP'') sale, TAMSA never

claimed a CEP offset. The lack of a CEP offset claim by TAMSA, and

inadequate information concerning levels of trade, according to

petitioners, precludes the Department from granting a CEP offset.

Petitioners begin by pointing out that TAMSA maintained that its

sale to the United States was an EP sale, not a CEP sale. Because of

TAMSA's steadfast insistence that its sale was not a CEP sale, and its

alleged refusal to provide any information which might be used in

conjunction with a CEP offset, petitioners maintain that TAMSA is not

entitled to the offset.

Even if TAMSA is not required to request a CEP offset, petitioners

argue, TAMSA has the burden to establish an entitlement to an offset by

providing sufficient information to demonstrate that sales to the

United States and home market were at different levels of trade, that

it is not possible to make a level of trade adjustment, and that the

level of trade in the home market is more advanced than that of the

sale to the United States. Citing Small Diameter Circular Seamless

Carbon and Alloy Steel Standard, Line, and Pressure Pipe from Germany

(``German Pipe'') (63 FR 13217, March 18, 1998), petitioners assert

that TAMSA alone was responsible for providing this information and

failed to do so. Petitioners note that, in its initial response, TAMSA

did not provide any information about different selling functions in

the home market and the United States market which the Department could

use in making a level of trade determination. Despite repeated requests

by the Department in supplemental questionnaires, petitioners contend,

TAMSA provided

[[Page 13964]]

little or no new information regarding the various selling functions in

both markets. Instead, petitioners state, TAMSA continued to maintain

that sales in both the home market and United States markets were at

the same level of trade, and at no point requested a level of trade

adjustment. Despite the fact that TAMSA provided just-in-time (``JIT'')

services to PEMEX, its largest customer, and did not provide them to

its United States customers, petitioners note that TAMSA never took the

position that JIT services were sufficient to create a difference in

levels of trade.

Petitioners state that the respondent has the burden of proof to

demonstrate that a level of trade adjustment based on price differences

is not possible. Petitioners state that TAMSA provided no information

to answer this question, and thus the Department's decision in the

preliminary results to grant a CEP offset is incorrect. Petitioners

believe that the Department did not explain its basis for finding that

non-PEMEX sales in the home market were at a different level of trade

from the sale to the United States, and that a level of trade

adjustment based on price differences is not possible. For all of these

reasons, petitioners believe that the Department should not grant a CEP

offset to TAMSA.

TAMSA counters that the Department's decision to grant a CEP offset

was proper if the Department maintains that the sale by TAMSA to the

United States was a CEP sale. TAMSA asserts that it did fully cooperate

with the Department and provided the necessary information.

Furthermore, TAMSA states that it did, in fact, advise the Department

that it had provided sufficient information for a CEP offset, in

comments which were provided prior to verification. This information,

according to TAMSA, includes a detailed explanation of the various

selling functions for each channel of distribution in the home market,

as well as for the sale to the United States. TAMSA states that if it

meets its burden to provide sufficient information for the Department

to determine if there is a more advanced level of trade in the home

market, yet provides insufficient information for a level of trade

adjustment, then it has nevertheless met the conditions for a CEP

offset.

TAMSA states that it has, in fact, met this burden. Concerning the

level of trade question, TAMSA states that the information provided to

the Department shows that it sold at different levels of trade in the

home market and the United States, and that the home market level of

trade was more advanced. TAMSA states that, although it initially

classified all customers as ``end users,'' it subsequently provided

detailed information regarding channels of distribution, selling

functions, and other information which clearly establishes different

channels of distribution and different selling functions with respect

to the two markets. TAMSA further notes that the Department verified

the services provided by TAMSA to its customers, including the

provision of JIT services in the home market and services provided by

Siderca Corp. in the United States. According to TAMSA, this

information, which was also verified, is sufficient to establish that

the U.S. sale was made at a different level of trade than TAMSA's home

market sales.

Regarding the question of whether there is enough information to

make a level of trade adjustment, and whether TAMSA cooperated

sufficiently in providing such information, TAMSA asserts that the

Department found no home market level of trade equal to the level of

trade of the United States sale. Consequently, a level of trade

adjustment was not feasible.

Department's Position

The question of whether a respondent is entitled to a CEP offset is

predicated on a certain pattern of facts. First, there must be a

decision that sales to the United States are CEP sales. Second, there

must be a determination that there are different levels of trade

between the home market and United States, that the home market level

of trade is more advanced, and that it is not possible to quantify the

price differences related to those sales and different levels of trade

to make a level of trade adjustment. Only after these conditions are

met can a CEP offset be made.

