Certain Forged Stainless Steel Flanges From India; Preliminary Results and Partial Rescission of Antidumping Duty Administrative Review

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

ACTION:

Notice of Preliminary Results and Partial Rescission of Antidumping Duty Administrative Review.

SUMMARY:

The Department of Commerce (the Department) is conducting an administrative review of the antidumping duty order on certain forged stainless steel flanges (stainless steel flanges) from India (A-533-809) manufactured by Isibars Ltd. (Isibars), Panchmahal Steel Ltd. (Panchmahal), Patheja Forgings and Auto Parts Ltd. (Patheja), and Viraj Forgings Ltd. (Viraj). The period of review (POR) covers the period February 1, 2000, through January 31, 2001. We preliminarily determine that sales of stainless steel flanges have been made below the normal value (NV) for some of the respondents. In addition, we have preliminarily determined to rescind the review with respect to Echjay Forgings Ltd. (Echjay) because it had no shipments of subject merchandise during the period of review. If these preliminary results are adopted in our final results of administrative review, we will instruct the U.S. Customs Service to assess antidumping duties based on the difference between United States price and the NV. Interested parties are invited to comment on these preliminary results. Parties who submit argument in these proceedings are requested to submit with the argument 1) a statement of the issues and 2) a brief summary of the argument.

EFFECTIVE DATE:

March 7, 2002.

FOR FURTHER INFORMATION CONTACT:

Thomas Killiam, Mike Heaney, or Robert James, AD/CVD Enforcement, Group III, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C. 20230, telephone: (202) 482-5222, (202) 482-4475, or (202) 482-0649, respectively.

APPLICABLE STATUTE AND REGULATIONS:

Unless otherwise indicated, all citations to the 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 to 19 CFR Part 351 (April 1, 2001).

SUPPLEMENTARY INFORMATION:

Background

On February 9, 1994, the Department published the antidumping duty order on stainless steel flanges from India (59 FR 5994). On February 14, 2001, the Department published the notice of “Opportunity to Request Administrative Review” for this order covering the period February 1, 2000 through January 31, 2001 ( 66 FR 10269). In accordance with 19 CFR 351.213(b)(2), on February 28, 2001, Isibars, Panchmahal and Viraj requested a review, and the petitioners, under 19 CFR 351.213(b)(1), requested a review of Echjay, Isibars, Panchmahal, Patheja and Viraj. The petitioners are Gerlin Inc., Ideal Forging Corporation, and Maas Flange Corporation. On March 22, 2001, the Department published in the Federal Register a notice of initiation of this antidumping duty administrative review (66 FR 16037).

On July 5, 2001, we extended the time limit for the preliminary results of this administrative review to February 28, 2002 (66 FR 35411).

Partial Rescission

On April 4, 2001, Echjay informed the Department that it had no shipments of subject merchandise to the United States during the period of review. The Department conducted a query of U.S. Customs Service data on entries of stainless steel flanges from India made during the POR, and confirmed that Echjay made no entries during the review period. Therefore, we preliminarily determine to rescind the review with respect to Echjay.

Scope of the Review

The products under review are certain forged stainless steel flanges, both finished and not finished, generally manufactured to specification ASTM A-182, and made in alloys such as 304, 304L, 316, and 316L. The scope includes five general types of flanges. They are weld-neck, used for butt-weld line connection; threaded, used for threaded line connections; slip-on and lap joint, used with stub-ends/butt-weld line connections; socket weld, used to fit pipe into a machined recession; and blind, used to seal off a line. The sizes of the flanges within the scope range generally from one to six inches; however, all sizes of the above-described merchandise are included in the scope. Specifically excluded from the scope of this order are cast stainless steel flanges. Cast stainless steel flanges generally are manufactured to specification ASTM A-351. The flanges subject to this order are currently classifiable under subheadings 7307.21.1000 and 7307.21.5000 of the Harmonized Tariff Schedule (HTS). Although the HTS subheadings are provided for convenience and customs purposes, the written description of the merchandise under review is dispositive of whether or not the merchandise is covered by the review.

Period of Review

The POR is February 1, 2000, through January 31, 2001.

Use of Facts Available

Section 776(a)(2) of the Act provides that, “if an interested party or any other person--(A) withholds information that has been requested by the administering authority; (B) fails to provide such information by the deadlines for the submission of the information or in the form and manner requested, subject to subsections (c)(1) and (e) of section 782; (C) significantly impedes a proceeding under this title; or (D) provides such information but the information cannot be verified as provided in section 782(i), the administering authority...shall, subject to section 782(d), use the facts otherwise available in reaching the applicable determination under this title.”

