[Federal Register Volume 59, Number 1 (Monday, January 3, 1994)]
[Notices]
[Pages 62-65]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 93-32066]


[[Page Unknown]]

[Federal Register: January 3, 1994]


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DEPARTMENT OF COMMERCE
[A-570-814]

 

Certain Carbon Steel Butt-Weld Pipe Fittings From the People's 
Republic of China; Affirmative Preliminary Determination of 
Circumvention of Antidumping Duty Order

AGENCY: International Trade Administration/Import Administration, 
Department of Commerce.

ACTION: Notice of affirmative preliminary determination of 
circumvention of antidumping duty order.

SUMMARY: On July 21, 1993, the Department of Commerce received an 
application for a circumvention inquiry of the antidumping duty order 
on certain carbon steel butt-weld pipe fittings from the People's 
Republic of China. Pursuant to that application, the Department of 
Commerce initiated a circumvention inquiry on September 2, 1993, which 
was published in the Federal Register on September 13, 1993 (58 FR 
47859).
    We preliminarily determine that imports into the United States of 
pipe fittings that were finished in Thailand from unfinished pipe 
fittings produced in the People's Republic of China constitute 
circumvention of the antidumping duty order on certain carbon steel 
butt-weld pipe fittings from the People's Republic of China, within the 
meaning of section 781(b) of the Tariff Act of 1930, as amended. 
Interested parties are invited to comment on this preliminary 
determination.

EFFECTIVE DATE: January 3, 1994.

FOR FURTHER INFORMATION CONTACT: Karin Price, Donald Little, or Maureen 
Flannery, Office of Antidumping Compliance, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-
4733.

SUPPLEMENTARY INFORMATION:

Background

    On July 6, 1992, the Department of Commerce (the Department) 
published in the Federal Register (57 FR 29702) the antidumping duty 
order on certain carbon steel butt-weld pipe fittings (pipe fittings) 
from the People's Republic of China (PRC). On July 21, 1993, the 
petitioner, the U.S. Fittings Group, alleged that the antidumping duty 
order on pipe fittings from the PRC was being circumvented, and 
requested that the Department investigate the matter. The U.S. Fittings 
Group is an ad hoc trade association of domestic producers of pipe 
fittings; its members currently consist of Hackney, Inc.; Ladish 
Company, Inc.; L.A. Boiler Works, Inc.; Mills Iron Works, Inc.; Steel 
Forgings, Inc.; and Tube Forgings of America, Inc.
    The petitioner alleged that the antidumping duty order on pipe 
fittings from the PRC is being circumvented through the shipment of 
unfinished pipe fittings produced in the PRC to Awaji Sangyo (Thailand) 
Company, Ltd. (AST), located in Thailand, which then finishes the pipe 
fittings and exports them to the United States free of antidumping 
duties. AST was excluded from the antidumping duty order on pipe 
fittings from Thailand (57 FR 29702, July 6, 1992) due to the finding 
of a de minimis margin for AST in the less-than-fair-value (LTFV) 
investigation of that case.
    The petitioner requested, in accordance with section 781(b) of the 
Tariff Act of 1930, as amended, (the Tariff Act), that the Department 
conduct a circumvention inquiry. On September 2, 1993, pursuant to the 
petitioner's application, the Department initiated a circumvention 
inquiry in this matter. The notice of initiation of circumvention 
inquiry of the antidumping duty order on pipe fittings from the PRC was 
published in the Federal Register on September 13, 1993 (58 FR 47859).
    On September 24, 1993 and September 28, 1993, respectively, the 
Department issued circumvention questionnaires to AST, and to the 
Ministry of Foreign Trade and Economic Cooperation (MFTEC) in the PRC 
on behalf of all manufacturers and sellers of pipe fittings in the PRC. 
AST responded to Part 1 of the questionnaire on October 4, 1993 and to 
Part 2 of the questionnaire on November 8, 1993. Mitsui & Company 
(Mitsui), on behalf of Shenzhen Fittings Manufacturing Factory 
(Shenzhen Factory), the Chinese supplier of unfinished pipe fittings to 
AST, responded to Part 1 of the questionnaire on October 15, 1993 and 
to Part 2 of the questionnaire on November 8, 1993. Shenzhen Factory is 
a limited partnership, in which Mitsui is the general partner. Neither 
MFTEC nor other Chinese manufacturers or sellers of the subject 
merchandise responded to the Department's questionnaire. The Department 
issued supplemental questionnaires to AST and to Mitsui on November 12, 
1993 and November 16, 1993, respectively. The Department received AST's 
response to its supplemental questionnaire on November 23, 1993, and 
Mitsui's response to its supplemental questionnaire on November 29, 
1993. The Department issued additional supplemental questionnaires to 
AST and Mitsui on December 3, 1993; responses were received on December 
10, 1993.
    The Department also issued a circumvention questionnaire to Thai 
Benkan Company, Ltd. (Thai Benkan), a Thai importer of unfinished tees 
manufactured by Shenzhen Factory, on November 8, 1993. The Department 
received a response from Thai Benkan on November 30, 1993, which was 
revised on December 2, 1993. Thai Benkan stated in its response that it 
has made no shipments of pipe fittings to the United States after 
November 1991.
    The Department also issued a questionnaire to Silbo Industries, 
Inc. (Silbo), a U.S. importer of subject merchandise from Thailand and 
the PRC, on November 16, 1993. Silbo responded to part of the 
questionnaire on December 8, 1993. The remaining portion of its 
response is due to the Department on January 4, 1994. Additionally, the 
Department sent a questionnaire to another company whose name is 
proprietary. However, the response was untimely and was returned and 
not considered for our determination.