The Department presented a detailed explanation of the process for

determining levels of trade and their proper treatment in the

preliminary results of this review. See Mexican OCTG, 63 FR 48699. To

summarize, the Department examines and compares the distribution

systems, including the selling functions, classes of customers, and

selling expenses, in the two markets. Further, unless the Department

finds that there are substantial differences in selling functions, it

will not determine that there are different levels of trade.

The Department's use of this test is well documented. In Certain

Cold-Rolled Carbon Steel Flat Products from the Netherlands (62 FR

18476, April 15, 1997), the Department stated that:

[t]he existence of different classes of customers, as well as

different functions performed by such customers, is not sufficient

to establish a difference in the levels of trade. Accordingly, we

consider the class of customer as one factor, along with the

producer/exporter's selling functions and the selling expenses

associated with these functions, in determining the stage of

marketing, i.e., the level of trade associated with the sales in

question.''

As noted in the preliminary results, we compared sales to

unaffiliated customers in the home market to the constructed sales to

the importer in the United States. This is consistent with the

Department's previous practice. See Id. At 18480. In this instance,

TAMSA's home market sales to unaffiliated parties are compared to the

sale to Siderca Corp., TAMSA's U.S. affiliate. All sales in the home

market are to end users, i.e. manufacturers which consume the final

product. The sale to Siderca Corp., by contrast, is similar to a sale

to a distributor. Siderca Corp. does not consume the product, but

rather acts as a reseller. Therefore, the sales in the home market and

the U.S. sale appear to be made at different points in the chain of

distribution.

With respect to the selling functions, TAMSA provided sufficient

information for the Department to compare selling functions in the two

markets. Information provided by TAMSA, and verified by the Department,

demonstrates that TAMSA's selling functions for home market sales are

different than those associated with TAMSA's sale to Siderca Corp.

First, TAMSA provides JIT services to the vast majority of its home

market customers. The Department verified the extent and the nature of

the expenses associated with JIT services. Also, as TAMSA stated in

submitting its chart of selling functions, TAMSA provides customer

visits in the home market. Neither of these services was provided in

connection with the U.S. sale to Siderca Corp. Services provided by

Siderca Corp. to end users in the United States are not relevant to

this analysis, because the appropriate comparison for LOT purposes is

between the ``starting price'' sale to the first unaffiliated customer

in the home market, and the constructed export price sale (i.e. the

sale to Siderca Corp.) in the United States. See Sec. 351.412(c) of the

Department's regulations. Based on information provided by TAMSA and on

the Department's verification, the Department's analysis of the selling

functions provided by TAMSA in both the home and U.S. markets indicates

that there are selling functions provided in sales to the home market

which are not provided in the U.S. market and that

[[Page 13965]]

all home market sales are made at a single level of trade.

Based on the facts of the case, the Department finds that sales by

TAMSA in the home market are at a different level of trade than the

sale to the United States. Sales in the home market are to end-users,

while the sale to Siderca Corp. is a sale to a distributor.

Furthermore, the provision of JIT services to the vast majority of home

market customers, as well as visits to customers, demonstrates that

TAMSA's sales in the home market and its sale to Siderca Corp. are

characterized by different selling functions. Therefore, the facts on

the record indicate that TAMSA's sales were made at different levels of

trade.

Next, the Department must determine if the home market level of

trade is more advanced than the U.S. level of trade. The Department's

analysis of the different selling functions indicates that the home

market sales are indeed made at a more advanced level of trade. The

home market sales to end users, who are further down the chain of

distribution than distributors such as Siderca Corp., and the selling

functions provided in the home market, especially JIT services,

constitute a far greater level of service and expense for TAMSA than

the services provided to Siderca Corp. in connection with the sale to

the United States.

Finally, the information on the record indicates that it is not

possible for the Department to make a level of trade adjustment.

Specifically, because there are no home market sales at the same level

of trade as the U.S. sale, it is not possible to quantify the extent to

which price differences are due to the level of trade differences.

Given that the home market sales are at a more advanced level of

trade, and that it is not possible to make a level of trade adjustment,

section 773(a)(7)(B) of the Act directs the Department to make a CEP

offset.

The statutory provision is not limited to situations in which a

respondent requests such an offset. The record indicates that TAMSA

provided sufficient information for the Department to conduct a level

of trade analysis and to determine that a CEP offset was appropriate.

Thus, petitioners' reliance on the German Pipe case is off point. In

that case, the respondent did not provide sufficient information either

before or during verification for the Department to conduct a level of

trade analysis. In the instant case, in contrast, TAMSA provided

information prior to verification, and Department officials were able

to verify the accuracy of the information during verification.

