[Federal Register Volume 62, Number 174 (Tuesday, September 9, 1997)]
[Notices]
[Pages 47446-47452]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-23856]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-428-820]
Small Diameter Circular Seamless Carbon and Alloy Steel Standard,
Line and Pressure Pipe From Germany: Preliminary Results of Antidumping
Duty Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of preliminary results of antidumping duty
administrative review.
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SUMMARY: In response to a request from the respondent,
Mannesmannroehren-Werke AG (``MRW'') and Mannesmann Pipe & Steel
Corporation (``MPS'') (collectively, ``Mannesmann''), the Department of
Commerce (the Department) is conducting an administrative review of the
antidumping duty order on small diameter circular seamless carbon and
alloy steel standard, line and pressure pipe from Germany. This review
covers the above manufacturer/exporter of the subject merchandise to
the United States. The period of review (POR) is January 27, 1995,
through July 31, 1996.
We preliminarily determine the dumping margin for Mannesmann to be
28.69 percent during the POR. Interested parties are invited to comment
on these preliminary results. Parties who submit arguments in this
proceeding should also submit with their arguments (1) a statement of
the issues, and (2) a brief summary of the arguments.
EFFECTIVE DATE: September 9, 1997.
FOR FURTHER INFORMATION CONTACT: Nancy Decker or Linda Ludwig,
Enforcement Group III, Import Administration, International Trade
Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, NW, Washington, DC 20230; telephone: (202) 482-
1324 or (202) 482-3833, respectively.
SUPPLEMENTARY INFORMATION:
The Applicable Statute
Unless otherwise indicated, all citations to the Tariff Act of
1930, as amended (the Act) are references to the provisions effective
January 1, 1995, the effective date of the amendments made to the Act
by the Uruguay Round Agreements Act (URAA). In addition, unless
otherwise indicated, all references to the Department's regulations are
to 19 CFR part 353, as amended by the Department's interim regulations
(April 1, 1997). Where appropriate, we have cited the Department's new
regulations, codified at 19 CFR part 351 (May 19, 1997--62 FR 27296).
While not binding on this review, the new regulations serve as a
restatement of the Department's policies.
Background
On June 19, 1995, the Department published in the Federal Register
(60 Fed. Reg. 31974) the final affirmative antidumping duty
determination on small diameter circular seamless carbon and alloy
steel standard, line and pressure pipe from Germany. We published an
antidumping duty order and amended final determination on August 3,
1995 (60 FR 39704). On August 12, 1996, the Department published the
Opportunity to Request an Administrative Review of this order for the
period January 27, 1995 through July 31, 1996 (61 FR 41768). The
Department received a request for an administrative review of
Mannesmann's exports from Mannesmann itself, a producer/exporter of the
subject merchandise. We published a notice of initiation of the review
on September 17, 1996 (61 FR 48882).
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 5, 1997, the Department
published a notice of extension of the time limit for the preliminary
results in this case. See
[[Page 47447]]
Extension of Time Limit for Antidumping Duty Administrative Review, 62
FR 10025 (March 5, 1997).
The Department is conducting this review in accordance with section
751(a) of the Act.
Scope of the Review
The scope of this review includes small diameter seamless carbon
and alloy standard, line and pressure pipes (seamless pipes) produced
to the American Society for Testing and Materials (ASTM) standards A-
335, A-106, A-53 and American Petroleum Institute (API) standard API 5L
specifications and meeting the physical parameters described below,
regardless of application. The scope of this review also includes all
products used in standard, line, or pressure pipe applications and
meeting the physical parameters below, regardless of specification.
For purposes of this review, seamless pipes are seamless carbon and
alloy (other than stainless) steel pipes, of circular cross-section,
not more than 114.3 mm (4.5 inches) in outside diameter, regardless of
wall thickness, manufacturing process (hot-finished or cold-drawn), end
finish (plain end, beveled end, upset end, threaded, or threaded and
coupled), or surface finish. These pipes are commonly known as standard
pipe, line pipe or pressure pipe, depending upon the application. They
may also be used in structural applications. Pipes produced in non-
standard wall thicknesses are commonly referred to as tubes.
