Initiation of Antidumping Duty Investigations: Stainless Steel Butt-Weld Pipe Fittings From Germany, Italy, Malaysia and the Philippines

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

EFFECTIVE DATE:

January 31, 2000.

FOR FURTHER INFORMATION CONTACT:

For Germany: Carrie Blozy or Rick Johnson at (202) 482-0165 and (202) 482-3818, respectively; for Italy, Helen Kramer or Linda Ludwig at (202) 482-0405 and (202) 482-3833, respectively; for Malaysia, Becky Hagen or Rick Johnson at (202) 482-3362 and (202) 482-3818, respectively; for the Philippines, Fred Baker or Robert James at (202) 482-2924 and (202) 482-0649, respectively, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, D.C. 20230.

Initiation of Investigations

The Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute are references to the provisions effective January 1, 1995, the effective date of the amendments made to the Tariff Act of 1930 (“the Act”) by the Uruguay Round Agreements Act (“URAA”). In addition, unless otherwise indicated, all citations to the Department's regulations are references to the provisions codified at 19 CFR part 351 (1999).

The Petition

On December 29, 1999, the Department of Commerce (“the Department”) received a petition on stainless steel butt-weld pipe fittings from Germany, Italy, Malaysia and the Philippines filed in proper form by Alloy Piping Products, Inc., Flowline Division, Markovitz Enterprises, Inc., Gerlin, Inc., and Taylor Forge (“petitioners”). On January 6, 2000, the Department requested clarification of certain areas of the petition and received a response on January 10, 2000.

In accordance with section 732(b) of the Act, petitioners allege that imports of stainless steel butt-weld pipe fittings from Germany, Italy, Malaysia and the Philippines are being, or are likely to be, sold in the United States at less than fair value within the meaning of section 731 of the Act, and that such imports are materially injuring an industry in the United States.

The Department finds that petitioners filed this petition on behalf of the domestic industry because they are interested parties as defined in sections 771(9)(C) and (D) of the Act and they have demonstrated sufficient industry support with respect to the antidumping duty investigations they are requesting the Department to initiate (see “Determination of Industry Support for the Petition” below).

Scope of Investigations

For purposes of these investigations, the product covered is certain stainless steel butt-weld pipe fittings. Certain stainless steel butt-weld pipe fittings (pipe fittings) are under 14 inches in outside diameter (based on nominal pipe size), whether finished or unfinished. The product encompasses all grades of stainless steel and “commodity” and “specialty” fittings. Specifically excluded from the definition are threaded, grooved, and bolted fittings, and fittings made from any material other than stainless steel.

The fittings subject to these investigations are generally designated under specification ASTM A403/A403M, the standard specification for Wrought Austenitic Stainless Steel Piping Fittings, or its foreign equivalents (e.g., DIN or JIS specifications). This specification covers two general classes of fittings, WP and CR, of wrought austenitic stainless steel fittings of seamless and welded construction covered by the latest revision of ANSI B16.9, ANSI B16.11, and ANSI B16.28. Pipe fittings manufactured to specification ASTM A774, or its foreign equivalents, are also covered by these investigations.

These investigations do not apply to cast fittings. Cast austenitic stainless steel pipe fittings are covered by specifications A351/A351M, A743/743M, and A744/A744M.

The stainless steel butt-weld pipe fittings subject to these investigations are currently classifiable under subheading 7307.23.0000 of the Harmonized Tariff Schedule of the United States (HTSUS). Although the HTSUS subheadings are provided for convenience and customs purposes, the written description of the scope of this investigation is dispositive.

During our review of the petition, we discussed the scope with the petitioners to insure that the scope in the petition accurately reflects the product for which they are seeking relief. Moreover, as discussed in the preamble to the Department's regulations (62 FR 27323), we are setting aside a period for parties to raise issues regarding product coverage. The Department encourages all parties to submit such comments by February 1, 2000. Comments should be addressed to Import Administration's Central Record Unit at Room 1870, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230. The period of scope consultations is intended to provide the Department with ample opportunity to consider all comments and consult with parties prior to the issuance of the preliminary determination.