Thus, based on the facts in the case, we agree with respondent that

a CEP offset is warranted if the Department continues to classify the

sale to the United States as a CEP sale.

The question of whether the sale is classified properly as a CEP

sale is addressed in the next comment.

Comment 2

TAMSA contends that the Department erred in classifying TAMSA's

sale to the United States as a CEP sale. Instead, TAMSA maintains that

the Department should classify TAMSA's United States sale as an EP

sale.

In support of its argument, TAMSA begins by restating the three-

prong test that the Department undertakes to determine if sales made

through a U.S. affiliate should be classified as CEP sales or

``indirect'' EP sales. The test examines three criteria: (1) Whether

merchandise sold to the United States entered into the physical

inventory of the affiliate or was shipped directly to the United States

customer; (2) whether a direct shipment to the unaffiliated customer

was the customary channel of trade, and; (3) whether the affiliate

acted only as a processor of documentation and as a communications link

between the unaffiliated customer and the producer or exporter. Where

one or more of these conditions is not met, the Department treats sales

through a U.S. affiliate as CEP sales. Noting that the Department

relied on the third prong of the test in rejecting its claim that the

sale was an EP sale, TAMSA lists the reasons cited by the Department

for its determination that the role of its affiliate, Siderca Corp.,

was more than ancillary, and argues that Siderca Corp. in fact served

only as a document processor and a communications link.

TAMSA denies any suggestion that Siderca Corp. solicited the sale,

or in any way negotiated the price of the sale. TAMSA states that the

record shows clearly that TAMSA, and not Siderca Corp., set the terms

and price for the sale in question. TAMSA cites a number of instances

in which it contends that the Department has treated sales as EP sales

when the United States affiliate has no authority to set prices or is

not in a position to negotiate prices, and states that the fact pattern

in this case is consistent with those cases. See Notice of Final

Determination of Sales at Less Than Fair Value: Beryllium Metal and

High Beryllium Alloys from the Republic of Kazakhstan (``Beryllium from

Kazakhstan''), 62 FR 2648 (January 17, 1997); 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 FR 12725 (March 16,

1998), Notice of Final Determination of Sales at Less Than Fair Value:

Stainless Steel Wire Rod from Korea (``Wire Rod from Korea''), 63 FR

40404 (July 29, 1998); and U.S. Steel Group v. United States, 15 F.

Supp. 2d 892 (CIT 1998). Regarding the sales agreement between TAMSA

and Siderca Corp., which confers exclusive marketing and sales agency

powers on Siderca Corp. with respect to TAMSA products, TAMSA argues

that the antidumping duty order rendered this agreement moot with

respect to any sales to the United States of subject merchandise.

Furthermore, TAMSA states that Siderca Corp. merely received a

request from the U.S. customer, and passed it on to TAMSA in Mexico.

TAMSA depicts the role of Siderca Corp. in finalizing the sale as the

passive role of a mere conduit for information passing between the U.S.

customer and TAMSA during the initial sales process. TAMSA states that

Siderca Corp. did not match the order to TAMSA's inventory, did not

find a buyer for the merchandise, and did not finalize the sale.

Once the sale terms were finalized, TAMSA asserts, the functions

performed by Siderca Corp. were all ``ancillary'' and therefore should

not weigh in the decision to treat this sale as a CEP sale. These

included paying for certain charges, such as brokerage and insurance,

serving as the importer of record, accepting payment, and other such

services.

TAMSA concludes by stating that the Department must go beyond a

listing of activities and must analyze the various activities involved

with the sale. TAMSA contends that the record, properly analyzed, shows

that this sale should be treated as an EP sale.

Petitioners respond by stating that the Department's normal

practice is to consider a sale made through a U.S. affiliate to be a

CEP sale unless the record indicates that all three prongs are met.

Petitioners state that Siderca Corp. had more than ancillary or

incidental involvement in the U.S. sale and that these activities were

sufficient to warrant the Department's treatment of the sale as a CEP

sale. Petitioners rely upon Certain Cold-Rolled and Corrosion-Resistant

Carbon Steel Flat Products from Korea, Final Results of Antidumping

Duty Administrative Review, (``Korean Steel''), 63 FR 13170 (March 18,

1998) and Stainless Steel Wire Rod from Spain, Final Determination of

Sales at Less Than Fair Value, (``Wire Rod from Spain''), 63

[[Page 13966]]

FR 40391 (July 29, 1998) in which the Department treated the sales at

issue as CEP sales.

Petitioners note in particular that the sales agency agreement

between TAMSA and Siderca Corp. names Siderca Corp. as TAMSA's

exclusive selling agent in the United States market, and further points

out that the terms of the sale and the selling activities performed by

Siderca Corp. appear to follow the terms of this agreement.