The seamless pipes subject to this review are currently
classifiable under subheadings 7304.10.10.20, 7304.10.50.20,
7304.31.60.50, 7304.39.00.16, 7304.39.00.20, 7304.39.00.24,
7304.39.00.28, 7304.39.00.32, 7304.51.50.05, 7304.51.50.60,
7304.59.60.00, 7304.59.80.10, 7304.59.80.15, 7304.59.80.20, and
7304.59.80.25 of the Harmonized Tariff Schedule of the United States
(HTSUS).
The following information further defines the scope of this review,
which covers pipes meeting the physical parameters described above:
Specifications, Characteristics and Uses: Seamless pressure pipes
are intended for the conveyance of water, steam, petrochemicals,
chemicals, oil products, natural gas and other liquids and gasses in
industrial piping systems. They may carry these substances at elevated
pressures and temperatures and may be subject to the application of
external heat. Seamless carbon steel pressure pipe meeting the ASTM
standard A-106 may be used in temperatures of up to 1000 degrees
Fahrenheit, at various American Society of Mechanical Engineers (ASME)
code stress levels. Alloy pipes made to ASTM standard A-335 must be
used if temperatures and stress levels exceed those allowed for A-106
and the ASME codes. Seamless pressure pipes sold in the United States
are commonly produced to the ASTM A-106 standard.
Seamless standard pipes are most commonly produced to the ASTM A-53
specification and generally are not intended for high temperature
service. They are intended for the low temperature and pressure
conveyance of water, steam, natural gas, air and other liquids and
gasses in plumbing and heating systems, air conditioning units,
automatic sprinkler systems, and other related uses. Standard pipes
(depending on type and code) may carry liquids at elevated temperatures
but must not exceed relevant ASME code requirements.
Seamless line pipes are intended for the conveyance of oil and
natural gas or other fluids in pipe lines. Seamless line pipes are
produced to the API 5L specification.
Seamless pipes are commonly produced and certified to meet ASTM A-
106, ASTM A-53 and API 5L specifications. Such triple certification of
pipes is common because all pipes meeting the stringent ASTM A-106
specification necessarily meet the API 5L and ASTM A-53 specifications.
Pipes meeting the API 5L specification necessarily meet the ASTM A-53
specification. However, pipes meeting the A-53 or API 5L specifications
do not necessarily meet the A-106 specification. To avoid maintaining
separate production runs and separate inventories, manufacturers
triple-certify the pipes. Since distributors sell the vast majority of
this product, they can thereby maintain a single inventory to service
all customers.
The primary application of ASTM A-106 pressure pipes and triple-
certified pipes is in pressure piping systems by refineries,
petrochemical plants and chemical plants. Other applications are in
power generation plants (electrical-fossil fuel or nuclear), and in
some oil field uses (on shore and off shore) such as for separator
lines, gathering lines and metering runs. A minor application of this
product is for use as oil and gas distribution lines for commercial
applications. These applications constitute the majority of the market
for the subject seamless pipes. However, A-106 pipes may be used in
some boiler applications.
The scope of this review includes all seamless pipe meeting the
physical parameters described above and produced to one of the
specifications listed above, regardless of application, and whether or
not also certified to a non-covered specification. Standard, line and
pressure applications and the above-listed specifications are defining
characteristics of the scope of this review. Therefore, seamless pipes
meeting the physical description above, but not produced to the ASTM A-
335, ASTM A-106, ASTM A-53, or API 5L standards shall be covered if
used in a standard, line or pressure application.
For example, there are certain other ASTM specifications of pipe
which, because of overlapping characteristics, could potentially be
used in A-106 applications. These specifications generally include A-
162, A-192, A-210, A-333, and A-524. When such pipes are used in a
standard, line or pressure pipe application, such products are covered
by the scope of this review.
Specifically excluded from this review are boiler tubing and
mechanical tubing, if such products are not produced to ASTM A-335,
ASTM A-106, ASTM A-53 or API 5L specifications and are not used in
standard, line or pressure applications. In addition, finished and
unfinished oil country tubular goods (OCTG) are excluded from the scope
of this review, if covered by the scope of another antidumping duty
order from the same country. If not covered by such an OCTG order,
finished and unfinished OCTG are included in this scope when used in
standard, line or pressure applications. Finally, also excluded from
this review are redraw hollows for cold-drawing when used in the
production of cold-drawn pipe or tube.