In addition, section 776(b) of the Act provides that, if the Department finds that an interested party “has failed to cooperate by not acting to the best of its ability to comply with a request for information,” the Department may use information that is adverse to the interests of the party as the facts otherwise available. Adverse inferences are appropriate “to ensure that the party does not obtain a more favorable result by failing to cooperate than if it had cooperated fully.” See Statement of Administrative Action (SAA) accompanying the URAA, H.R. Doc. No. 316, 103d Cong. 2nd Sess. (1994), at 870. Furthermore, “an affirmative finding of bad faith on the part of the respondent is not required before the Department may make an adverse inference.” See Antidumping Duties, Countervailing Duties; Final Rule, 62 FR 27340 (May 17, 1997). The statute notes, in addition, that in selecting from among the facts available the Department may, subject to the corroboration requirements of section 776(c), rely upon information drawn from the petition, a final determination in the investigation, any previous administrative review conducted under section 751 (or section 753 for countervailing duty cases), or any other information on the record.

Section 776(c) provides that, when the Department relies on secondary information rather than on information obtained in the course of a investigation or review, the Department shall, to the extent practicable, corroborate that information from independent sources that are reasonably at its disposal. The SAA states that the independent sources may include published price lists, official import statistics and customs data, and information obtained from interested parties during the particular investigation or review. See SAA at 870. The SAA clarifies that “corroborate” means that the Department will satisfy itself that the secondary information to be used has probative value. Id. As noted in 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; Preliminary Results of Antidumping Duty Administrative Reviews and Partial Termination of Administrative Reviews, 61 FR 57391, 57392 (November 6, 1996), to corroborate secondary information, the Department will, to the extent practicable, examine the reliability and relevance of the information used.

Patheja failed to respond to our May 28, 2001 antidumping questionnaire, and has provided no probative information for this review. Panchmahal failed to respond to our July 11, 2001 request for supplemental information concerning its section A, B, and C responses to our antidumping questionnaire, and failed to respond to our July 30, 2001 request for cost of production/constructed value (COP/CV) information. Patheja's failure to respond to our antidumping questionnaire is a failure to provide requested information as defined by section 776(a)(2)(B) of the Act. Panchmahal's failure to provide COP/CV information as well as Panchmahal's failure to provide a complete response to sections A, B, and C of our antidumping questionnaire is also a failure to provide requested information as defined by section 776(a)(2)(B) of the Act. Additionally, both of these failures to provide requested information have significantly impeded this proceeding, as defined by section 776(a)(2)(C) of the Act. Moreover, as Patheja and Panchmahal have supplied no information or explanation of why they did not respond to our questionnaire and supplemental questionnaire respectively, sections 782(c)(1), (d) and (e) of the Act are inapplicable. Accordingly, we preliminarily determine that the use of facts available under section 776(a) of the Act is warranted.

Patheja never attempted to respond to our questionnaire or to explain why it could not respond. Panchmahal made an initial response, but thereafter, made no attempt to respond to our supplemental questionnaire. Moreover, Panchmahal provided no explanation as to why it could not respond. The lack of attempt to cooperate or even to offer an explanation for the failure to do so supports our conclusion that the two firms did not cooperate to the best of their ability. As noted above, Section 776(b) of the Act provides that if the Department finds that an interested party has failed to cooperate by not acting to the best of its ability to comply with the Department's requests for information, the Department may use an inference that is adverse to the interests of that party in selecting from among the facts available, which includes information derived from the petition. See SAA at 829-831 and 870 (1994).

Because we were unable to calculate margins for these respondents, we have assigned them the highest margin from any segment of this proceeding, in accordance with our practice. See e.g., Certain Cased Pencils from the People's Republic of China; Preliminary Results and Rescission In Part of Antidumping Duty Administrative Review, 66 FR 1638, 1640 (January 9, 2001). The highest margin assigned for flanges from India is 210 percent. See Amended Final Determination and Antidumping Duty Order; Certain Forged Stainless Steel Flanges from India, 59 FR 5994 (February 9, 1994) (the Order). This margin was based on information in the petition.

Section 776(c) of the Act provides that when the Department relies on secondary information (such as that in the petition) in using the facts otherwise available, it must, to the extent practicable, corroborate that information from independent sources that are reasonably at its disposal. The SAA clarifies that “corroborate” means that the Department will satisfy itself that the secondary information to be used has probative value (see SAA at 870). The SAA also states that independent sources used to corroborate such evidence may include, for example, published price lists, official import statistics and U.S. Customs Service data, and information obtained from interested parties during the particular investigation (see SAA at 870). Thus, to corroborate secondary information, the Department will, to the extent practicable, examine the reliability and relevance of the information used.