Scope of the Antidumping Duty Order

    Imports covered by the antidumping duty order are shipments of 
carbon steel butt-weld pipe fittings, having an inside diameter of less 
than 14 inches, imported in either finished or unfinished form. These 
formed or forged pipe fittings are used to join sections in piping 
systems where conditions require permanent, welded connections, as 
distinguished from fittings based on other fastening methods (e.g., 
threaded, grooved, or bolted fittings). Carbon steel butt-weld pipe 
fittings are currently classified under subheading 7307.93.30 of the 
Harmonized Tariff Schedule (HTS). Although the HTS subheading is 
provided for convenience and Customs purposes, our written description 
of the scope of this order remains dispositive.

Scope of the Anti-Circumvention Inquiry

    The products subject to this circumvention inquiry are pipe 
fittings, as described above in the ``Scope of the Antidumping Duty 
Order'' section, which are exported in unfinished form from the PRC to 
Thailand, where some finishing is performed. We requested data for the 
period January 1, 1991 through August 31, 1993, except for pattern of 
trade data, which were requested for the period January 1, 1988 through 
August 31, 1993.

Nature of the Anti-Circumvention Inquiry

    Section 781(b)(1) of the Tariff Act provides that if:
    (A) Merchandise imported into the United States is of the same 
class or kind as any merchandise produced in a foreign country that is 
the subject of an antidumping duty order,
    (B) Before importation into the United States, such imported 
merchandise is completed or assembled in another foreign country from 
merchandise which (i) is subject to such order, or (ii) is produced in 
the foreign country with respect to which such order applies,
    (C) The difference between the value of such imported merchandise 
and the value of the merchandise completed or assembled in another 
foreign country is small, and
    (D) The administering authority determines that action is 
appropriate under this paragraph to prevent evasion of such order,

the Department, after taking into account any advice provided by the 
U.S. International Trade Commission (ITC) under section 781(e), may 
include such imported merchandise within the scope of such order.
    In determining whether to include merchandise assembled or 
completed in a foreign country within an order, section 781(b)(2) of 
the Tariff Act directs the Department to consider such other factors as 
(1) the pattern of trade, (2) whether the manufacturer or exporter of 
the merchandise produced in the country to which the order applies is 
related to the entity who uses such merchandise to assemble or complete 
in the foreign country the merchandise that is subsequently imported 
into the United States, and (3) whether imports into the foreign 
country of the merchandise produced in the country to which the order 
applies have increased after issuance of that order.

