[Federal Register Volume 59, Number 191 (Tuesday, October 4, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-24540]


[[Page Unknown]]

[Federal Register: October 4, 1994]


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DEPARTMENT OF COMMERCE
[A-412-816]

 

Notice of Preliminary Determination of Sales at Less Than Fair 
Value: Certain Carbon Steel Butt-weld Pipe Fittings From the United 
Kingdom

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

EFFECTIVE DATE: October 4, 1994.

FOR FURTHER INFORMATION CONTACT:
Vincent Kane, or Julie Anne Osgood, Office of Countervailing 
Investigations, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW, Washington, D.C. 20230; telephone (202) 482-
2815 or 482-0167, respectively.

    Preliminary Determination: We have preliminarily determined that 
certain carbon steel butt-weld pipe fittings from the United Kingdom 
(``U.K.'') are being sold in the United States at less than fair value, 
as provided in section 733 of the Tariff Act of 1930, as amended (the 
``Act''). The estimated margins of sales at less than fair value are 
shown in the ``Suspension of Liquidation'' section of this notice.

Case History

    Since the initiation of this investigation on March 21, 1994 (59 FR 
14148, March 25, 1994), the following events have occurred:
    On April 11, 1994, the United State International Trade Commission 
(``ITC'') issued an affirmative preliminary injury determination (see 
ITC Investigation No. 731-TA-694).
    In accordance with 19 CFR 353.42(b), the Department of Commerce 
(``the Department'') issued its antidumping duty questionnaire to 
B.K.L. Fittings Limited (``BKL''), on April 29, 1994. BKL is the only 
U.K. producer and exporter named in the petition.
    Petitioner requested a 50-day postponement of the preliminary 
determination on June 30, 1994. The request was granted by the 
Department of Commerce on July 19, 1994 (59 FR 37961, July 26, 1994).
    On June 16, 1994, petitioner alleged that BKL was selling the 
subject merchandise in the U.K. at less than its cost of production. 
After analyzing petitioner's allegation we found reasonable grounds to 
believe or suspect that sales in the home market were being made at 
less than the cost of production. On August 15, 1994, we issued a cost 
of production/constructed value questionnaire to BKL.
    On August 4, 1994, petitioner alleged critical circumstances with 
regard to imports of certain carbon steel butt-weld pipe fittings from 
the U.K.

Scope of Investigation

    The products covered by this investigation are certain carbon steel 
butt-weld pipe fittings (``pipe fittings'') having an inside diameter 
of less than fourteen inches (355 millimeters), imported in either 
finished or unfinished condition. Pipe fittings are formed or forged 
steel products used to join pipe sections in piping systems where 
conditions require permanent welded connections, as distinguished from 
fittings based on other methods of fastening (e.g., threaded, grooved, 
or bolted fittings). Butt-weld fittings come in a variety of shapes 
which include ``elbows,'' ``tees,'' ``caps,,'' and ``reducers.'' The 
edges of finished pipe fittings are beveled, so that when a fitting is 
placed against the end of a pipe (the ends of which have also been 
beveled), a shallow channel is created to accommodate the ``bead'' of 
the weld which joins the fitting to the pipe. These pipe fittings are 
currently classifiable under subheading 7307.93.3000 of the Harmonized 
Tariff Schedule of the United States (``HTSUS'').
    Although the HTSUS subheading is provided for convenience and 
customs purposes, our written description of the scope of this 
proceeding is dispositive.

Period of Investigation

    The period of investigation (``POI'') is September 1, 1993, through 
February 28, 1994.

Product Comparisons

    In making our fair value comparisons, in accordance with the 
Department's standard methodology, we first compared sales of 
merchandise identical in all respects. If no identical merchandise was 
sold, we compared sales of the most similar merchandise, as determined 
by the model-matching criteria contained in Appendix V of the 
questionnaire (``Appendix V'') (on file in Room B-099 of the main 
building of the Department of Commerce (``Public File'')).
    We were unable to compare United States sales to home market sales 
at the same level of trade in accordance with 19 CFR 353.58 (1994), 
because the computer tape submitted by respondent did not identify the 
level of trade for each sale. For purposes of our preliminary 
determination we compared sales without regard to level of trade. 
However, we will request that respondent submit the necessary data on 
level of trade to the Department within the regulatory deadlines (see 
19 CFR 353.31) and we will take it into consideration in accordance 
with 19 CFR 353.58 in our final determination.