Determination of Industry Support for the Petition

Section 732(b)(1) of the Act requires that a petition be filed on behalf of the domestic industry. Section 732(c)(4)(A) of the Act provides that a petition meets this requirement if the domestic producers or workers who support the petition account for: (1) At least 25 percent of the total production of the domestic like product; and (2) more than 50 percent of the production of the domestic like product produced by that portion of the industry expressing support for, or opposition to, the petition.

Section 771(4)(A) of the Act defines the “industry” as “the producers of a domestic like product.” Thus, to determine whether the petition has the requisite industry support, the statute directs the Department to look to producers and workers who produce the domestic like product. The International Trade Commission (“ITC”), which is responsible for determining whether “the domestic industry” has been injured, must also determine what constitutes a domestic like product in order to define the industry. While both the Department and the ITC must apply the same statutory definition regarding the domestic like product (see section 771(10) of the Act), they do so for different purposes and pursuant to separate and distinct authority. In addition, the Department's determination is subject to limitations of time and information. Although this may result in different definitions of the domestic like product, such differences do not render the decision of either agency contrary to the law.

Section 771(10) of the Act defines the domestic like product as “a product that is like, or in the absence of like, most similar in characteristics and uses with, the article subject to an investigation under this title.” Thus, the reference point from which the domestic like product analysis begins is “the article subject to an investigation,” i.e., the class or kind of merchandise to be investigated, which normally will be the scope as defined in the petition. Moreover, petitioners do not offer a definition of domestic like product distinct from the scope of the investigation.

In this case, the domestic like product referred to in the petition is the single domestic like product defined in the “Scope of Investigations” section, above. The Department has no basis on the record to find the petition's definition of the domestic like product to be inaccurate. No comments were received regarding this issue. The Department has, therefore, adopted the domestic like product definition set forth in the petition.

Moreover, the Department has determined that the petition and supplemental information to the petition contain adequate evidence of sufficient industry support; therefore, polling was not necessary. (See Attachment to the Initiation Checklist Re: Industry Support, January 18, 2000.) To the best of the Department's knowledge, producers supporting the petition with respect to each of the four countries represent over 50 percent of total production of the domestic like product. Additionally, no person who would qualify as an interested party pursuant to section 771(9)(A), (C), (D), (E) or (F) of the Act has expressed opposition to the petition.

Accordingly, the Department determines that these petitions are filed on behalf of the domestic industry within the meaning of section 732(b)(1) of the Act.

Export Price, Constructed Export Price, and Normal Value

The following are descriptions of the allegations of sales at less than fair value upon which the Department based its decision to initiate these investigations.

Petitioners relied upon price data (and in the case of Germany, also cost data) contained in confidential market research reports on Germany, Italy, Malaysia and the Philippines. At our request, petitioners arranged for the Department to contact the authors of the reports to verify the accuracy of the data, the methodologies used to collect the data, and the credentials of those gathering the market research. The Department's discussions with the authors of the market research reports are summarized in the following Memoranda to the File on file in the individual country case files in the Central Records Unit, Room B-099 of the Department:

• January 7, 2000, Telephone Call to Market Research Firm Regarding the AD Petition for Antidumping Investigation of Stainless Steel Butt-weld Pipe Fittings from Germany;
• January 7, 2000, Telephone Call to Market Research Firm Regarding the AD Petition for Antidumping Investigation of Stainless Steel Pipe Fittings from Italy;
• January 12, 2000, Telephone Call to Market Research Firm Regarding the AD Petition for Antidumping Investigation of Stainless Steel Pipe Fittings from Malaysia; and
• January 12, 2000, Telephone Call to Market Research Firm Regarding the AD Petition for Antidumping Investigation of Stainless Steel Pipe Fittings from the Philippines.

The Department has checked the methodologies employed by petitioners in calculating export price, constructed export price, normal value, cost and constructed value, and has not found any discrepancies between petitioners' methodologies and the Department's normal practice.

