[Federal Register Volume 60, Number 18 (Friday, January 27, 1995)]
[Notices]
[Pages 5351-5355]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-2106]



-----------------------------------------------------------------------

DEPARTMENT OF COMMERCE
[A-351-826]


Notice of Preliminary Determination of Sales at Less Than Fair 
Value: Small Diameter Circular Seamless Carbon and Alloy Steel, 
Standard, Line and Pressure Pipe From Brazil

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

EFFECTIVE DATE: January 27, 1995.

FOR FURTHER INFORMATION CONTACT: Irene Darzenta or Fabian Rivelis, 
Office of Antidumping Investigations, Import Administration, U.S. 
Department of Commerce, 14th Street and Constitution Avenue, NW., 
Washington, DC 20230; telephone (202) 482-6320 or 482-3853, 
respectively.

PRELIMINARY DETERMINATION: The Department of Commerce (the Department) 
preliminarily determines that small diameter circular seamless carbon 
and alloy steel, standard, line and pressure pipe from Brazil (seamless 
pipe) is 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 are shown in the ``Suspension of 
Liquidation'' section of this notice.

Case History

    Since the notice of initiation on July 13, 1994 (59 FR 37025, July 
20, 1994), the following events have occurred.
    On August 8, 1994, the U.S. International Trade Commission (ITC) 
issued an affirmative preliminary injury determination (USITC 
Publication 2734, August 1994).
    On August 11, 1994, we sent a cable to the U.S. Embassy in Brazil 
requesting information for purposes of respondent selection. Based on 
the information provided by the Embassy, as well as by petitioner, we 
identified as the two producers of subject merchandise in Brazil 
Mannesmann S.A. and NCS Siderurgica. On August 19, 1994, we named 
Mannesmann S.A. (MSA) as a mandatory respondent in this investigation 
and issued to it an antidumping questionnaire. Also on the same date, 
we sent an antidumping survey to NCS Siderurgica in order to determine 
whether it should be required to respond to a full questionnaire. 
Although NCS Siderurgica did not respond to the survey, based on 
information obtained from Iron and Steel Works of the World and 
petitioner's claim that MSA produced all of the subject merchandise 
exported from Brazil to the United States during the last 12 months 
prior to the filing of the petition, we determined that MSA would be 
the sole mandatory respondent in this investigation.
    On October 21, 1994, we received comments on the issues of scope 
and class or kind of merchandise from interested parties, pursuant to 
the Department's invitation for such comments in its notice of 
initiation. On October 31 and November 17, 1994, we received rebuttal 
comments on this issue.
    On September 12, 1994, we received from MSA a response to Section A 
of the Department's questionnaire. Responses to Sections B and C were 
submitted on October 14, 1994. On October 11, and November 3, 1994, we 
received petitioner's comments regarding MSA's responses to Sections A, 
B, and C. We sent MSA a supplemental questionnaire on November 18, 
1994. MSA submitted its supplemental response, including revised sales 
listings, on December 9, 1994.
    On October 27, 1994, the Department received a request from 
petitioner to postpone the preliminary determination until January 19, 
1995. On November 18, 1994, we published in the Federal Register (59 FR 
59748), a notice announcing the postponement of the preliminary 
determination until not later than January 19, 1995, in accordance with 
19 C.F.R. 353.15 (c) and (d).
    On January 4, 1995, respondent notified the Department of certain 
revisions to be made to its December 9, 1994, sales listings because of 
certain programming errors and inconsistencies concerning sale dates, 
grade codes and differences-in-merchandise data.
    On January 9, 1995, petitioner submitted comments regarding the 
quality of MSA's responses, urging the Department to reject the 
responses and use best information available (BIA) in the preliminary 
determination because of the numerous deficiencies contained in these 
responses.