Fair Value Comparisons

    To determine whether BKL's sales for export to the United States 
were made at less than fair value, we compared the United States price 
(``USP'') to the foreign market value (``FMV''), as specified in the 
``United States Price'' and ``Foreign Market Value'' sections of this 
notice. BKL's sales for export to the Untied States and in its home 
market involved both identical and similar merchandise. For those U.S. 
sales compared to a sale of similar merchandise in the home market, we 
made an adjustment, pursuant to 19 CFR 353.57, for physical differences 
in merchandise. For certain products, respondent did not provide the 
information necessary to make a comparison with the most similar 
merchandise based on the model-matching criteria contained in Appendix 
V. As those sales accounted for a very small percentage of total sales 
of subject merchandise, they have been disregarded in calculating our 
preliminary margin.

United States Price

    We based USP on purchase price, in accordance with section 772(b) 
of the Act, where the subject merchandise was sold to an unrelated 
purchaser in the United States before importation and where the use of 
exporter's sales price (``ESP'') methodology was not otherwise 
indicated.
    We calculated purchase price based on packed, c.i.f. import prices 
to an unrelated customer in the United States. We made deductions to 
the U.S. price, where appropriate, for foreign brokerage, foreign 
inland freight, ocean freight and marine insurance, U.S. duty and 
brokerage.
    Where sales to the first unrelated purchaser took place after 
importation of the subject merchandise into the United States, we based 
USP on ESP, in accordance with section 772(c) of the Act. Almost all of 
the ESP sales of subject merchandise were reported as further 
manufactured in the United States.
    For ESP sales we made deductions, where appropriate, for discounts, 
foreign brokerage, foreign inland freight, ocean freight, marine 
insurance, U.S. duty, U.S. inland freight, and U.S. brokerage and 
handling. In addition, for ESP sales only, we deducted credit expense, 
indirect selling expense, inventory carrying costs, and commissions to 
an unrelated agent. For certain ESP sales where respondent did not 
provide paydates, we used the average number of credit days in 
calculating credit expense.
    We made an adjustment to U.S. price for value-added tax (``VAT'') 
assessed on comparison sales in the U.K. in accordance with our 
practice, pursuant to the Court of International Trade (``CIT'') 
decision in Federal-Mogul, et al. v. United States, 834 F. Supp. 1391. 
See Preliminary Antidumping Duty Determination: Color Negative 
Photographic Paper and Chemical Components from Japan (59 FR 16177, 
16179, April 6, 1994), for an explanation of this methodology.
    For pipe fittings that were further manufactured in the United 
States, we deducted all value added in the United States, pursuant to 
section 772(e)(3) of the Act. The value added consists of the cost of 
fabrication and general expenses associated with the further 
manufacturing operations, as well as a proportional amount of profit or 
loss attributable to the further manufacture. We calculated profit or 
loss by deducting from the sales price of the further manufactured 
merchandise the related production costs and selling expense incurred 
by the company in both the U.K. and the United States. We then 
allocated total profit or loss proportionately to all components of 
cost. We included only the profit or loss allocated to the further 
manufacturing portion of total cost in our calculation of value added. 
Additionally, we adjusted general and administrative (G&A) expenses 
from an allocation based on weight to an allocation based on cost of 
sales.
    Where respondent did not provide further manufacturing costs for 
certain products, we disregarded sales of those products in our 
preliminary margin calculation.

Foreign Market Value

    In order to determine whether BKL had a sufficient volume of sales 
in the home market to serve as the basis for calculating FMV, we 
compared the volume of home market sales of subject merchandise to the 
volume of third country sales of subject merchandise, in accordance 
with section 773(a)(1)(B) of the Act. On this basis, we determined that 
the home market was viable.
    We calculated FMV based on both f.o.b. plant and delivered prices 
inclusive of packing, to customers in the U.K. In light of the decision 
of the Court of Appeals for the Federal Circuit in Ad Hoc Committee of 
AZ-NM-TX-FL Producers of Gray Portland Cement v. United States, 13 F. 
3d 398 (Fed. Cir., January 5, 1994), we deducted post-sale home market 
movement charges from the FMV under the circumstance-of-sale provision 
of 19 CFR 353.56(a). This adjustment included home market inland 
freight.
    We deducted rebates, where appropriate, on home market sales. We 
deducted home market packing costs and added U.S. packing costs in 
accordance with section 773(a)(1) of the Act. In addition, we made 
circumstance-of-sale adjustments for differences in credit charges 
between the two markets, pursuant to CFR 353.56(a)(2). In calculating 
home market credit expense, we used the weighted-average interest rate 
paid by respondent on short-term borrowings denominated in British 
pounds. In calculating U.S. credit expense, we used the weighted-
average interest rate paid by respondent on short-term dollar 
borrowings. For a further discussion of the Department's treatment of 
credit in this investigation, please see Memorandum from Barbara R. 
Stafford to Susan G. Esserman (September 26, 1994) on file in room B-
099 of the U.S. Department of Commerce.
    In accordance with 19 CFR 353.56(b)(1), we deducted home market 
indirect selling expenses as an offset to the U.S. commissions, but 
capped this deduction by the amount of the ESP commissions and indirect 
selling expenses. We adjusted for VAT in accordance with our practice 
(see ``United States Price'' section of this notice.)