Although the HTSUS subheadings are provided for convenience and
customs purposes, our written description of the scope of this review
is dispositive.
Verification
As provided in section 782(i) of the Act, we verified information
provided by the respondent by using standard verification procedures,
including on-site inspection of the manufacturer's facilities, the
examination of relevant sales and financial records, and selection of
original documentation containing relevant information. Our
verification results are outlined in the verification reports, the
public versions of which are available at the Department of Commerce,
in Central Records Unit (CRU), Room B099.
[[Page 47448]]
Transactions Reviewed
The Department determined the normal value (NV) and constructed
export price (CEP) of each sale to the first unaffiliated customer in
the United States during the POR.
Product Comparisons
In accordance with section 771(16) of the Act, we considered all
products produced by the respondent, covered by the description in the
``Scope of the Review'' section, above, and sold in the home market
during the POR, to be foreign like products for purposes of determining
appropriate product comparisons to U.S. sales. 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 most similar foreign like product
on the basis of the characteristics listed in Appendix V of the
Department's antidumping questionnaire.
Fair Value Comparisons
To determine whether sales of small diameter circular seamless
carbon and alloy steel standard, line and pressure pipe by Mannesmann
to the United States were made at less than fair value, we compared the
CEP to the NV, as described in the ``Constructed Export Price'' and
``Normal Value'' sections of this notice. 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.
Date of Sale
The Department's current policy is normally to use the date of
invoice as recorded in the exporter or producer's records kept in the
ordinary course of business as the date of sale. However, we may use a
date other than the date of invoice where appropriate.
For Mannesmann's home-market sales, the company reported and we
used invoice date (which is also shipment date) as the date of sale.
For Mannesmann's U.S. sales, the company reported the date of order
confirmation as the date of sale. In the Department's September 18,
1996 questionnaire to Mannesmann at Appendix I, the Department stated
that in no case could the date of sale be later than the date of
shipment. Because the date of shipment for Mannesmann's U.S. sales was
in all cases earlier than the date of invoice (and thus not reported as
date of sale), we have used the shipment date of U.S. sales as date of
sale. Since there can be several months between order confirmation and
shipment, using shipment date in both markets puts home market and U.S.
sales on the same basis for date of sale.
Constructed Export Price
We have preliminarily determined that Mannesmann's U.S. sales
reported as export price (EP) sales were CEP sales. Our determination
is based on the evidence in the record of this review establishing that
U.S. sales were made through Mannesmann's affiliated sales agent, MPS,
who, as shown below, was more than a mere conduit, performing only
clerical functions, for the producer/exporter.
The Department determines U.S. sales through affiliated sales
agents to be EP only if: (1) The merchandise was shipped directly to
the unaffiliated buyer, without being introduced into the affiliated
selling agent's inventory; (2) this procedure is the customary sales
channel between the parties; and (3) the affiliated selling agent
located in the United States acts only as a processor of documentation
and a communication link between the foreign producer and the
unaffiliated buyer. See, e.g., Certain Cut-to-Length Carbon Steel Plate
from Germany: Final Results of Antidumping Duty Administrative Review,
62 FR 18390, 18389-18391 (April 15, 1997); Notice of Final
Determination of Sales at Less than Fair Value: Large Newspaper
Printing Presses and Components Thereof, Whether Assembled or
Unassembled, From Germany, 61 FR 38166, 38174-5 (July 23, 1996);
Certain Corrosion-Resistant Carbon Steel Flat Products From Korea:
Final Results of Antidumping Duty Administrative Review, 61 FR 18547,
18551 (April 26, 1996). This test has been approved by the CIT.
Independent Radionic Workers of America v. United States, Slip Op. 95-
45 at 2-3 (CIT 1995); PQ Corp. v. United States, 652 F. Supp. 724, 733-
35 (CIT 1987).