Furthermore, petitioners note that the agreement was extended, without

amendment, after the antidumping duty order went into effect.

Petitioners further assert that the contacts between Siderca Corp.

and the U.S. customer were consistent with the functions described in

the agreement. For example, according to petitioners, the U.S. customer

contacted Siderca Corp., not TAMSA, regarding this sale, and Siderca

Corp. had exclusive contact with the customer throughout the sales

process. Additionally, Siderca Corp. had longstanding and frequent

contacts with the customer and worked regularly with it to meet its

needs as they arose for a variety of products and services. These

contacts and activities, petitioners believe, indicate that Siderca

Corp.'s efforts brought about the sale of TAMSA merchandise in the

United States.

While not disputing that TAMSA may have set the price for the sale,

petitioners reiterate that the selling agreement between TAMSA and

Siderca Corp. grants Siderca Corp. certain rights in negotiating and

setting prices as part of its work in marketing TAMSA products.

Petitioners state that the Department should discount other assertions

on the record regarding TAMSA's role in setting the price, and instead

should concentrate on the selling agreement.

As for the other functions carried out with respect to this sale,

petitioners believe that these activities, taken as a whole, indicate

more than ancillary involvement by Siderca Corp. Petitioners urge the

Department to consider the range of services and activities in the

aggregate, rather than line by line, in making its determination.

Petitioners also advise the Department to examine the differences in

indirect selling expenses incurred by Siderca Corp. and TAMSA when

making its determination on this question.

Finally, petitioners state that it is also doubtful that TAMSA

passed the second prong of the CEP test. Petitoners note that, in the

original investigation, the merchandise sold to the U.S. was produced

to order and the U.S. sales were made through a different U.S.

affiliate. Comparing the fact pattern in this review to the one from

the original investigation, petitioners find the two to be different

and conclude that the current United States sale does not represent the

customary commercial channel between the parties involved in the sale.

According to petitioners, this sale therefore failed two of the three

prongs of the ``indirect EP sale'' test, and the Department should

therefore treat this sale as a CEP sale.

Department's Position

Section 772(b) of the Act defines CEP as ``the price at which the

subject merchandise is first sold (or agreed to be sold) in the United

States before or after the date of importation by or for the account of

the producer or exporter of such merchandise or by a seller affiliated

with the producer or exporter, to a purchaser not affiliated with the

producer or exporter, as adjusted.'' Section 772(a) of the Act defines

EP as ``the price at which the subject merchandise is first sold (or

agreed to be sold) before the date of importation by the producer or

exporter of the subject merchandise outside of the United States to an

unaffiliated purchaser in the United States, or to an unaffiliated

purchaser for exportation to the United States, as adjusted.'' When

sales are made prior to importation through an affiliated U.S. sales

agent to an unaffiliated customer in the United States, our practice is

to examine several criteria in order to determine whether or not the

sales are ``indirect'' EP sales. Those criteria are: (1) Whether the

merchandise was shipped directly from the manufacturer to the

unaffiliated U.S. customer; (2) whether this was the customary

commercial channel between the parties involved; and (3) whether the

function of the U.S. selling agent was limited to that of a ``processor

of sales-related documentation'' and a ``communications link'' between

the exporter and the unaffiliated U.S. buyer. See Canadian Steel 63 FR

at 12738. Where all three criteria are met, the Department has regarded

the routine selling functions of the exporter as merely having been

relocated geographically from the country of exportation to the United

States where the sales agent performs them, and has determined the

sales to be EP sales. Where one or more of these conditions is not met,

the Department has classified the sales in question as CEP sales.

In attempting to determine whether a sale should be treated as EP

or CEP, the Department looks at the overall role of an affiliate in the

sales process. Essentially, the Department wishes to determine whether

the affiliate is substantially involved in the sales process. While

each of the three prongs addresses this question to some extent, the

third prong of the test is the most important with respect to resolving

the question. After carefully examining the evidence, the Department

believes that the fact pattern indicates clearly that the affiliate,

Siderca Corp., played the leading role in the U.S. sale made during

this administrative review and was substantially involved in the sales

process.

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, and performed functions for which it is responsible 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, contrary to TAMSA's

claims, 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. Siderca Corp.

[[Page 13967]]

was aware of the existence of the merchandise from a canceled sale that

it had previously arranged, and upon receiving the inquiry forwarded it

to TAMSA for approval. 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.