Cost of Production

    Petitioner alleged that BKL made home market sales during the POI 
at prices below its cost of production (``COP''). Based on petitioner's 
allegations and after examining the evidence on the record, we 
concluded that we had reasonable grounds to ``believe or suspect'' that 
sales were made below COP. Thus, we initiated a COP investigation 
pursuant to section 773(b) of the Act.
    We performed a product-specific COP test, in which we examined 
whether each home market sale was priced below that product's COP. The 
Department defines COP as the sum of direct material, direct labor, 
variable and fixed factory overhead, general expenses, and packing 
expense, in accordance with 19 CFR 353.51(c). (See, e.g., Preliminary 
Results of Antidumping Duty Administrative Review: Polyethylene 
Terephthalate Film, Sheet, and Strip From the Republic of Korea (59 FR 
35098, 35099, July 8, 1994).) We compared the COP for each product to 
the home market unit price, net of rebates, movement expenses, and 
indirect expenses. We relied on submitted COP information except for 
the calculation of financing expense. The submitted calculation was 
based on the combination of the financial statements of BKL and its 
parent company without taking into account elimination of intercompany 
transactions. Therefore, we recalculated financing expense using the 
parent company financial statements only.
    In accordance with section 773(b) of the Act, we also examined 
whether the home market sales of each product were made at prices below 
their COP in substantial quantities over an extended period of time, 
and whether such sales were made at prices that would permit recovery 
of all costs within a reasonable period of time in the normal course of 
trade.
    To satisfy the requirement of 773(b)(1) that below cost sales be 
disregarded only if made in substantial quantities, the following 
methodology was used. For each product where less than ten percent, by 
quantity, of the home market sales during the POI were made at prices 
below the COP, we included all sales of that model for the computation 
of FMV. For each product where ten percent or more, but less than 90 
percent, of the home market sales during the POI were priced below the 
COP, we excluded from the calculation of FMV those home market sales 
which were priced below the COP, provided that the below-cost sales of 
that product were made over an extended period of time. Where we found 
that more than 90 percent of respondent's sales were at prices below 
the COP, and such sales were over an extended period of time, we 
disregarded all sales of that product and calculated FMV based on CV.
    In order to determine whether below-cost sales had been made over 
an extended period of time, we compared the number of months in which 
below-cost sales occurred for each product to the number of months in 
the POI in which that product was sold. If a product was sold in fewer 
than three months during the POI, we did not exclude sales unless there 
were below cost sales in each month of sale. If a product was sold in 
three or more months, we did not exclude the below-cost sales unless 
there were below-cost sales in at least three months during the POI. 
(See Preliminary Results and Partial Termination of Antidumping Duty 
Administrative Reviews: Tapered Roller Bearings, Four Inches or Less in 
Outside Diameter, and Components Thereof, From Japan (58 FR 69336, 
69338, December 30, 1993).)

Constructed Value

    For those products without an adequate number of sales at prices 
equal to or greater than the COP, we based FMV on constructed value 
(``CV''), pursuant to section 773(b)(2) of the Act. We calculated CV 
based on the sum of the cost of materials, fabrication, general 
expenses, U.S. packing costs and profit, in accordance with section 
773(e)(1)(B) (i) and (ii) of the Act. We relied on submitted CV 
information except for the calculation of financing expense, which we 
recalculated as described in the ``Cost of Production'' section of this 
notice. We included in our calculation of CV: (1) the greater of BKL's 
general expenses or the statutory minimum of ten percent of the cost of 
manufacture (``COM''), as appropriate, and; (2) for profit, the greater 
of BKL's profit or the statutory minimum of eight percent of the sum of 
COM and general expenses.

Currency Conversion

    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.