In applying the first two criteria to the present review, we found
that for the majority of sales, the merchandise was shipped directly to
the unaffiliated U.S. customer without being introduced into MPS's
inventory. We found that MPS occasionally buys for its own inventory,
but we did not find any subject merchandise purchased for inventory
during the POR. In addition, several sales were warehoused upon arrival
in the U.S. when the original customer canceled its order. MPS could
not find a new customer and subsequently sold the merchandise to the
original customer. The Department verified that the terms of sale
during the POR were CIF, duty paid to a port of entry near the
customer's plant, and that MPS did not take physical possession of the
shipment, except in the unusual instance described above.
Concerning the third criterion, however, the Department has
determined that MPS did act as more than a processor of sales documents
and a communications link between the unaffiliated U.S. customer and
MRW, the producer in Germany. Although the MRW participates with MPS in
meetings with U.S. customers once or twice a year and claims to reserve
the right to approve all orders, MPS negotiates each of the sales with
the customers, aiming to get the best price the market will allow. MPS
admitted it had a small say in the price negotiated but claimed that it
is very limited. The Department determined that MPS essentially
negotiates all sales. We found no evidence to support Mannesmann's
claim that MRW approved of or knew of the final prices on individual
sales to U.S. customers. To the contrary, regardless of whether MRW has
final approval rights, the record indicated that MPS has significant
involvement in the sales process. Further, while MPS admitted that it
is allowed to make a small profit on the U.S. sales, we found the price
differential between the price from the German sales agent (Mannesmann
Handel, a go-between for MRW and MPS) to MPS and the price from MPS to
the customer to be unexplained by the small commissions or profits
referenced by MPS at verification, nor by the U.S. duties and cash
deposits on antidumping duties, which MPS pays as importer of record
(see Sales Verification Report). Therefore, based on an analysis of all
the facts, we find that the selling activities of MPS extend beyond
those of a processor of documents or a communications link.
We calculated CEP based on packed prices to unaffiliated customers
in the United States. Where appropriate, we made deductions from the
starting price for discounts, foreign inland freight, international
freight, marine insurance, other transportation expenses, U.S. Customs
duties, warranties, credit expense, and other selling expenses that
were associated with economic activities occurring in the United
States. Finally, we made an adjustment for CEP profit in accordance
with section 772(d)(3) of the Act.
Based on our verification of Mannesmann's sales responses, we made
adjustments to credit, quantity, gross unit price, shipment date, and
sales date on certain sales, and we also increased other transportation
expenses on certain sales to account for unreported unloading expenses.
We also rejected as unverifiable reported U.S.
[[Page 47449]]
duty, foreign inland freight and international freight. Accordingly,
pursuant to section 776(a) of the Act, we used partial facts available.
For U.S. duty and foreign inland freight, we used the highest reported
U.S. duty and foreign inland freight, respectively, on any individual
U.S. sale. For international freight, we added the highest differential
between the actual and the reported international freight (from the
sales examined at verification) to reported international freight on
every U.S. sale.
Mannesmann's response indicated that U.S. credit expense was
calculated using the U.S. sales agent's interest rate on inter-company
loans from its parent. We compared this to the U.S. prime rate. Since
the company did not indicate that it has external borrowings and the
prime rate was always higher than the inter-company rate, we
recalculated credit expense using the U.S. prime rate.
At verification, the respondent indicated that it had not reported
any U.S. sales of ASTM A-333 (although it had reported home market
sales of this specification) to the Department because it believed the
scope definitively excluded this specification (as low temperature
service steels). We note that the scope discussion indicates A-333
(along with several other specifications) is covered by the scope of
this review if it is used in a standard, line, or pressure pipe
application. The respondent did not address the applications of the A-
333 sales during verification. Therefore, as facts available, we are
assuming all unreported low temperature steel sales (sourced from the
German producer) by MPS to be A-333 and, therefore, subject
merchandise. We summed the total quantity of these sales from
verification documents and applied Mannesmann's rate from the original
investigation as facts otherwise available (see ``Use of Facts
Otherwise Available'' section below).
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 ``fair''
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, in the usual commercial quantities and in the ordinary
course of trade, at the same level of trade as the export price. See
``Level of Trade'' section below.