The cases cited by both TAMSA and petitioners, when compared with

the fact pattern of the case, reinforce the conclusion that this sale

should be classified as a CEP sale. In Wire Rod from Korea, the

Department treated the sales as EP sales because the Department

``(c)onfirmed Changwon's assertions that POSAM (the U.S. affiliate) is

not in a position to negotiate, confirm, or reject prices without

approval from Changwon'' and ``POSAM * * * did not solicit business on

behalf of Changwon'' and ``Changwon itself contacted its potential U.S.

customers'' (63 FR at 40418-19). In this instance, in contrast, Siderca

Corp. had the authority to negotiate, confirm, or reject prices through

its selling agreement. Additionally, the Department determined at the

Siderca Corp. verification that Siderca Corp. maintains a sales staff

which is in active contact with U.S. customers, whereas TAMSA had no

contact with the potential U.S. customers.

In Beryllium from Kazakhstan, the Department treated the sales as

EP because ``verification findings confirmed the limits on BMI's (the

U.S. affiliate) authority to finalize the sales and that BMI is acting

solely as a processor of documentation and communications link'' (62 FR

at 2649). In the instant case, in contrast, the verification findings

indicate that Siderca Corp.'s authority is not limited, because of the

existence of the selling agreement.

As for the Canadian Steel case relied upon by the respondent, the

U.S. affiliate whose sales were deemed to be EP sales in that case did

not solicit sales, negotiate contracts or prices, or provide customer

support. Siderca Corp., in contrast, regularly did all of the above on

behalf of TAMSA. Even if it did not expressly solicit this particular

sale, its function, which included negotiation with respect to this

sale, clearly exceeded the Canadian Steel definition of ancillary

functions.

Although TAMSA relied upon U.S. Steel Group v. United States, that

case actually involved CEP, not EP, sales. In that case, the Court of

International Trade (``CIT'') examined the Department's determination

in Certain Cut-to-Length Carbon Steel Plate from Germany; Final Results

of Antidumping Duty Administrative Review, 62 FR 18391 (April 15,

1997). The CIT noted that, during the review, the producer, Dillinger,

stated that it set the terms of the sale, including the final price.

The Court further noted that the Department had found that the U.S.

affiliate, Francosteel, among other things, either solicited or

responded to the initial U.S. customer contact, received the purchase

orders, negotiated the final sale with the U.S. customer using the

pricing and term guidelines provided by Dillinger, took title to the

merchandise, acted as importer of record, and invoiced the U.S.

customer. Finally, Francosteel had the flexibility to make decisions on

its own as to price. All of these factors, ``[c]ombined with all the

normal selling functions, which have not always led to CEP

classification, legitimately may be viewed as pushing this sale over

the edge into CEP rather than the EP category.'' U.S. Steel Group, 15

F. Supp. 2d at 903. A similar fact pattern exists in this case. Siderca

Corp. has the authority to make pricing decisions on its own; it made

the first contact with the customer and performed all of the selling

functions listed above.

The case cited by petitioners also support a conclusion that this

sale is best classified as a CEP sale. In Wire Rod from Spain, 63 FR at

40394, the Department treated the U.S. sales as CEP sales under a

similar fact pattern. The Department noted that the U.S. affiliate

(Acerinox) ``will contact U.S. customers that it has not dealt with for

some time. Otherwise, U.S. customers contact Acerinox to inquire about

purchasing'' Roldan's SSWR, the product made by the parent company. The

Department further stated that Acerinox ``(m)ay accept the customer's

order, if it is a small order. * * * For inquiries regarding

significant purchases, Acerinox will contact (the parent company) to

determine the sales terms' that are acceptable. After taking an order,

Acerinox transmits it to the parent company. Acerinox then coordinates

freight in the United States and collects and transfers payment to the

parent company. Based upon this fact pattern, the Department stated

that ``[t]he record shows that Acerinox was involved in every aspect of

the sales process except for arranging for shipment [of the product] to

the United States and invoicing the U.S. customers. Moreover,

Acerinox's involvement in the sales process was extensive * * *'' when

compared to that of the parent company. The Department further stated

that ``[t]he preponderance of selling functions incurred to sell

Roland's (wire rod) to the U.S. customers occurred in the United

States. Furthermore, Acerinox's role in negotiating the terms of

certain U.S. sales is not indicative of the ancillary role normally

played by a ``processor of sales-related documentation'' and a

``communication link.'' Specifically, Acerinox's authority to negotiate

and accept sales terms * * * as well as its authority to initiate

contact with U.S. customers * * * contradicts' the parent company's

claim that the U.S. affiliate's activities were ancillary. Thus, the

Department classified these sales as CEP sales.