Germany

Petitioners identified Buttings Edelstahlrohre GMBH, Hage Fittings GMBH (“Hage”), Kremo-Werke Hermanns GMBH (“Kremo”), Nirobo Metal Verarbeitungs GMBH (“Nirobo”), Uhlig-Rohrbogen GMBH (“Uhlig”), and Wilh. Schulz (“Schulz”) as the known producers and exporters of subject merchandise from Germany to the United States. With respect to home market viability, credible information provided by the foreign market researcher showed that home market sales were over 64 times the volume of exports to the United States in 1998 in the aggregate, and that domestic sales by each of the producers/exporters far exceeded exports to the United States. Therefore, the Department concluded that home market sales were sufficient to form a basis for NV, pursuant to section 773(a)(1)(B)(ii)(II) of the Act.

Petitioners obtained home market prices for Schulz, Hage, Kremo, and Nirobo from foreign market research, contemporaneous with the pricing information used as the basis for constructed export price (“CEP”). However, due to the differences in German and U.S. specifications for subject merchandise, petitioners were unable to obtain any products offered for sale to customers in Germany which are either identical or similar to those sold to the United States. Additionally, as further explained below in the “Initiation of Cost Investigation” section, petitioners provided information demonstrating reasonable grounds to believe or suspect that sales of pipe fittings sold in the home market were made at prices below the fully absorbed cost of production (“COP”), within the meaning of section 773(b) of the Act.

Pursuant to section 773(b)(3) of the Act, COP consists of the cost of manufacturing (“COM”), selling, general, and administrative expenses (“SG&A”), including financial expense, and packing costs. To calculate COP, petitioners based COM on their own production experience, adjusted for known differences between costs incurred to produce stainless steel butt-weld pipe fittings in the United States and in Germany using publicly available data (e.g., company brochures, published industry standards, published industry statistics, trade journals, etc.) and foreign market research. The foreign market research provided information on the cost of raw materials in the home market. To calculate the SG&A components of COP, petitioners relied upon the information contained in the financial statements of a German stainless steel butt-weld pipe fittings producer. Petitioners excluded packing from the calculation because they lacked the information to calculate an amount. We found this omission reasonable and conservative. After review, we relied on the cost data contained in the petition.

Based on our analysis, certain of the home market sales reported in the petition were shown to be made at prices below the cost of production (see Initiation of Cost Investigation, below). Therefore, petitioners based NV on the constructed value (“CV”), pursuant to sections 773(a)(4) and 773(e) of the Act. Pursuant to section 773(e) of the Act, CV consists of the COM, SG&A expenses, packing costs and profit of the merchandise. To calculate the COM, SG&A expenses, and packing costs for CV, petitioners followed the same methodology used to determine COP. We confirmed that this methodology was consistent with the statute. Petitioners also added to CV an amount for profit, pursuant to section 773(e)(2) of the Act. Profit was based upon the aforementioned German producer's financial statements.

Petitioners based CEP on six contemporaneous U.S. sales by Schulz to an unaffiliated purchaser. The terms of sale were f.o.b. Schulz U.S.A.'s (Schulz's subsidiary) warehouse. Petitioners calculated a net U.S. price for each sale by subtracting estimated costs for shipment from the factory in Germany to the port of export in Germany. Also, petitioners subtracted ocean freight and insurance, an amount for import duties based on the 1999 import duty rate of five percent of dutiable value, amounts for the U.S. harbor maintenance fee of 0.125 percent of dutiable value and the U.S. merchandise processing fee of 0.21 percent of dutiable value, and U.S. inland freight costs from the port to Schulz U.S.A.'s warehouse. Finally, petitioners deducted U.S. indirect selling expenses incurred by Schulz U.S.A., Schulz's subsidiary in Houston, Texas, based on a petitioning firm's expenses.

Petitioners estimated dumping margins ranging from 8.35 percent to 76.24 percent. Should the need arise to use as facts available under section 776 of the Act any of this information in our preliminary or final determinations, we may re-examine the information and revise the margin calculations, if appropriate.