We excluded from our analysis negative quantity observations
reported in the database, while leaving in the database the positive
quantity observations on the same orders with the negative quantity
observations. We found that the products in question would not likely
be used in matching to U.S. sales. We also excluded from our analysis
NV sales to affiliated home market customers where the weighted-average
sales prices to the affiliated parties were less than 99.5 percent of
the weighted-average sales prices to unaffiliated parties. See Usinor
Sacilor v. United States, 872 F. Supp. 1000, 1004 (CIT 1994).
On May 5, 1997, Mannesmann requested to be excused from reporting
all ``downstream sales'' (sales by affiliated resellers to unaffiliated
customers). It based its request on the fact that the sales to the
affiliated resellers would pass the arm's-length test or would not be
used in the Department's analysis. On May 14, 1997, the Department
informed Mannesmann that, based on Mannesmann's portrayal of the
information submitted, it did not have to report downstream sales at
that time. We preliminarily find that sales to one affiliated reseller
pass the arm's-length test, while sales to the other affiliated
resellers do not pass the arm's-length test but would not be used for
matching purposes.
Where appropriate, we deducted credit expenses, warranties,
packing, and certain discounts, and we added interest revenue. We
rejected as unverifiable inland freight, ``other adjustments,'' and
certain rebates and discounts (see Sales Verification Report). We
denied deductions from the reported price for each of these items.
The respondent reported credit expense based on a POR-average days
outstanding for receivables (all customers) on all sales (including
non-subject merchandise), since it indicated that it could only
manually provide payment date information on all sales. We compared
this overall average days of outstanding payment to the actual days
payment was outstanding on the sales examined at verification. We found
the actual days between shipment and payment to be consistently lower
than the average days used. Therefore, we calculated a simple average
days outstanding using actual shipment and payment dates from the sales
examined at verification, and we recalculated credit expense using this
average figure.
We found that respondent paid commissions in the home market on the
foreign like product to affiliated parties. Since there is no benchmark
which can be used to determine whether affiliated party commissions are
arm's-length values (i.e., the producer does not use an unaffiliated
selling agent for sales of the foreign like product), we have assumed
that affiliated party commissions were not paid on an arm's-length
basis. As a result, we did not make a circumstance-of-sale adjustment
for affiliated party commissions in the home market.
For comparison to CEP, we increased NV by U.S. packing costs in
accordance with section 773(a)(6)(A) of the Act. We made adjustments to
NV for differences in cost attributable to differences in physical
characteristics of the merchandise, pursuant to section
773(a)(6)(C)(ii) of the Act.
Level of Trade
In accordance with section 773(a)(1)(B)(i) of the Act and the
Statement of Administrative Action (SAA) accompanying the URAA, to the
extent practicable, the Department will calculate normal values based
on sales at the same level of trade as the U.S. sales (either EP or
CEP). When the Department is unable to find sales in the comparison
market at the same level of trade as the U.S. sales, the Department may
compare sales in the U.S. and foreign markets at different levels of
trade, and adjust NV if appropriate. The NV level of trade is that of
the starting-price sales in the home market. When NV is based on CV,
the level of trade is that of the sales from which we derive selling,
general and administrative expenses, and profit.
As the Department explained in Gray Portland Cement and Clinker
From Mexico: Final Results of Antidumping Duty Administrative Review,
62 FR 17148, 17156 (April 9, 1997) (``Cement From Mexico''), for both
EP and CEP, the relevant transaction for the level of trade 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 EP results in a price that would have been charged
if the importer had not been affiliated. We calculate the CEP by
removing from the first resale to an independent U.S. customer the
expenses specified in section 772(d) of the Act and the profit
associated with these expenses. These expenses represent activities
undertaken by, or on behalf of, the affiliated importer. Because the
expenses deducted under section 772(d) represent selling activities in
the United States, the deduction of these expenses normally yields a
different level of trade
[[Page 47450]]
for the CEP than for the later resale (which we use for the starting
price).