Again, the fact pattern in Wire Rod from Spain is consistent with

that found in this review. TAMSA had no direct contact with the U.S.

customer, whereas Siderca Corp., through its selling agreement, had the

authority to set the price and terms. While TAMSA had a role in setting

the price, as did the parent of Acerinox, Siderca Corp.''s contacts

with customers, its flexibility in negotiating terms of sale, and its

other sales-related activities, indicate that the sale is appropriately

classified as CEP.

Finally, in Korean Steel, 63 FR at 13177, the Department again

found that a fact pattern similar to that in this case warranted CEP

treatment of the U.S. sales. In the Korean Steel case, the Department

stated that ``(a)ll of Dongbu's U.S. sales are made through DBLA [the

U.S. affiliate], and that Dongbu's U.S. customers seldom have contact

with Dongbu. Furthermore, it is DBSA (and not Dongbu) that writes and

signs the sales contract. * * * Furthermore, we find that, in addition

to playing a key role in the sales negotiation process, DBLA played a

central role in all sales activities after the merchandise arrived in

the United States.''

Based on the facts of the case, and their similarity to previous

cases concerning the issue of whether a sale should be classified as

CEP or EP, we believe that TAMSA's sale to the United

[[Page 13968]]

States is properly classified as a CEP sale.

Comment 3

Petitioners argue that the Department should apply partial facts

available for certain selling expenses incurred in the United States.

Petitioners believe that TAMSA did not cooperate fully, or to the best

of its ability, in providing proper figures and supporting

documentation for various expenses such as brokerage.

Petitioners present a sequence of events which purport to show that

TAMSA did not cooperate to the best of its ability. Petitioners point

to the first price build-up submitted by TAMSA and assert that it

contained numerous errors and omissions. Petitioners state that,

despite requests for clarification of the expenses in the price build-

up, TAMSA did not present all of the expenses or a satisfactory

explanation until verification. During the verification in Veracruz,

petitioners state that the Department discovered previously unknown and

unreported expenses. Similarly, according to petitioners, at the

verification of Siderca Corp. in Houston, the Department discovered new

supporting documentation for the various expenses. Because neither all

expenses nor all supporting documents were provided before the two

verifications, petitioners urge the Department to use partial facts

available with regard to these expenses.

TAMSA retorts that it did, in fact, cooperate fully and to the best

of its ability. TAMSA states that, contrary to petitioners' claims, all

expenses related to the sale into the United States were reported

before verification in Veracruz. Of the three charges mentioned by

petitioners (brokerage charges, stevedoring, and wharfage), TAMSA

points out that each was reported before verification. While

acknowledging that two of the three charges were reported late or were

initially mis-reported, TAMSA attributes this delay to clerical errors

or omissions that TAMSA itself discovered and corrected prior to the

Department's first verification in Veracruz. Because the errors were

minor, and were corrected either before or at verification, TAMSA

contends that it is the Department's practice to accept such

corrections. See Notice of Final Determination of Sales at Less Than

Fair Value: Stainless Steel Wire Rod from Sweden, 63 FR 40449 (July 29,

1998); Notice of Final Determination of Sales at Less Than Fair Value:

Static Random Access Memory Semiconductors from Taiwan, 63 FR 8909

(February 23, 1998); Final Determination of Sales at Less Than Fair

Value: Certain Cut-to-Length Carbon Steel Plate from the People's

Republic of China, 62 FR 61964 (November 20, 1997).

Department's Position

We agree with respondent. While the Department generally requires

respondents to report all expenses and provide any requested supporting

documentation in accordance with established deadlines, the fact is

that TAMSA provided data on nearly all expenses in a timely manner.

TAMSA reported only one minor expense prior to the Department's

verification in Veracruz. Furthermore, the Department verified the

accuracy of the reported expenses. The additional support documentation

added to the record at the verification in Houston did not reflect a

change in the expenses reported. Although they demonstrated that

Siderca Corp. did have greater control in the price build-up than

originally claimed by TAMSA, the additional support documentation added

to the record at the verification in Houston did not reflect a change

in the expenses reported.

Finally, although TAMSA did not provide all of the supporting

documentation for all of the expenses incurred prior to the

verifications, the Department was able to supplement and verify all

relevant information during the two verifications. Therefore, we will

not make any changes with regard to these expenses.

Comment 4

Petitioners assert that the Department should deduct commissions

paid to Siderca Corp. from the United States price. Assuming that

TAMSA's United States sale is classified properly as a CEP sale,

petitioners argue that the statute calls for commissions to be deducted

from the United States Price.

Petitioners note that Siderca Corp. is entitled, under its selling

agreement with TAMSA, to receive a ``commission'' equal to a percentage

of the actual price charged to customers. If this figure is intended to

offset expenses incurred by Siderca Corp., petitioners argue, the

amount of the commission which exceeds the expenses should be deducted.