To assess the reliability of the petition margin, in accordance with section 776(c) of the Act, to the extent practicable, we examined the key elements of the calculations of export price and normal value upon which the petitioners based their margins for the petition. The U.S. prices in the petition were based on quotes to U.S. customers, most of which were obtained through market research. See Petition for the Imposition of Antidumping Duties, December 29, 1993. We were able to corroborate the U.S. prices in the petition by comparing these prices to publicly available information based on IM-145 import statistics. See Memorandum from Thomas Killiam, Case Analyst to the File, Corroboration of Petition Rate for Use as Facts Available, January 10, 2002.

The normal values in the petition were based on actual price quotations obtained through market research. The Department did not receive any useful information from Patheja, and we were unable to verify the partial information submitted by Panchmahal prior to its withdrawal from participation in the review. The Department is not aware of other independent sources of information that would enable it to corroborate the margin calculations in the petition further. We note that four Indian manufacturers currently have a 210 percent margin under this order.

The implementing regulation for section 776 of the Act, codified at 19 CFR 351.308(d), states, “(t)he fact that corroboration may not be practicable in a given circumstance will not prevent the Secretary from applying an adverse inference as appropriate and using the secondary information in question.” Additionally, the SAA at 870 states specifically that, where “corroboration may not be practicable in a given circumstance,” the Department may nevertheless apply an adverse inference. The SAA at 869 emphasizes that the Department need not prove that the facts available are the best alternative information. Therefore, based on our efforts, described above, to corroborate information contained in the petition and in accordance with 776(c) of the Act, which discusses facts available and corroboration, we consider the margins in the petition to be corroborated to the extent practicable for purposes of this preliminary determination (see Certain Cut-to-Length Carbon Steel Plate from Mexico: Final Results of Antidumping Duty Administrative Review, 64 FR 76, 84 (January 4, 1999)).

Fair Value Comparisons

To determine whether sales of flanges from India were made in the United States 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. In accordance with section 777A(d)(1)(A)(i) of the Act, we calculated EPs and CEPs and compared these prices to weighted-average normal values or CVs, as appropriate.

Export Price and Constructed Export Price

In accordance with section 772 of the Act, we calculated either an EP or a CEP, depending on the nature of each sale. Section 772(a) of the Act defines EP as the price at which the subject merchandise is first sold before the date of importation by the exporter or producer outside the United States to an unaffiliated purchaser in the United States, or to an unaffiliated purchaser for exportation to the United States. Section 772(b) of the Act defines CEP as the price at which the subject merchandise is first sold in the United States before or after the date of importation, by or for the account of the producer or exporter of the merchandise, or by a seller affiliated with the producer or exporter, to an unaffiliated purchaser, as adjusted under sections 772(c) and (d) of the Act.

We calculated EP and CEP, as appropriate, based on prices charged to the first unaffiliated customer in the United States. We used the date of invoice as the date of sale. We based EP on the packed C&F, CIF duty paid, FOB, or ex-dock duty paid prices to the first unaffiliated purchasers in the United States. We added to U.S. price amounts for duty drawback, when reported, pursuant to section 772(c)(1)(B) of the Act. We also made deductions for movement expenses in accordance with section 772(c)(2)(A) of the Act, including: foreign inland freight, foreign brokerage and handling, bank export document handling charges, ocean freight, and marine insurance.

For CEP sales, in accordance with section 772(d)(1) of the Act, we deducted from the starting price those selling expenses that were incurred in selling the subject merchandise in the United States, including direct selling expenses (i.e., credit), and imputed inventory carrying costs. In accordance with section 772(d)(3) of the Act, we deducted an amount for profit allocated to the expenses deducted under sections 772(d)(1) and (2) of the Act.

For these preliminary results, for Viraj's U.S. prices we have used Viraj's prices to its first unaffiliated U.S. customers. In the case of one of Viraj's U.S. customers, we have solicited information bearing on a possible affiliation with Viraj. Prior to issuing our final results, we will further examine whether sales from Viraj to the customer in question, rather than sales from that customer in question to its own customers, constitute the appropriate basis for U.S. price. We invite comments on this issue.