To determine whether home market sales are at a different level of
trade than U.S. sales, we examine whether the home market sales are at
different stages in the marketing process than the U.S. sales. The
marketing process in both markets begins with the good being sold by
the producer and extends to the sale to the final user. The chain of
distribution between the producer and the final user may have many or
few links, and each respondent's sales are generally to an importer,
whether independent or affiliated. We review and compare the
distribution systems in the home market and the United States,
including selling functions, class of customer, and the extent and
level of selling expenses for each claimed level of trade. Customer
categories such as distributor, retailer or end-user are commonly used
by respondents to describe level of trade, but without substantiation,
they are insufficient to establish that a claimed level of trade is
valid. An analysis of the chain of distribution and of the selling
functions substantiates or invalidates the claimed customer
categorization levels. Different levels of trade necessarily involve
differences in selling functions, but differences in selling functions,
even substantial ones, are not alone sufficient to establish a
difference in the level of trade. Differences in levels of trade are
characterized by purchasers at different stages in the chain of
distribution and sellers performing qualitatively or quantitatively
different functions in selling to them.
When we compare U.S. sales to home market sales at a different
level of trade, we make a level-of-trade adjustment only if the
difference in level of trade affects price comparability. We determine
any effect on price comparability by examining sales at different
levels of trade in a single market, the home market. Any price effect
must be manifested in a pattern of consistent price differences between
home market sales used for comparison and sales at the equivalent level
of trade of the export transaction. See Granular Polytetrafluorethylene
Resin from Italy; Preliminary Results of Antidumping Duty
Administrative Review, 62 FR 26283, 26285 (May 13, 1997); Cement From
Mexico at 17156. To quantify the price differences, we calculate the
difference in the average of the net prices of the same models sold at
different levels of trade. We use the average percentage difference
between these net prices to adjust NV when the level of trade of NV is
different from that of the export sale. If there is a pattern of no
price differences, then the difference in level of trade does not have
a price effect and, therefore, no adjustment is necessary.
Mannesmann sold to end-users and distributors in the U.S. market
and in the home market. Mannesmann claimed that sales to end-users and
distributors were at separate levels of trade. While Mannesmann's
questionnaire response indicated that it provided higher levels of
support to end-users than to distributors, Mannesmann did not explain
what distinguished high from low support or support these claims at
verification. At verification, when asked about levels of trade,
Mannesmann merely provided an MWR organization chart, which showed that
there was a different sales group for sales to end-users than for sales
to distributors. This chart did not indicate a separate subdivision for
U.S. sales. The respondent provided no support or information, as
requested in the sales verification outline, regarding differences in
selling functions for sales to end-users versus distributors and
between sales to its home market customers and the CEP level of trade.
Thus, our analysis of the information in this case leads us to conclude
that sales within each market and between markets are not made at
different levels of trade. Accordingly, we preliminarily find that all
sales in the home market and the U.S. market are made at the same level
of trade. Therefore, all price comparisons are at the same level of
trade and no adjustment pursuant to section 773(a)(7) is warranted.
Use of Facts Otherwise Available
We preliminarily determine, in accordance with section 776(a) of
the Act, that the use of facts available is appropriate for certain
aspects of Mannesmann's response as described in the ``Constructed
Export Price'' and ``Normal Value'' sections above. We find that we
were unable to verify certain information and that the respondent did
not provide the information necessary to make a decision on whether
certain unreported U.S. sales should have been reported under the scope
of this review.
Furthermore, we determine that, pursuant to section 776(b) of the
Act, it is appropriate to make an inference adverse to the interests of
this company because it failed to cooperate by not acting to the best
of its ability in providing the Department with information. We found
that Mannesmann did not act to the best of its ability by not providing
information on the uses of certain U.S. sales (A-333 sales). Also,
Mannesmann did not provide us with the majority of sales trace
verification packages until late on the final day of the home market
verification. These packages did not include any supporting
documentation for numerous adjustments (as discussed under the ``Normal
Value'' section above). Section 776(b) of the Act also authorizes the
Department to use as adverse facts available information derived from
the petition, the final determination, a previous administrative
review, or other information placed on the record. In this case, as
described above, we have used as facts available Mannesmann's rate from
the original investigation, which was based on information from the
petition. Although we have not fully corroborated this information in
accordance with section 776 (c) of the Act, we will do so for the final
results.