Scope of Investigation

    For purposes of this investigation, 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, bevelled 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.
    The seamless pipes subject to these investigations 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 
investigation, 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 American 
Society for Testing and Materials (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, 
[[Page 5352]] 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 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 investigation includes all multiple-stenciled 
seamless pipe meeting the physical parameters described above and 
produced to one of the specifications listed above, whether or not also 
certified to a non-covered specification. Standard, line and pressure 
applications are defining characteristics of the scope of this 
investigation. Therefore, seamless pipes meeting the physical 
description above, but not produced to the A-106, A-53, or API 5L 
standards shall be covered if used in an A-106, A-335, A-53 or API 5L 
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 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 investigation.
    Specifically excluded from this investigation are boiler tubing, 
mechanical tubing and oil country tubular goods except when used in a 
standard, line or pressure pipe application. Also excluded from this 
investigation 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 
investigation is dispositive.

Scope Issues

    In our notice of initiation we identified two issues which we 
intended to consider further. The first issue was whether to consider 
end-use a factor in defining the scope of these investigations.1 
The second issue was whether the seamless pipe subject to this 
investigation constitutes more than one class or kind of merchandise. 
In addition to these two issues, interested parties have raised a 
number of other issues regarding whether certain products should be 
excluded from the scope of this investigation. These issues are 
discussed below.

    \1\Various parties in this investigation, as well as in the 
concurrent investigations involving the same product from Argentina, 
Italy, and Germany have raised issues and made arguments. For 
purposes of simplicity and consistency across investigations, we 
will discuss all of these issues in this notice.
---------------------------------------------------------------------------

    Regarding the end-use issue, interested parties have submitted 
arguments about whether end-use should be maintained as a scope 
criterion in this investigation. After carefully considering these 
arguments, we have determined that, for purposes of this preliminary 
determination, we will continue to include end-use as a scope 
criterion. We agree with petitioner that pipe products identified as 
potential substitutes used in the same applications as products meeting 
the requisite ASTM specifications may fall within the same class or 
kind, and within the scope of any order issued in this investigation. 
However, we are well aware of the difficulties involved with requiring 
end-use certifications, particularly the burdens placed on the 
Department, the U.S. Customs Service, and the parties. We will strive 
to simplify any procedures used in this regard. We will, therefore, 
carefully consider any comment on this issue for purposes of our final 
determination.
    Regarding the class or kind issue, although respondents propose 
dividing the scope of this investigation into two classes or kinds of 
merchandise, they do not agree on the merchandise characteristics that 
will define the two classes. The respondents in this investigation and 
in the German investigation argue that the scope should be divided into 
two classes or kinds based on the material composition of the pipe--
carbon versus alloy. The respondent in the Argentine investigation 
argues that the scope should be divided into two classes or kinds of 
merchandise based on size. Petitioner maintains that the subject 
merchandise constitutes a single class or kind.
    We have considered the class or kind comments of the interested 
parties and have analyzed this issue based on the criteria set forth by 
the Court of International Trade in Diversified Products v. United 
States, 6 CIT 155, 572 F. Supp. 883 (1983). These criteria are as 
follows: (1) the general physical characteristics of the merchandise; 
(2) the ultimate use of the merchandise; (3) the expectations of the 
ultimate purchasers; (4) the channels of trade; and (5) cost.
    We note that certain differences exist between the physical 
characteristics of the various products (e.g., size, composition). In 
addition, there appear to be cost differences between the various 
products. However, the information on record is not sufficient to 
justify dividing the class or kind of merchandise. The record on 
ultimate use of the merchandise and the expectations of the ultimate 
purchasers indicates that there is a strong possibility that there may 
be overlapping uses because any one of the various products in question 
may be used in different applications (e.g., line and pressure pipe). 
Also, based upon the evidence currently on the record, we determine 
that the similarities in the distribution channels used for each of the 
proposed classes of merchandise outweigh any differences in the 
distribution channels.
    In conclusion, while we recognize that certain differences exist 
between the products in the proposed class or kind of merchandise, we 
find that the similarities are more significant. Therefore, for 
purposes of this preliminary determination, we will continue to 
consider the scope as covering one class or kind of merchandise. This 
preliminary decision is consistent with past cases concerning steel 
pipe products. (See e.g., Final Determination of Sales at Less Than 
Fair Value: Circular Welded Non-Alloy Steel Pipe From Brazil et. al., 
57 FR 42940, September 17, 1992). However, a number of issues with 
respect to class [[Page 5353]] or kind remain to be clarified. We will 
provide the parties with another opportunity to submit additional 
information and argument for the final determination. For a complete 
discussion of the parties' comments, as well as the Department's 
analysis, see memorandum from Gary Taverman, Acting Director, Office of 
Antidumping Investigations to Barbara Stafford, Deputy Assistant 
Secretary for Investigations, dated January 19, 1995.
    Regarding the additional issues concerning exclusion of certain 
products, one party requests that the Department specify that multiple-
stencilled seamless pipe stencilled to non-subject standards is not 
covered. Furthermore, this party argues that the scope language should 
be clarified so that it specifically states that only standard, line, 
and pressure pipe stencilled to the ASTM A-106, ASTM A-53 or API-5L 
standards are included, and that we clarify the meaning of ``mechanical 
tubing.'' In addition, this party requests that the Department exclude 
unfinished oil country tubular goods, ASTM A-519 pipe (a type of 
mechanical tubing) and mechanical tube made to customer specifications 
from the scope of this investigation.
    Another party requests that the Department specifically exclude 
hollow seamless steel products produced in non-pipe sizes (known in the 
steel industry as tubes), from the scope of this investigation.
    Because we currently have insufficient evidence to make a 
determination regarding these requests, we are not yet in a position to 
address these concerns. Therefore, for purposes of this preliminary 
determination, we will not exclude these products from the scope of 
this investigation. Once again, we will collect additional information 
and consider additional argument before the final determination.