Initiation of Cost Investigation

As noted above, pursuant to section 773(b) of the Act, petitioners provided specific factual information demonstrating reasonable grounds to believe or suspect that sales in the German home market were made at prices below the fully absorbed COP and, accordingly, requested that the Department conduct a country-wide sales-below-COP investigation in connection with the requested antidumping investigation for Germany. The Statement of Administrative Action accompanying the URAA, H.R. Doc. 103-412 (“SAA”), at 833, states that an allegation of sales below COP need not be specific to individual exporters or producers. According to the SAA, “Commerce will consider allegations of below-cost sales in the aggregate for a foreign country, just as Commerce currently considers allegations of sales at less than fair value on a country-wide basis for purposes of initiating an antidumping investigation.” Id.

Further, the SAA provides that:

new section 773(b)(2)(A) retains the current requirement that Commerce have ‘reasonable grounds to believe or suspect’ that below cost sales have occurred before initiating such an investigation. ‘Reasonable grounds’ * * * exist when an interested party provides specific factual information on costs and prices, observed or constructed, indicating that sales in the foreign market in question are at below-cost prices.

Id. Based upon the comparison of the adjusted prices from the petition for the representative foreign like products to their costs of production as discussed above, we find the existence of “reasonable grounds to believe or suspect” that sales of the foreign like product in Germany were made below the COP within the meaning of section 773(b)(2)(A)(i) of the Act. Accordingly, the Department is initiating the requested country-wide cost investigation. (See country-specific section above and cost attachment to the initiation checklist.)

Italy

Petitioners identified Bassi Luigi & Co., Coprosider S.p.A, Curvinox, Gam Raccordi S.p.A., Nuova Steelcom S.r.L., Rivit S.p.A., and Vignatti Fitting S.r.L. as the known producers and exporters of the subject merchandise to the United States. Petitioners based NV on Italian home market prices. The foreign market researcher provided prices for sales by Coprosider S.p.A. to unaffiliated customers in Italy contemporaneous with the U.S. sales. With respect to home market viability, credible information provided by the foreign market researcher showed that home market sales were over 46 times the volume of exports to the United States in 1998 in the aggregate, and that domestic sales by each of the producers/exporters far exceeded exports to the United States. Therefore, the Department concluded that home market sales were sufficient to form a basis for NV, pursuant to section 773(a)(1)(B)(ii)(II) of the Act.

Petitioners calculated net prices for sales in Italy by subtracting from the reported gross prices imputed credit expenses, based on the average payment period of 60 days reported by the foreign market researcher and the average lending rate in Italy during the period of investigation (“POI”) of six percent, calculated from rates published in International Financial Statistics. Given that the foreign market researcher reported that the prices did not include delivery, petitioners did not deduct inland freight rates from the reported home market gross prices. In addition, they did not adjust the reported prices for differences in packing costs, adopting the conservative position that packing costs were the same for home market and U.S. sales.

Petitioners converted home market prices quoted in lira per piece to U.S. dollars per piece by using the Euro/U.S. dollar exchange rate in effect multiplied by a fixed conversion rate for Italian lira/Euro during the period in which the U.S. sale occurred. The source for the exchange rates was the Federal Reserve Bulletin.

Petitioners based export price (“EP”) on U.S. price quotes for pipe fittings manufactured by Coprosider offered for sale to an unaffiliated U.S. purchaser during the POI, prior to the date of importation. This information was obtained from a confidential source, attested to by an affidavit. Petitioners selected pipe fittings with specifications commonly exported to the United States. The terms of sale were CIF New Jersey, import duty paid. Petitioners subtracted estimated costs incurred to transport the subject merchandise from the factory to the port of export, as provided by the foreign market researcher. In addition, petitioners deducted a sales discount granted by the importer.

Petitioners estimated the cost of international freight based upon the difference between the CIF and U.S. Customs values reported in the official import statistics for January-September 1999. In addition, petitioners subtracted an amount for import duties based on the 1999 import duty rate of five percent of dutiable value, and amounts for the U.S. harbor maintenance fee of 0.125 percent of dutiable value and the U.S. merchandise processing fee of 0.21 percent of dutiable value. See supplement to petition, dated January 11, 2000.