I. Statutory Criteria

(1) Class or Kind of Merchandise
    In this inquiry, the merchandise completed in Thailand and exported 
to the United States is pipe fittings having an inside diameter of less 
than 14 inches. Thus, the product exported to the United States is of 
the same class or kind of merchandise as the product subject to the 
antidumping duty order.
(2) Merchandise Imported Into the United States Completed From 
Merchandise Subject to an Order
    The pipe fittings finished in Thailand and exported to the United 
States were completed from unfinished ``as-formed'' pipe fittings 
manufactured in the PRC. Therefore, the merchandise exported to the 
United States is completed from merchandise subject to the antidumping 
duty order and produced in the country with respect to which the 
antidumping duty order applies.
(3) Difference in Value
    In this anti-circumvention inquiry, we based our analysis of the 
difference in value on both a quantitative analysis of the value of the 
finishing process in Thailand, and a qualitative analysis of the nature 
of the processing performed in Thailand and the level of investment in 
Thailand. Such an analysis is consistent with our analysis in previous 
anti-circumvention inquiries. See, e.g., Granular 
Polytetrafluoroethylene Resin from Italy; Final Affirmative 
Determination of Circumvention of Antidumping Duty Order (58 FR 26100, 
April 30, 1993).
    (a) Value of the Completed Merchandise. We used the selling price 
of the finished tees sold by AST to the United States on a model-
specific, per kilogram basis to represent the value of the finished 
pipe fittings sold to the United States, as reported in AST's 
questionnaire response. The terms of sale for these sales were CIF U.S. 
port duty unpaid.
    (b) Value of Thai Completion. In order to determine the value of 
the Thai completion, we used the cost of manufacturing at AST's factory 
which finished the tees from unfinished Chinese tees for each month 
during the period January 1, 1991 through August 31, 1993 in which the 
finishing occurred, as provided by AST. We allocated selling, general, 
and administrative expenses and profit from AST's financial statements, 
as well as an amount of Awaji Sangyo K.K. of Japan's export selling 
expenses as provided in AST's November 23, 1993 response, to AST's cost 
of manufacturing.
    We used the value of the Thai completion, as provided by AST, 
because it was the most complete, verifiable information available. 
Complete factors data were unavailable for constructing the cost of the 
unfinished Chinese tees. For example, Shenzhen Factory was not able to 
provide the consumption rates of raw material inputs, other than steel 
pipe, used in manufacturing the unfinished tees or the number of labor 
hours used in the production process. Public data on electricity 
consumption for producing unfinished tees were also not available.
    We calculated the difference in value percentage by dividing the 
value added in Thailand by the value of the completed merchandise. We 
preliminarily determine that the difference in value is 15 percent of 
the value of the completed merchandise. (Since the precise figure is 
business proprietary, the stated percentage is within a range of plus 
or minus 10 percent.) See December 22, 1993 proprietary analysis 
memorandum from case analyst to the File. In order to determine whether 
15 percent is ``small'' within the meaning of the Tariff Act, we 
examined the nature of the processing performed in Thailand and the 
level of investment in Thailand.

Nature of Processing

    According to the description of the manufacturing process provided 
by the ITC in its final affirmative determination of injury concerning 
imports of pipe fittings from the PRC and Thailand (see Certain Carbon 
Steel Butt-Weld Pipe Fittings from China and Thailand; Determinations 
of the Commission in Investigations Nos. 731-TA-520 and 521 (Final) 
Under the Tariff Act of 1930, Together With the Information Obtained in 
the Investigations, USITC Publication 2528, June 1992 at I-7 through I-
10), the cold process is the most efficient process for forming tees 
which are less than 12 inches in diameter. In the cold process, the raw 
material pipe is first cut to length, and the section is enclosed in a 
die that matches the shape and size of the finished tee within a press. 
The die is then closed, plugs are used to seal the ends, and a fluid, 
such as water or a light oil, forces under pressure the metal into the 
shape of the die. This process produces the unfinished tee. Finishing 
steps re-round, resize, and anneal the unfinished tee.
    The finishing steps involved in the production of pipe fittings 
include one or more of the following: shot blasting, machine beveling, 
boring and tapering, grinding, die stamping, inspection, and painting. 
According to the ITC, beveling, boring, and tapering add an estimated 
11-20 percent of value, and the remaining finishing operations add an 
estimated 3-9 percent of value.
    Mitsui's response indicates that Shenzhen Factory produces 
unfinished tees using a cold-forming method. After Shenzhen Factory 
cuts the raw material carbon steel pipe to a pre-determined length and 
lubricates the pipe on the exterior surface, it cold forms the pipe 
using the ``Bulge Method,'' a process in which a hydraulic press is 
used.
    AST receives the unfinished tees in this as-formed condition, with 
the bulging head closed. AST then cuts the bulging head off the tee, 
heat treats the ``decapped'' as-formed tee in order to prevent the 
steel material from becoming brittle from the stress of cold-forming, 
shot blasts the tees to remove heat scales from the surface, and bevels 
and precision machines the ends of the tees. These processes are then 
followed by cleaning, coating with an oxidizing agent or paint, and 
marking. AST does not provide any additional materials to the 
unfinished pipe fitting.
    Based on the above description of the manufacturing process for 
tees and other pipe fittings, we preliminarily determine that the 
finishing operations performed by AST, or by any other Thai company, to 
finish pipe fittings are of minor value when compared to the production 
of the unfinished pipe fittings.