Period of Investigation

    The period of investigation (POI) is January 1, 1994, through June 
30, 1994.

Such or Similar Comparisons

    We have determined that all the products covered by this 
investigation constitute a single category of such or similar 
merchandise. We made fair value comparisons on this basis. In this case 
we only compared identical merchandise on the basis of the criteria 
defined in Appendix V to the antidumping questionnaire, on file in Room 
B-099 of the main building of the Department. Where there were no sales 
of identical merchandise in the home market to compare to U.S. sales, 
we did not make sales comparisons for the reasons outlined below in the 
``Fair Value Comparisons'' section of this notice.

Fair Value Comparisons

    Although we found several areas in MSA's response where further 
clarification and/or information will be required, we believe that much 
of respondent's data is usable for purposes of the preliminary 
determination. See Team Concurrence Memorandum dated January 19, 1995. 
However, our examination of the differences in merchandise (difmer) 
data provided in MSA's December 9, 1994, supplemental response revealed 
inconsistencies that make it impracticable for us to use our normal 
methodology for hyperinflationary economies.
    Specifically, in its December 9, 1994, and January 4, 1995, 
submissions, respondent stated that it reported monthly replacement 
costs for home market products based on a production month (which also 
happens to be both the month of shipment and the month of sale). 
Monthly replacement costs for U.S. products were reported based on a 
production month equal to the reported month of shipment minus one 
month (which is not the month of sale). Although respondent's 
replacement costs were based on inflation-adjusted (UFIR) figures 
derived directly from its cost accounting system, respondent converted 
these ``indexed'' costs into current Brazilian currency (cruzeiros or 
reais, as appropriate) on the date of shipment, thereby creating a 
problem of costs not being comparable over time.
    Since the January 4, 1995, submission, we did not have sufficient 
time for purposes of the preliminary determination to collect the 
necessary information to perform the proper indexation of these figures 
in accordance with the methodology outlined in Department Policy 
Bulletin No. 94.5 dated March 25, 1994. Given the lack of usable difmer 
data, which we believe can be rectified by issuing a second 
supplemental questionnaire, we made fair value comparisons only with 
respect to identical merchandise and without regard to difmers.
    To determine whether sales of seamless pipe from MSA 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.
    In accordance with past practice, we determine Brazil's economy to 
be hyperinflationary. See Final Determination of Sales at Less Than 
Fair Value: Ferrosilicon From Brazil, 59 FR 732, January 6, 1994 
(Ferrosilicon). Pursuant to our methodology concerning such an economy, 
we made contemporaneous sales comparisons based on the month of the 
U.S. sale. In accordance with 19 C.F.R. 353.58, we made comparisons at 
the same level of trade, where possible.