Petitioners estimated dumping margins ranging from 61.41 percent to 86.88 percent. See supplement to petition dated January 11, 2000. Should the need arise to use, as facts available under section 776 of the Act, any of this information in our preliminary or final determination, we may re-examine the information and revise the margin calculations, if appropriate.

Malaysia

Petitioners identified Amalgamated Industrial Stainless Steel, Schulz Malaysia, and Kanzen Tetsu as the known producers and exporters of the subject merchandise to the United States. Petitioners based NV on Malaysian home market prices. With respect to home market viability, petitioners concluded, based on information provided by the foreign market researcher and attested to by an affidavit, that each of the three companies had home market sales of pipe fittings greater than five percent of each company's respective exports to the United States and, therefore, the volume of home market sales was sufficient to form a basis for NV pursuant to section 773(a)(1)(B)(ii)(II) of the Act. See Declaration of (Foreign Market Researcher) Regarding Sales in Malaysia of Stainless Steel Butt-Weld Pipe Fittings, Exhibit 1 of petitioners' January 3, 2000 submission.

The foreign market researcher provided prices for sales to unaffiliated customers in Malaysia. Petitioners calculated net prices for sales in Malaysia by subtracting from the reported gross prices average freight costs and imputed credit expenses, the latter being based on the average payment period of 30 days reported by the foreign market researcher and the average lending rate in Malaysia during the POI of 7.64 percent, calculated from rates published in International Financial Statistics. Because the home market prices were obtained from end users, petitioners also subtracted a distributor mark-up of four percent from the normal value, which was based on foreign market research. Petitioners did not adjust the reported prices for differences in packing costs. See footnote 3, above. Finally, petitioners converted the home market prices from Malaysian Ringgits to U.S. dollars based on the average exchange rate of the month in which the U.S. sale took place, as published in the Federal Reserve Bulletin.

Petitioners based U.S. price (in this case, EP) on sales to an unaffiliated U.S. purchaser by Kanzen Tetsu during the first and second quarters of 1999 prior to the date of importation, as obtained from a confidential source, attested to by an affidavit. The petitioners selected pipe fittings with specifications commonly exported to the United States. The terms of sale were delivered, duty paid, to the U.S. customers. Petitioners subtracted estimated costs incurred to transport the subject merchandise from the factory to the port of export, as provided by the foreign market researcher.

Petitioners estimated the cost of international freight based upon the difference between the CIF and U.S. Customs values reported in the official import statistics for January-September 1999. In addition, petitioners subtracted an amount for import duties based on the 1999 import duty rate of five percent of dutiable value, and amounts for the U.S. harbor maintenance fee of 0.125 percent of dutiable value and the U.S. merchandise processing fee of 0.21 percent of dutiable value. See supplement to petition dated January 10, 2000. Finally, petitioners subtracted a markup included in the reported price, as obtained from a confidential source, attested to by an affidavit.

Petitioners estimated dumping margins ranging from 39.6 to 60.1 percent. Should the need arise to use, as facts available under section 776 of the Act, any of this information in our preliminary or final determinations, we may re-examine the information and revise the margin calculations, if appropriate.

The Philippines

Petitioners identified two Philippine exporters and producers of stainless steel butt-weld pipe fittings: Enlin Steel Corporation (“Enlin”) and Tung Fong Industrial Co., Inc. (“Tung Fong”). Petitioners noted that, to the best of their knowledge, these two companies accounted for one hundred percent of the exports of subject merchandise from the Philippines. Petitioners obtained price quotes from Enlin and Tung Fong for stainless steel butt-weld pipe fittings offered for sale to customers in the Philippines which were similar to those sold to the United States. Petitioners adjusted these prices for estimated freight costs and a distributor markup of five percent, since the sales prices were obtained from end-users. Petitioners did not calculate an imputed credit expense for the home market sales because the terms of payment were payment before delivery or cash on delivery. In addition, petitioners did not adjust the reported prices for differences in packing costs. See footnote 3, above. Finally, petitioners converted the home market prices from Philippine pesos to U.S. dollars based on the average exchange rate of the month in which the U.S. sale took place, as published in International Financial Statistics.