TAMSA counters that these are related party commissions and are

thus intra-company transfers. TAMSA states that the general practice of

the Department is to treat related party mark-ups in price not as

commissions, but as intra-company transfers rather than as expenses.

Since these are not sales expenses, they should not be deducted from

United States price. TAMSA cites various cases in which the Department

did not deduct commissions between affiliated parties. See Antifriction

Bearings (Other Than Tapered Roller Bearings) and Parts Thereof from

France, Germany, Italy, Japan, Romania, Singapore, Sweden, and the

United Kingdom, 63 FR 33320 (June 18, 1998); Korean Steel, 63 FR 13170.

Department's Position

We agree with respondent. The Department does not generally treat

price mark-ups between affiliates such as the ones in this case as

commissions. See U.S. Steel Group, 15 F. Supp. 2d at 903, and Floral

Trade Council v. United States, Slip-Op. 99-10 (CIT January 27, 1999).

Instead, these are intra-company transfers which the Department treats

as part of the general operating expenses of the company. Thus we

generally do not deduct them from U.S. price. Instead, in accordance

with 19 CFR 351.402(e), we deduct the actual expenses of the affiliated

importer. ``Although the statute appears to require the expense

represented by commissions to be deducted from CEP whether or not the

producer/exporter and U.S. [affiliate] are related, the statute does

not define `commissions.' '' Floral Trade Council, Slip Op. 99-10 at

10. Therefore, the Court has sustained the Department's practice of

treating commissions paid by the producer/exporter to an affiliate as

an intra-company transfer, rather than as a true commission. Id.

Petitioners cite section 771(d) of the Act (19 U.S.C. 1677a(d)) in

support of their contention that commissions should be deducted.

However, the opinion in U.S. Steel Group makes clear that, ``[i]f

expenses represented by the commissions are already accounted for by

means of a deduction for selling expenses nominally made under another

provision of 19 U.S.C.A. 1677a(d), or the expense does not truly exist,

no additional commission deduction need be made.'' 15 F. Supp. 2d at

903. Because the Department has already made adjustments for all of

TAMSA's selling expenses under 19 U.S.C. 1677a(d) related to the sale

in question, an additional adjustment for ``commission'' would

constitute double-counting. Consequently, the Department has made no

further adjustments in this regard.

Petitioners' claim that the amount of the ``commission'' that

exceeds the expenses incurred by Siderca Corp. is also already

addressed by another provision of section 772(d) of the Act (19 U.S.C.

1677a(d)), specifically the CEP profit provision, section 772(d)(3) of

the Act (19 U.S.C. 1677a(d)(3)). The

[[Page 13969]]

Court has also affirmed the Department's position that the amount by

which ``commissions'' paid to affiliates represents profit for the

affiliate receiving them. A profit amount has already been accounted

for under the CEP profit provision. Floral Trade Council, Slip Op. 99-

10 at 13.

Comment 5

Petitioners urge the Department to correct TAMSA's reported

warehousing expenses in connection with the provision of Just In Time

services to certain domestic customers. Petitioners assert that TAMSA's

methodology, which reports expenses on a monthly basis by regional

warehouse, is distortive. Petitioners cite changes in the actual

expenses per month, and state that there appears to be no correlation

between these expenses and the tonnage shipped or warehoused in that

month. In particular, there appear to be instances where costs go up

even though tonnages go down for a month. Petitioners urge the

Department to recalculate warehousing expenses for each region on a

per-ton amount for the entire period of review.

TAMSA counters that its methodology is reasonable, that it acted to

the best of its ability in providing information, and that its

reporting methodology was not unreasonably distortive. Because of the

nature of Just In Time services (i.e., rapid delivery upon order),

expenses incurred in a month usually correspond closely to tonnages

shipped and sold in that month. To relate expenses from one month to

sales in a different month, as petitioners' methodology would, is more

distortive, according to TAMSA. TAMSA further explains how lower

tonnages in a month might incur higher expenses. For example, TAMSA

could incur more customer support expenses during a month in which it

made many smaller sales than in a month in which it made a single

larger tonnage sale. TAMSA cites Tapered Roller Bearings and Parts

Thereof, Finished and Unfinished, from Japan, and Tapered Roller

Bearings, Four Inches or Less in Outside Diameter, and Components

Thereof, from Japan: Final Results of Antidumping Duty Administrative

Reviews (63 FR 63860, November 17, 1998) in support of its assertion

that the Department should accept this methodology.