Cost of Production Analysis
Petitioners alleged, on December 20, 1996, that Mannesmann sold
small diameter circular seamless carbon and alloy steel standard, line
and pressure pipe in the home market at prices below cost of production
(COP). Based on this allegation, in accordance with Section 773(b) of
the Act, the Department determined, on January 31, 1997, that it had
reasonable grounds to believe or suspect that Mannesmann had sold the
subject merchandise in the home market at prices below COP. See Letter
to Mannesmann and Decision Memorandum (January 31, 1997). We therefore
initiated a cost investigation with regard to Mannesmann in order to
determine whether the respondent made home-market sales at prices below
its COP within the meaning of section 773(b) of the Act. Before making
any fair value comparisons, we conducted the COP analysis described
below.
A. Calculation of COP
We calculated the COP based on the sum of respondent'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.
Based on our verification of Mannesmann's cost response, we adjusted
Mannesmann's reported COP to reflect certain adjustments to cost of
manufacturing and interest expense as described below. We also have
denied a claimed start-up adjustment (as described below) and used
reported costs without the start-up adjustment.
1. Major Inputs
Mannesmann purchased the majority of its major inputs, billet
rounds, for seamless pipe, from an affiliated party.
[[Page 47451]]
Sections 773(f)(2) and (3) of the Act specify the treatment of
transactions between affiliated parties for purposes of reporting cost
data (for use in determining both COP and CV) to the Department.
Section 773(f)(2) indicates that the Department may disregard such
transactions if the amount representing that element (the transfer
price) does not fairly reflect the amount usually reflected (typically
the market price) in the market under consideration (where the
production takes place). Under these circumstances, the Department may
rely on the market price to value inputs purchased from affiliated
parties.
Section 773(f)(3) indicates that, if transactions between
affiliated parties involve a major input, then the Department may value
the major input based on the COP if the cost is greater than the amount
(higher of transfer price or market price) that would be determined
under 773(f)(2). Section 773(f)(3) applies if the Department ``has
reasonable grounds to believe or suspect that an amount represented as
the value of such input is less than the COP of such input.'' The
Department generally finds that such ``reasonable grounds'' exist where
it has initiated a COP investigation of the subject merchandise.
Because a COP investigation is being conducted in this case, the
Department requested in its supplemental Section D questionnaire that
Mannesmann provide cost of production information for the billet
rounds. That cost information was provided by the affiliated party and
was verified. In accordance with sections 773(f) (2) and (3), we used
the highest of transfer price, cost of production or market value to
value the billets. To determine the market value, we compared
information on one grade of billets which was obtained from both
affiliated and unaffiliated parties during the POR. We applied the
percentage price increase paid to unaffiliated parties to affiliated
party purchases to reflect market value (see Department's September 2,
1997 Analysis Memorandum).
2. Financial (Interest) Expense
In calculating net financial expense in its response, respondent
subtracted what it claimed to be financial income from short-term
sources. At verification, however, respondent failed to provide support
that the income was, in fact, short term in nature (see Cost
Verification Report). The Department considers financial income from
long-term investments as not being related to the production activities
of the company and, therefore, does not allow financial income from
long-term investments as offsets to financial expense in calculating
COP and CV. The Department only allows financial expense to be offset
by interest income from short-term sources (i.e., working capital). We
have therefore disallowed respondent's claimed offsets.
3. Start-Up Costs
Respondent claimed a start-up adjustment for operations at the
Zeithain plant during the first half of 1996. Specifically, these
start-up operations were associated with the complete rebuilding and
modernization of certain production equipment. Respondent claims that
it is eligible for this adjustment because the project represented a
major change in the production process and because output was adversely
affected by the start-up operations in a manner unrelated to the
pressures of market demand and seasonal factors.
Under section 773(f)(1)(C)(ii) of the Act, Commerce may make an
adjustment for start-up costs only if the following two conditions are
satisfied: (1) A company is using new production facilities or
producing a new product that requires substantial additional
investment, and (2) production levels are limited by technical factors
associated with the initial phase of commercial production.