United States Price

    We based USP on purchase price (PP), in accordance with section 
772(b) of the Act, because the subject merchandise was sold to 
unrelated purchasers in the United States before importation and 
because exporter's sales price methodology was not otherwise indicated.
    We calculated PP based on packed CIF or duty paid, delivered prices 
to unrelated customers. In accordance with section 772(d)(2)(A) of the 
Act, we made deductions, where appropriate, for ocean freight and 
insurance, U.S. brokerage, U.S. import duty and U.S. inland freight. 
Because respondent incorrectly reported U.S. shipment date based on a 
date later than when the merchandise was shipped from the factory, we 
revised U.S. shipment dates so that they appropriately reflect the date 
the merchandise is shipped from the factory. We believe that it is 
reasonable to assume that the approximate time difference between the 
reported U.S. shipment date and the date on which the merchandise left 
the factory (i.e., upon production) is one month based respondent's 
December 9, 1994, and January 4, 1995, submissions.
    We made an adjustment to USP for the taxes paid on the comparison 
sales in Brazil. In this investigation, there are four levels of taxes 
levied on sales of the subject merchandise in the home market. The ICMS 
tax is a regional tax, which varies depending upon the Brazilian state 
in which the purchase originates. The IPI, PIS and FINSOCIAL taxes are 
fixed percentage rate taxes. Because these taxes are calculated on the 
same base price, we find them not to be cascading. Thus, for each sale, 
we made only one tax adjustment which equals the sum of the actual tax 
rates. (See Ferrosilicon, 59 FR at 733).

Foreign Market Value

    In order to determine whether there were sufficient sales of 
seamless pipe in the home market to serve as a viable basis for 
calculating FMV, we compared the volume of home market sales of 
seamless pipe to the volume of third country sales of seamless pipe in 
accordance with section 773(a)(1)(B) of the Act. Based on this 
comparison, we found that the volume of home market sales was greater 
than five percent of the [[Page 5354]] aggregate volume of third 
country sales. Therefore, we determined that MSA had a viable home 
market with respect to sales of seamless pipe during the POI.
    During the POI, MSA made home market sales to unrelated customers, 
as well as to one related customer, Mannesmann Commerciale S.A. (MCSA). 
In its response, MSA provided two home market sales listings. One sales 
listing consisted of MSA's sales to MCSA and unrelated parties; the 
other consisted of MCSA's sales to unrelated parties including MCSA's 
unrelated customers (``downstream'' sales). MSA claims that its related 
party sales were made at arm's-length. To test the accuracy of 
respondent's claim, we compared related party prices to unrelated party 
prices using the test set forth in Appendix II to the Final 
Determination of Sales at Less Than Fair Value: Certain Cold-Rolled 
Carbon Steel Flat Products from Argentina, 58 FR 37062 (July 9, 1994), 
and found that its prices to MCSA were not at arm's-length. Therefore, 
we excluded MSA's related party sales from our analysis, and used only 
those sales made to unrelated parties including the downstream sales.
    In accordance with past practice, in order to eliminate the 
distortive effects of hyperinflation in the Brazilian economuy, we 
calculated separate weighted-average FMVs for each month. (See 
Ferrosilicon, 59 FR at 733).
    In accordance with 19 C.F.R. 353.46, we calculated FMV based on FOB 
or CIF prices, exclusive of any inflation adjustment, charged to 
unrelated customers in Brazil. In light of the Court of Appeals for the 
Federal Circuit's (CAFC) decision in Ad Hoc Committee of AZ-NM-TX-FL 
Producers of Gray Portland Cement versus United States, 13 F.3d 398 
(Fed. Cir. 1994), the Department no longer can deduct home market 
movement charges from FMV pursuant to its inherent power to fill in 
gaps in the antidumping statute. Instead, we will adjust for those 
expenses under the circumstance-of-sale provision of 19 C.F.R. 
353.56(a) and the exporter's sales price offset provision of 19 C.F.R. 
353.56(b)(2), as appropriate. Accordingly, in the present case, we 
deducted post-sale home market movement charges from FMV under the 
circumstance-of-sale provision of 19 C.F.R. 353.56(a). This adjustment 
included home market inland freight and insurance.
    Pursuant to 19 C.F.R. 353.56(a)(2), we made further circumstance-
of-sale adjustments, where appropriate, for differences in credit 
expenses, warranties and product liability expenses between the U.S. 
and home markets. For certain transactions with reported negative 
values (e.g., warranty expenses), we made no adjustment to FMV for the 
subject expenses. We recalculated U.S. credit expenses in accordance 
with respondent's methodology, using the revised U.S. shipment dates. 
(See ``United States Price'' section of this notice.) For sales with 
missing payment dates, we recalculated U.S. credit expenses using the 
date of the preliminary determination for date of payment. For sales 
with missing shipment and payment dates, we recalculated U.S. credit 
expenses using the average number of credit days between the revised 
shipment dates and the reported payment dates for respondent's U.S. 
sales which were reportedly shipped and paid. We disallowed MSA's claim 
for home market commissions made to a related party because respondent 
did not demonstrate that these commissions were arm's-length 
transactions. (See LMI-La Metalli Industriale, S.p.A. versus United 
States, 912 F.2d 455 (Fed. Cir. 1990)). We added interest revenue, 
where appropriate.
    We also deducted home market packing and added U.S. packing costs, 
in accordance with section 773(a)(1) of the Act.
    We adjusted for taxes collected in the home market. See ``United 
States Price'' section of this notice.
    We did not make adjustments for differences in the physical 
characteristics of the merchandise for the reasons outlined above.