With respect to home market viability, petitioners determined, based on information provided by a foreign market researcher, that the volume of Philippine home market sales was sufficient to form a basis for NV pursuant to section 773(a)(1)(B)(ii)(II) of the Act.

Petitioners based EP for Tung Fong on either duty-paid, CIF price quotes made by Tung Fong to unaffiliated U.S. distributors or on ex-work sales. Petitioners based EP for Enlin on duty-paid CIF price quotes. For the U.S. sales whose terms were CIF duty paid, the petitioners made deductions for foreign inland freight, international freight and insurance, U.S. import duties, and imputed credit. For the ex-works sales, petitioners made adjustments for imputed credit. For sales made through distributors, petitioners made a deduction for the U.S. distributor's markup.

Petitioners estimated foreign inland freight based on freight rate and distance information provided by a foreign market researcher. They estimated international freight and insurance by calculating the difference between the CIF and U.S. Customs values reported in the official import statistics for January through September, 1999. They calculated the import duties based on the 1999 import duty rate of five percent of dutiable value. In addition, petitioners subtracted amounts for the U.S. harbor maintenance fee of 0.125 percent of dutiable value and the U.S. merchandise processing fee of 0.21 percent of dutiable value. See supplement to petition dated January 10, 2000, Exhibit P-1.

Petitioners calculated imputed credit expenses based on the average payment period of 90 days for sales made by Tung Fong and 30 days for sales made by Enlin, and the average lending rate in the United States of 7.88 percent for the POI as published in International Financial Statistics. They calculated the distributor's percentage markup based on the domestic industry's knowledge of the channels of distribution in the United States.

Petitioners estimated dumping margins ranging from 18.24 percent to 60.17 percent. Should the need arise to use as facts available under section 776 of the Act any of this information in our preliminary or final determinations, we may re-examine the information and revise the margin calculations, if appropriate.

Allegations and Evidence of Material Injury and Causation

The petition alleges that the U.S. industry producing the domestic like product is being materially injured, and is threatened with material injury, by reason of the individual and cumulated imports of the subject merchandise sold at less than NV. Petitioners explained that the industry's injured condition is evident in the declining trends in (1) U.S. market share, (2) average unit sales values, (3) share of domestic consumption, (4) operating income, (5) employment, (6) output, (7) sales, and (8) capacity utilization.

The allegations of injury and causation are supported by relevant evidence including U.S. Customs import data, lost sales, and pricing information. The Department assessed the allegations and supporting evidence regarding material injury and causation and determined that these allegations are supported by accurate and adequate evidence and meet the statutory requirements for initiation (see Attachments to Initiation Checklist, Re: Material Injury, January 18, 2000).

Initiation of Antidumping Investigations

Based upon our examination of the petition on pipe fittings from Germany, Italy, Malaysia and the Philippines, we find that the petition meets the requirements of section 732 of the Act. Therefore, we are initiating antidumping duty investigations to determine whether imports of pipe fittings from Germany, Italy, Malaysia and the Philippines are being, or are likely to be, sold in the United States at less than fair value. Unless this deadline is extended, we will make our preliminary determinations no later than 140 days after the date of this initiation.

Distribution of Copies of the Petition

In accordance with section 732(b)(3)(A) of the Act, a copy of the public version of the petition has been provided to the representatives of Germany, Italy, Malaysia and the Philippines. We will attempt to provide a copy of the public versions of each petition to each exporter named in the petition, as appropriate.

International Trade Commission Notification

We have notified the ITC of our initiations, as required by section 732(d) of the Act.

Preliminary Determinations by the ITC

The ITC will determine, by no later than February 14, 2000, whether there is a reasonable indication that imports of pipe fittings from Germany, Italy, Malaysia and the Philippines are causing material injury, or threatening to cause material injury, to a U.S. industry. A negative ITC determination will result in these investigations being terminated; otherwise, these investigations will proceed according to statutory and regulatory time limits.

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