The SAA at 166 states that ``new production facilities'' includes
the substantially complete retooling of an existing plant.
Substantially complete retooling involves the replacement of nearly all
production machinery or the equivalent rebuilding of existing
machinery. The production machinery which was replaced represents only
one process in multiple processes according to Mannesmann's internal
documentation describing the production process (see Department's
September 2, 1997 Analysis Memorandum). Thus, it does not meet the
requirement that nearly all production machinery be replaced, and does
not represent a substantial portion of the overall assets in the
facility.
Furthermore, Mannesmann did not demonstrate that production levels
were limited by technical factors associated with the initial phase of
commercial production. Company records indicate that production and
manufacturing activity levels were substantially the same during the
January to June 1995 time period as during the alleged start-up period
of January to June 1996.
Accordingly, we reject Mannesmann's claim for a start-up adjustment
because it did not demonstrate that they were using new production
facilities, including substantially complete retooling; nor did they
demonstrate that production levels were limited by technical factors
associated with the initial phase of commercial production.
B. Test of Home Market Prices
We used the respondent's weighted-average COP, as adjusted (see
above), for the period January 1, 1995 to July 31, 1996. 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,
rebates, and discounts.
C. Results of COP Test
Pursuant to section 773(b)(2)(C), where less than 20 percent of
Mannesmann'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 respondent's sales of a given
product 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. We also determined that such sales were also not made at prices
which would permit recovery of all costs within a reasonable period of
time, in accordance with section 773(b)(2)(D) of the Act, and
therefore, we disregarded the below-cost sales. Where all
contemporaneous sales of a specific comparison product were at prices
below the COP, 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 Mannesmann's cost of materials, fabrication, SG&A,
U.S. packing costs, and interest expenses as reported and a calculated
profit. As noted above, we recalculated Mannesmann's cost of
manufacturing, SG&A, and interest expense based on our verification
results. 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
[[Page 47452]]
ordinary course of trade, for consumption in the foreign country. For
selling expenses, we used the weighted-average home market selling
expenses.
Currency Conversion
For purposes of the preliminary results, we made currency
conversions 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. 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:
------------------------------------------------------------------------
Margin
Manufacturer/exporter Period (percent)
------------------------------------------------------------------------
Mannesmannroehren-Werke AG....... 1/27/95-7/31/96.......... 28.69
------------------------------------------------------------------------
Parties to the proceeding may request disclosure within five days
of the date of publication of this notice. Any interested party may
request a hearing within 10 days of publication. Any hearing, if
requested, will be held 44 days after the date of publication or the
first business day thereafter. Case briefs from interested parties may
be submitted not later than 30 days after the date of publication.
Rebuttal briefs, limited to issues raised in those briefs, may be filed
not later than 37 days after the date of publication of this notice.
The Department will publish the final results of this administrative
review, including its analysis of issues raised in the case and
rebuttal briefs, not later than 120 days after the date of publication
of this notice.
The following deposit requirements will be effective upon
publication of the final results of this antidumping duty review for
all shipments of small diameter circular seamless carbon and alloy
steel standard, line and pressure pipe, entered, or withdrawn from
warehouse, for consumption on or after the publication date, as
provided by section 751(a) of the Tariff Act: (1) The cash deposit rate
for the reviewed company will be that established in the final results
of review; (2) for exporters not covered in this review, but covered in
the LTFV investigation or previous review, the cash deposit rate will
continue to be the company-specific rate from the LTFV investigation;
(3) if the exporter is not a firm covered in this review, a previous
review, or the original 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; (4) the cash deposit
rate for all other manufacturers or exporters will continue to be 57.72
percent, the ``All Others'' rate made effective by the LTFV
investigation. These requirements, when imposed, shall remain in effect
until publication of the final results of the next administrative
review.
This notice serves as a preliminary reminder to importers of their
responsibility under 19 CFR 353.26 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 published in accordance
with section 751(a)(1) of the Act and 19 CFR 353.22.
Dated: September 2, 1997.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 97-23856 Filed 9-8-97; 8:45 am]
BILLING CODE 3510-DS-P