Normal Value

A. Viability

In order to determine whether there is sufficient volume of sales in the home market to serve as a viable basis for calculating NV (i.e., the aggregate volume of home market sales of the foreign like product during the POR is equal to or greater than five percent of the aggregate volume of U.S. sales of subject merchandise during the POR), for each respondent we compared the volume of home market sales of the foreign like product to the volume of U.S. sales of the subject merchandise. Since we found no reason to determine that quantity was not the appropriate basis for these comparisons, we did not use value as the measure. See 351.404(b)(2).

We based our comparisons of the volume of U.S. sales to the volume of home market sales on reported stainless steel flange weight, rather than on number of pieces. The record demonstrates that there can be large differences between the weight (and corresponding cost and price) of stainless steel flanges based on relative sizes, so comparisons of aggregate data would be distorted for these products if volume comparisons were based on the number of pieces.

We determined that for Viraj, the home market was viable because Viraj's home market sales were greater than 5 percent of its U.S. sales based on aggregate volume by weight. Because Isibars reported no home market or third country sales, we based NV on CV, pursuant to section 351.404(f) of the Department's regulations.

B. Arm's Length Sales

Since no information on the record indicates any comparison market sales to affiliates, we did not use an arm's-length test for comparison market sales.

C. Cost of Production Analysis

The petitioners in this proceeding filed timely sales-below-cost allegations with regard to Viraj. See petitioners' letters of June 6, 2001. The petitioners' allegations were based on the respondents' questionnaire responses. We found that petitioners' methodology provided the Department with a reasonable basis to believe or suspect that sales in the home market had been made at prices below the COP. Accordingly, pursuant to section 773(b)(1) of the Act, we initiated an investigation to determine whether Viraj's sales of flanges were made at prices below COP during the POR. See memorandum from Thomas Killiam, Case Analyst, to Richard Weible, Office Director, Petitioners' Allegation of Sales Below the Cost of Production, dated July 1, 2001.

Each respondent defined its unique products, and thus its costs, based on different product characteristics. We determined that only grade, type, size, pressure rating, and finish were required to define models for purposes of matching. To make the model definitions for the cost test identical to those in the model match, we used the above criteria to define models and calculate costs. Where necessary, we converted costs from a per-piece basis to a per-kilogram basis. See the company-specific analysis memoranda for Isibars and Viraj, dated concurrently with this notice and available in the Central Records Unit.

In accordance with section 773(b)(3) of the Act, we calculated COP for Viraj based on the sum of the costs of materials and fabrication employed in producing the foreign like product, plus selling, general, and administrative expenses (SG&A) and packing. We relied on the home market sales and COP information provided by Viraj. After calculating COP, we tested whether home market sales of stainless steel flanges were made at prices below COP within an extended period of time in substantial quantities and whether such prices permitted the recovery of all costs within a reasonable period of time. We compared model-specific COPs to the reported home market prices less movement charges, discounts, and rebates.

Pursuant to section 773(b)(2)(C) of the Act, where less than 20 percent of a respondent's home market sales for a model are at prices less than the COP, we do not disregard any below-cost sales of that model because we determine that the below-cost sales were not made within an extended period of time in “substantial quantities.” Where 20 percent or more of a respondent's home market sales of a given model are at prices less than COP, we disregard the below-cost sales because they are 1) made within an extended period of time in substantial quantities in accordance with sections 773(b)(2)(B) and (C) of the Act, and 2) based on comparisons of prices to weighted-average COPs for the POR, were at prices which would not permit the recovery of all costs within a reasonable period of time in accordance with section 773(b)(2)(D) of the Act.

The results of our cost test for Viraj indicated that for certain comparison market models, less than 20 percent of the sales of the model were at prices below COP. We therefore retained all sales of these comparison market models in our analysis and used them as the basis for determining NV. Our cost test also indicated that within an extended period of time (one year, in accordance with section 773(b)(2)(B) of the Act), for certain comparison market models, more than 20 percent of the comparison market sales were sold at prices below COP. In accordance with section 773(b)(1) of the Act, we therefore excluded these below-cost sales from our analysis and used the remaining above-cost sales as the basis for determining NV.

D. Product Comparisons

We compared Viraj's U.S. sales with contemporaneous sales of the foreign like product in the home market. We considered stainless steel flanges identical based on grade, type, size, pressure rating and finish. We used a 20 percent difference-in-merchandise (DIFMER) cost deviation cap as the maximum difference in cost allowable for similar merchandise, which we calculated as the absolute value of the difference between the U.S. and comparison market variable costs of manufacturing divided by the total cost of manufacturing of the U.S. product. For Isibars we compared U.S. price to CV.