Currency Conversion

    No certified rates of exchange, as furnished by the Federal Reserve 
Bank of New York, were available for the POI. In place of the official 
certified rates, we used the daily official exchange rates for the 
Brazilian currency published by the Central Bank of Brazil which were 
provided by respondent in its Section A response.

Verification

    As provided in section 776(b) of the Act, we will verify the 
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 seamless 
pipe from Brazil, 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 of publication of this notice in the 
Federal Register. The Customs Service shall require a cash deposit or 
the posting of a bond equal to the estimated preliminary dumping 
margins, as shown below. The suspension of liquidation will remain in 
effect until further notice. The estimated preliminary dumping margins 
are as follows:

------------------------------------------------------------------------
                                                                 Margin 
                Manufacturer/producer/exporter                  percent 
------------------------------------------------------------------------
Mannesmann S.A...............................................      12.83
All Others...................................................      12.83
------------------------------------------------------------------------

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 imports of the subject merchandise are 
materially injuring, or threaten material injury to, the U.S. industry 
before the later of 120 days after the date of the preliminary 
determination or 45 days after our final determination.

Public Comment

    In accordance with 19 C.F.R. 353.38, case briefs or other written 
comments in at least ten copies must be submitted to the Assistant 
Secretary for Import Administration no later than March 10, 1995, and 
rebuttal briefs no later than March 15, 1995. In accordance with 19 
C.F.R. 353.38(b), we will hold a public hearing, if requested, to give 
interested parties an opportunity to comment on arguments raised in 
case or rebuttal briefs. Tentatively, the hearing will be held on March 
20, 1995 at 10:00 a.m. at the U.S. Department of Commerce, Room 1414, 
14th Street and Constitution Avenue, N.W., Washington, D.C. 20230. 
Parties should confirm by telephone the time, date, and place of the 
hearing 48 hours before the scheduled time.
    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 in the Federal Register. Request 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 C.F.R. 353.38(b), oral presentation will be 
limited to issues raised in the briefs.
    This determination is published pursuant to section 733(f) of the 
Act (19 U.S.C. 1673b(f)) and 19 C.F.R. 353.15(a)(4).

    [[Page 5355]] Dated: January 19, 1995.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 95-2106 Filed 1-26-95; 8:45 am]
BILLING CODE 3510-DS-P