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

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

ACTION:

Notice of Preliminary Results of Antidumping Duty Administrative Review.

SUMMARY:

In response to requests from two respondents, the Department of Commerce (the Department) initiated an administrative review of the antidumping duty order on circular welded non-alloy steel pipe (P&T) from Mexico. We are rescinding the review with respect to one of the respondents, Hylsa S.A. de C.V. (Hylsa). The review covers one manufacturer and exporter of the subject merchandise, Tuberia Nacional S.A. de C.V. (TUNA). The period of review (POR) is November 1, 1998, through October 31, 1999. We preliminarily determine that sales have been made below normal value (NV). If these preliminary results are adopted in our final results of administrative review, we will instruct U.S. Customs to assess antidumping duties based on the difference between export price (EP) or constructed export price (CEP) and NV. Interested parties are invited to comment on these preliminary results.

EFFECTIVE DATE:

December 12, 2000.

FOR FURTHER INFORMATION CONTACT:

John Drury or Nancy Decker, 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 or (202) 482-0196, respectively.

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 (1999).

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 1998/99 review period on November 16, 1999 (64 FR 62167). Respondents TUNA and Hylsa, as well as petitioners, 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 21, 1999. See 64 FR 72644 (December 21, 1998).

The Department received timely requests for withdrawal from the administrative review from the respondent Hylsa on March 15, 2000. On March 22, 2000, petitioners also withdrew their request for a review of Hylsa. In accordance with 19 CFR 351.213(d)(1), the Department is now terminating this review for respondent Hylsa because both petitioners and respondent have withdrawn their requests for review and no other interested parties have requested a review.

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 11, 2000, the Department published a notice of extension of the time limit for the preliminary results in this case to November 29, 2000. See Extension of Time Limit: Circular Welded Non-Alloy Pipe From Mexico; Antidumping Administrative Review, 65 FR 49223 (August 11, 2000).

Period of Review

The review covers the period November 1, 1998 through October 31, 1999. The Department is conducting this review in accordance with section 751 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 United States 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 respondent, 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 U.S. 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 U.S. sales, we compared U.S. sales to the next most similar foreign like product on the basis of the characteristics listed in the Department's August 25, 2000, supplemental questionnaire, or to constructed value (CV).

Verification

As provided in section 782(i) of the Act, we verified information provided by TUNA (sales and cost) using standard verification procedures, including on-site inspection of the manufacturer's facilities and the examination of the relevant sales and financial records.

Our verification results are outlined in the public versions of the verification reports. See Sales Verification Report dated November 29, 2000 and Cost Verification Report dated November 29, 2000.

Based on our findings at verification, we made changes to TUNA's reported general and administrative expenses, direct materials costs, and fixed overhead costs.

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 U.S. transactions.

We have used the date of invoice as the date of sale for all home market and U.S. sales made by TUNA during the POR.

Export Price and Constructed Export Price

We analyzed sales made to the United States, and determined that there were 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 included those sales that passed the arm's-length test in our analysis (see 19 CFR 351.403; 62 FR at 27355-56).

Where such sales did not pass the arm's length test, we used sales from affiliated resellers to the first unaffiliated customer. Additionally, we used sales from TUNA, Lamina y Placa Monterrey and Lamina y Placa Commercial which were made directly to unaffiliated customers. We preliminarily determine that TUNA, Lamina y Placa Monterrey and Lamina y Placa Commercial are all producers of the subject merchandise, as defined by section 771(28) of the Act, and that all three should be collapsed into a single entity for purposes of calculating normal value. See 19 CFR 351.401(f).

The Department collapses the operations of producers into a single entity when: (1) The producers are affiliated, (2) the producers have production facilities which would not require substantial retooling for producing similar or identical products, and (3) there is a significant potential for manipulation of price or production. In determining whether a significant potential for manipulation exists, the Department may consider: (1) The level of common ownership, (2) overlapping managerial employees or board members of the affiliated firms, and (3) whether the operations of the affiliated firms are intertwined. Based on the totality of the circumstances, the Department collapses affiliated producers and treats them as a single entity when these criteria are met. See Stainless Steel Wire Rod from Sweden, Final Determination of Sales at Less Than Fair Value, 63 FR 40452-53 (July 29, 1998).

In this instance, all three producers are in the same corporate group, the Villacero group, which is family owned. The facility of the TUNA entity for producing merchandise is used by all three producers. The merchandise produced by all three producers also is identical. The managerial employees and board members which control the Lamina y Placa companies also control TUNA. Finally, the operations of all three producers are not merely intertwined, but are conducted at the same facility in terms of production of subject merchandise. Based on the facts of the case, we are collapsing all three producers into a single entity for the purpose of this review in accordance with the Department's regulations. See TUNA Analysis Memorandum, dated November 29, 2000.

Where appropriate, in accordance with section 773(a)(6)(A) of the Act, we deducted credit expenses, warranties, advertising, insurance, packing, and certain discounts.

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 affect 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.

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. Sales in the home market to unaffiliated parties were to end users and distributors. Conversely, all 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 certain selling functions in the form of specialized services to one channel of distribution, such as engineering advice and custom designed products, which are not provided to any other home market customers. In a separate channel of distribution, TUNA performs additional selling functions, related principally to affiliated resellers, which allow the resellers to perform selling functions for their unaffiliated customers. The selling functions provided by TUNA in this channel of trade, such as excess inventory return and personnel training, are unique.

Based on our analysis, we preliminarily determine that there are three levels of trade in the home market. Those sales receiving certain selling functions in the form of 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 only the “core” selling functions, described above, are performed.

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 (such as inventory maintenance) performed by TUNA for its U.S. affiliate. Therefore, we preliminarily determine that the CEP is at a different LOT from any of the 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 United States are at the same level of trade as those sales in the home market which do not receive specialized 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 LOT where such differences affect price comparability. For CEP, because there are insufficient data to perform an analysis of the effect 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 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 29, 2000.

Cost-of-Production Analysis

Because the Department disregarded sales below cost for 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 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, with changes. See TUNA Analysis Memorandum, dated November 29, 2000.

B. Test of Home-Market Prices

We used the respondents' weighted-average COPs for the period November 1, 1999, through October 31, 2000. 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 TUNA's sales of a given product were at prices less than the COP, we did not disregard any below-cost sales of that product because we determined that the below-cost sales were not made in “substantial quantities.” Where 20 percent or more of TUNA's sales during the POR were at prices less than the COP, we determined such sales to have been made in “substantial quantities” within an extended period of time in accordance with section 773(b)(2)(B) of the Act. 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. 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 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:

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 merchandise by that importer during the POR.

Furthermore, the following deposit requirements will be effective upon completion of the final results of this administrative review 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 the reviewed firm 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.