E. Level of Trade

In accordance with section 773(a)(1)(B) 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 LOT in the comparison market 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 SG&A expenses and profit. With respect to U.S. price for EP transactions, the LOT is also that of the starting-price sale, which is usually from the exporter to the importer. For CEP, the LOT is that of the sale from the exporter to the importer.

To determine whether comparison market sales are at a different level of trade than U.S. sales, we examined stages in the marketing process and selling functions along the chain of distribution between the producer and the unaffiliated customer. In analyzing the selling activities of the respondents, we did not note any significant differences in functions provided in any of the markets. Based upon the record evidence, we have determined that for each respondent there is one LOT for all EP sales, the same LOT as for all comparison market sales. Accordingly, because we find the U.S. sales and comparison market sales to be at the same LOT, no LOT adjustment under section 773(a)(7)(A) is warranted.

F. Comparison Market Price

We based comparison market prices on the packed, ex-factory or delivered prices to the unaffiliated purchasers in the comparison market. We made adjustments for differences in packing and for movement expenses in accordance with sections 773(a)(6)(A) and (B) of the Act. In addition, we made adjustments for differences in cost attributable to differences in physical characteristics of the merchandise pursuant to section 773(a)(6)(C)(ii) of the Act, and for differences in circumstances of sale (COS) in accordance with section 773(a)(6)(C)(iii) of the Act and 19 CFR 351.410. For comparison to EP we made COS adjustments by deducting comparison market direct selling expenses and adding U.S. direct selling expenses.

In accordance with section 773(a)(4) of the Act, we based NV on CV if we were unable to find a contemporaneous comparison market match for the U.S. sale. We calculated CV based on the cost of materials and fabrication employed in producing the subject merchandise, SG&A, and profit. In accordance with 773(e)(2)(A) of the Act, we based SG&A expenses 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. For selling expenses, we used the weighted-average comparison market selling expenses. Where appropriate, we made COS adjustments to CV in accordance with section 773(a)(8) of the Act and 19 CFR 351.410. We also made adjustments, where applicable, for comparison market indirect selling expenses to offset commissions in EP comparisons.

Preliminary Results of Review

As a result of our review, we preliminarily determine the weighted-average dumping margins for the period February 1, 1999, through January 31, 2000, to be as follows:

The Department will disclose calculations performed in connection with these preliminary results of review within five days of the date of publication of this notice in accordance with 19 CFR 351.224(b). An interested party may request a hearing within 30 days of publication. See CFR 351.310(c). Any hearing, if requested, will be held 37 days after the date of publication, or the first business day thereafter, unless the Department alters the date per 19 CFR 351.310(d). Interested parties may submit case briefs and/or written comments no later than 30 days after the date of publication of these preliminary results of review. Rebuttal briefs and rebuttals to written comments, limited to issues raised in the case briefs and comments, may be filed no later than 35 days after the date of publication of this notice. Parties who submit argument in these proceedings are requested to submit with the argument 1) a statement of the issue, 2) a brief summary of the argument and (3) a table of authorities. The Department will issue the final results of this administrative review, including the results of our analysis of the issues raised in any such written comments or at a hearing, within 120 days of publication of these preliminary results.

The Department shall determine, and the U.S. Customs Service shall assess, antidumping duties on all appropriate entries. In accordance with 19 CFR 351.212(b)(1), we will calculate assessment rates for the merchandise based on the ratio of the total amount of antidumping duties calculated for the examined sales made during the POR to the total quantity (in kilograms) of the sales used to calculate those duties. This rate will be assessed uniformly on all entries of merchandise of that manufacturer/exporter made during the POR. The Department will issue appropriate appraisement instructions directly to the Customs Service upon completion of the review.

Furthermore, the following deposit requirements will be effective upon completion of the final results of this administrative review for all shipments of flanges from India entered, or withdrawn from warehouse, for consumption on or after the publication date of the final results of this administrative review, as provided by section 751(a)(1) of the Act: (1) the cash deposit rates for the reviewed companies will be the rates established in the final results of administrative review; (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 this review, or the LTFV investigation; and (4) if neither the exporter nor the manufacturer is a firm covered in this review or any previous reviews, the cash deposit rate will be 162.14 percent, the “all others” rate established in the LTFV investigation (59 FR 5994) (February 9, 1994).

This notice also serves as a preliminary reminder to importers of their responsibility under 19 CFR 351.402(f) 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.

We are issuing and publishing this notice in accordance with sections 751(a)(1) and 777(i)(1) of the Act.