Department's Position

We agree with respondent. The methodology which TAMSA used is based

on actual, verified monthly figures. By using this methodology, TAMSA

has provided the Department with a more detailed, and more accurate,

warehousing cost. Adopting the petitioners' methodology would be less

accurate, as it would spread out monthly costs over the entire period

of review. As it is generally the Department's preference to use the

most accurate and reasonable methodology possible, a warehousing

expense methodology which is based on monthly figures is preferable to

one based on annual averages.

Comment 6

Petitioners request that the Department adjust the reported home

market freight charges for inland freight from the plant to the

warehouse. Since TAMSA was unable to report the actual freight charges,

it took the price lists for freight and adjusted these using a

methodology to take into account trucks which did not ship with a full

load. Petitioners argue that this ``constructed'' freight charge is

distortive. As partial facts available, petitioners suggest using the

prices from the price lists as a surrogate for the freight costs.

TAMSA counters that its allocation methodology was reasonable. As

directed by the Department's original questionnaire, TAMSA attempted to

allocate freight costs on the basis of the unit weight of the

individual products shipped. Because it used actual price lists, as

adjusted for instances not involving full truck loads, TAMSA claims

that its methodology more closely reflects the actual prices paid for

freight.

Department's Position

We agree with respondent. While the Department prefers to have

actual freight costs, a reasonable allocation methodology that most

closely reflects the actual costs is acceptable. The Department

verified information regarding price lists and payment for freight.

Based upon this verified information, the Department believes that this

methodology most closely reflects actual costs.

Comment 7

Both petitioners and respondents request that the Department

correct certain clerical errors. Petitioners request that the

Department make an adjustment to its cost calculation methodology by

eliminating the field titled ``SEPTADJ,'' that it correct the direct

selling expenses calculation by adding CREDITU to the expense, and that

it correct the application of exchange rates to packing expenses. TAMSA

requests that the Department calculate normal value based on monthly

averages (instead of on averages for the ``90-60 window'' as it has

done in the current program), that it add BILLADJH to the cost

calculation program, that it correct a conversion error in the CEP

ratio calculation, and that it not deduct CREDITU from U.S. direct

selling expenses.

Department's Position

The Department has examined the error allegations, and has made the

changes requested by both parties. Petitioners' and TAMSA's clerical

error requests regarding direct selling expenses address the same

issue. Both parties proposed programming language to address the issue.

Because we believe that petitioners most closely follow the proper

methodology, we have adopted their suggested programming language for

the final results. Because the details of these clerical error issues

involve proprietary data, see Analysis Memorandum for Final Results,

March 8, 1999.

Final Results of the Review

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

weighted-average dumping margins exist:

Circular Welded Non-Alloy Steel Pipes and Tubes

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

Weighted-

Producer/manufacturer/exporter average

margin

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

Hylsa...................................................... 0.00

TAMSA...................................................... 0.00

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

The Department shall determine, and the Customs Service shall

assess, antidumping duties on all appropriate entries. The Department

will issue appraisement instructions directly to the Customs Service.

Furthermore, the following deposit requirements will be effective upon

publication of this notice of final results of review for all shipments

of oil country tubular goods from Mexico entered, or withdrawn from

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

provided for by section 751(a)(1) of the Act: (1) The cash deposit rate

for the reviewed company will be the rate for that firm as stated

above; (2) for previously reviewed or investigated companies not listed

above, the cash deposit rate will continue to be the company-specific

rate published for the most recent period; (3) if the exporter is not a

firm covered in this review, or the original less than fair value

(LTFV) investigation, but the manufacturer is, the cash deposit rate

will be the rate established for the most recent period for the

manufacturer of the merchandise; and (4) if neither the exporter nor

the manufacturer is a firm

[[Page 13970]]

covered in this review, the cash deposit rate will be 23.79 percent.

This is the ``all others'' rate from the LTFV investigation. These

deposit requirements, when imposed, shall remain in effect until

publication of the final results of the next administrative review.

This notice serves as a final reminder to importers of their

responsibility under 19 CFR 351.402(f) of the Department's regulations

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 notice also

serves as a reminder to parties subject to administrative protective

order (APO) of their responsibility concerning the disposition of

proprietary information disclosed under APO in accordance with 19 CFR

351.306 of the Department's regulations. Timely written notification of

return/destruction of APO materials or conversion to judicial

protective order is hereby requested. Failure to comply with the

regulations and the terms of an APO is a sanctionable violation.

This administrative review and this notice are in accordance with

section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and Sec. 351.221 of

the Department's regulations.

Dated: March 10, 1999.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 99-7100 Filed 3-22-99; 8:45 am]

BILLING CODE 3510-DS-P