Critical Circumstances

    Petitioner alleges that critical circumstances exist with respect 
to imports of the subject merchandise from the U.K. Section 733(e)(1) 
of the Act provides that the Department will determine that there is a 
reasonable basis to believe or suspect that critical circumstances 
exist if:
    (A)(i) There is a history of dumping in the United States or 
elsewhere of the class or kind of merchandise which is the subject of 
this investigation, or
    (ii) The person by whom, or for whose account, the merchandise was 
imported knew or should have known that the exporter was selling the 
merchandise which is the subject of the investigation at less than its 
fair value, and
    (B) There have been massive imports of the class or kind of 
merchandise which is the subject of the investigation over a relatively 
short period.
    Regarding (A)(ii) above, we normally consider margins of 15 percent 
or more for exporter's sales price sales, and margins of 25 percent or 
more for purchase price sales sufficient to input knowledge of dumping. 
If the U.S. price is based on both PP and ESP, we normally weight-
average the 25 percent and 15 percent benchmarks by the volume of PP 
and ESP sales to arrive at a weighted-average benchmark percentage for 
imputing the knowledge of dumping (see, e.g., Notice of Final 
Determination of Sales at Less Than Fair Value: Certain Cold-Rolled 
Carbon Steel Flat Products From Argentina (58 FR 37078, July 9, 1993)).
    The calculated preliminary margin in this investigation indicates 
that importers of pipe fittings should have known that the merchandise 
was being sold at less than fair value.
    Pursuant to 19 CFR 353.16 (f), we generally consider the following 
factors in determining whether imports have been massive over a short 
period of time: (1) The volume and value of the imports; (2) seasonal 
trends (if applicable); and (3) the share of domestic consumption 
accounted for by imports.
    If imports during the period immediately following the filing of 
the petition increase by at least 15 percent over imports during a 
comparable period immediately proceeding the filing of a petition, we 
normally consider them massive pursuant to section 353.16(f)(2) of the 
Department's regulations.
    In order to determine whether imports have been massive over a 
relatively short period of time, we compared BKL's reported shipments 
of butt-weld pipe fittings to the United States in the seven months 
after the petition was filed to the seven months immediately before 
this period. Our analysis showed that the volume of imports of subject 
merchandise to the United States by BKL had increased by more than 15 
percent. (See 19 CFR 353.16(f)(2).) Based on this analysis, we 
determine that imports of butt-weld pipe fittings from the U.K. were 
massive over a relatively short period of time. Accordingly, as the 
criteria enumerated in section 733(e)(1) of the Act are met, we 
preliminarily determine that critical circumstances exist for imports 
of butt-weld pipe fittings from the U.K.

Verification

    As provided in section 776(b) of the Act, we will verify 
information used in making our final determination.

Suspension of Liquidation

    In accordance with section 733(d)(1) of the Act, we are directing 
the Customs Service to suspend liquidation of all entries of butt-weld 
pipe fittings from the U.K., as defined in the ``Scope of 
Investigation'' section of this notice, that are entered or withdrawn 
from warehouse for consumption on or after the date 90 days prior to 
publication of this notice in the Federal Register. The Customs Service 
shall require a cash deposit or posting of a bond equal to the 
estimated dumping margins shown below. This suspension of liquidation 
will remain in effect until further notice. The estimated preliminary 
weighted-average dumping margins are as follows:

------------------------------------------------------------------------
                                                                Margin  
               Manufacturer/producer/exporter                percentages
------------------------------------------------------------------------
BKL........................................................       73.38 
All others.................................................       75.38 
------------------------------------------------------------------------

ITC Notification

    In accordance with section 733(f) of the Act, we have notified the 
ITC of our determination. If our final determination is affirmative, 
the ITC will determine whether these imports are materially injuring, 
or threaten material injury to, the U.S. industry within 75 days after 
our final determination.

Public Comment

    Interested parties who wish to request a hearing must submit a 
written request to the Assistant Secretary for Import Administration, 
U.S. Department of Commerce, room B-099, within ten days of the 
publication of this notice. Requests should contain: (1) The party's 
name, address, and telephone number; (2) the number of participants; 
and (3) a list of the issues to be discussed.
    In accordance with 19 CFR 353.38, case briefs or other written 
comments in a least six copies must be submitted to the Assistant 
Secretary no later than November 16, 1994, and rebuttal briefs no later 
than November 23, 1994. A hearing, if requested, will be held on 
November 28, 1994, at the U.S. Department of Commerce in room 1414. 
Parties should confirm by telephone the time, date, and place of the 
hearing two days prior to the scheduled date. In accordance with 19 CFR 
353.38(b), oral presentations will be limited to issues raised in the 
briefs.
    We will make our final determination not later than 75 days after 
the date of this preliminary determination.
    This determination is published pursuant to section 733(f) of the 
Act and 19 CFR 353.15(a)(4).

    Dated: September 26, 1994.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 94-24540 Filed 10-3-94; 8:45 am]
BILLING CODE 3510-DS-M