Level of Investment

    AST has stated that it began in 1991 its tees conversion operation, 
i.e., the conversion of unfinished tees into finished tees, pursuant to 
a formal corporate decision made in the prior year. This was an interim 
step with the goal of producing tees in an integrated process, from the 
raw material pipe, by the end of 1993. The level of investment 
undertaken by AST, or which will be undertaken by AST, toward this goal 
indicates that the plant and equipment required to produce the as-
formed tee from the raw material pipe is substantial as compared to 
that required for the finishing operations. See December 22, 1993 
proprietary analysis memorandum from case analyst to the File.
    We have determined that the finishing operations performed to 
finish unfinished tees provide limited value to the finished tee 
relative to the production process used to manufacture the unfinished 
tee. Moreover, the level of investment required to produce unfinished 
tees is significant when compared to that required to finish the 
unfinished tee. Accordingly, based on the qualitative factors discussed 
above, we preliminarily determine that the calculated difference in 
value percentage is ``small'' within the meaning of section 781(b) of 
the Tariff Act.
    (4) Action is Appropriate to Prevent Evasion of the Order We 
preliminarily determine that action is appropriate to prevent the 
circumvention of the antidumping duty order on pipe fittings from the 
PRC. The Department has no other means to ensure that entries of 
Chinese pipe fittings finished by AST are suspended and any appropriate 
duties ultimately collected thereon, or to ensure that proper cash 
deposits are collected on entries of Chinese pipe fittings finished by 
other companies in Thailand.

II. Factors

(1) Pattern of Trade
    To evaluate the pattern of trade factors in this case, we examined 
the timing and quantities of exports of pipe fittings from AST to the 
United States during the period January 1, 1988 through August 1, 1993. 
AST began exporting finished tees to the United States in 1991. Data on 
AST's exports of finished tees to the United States show a significant 
increase in the volume of these exports subsequent to the issuance of 
the antidumping duty order on pipe fittings from the PRC. We also 
examined data on Shenzhen Factory's exports to the United States for 
the period January 1, 1991 through August 31, 1993. These data indicate 
that the volume of Shenzhen Factory's exports to the United States 
decreased significantly subsequent to the issuance of the antidumping 
duty order on pipe fittings from the PRC.
    Therefore, this factor indicates that circumvention may have been 
occurring during the period. See December 22, 1993 analysis memorandum 
from case analyst to the File.
    Because an antidumping duty order on pipe fittings from Thailand 
was issued by the Department at the same time as the order on pipe 
fittings from the PRC, any comparison of the quantity of exports from 
Thailand to the United States with the quantity of exports from the PRC 
to the United States prior to and subsequent to the issuance of the 
orders would be meaningless. Therefore, we have not included such a 
comparison in our analysis.
(2) Relationship
    Generally, we consider circumvention to be more likely when the 
manufacturer of the covered merchandise is related to the third country 
assembler. Our inquiry indicates that the relationship between AST, the 
third country assembler and exporter of the finished pipe fittings to 
the United States, and Mitsui and Shenzhen Factory, the entity which 
produced the unfinished pipe fittings sold to AST, was limited to the 
purchase/sale of the unfinished pipe fittings. Therefore, in this 
inquiry, no purchases of Chinese unfinished pipe fittings occurred 
between related parties within the meaning of section 773(e)(4) of the 
Tariff Act.
(3) Increase in Imports
    Data on imports of unfinished pipe fittings into Thailand from 
Chinese manufacturers/sellers other than Shenzhen Factory were not 
available, and public data on imports of pipe fittings from the PRC 
into Thailand were not available for the period after June 1992. 
Therefore, to measure the increase in imports, we examined export data 
supplied by Shenzhen Factory for the period January 1, 1991 through 
August 31, 1993. It is clear that an increase in exports of unfinished 
tees from Shenzhen Factory to Thailand occurred after the issuance of 
the antidumping duty order on pipe fittings from the PRC. This increase 
corresponds to the increase of AST's exports of finished tees to the 
United States during the same period. See December 22, 1993 analysis 
memorandum from the case analyst to the File. Accordingly, this factor 
indicates that circumvention activities may have occurred.

Affirmative Preliminary Determination of Circumvention

    After consideration of the factors discussed above, we 
preliminarily determine that circumvention of the antidumping duty 
order on pipe fittings from the PRC has occurred within the meaning of 
section 781(b) of the Tariff Act. We base this determination on the 
following. First, the items completed in Thailand and sold to the 
United States are of the same class or kind of merchandise as that 
covered by the order, and are completed from merchandise produced in 
the PRC and covered by the order. Second, the difference in value 
between the unfinished pipe fittings sold to Thailand and the value of 
the finished pipe fittings exported to the United States is small. We 
note that our determination of ``small'' in this case is not 
necessarily synonymous with the determination of ``small'' that the 
Department has used in the past or that the Department will use in 
future anti-circumvention inquiries, because Congress has directed us 
to make such determinations on a case-by-case basis. Further, we find 
the pattern of trade and level of imports into Thailand indicate a 
finding of circumvention of the antidumping duty order. Finally, we 
find that action is appropriate to prevent evasion of the antidumping 
duty order. To this end, and in accordance with the purposes of section 
781, we are applying this finding to all Thai manufacturers/exporters 
of the class or kind of merchandise, i.e., pipe fittings, subject to 
the certification requirements described below.

Requirement of Certification

    Considered within the scope of the antidumping duty order on pipe 
fittings from the PRC are all imports from all producers into the 
United States of pipe fittings from Thailand, as defined in the ``Scope 
of the Inquiry'' section of this notice, unless accompanied by a 
certificate stating that such pipe fittings have not been produced from 
unfinished Chinese pipe fittings.

Suspension of Liquidation

    In accordance with 19 CFR 353.29(j)(2), we are directing the U.S. 
Customs Service to suspend liquidation of all entries of pipe fittings 
from Thailand. The merchandise subject to suspension of liquidation is 
pipe fittings, as defined in the ``Scope of Circumvention Inquiry'' 
section of this notice, that are entered or withdrawn from warehouse, 
for consumption on or after the date of publication of this notice in 
the Federal Register. (We note that entries of pipe fittings from 
Thailand, with the exception of AST's pipe fittings, are currently 
being suspended pursuant to the antidumping duty order on pipe fittings 
from Thailand (57 FR 29702, July 6, 1992).) For all such imports which 
are accompanied by a certificate stating that such pipe fittings have 
not been produced from unfinished Chinese pipe fittings, the U.S. 
Customs Service shall require a cash deposit or posting of a bond in 
the amount of the company-specific rate for the Thai manufacturer/
exporter, or, if there is no company-specific rate for the Thai 
manufacturer or exporter, the ``All Others'' rate for pipe fittings 
from Thailand. For all such imports which are accompanied by a 
certificate stating that the merchandise was manufactured using Chinese 
unfinished pipe fittings and the name of the manufacturer of the 
Chinese unfinished pipe fittings, the U.S. Customs Service shall 
require a cash deposit or posting of a bond in the amount of the 
company-specific rate of the manufacturer of the Chinese unfinished 
pipe fittings. For all such imports which are accompanied by a 
certificate stating that such pipe fittings have been produced from 
unfinished Chinese pipe fittings, but do not provide the specific 
Chinese manufacturer, the U.S. Customs Service shall require a cash 
deposit or posting of a bond in the amount of the highest rate for pipe 
fittings from the PRC. For all other imports of pipe fittings from 
Thailand which are accompanied by an inadequate certificate, or no 
certificate, the U.S. Customs Service shall require a cash deposit or 
posting of a bond in an amount based on the higher of (1) the highest 
rate for any manufacturer/exporter of pipe fittings from the PRC, or 
(2) the rate for the Thai manufacturer/exporter, or, if there is no 
company-specific rate for the Thai manufacturer or exporter, the ``All 
Others'' rate for pipe fittings from Thailand.
    This suspension of liquidation shall remain in effect until further 
notice.

Notification of the International Trade Commission

    The Department, consistent with section 781(e)(1)(B) of the Tariff 
Act, will notify the ITC of this preliminary determination to include 
merchandise subject to this inquiry within the antidumping duty order 
on pipe fittings from the PRC. Pursuant to section 781(e)(2) of the 
Tariff Act, the ITC may request consultation concerning the 
Department's proposed inclusion of the subject merchandise. If, after 
consultations, the ITC believes that a significant injury issue is 
presented by the proposed inclusion, the ITC will have 60 days from the 
date of notification to provide written advice to the Department.

Public Comment

    Interested parties may request disclosure within 5 days of the date 
of publication of this determination, and may request a hearing within 
10 days of publication. Case briefs and/or written comments from 
interested parties may be submitted not later than February 16, 1994. 
Rebuttal briefs and rebuttals to written comments, limited to issues 
raised in those briefs or comments, may be filed not later than 
February 22, 1994. Any hearing, if requested, will be held on February 
24, 1994. The Department will publish its final determination with 
respect to this anti-circumvention inquiry, including the results of 
its analysis of any written or oral comments.
    This preliminary affirmative circumvention determination is in 
accordance with section 781(b) of the Tariff Act (19 U.S.C. 1677j(b)) 
and 19 CFR 353.29(f).

    Dated: December 23, 1993.
Barbara R. Stafford,
Acting Assistant Secretary for Import Administration.
[FR Doc. 93-32066 Filed 12-30-93; 8:45 am]
BILLING CODE 3510-DS-P