[Federal Register Volume 60, Number 38 (Monday, February 27, 1995)]
[Notices]
[Pages 10538-10542]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-4724]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-427-813]
Notice of Final Determination of Sales at Less Than Fair Value:
Certain Carbon Steel Butt-Weld Pipe Fittings From France
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: February 27, 1995.
FOR FURTHER INFORMATION CONTACT: Penelope Naas or Gary Bettger, Office
of Countervailing Investigations, Import Administration, International
Trade Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, NW, Washington, DC 20230; telephone (202) 482-3534
or 482-2239, respectively.
Final Determination
We determine that certain carbon steel butt-weld pipe fittings from
France are being sold in the United States at less than fair value, as
provided in section 735 of the Tariff Act of 1930, as amended (the
``Act''). The estimated margin is shown in the ``Suspension of
Liquidation'' section of this notice.
Case History
Since the publication of the preliminary determination in the
Federal Register on October 4, 1994 (59 FR 50565), the following events
have occurred:
On October 5, 1994, pursuant to Sec. 353.20(b)(1) of the
Department's regulations, Interfit, S.A. (``Interfit''), requested that
the final determination in this case be postponed. On November 14,
1994, the Department published in the Federal Register a notice
postponing the publication of the final determination in this case no
later than February 16, 1995 (59 FR 56461).
From October 10 through October 14, 1994, we verified the responses
of Interfit at its offices in Maubeuge, France and Starval in Marly La
Ville, France, respectively. On October 17, 1994, we conducted a
verification of related party and certain other issues at Vallourec
Group Headquarters in Boulogne-Bilancourt, France. During the period of
December 20 to 21, 1994, we verified the responses of Interfit, Starval
and Vallourec Inc. in Houston, Texas. From December 12 to December 16,
1994, we verified Interfit's cost of production data at its offices in
Maubeuge.
On January 23, 1995, and on January 30, 1995, petitioner and
respondent submitted case and rebuttal briefs to the
[[Page 10539]] Department. On February 1, 1995, the Department held a
public hearing in this investigation.
Scope of the Investigation
The products covered by this investigation are certain carbon steel
butt-weld 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 investigation is dispositive.
Period of Investigation
The period of investigation (``POI'') is September 1, 1993, through
February 28, 1994.
Fair Value Comparisons
To determine whether Interfit'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.
Regarding level of trade, Interfit reported that it sells only to
distributors in the United States and the home market.
We made revisions to Interfit's reported data, where appropriate,
based on findings at verification.
United States Price
Because Interfit's U.S. sales of certain carbon steel butt-weld
pipe fittings were made to an unrelated distributor in the United
States prior to importation, and the exporter's sales price methodology
was not indicated by other circumstances, we based USP on the purchase
price (``PP'') sales methodology in accordance with section 772(b) of
the Act.
We calculated Interfit's USP sales based on packed, c.i.f., duty
paid, landed prices to unrelated customers in the United States. We
made deductions, where appropriate, for foreign inland freight, foreign
brokerage, marine insurance, ocean freight, U.S. brokerage, U.S.
duties, and rebates. Reported U.S. duties were adjusted based on
information collected at verification.
We made an adjustment to USP for value-added tax (``VAT'') assessed
on comparison sales in France 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 tax methodology.
Foreign Market Value
In order to determine whether there was a sufficient volume of
sales in the home market to serve as a viable 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.
In its May 13, 1994, response, Interfit reported that all home
market sales were made to distributors, three of which were related to
Interfit. Based on information verified in this investigation, we do
not consider Interfit's indirect minority interest in Hardy-Tortauax
(``H-T'') and Trouvay & Cauvin (``T&C'') to be a sufficient basis to
determine that the parties are ``related,'' as defined in section
771(13) of the Act and 19 CFR 353.45(b). See, the Department's
concurrence memorandum from the preliminary determination (September
26, 1994, at page 3). However, with respect to the third related
distributor, Starval, we determined that its relationship to Interfit
(e.g., 100 percent common ownership) satisfies the definition of a
related party.
Therefore, we compared Interfit's prices to Starval with Interfit's
prices to unrelated parties using the arm's length test as set forth in
Appendix II to 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 determined that the sales made to Starval
were not at arm's length. Accordingly, we requested and received
Starval's sales to unrelated customers in the home market. While
verifying Starval's sales response, we found that several sales had
been reported a number of times. This rendered Starval's home market
database unusable for purposes of the final determination. Thus, we
have disregarded a small portion of Interfit's home market sales and
used sales made by Interfit directly to unrelated parties.
Cost of Production
Petitioner alleged that Interfit made home market sales during the
POI at prices below the cost of production (``COP''). Based on
petitioner's allegation, we concluded that we had reasonable grounds to
believe or suspect that sales were made below COP. In the course of
this investigation, we gathered and verified data on production costs.
For purposes of the preliminary determination, because Interfit's
cost data was incomplete and submitted too late for consideration, as
best information available (``BIA''), we made an adverse assumption
that all home market sales were below the COP and based foreign market
value on constructed value (``CV''). We then calculated the CV using
Vallourec's transfer prices. We stated that we would verify whether
those prices were at arm's length.
For the final determination, however, we have reviewed and analyzed
respondents COP data. In accordance with our standard practice, we
asked Interfit to provide cost data for inputs produced by related
parties. Interfit failed to provide data on the cost of pipe, a major
input, produced by its related supplier, Vallourec. Therefore, we have
valued the input on the basis of BIA and used the resulting COP to test
home market sale prices. As BIA we adjusted the transfer prices for the
input upward by the average difference between petitioner's acquisition
cost of pipe, as reported in the petition, and the transfer price
Interfit pays to its supplier.
In order to determine whether home market prices were below the COP
within the meaning of section 773(b) of the Act, we performed a
product-specific cost test, in which we examined whether each product
sold in the home market during the POI was priced below the COP of that
product. We calculated COP based on the sum of Interfit's cost of
materials, fabrication, general expenses, and packing, in accordance
with 19 CFR 353.51(c). For each product, we compared this sum to the
home market unit price, net of movement expenses, rebates and selling
expenses. We made changes, where appropriate, to submitted COP data, as
[[Page 10540]] discussed above and in the Interested Party Comments
section of this notice, below.
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.
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
disregarded 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.
In order to determine whether below-cost sales had been made over
an extended period of time, in accordance with section 773(b)(1) of the
Act, 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 three or more months of
the POI, we did not exclude below-cost sales unless there were below-
cost sales in at least three months during the POI. When we found that
sales of a product only occurred in one or two months, the number of
months in which the sales occurred constituted the extended period of
time; i.e., where sales of a product were made in only two months, the
extended period of time was two months, where sales of a product were
made in only one month, the extended period of time was one month. (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 10, 1993).
Interfit provided no indication that its below cost sales were at
prices that would permit recovery of all costs within a reasonable
period of time and in the normal course of trade. (See, section
773(b)(2); 19 U.S.C. 1677b(b)(2)).
Constructed Value
Where all home market sales of a product were disregarded, we based
FMV on CV. We calculated CV based on the sum of the adjusted cost of
materials, fabrication, general expenses, U.S. packing costs and
profit. We adjusted the cost of materials as discussed in the
Interested Party Comments section of this notice, below. In accordance
with section 773(e)(1)(B) (i) and (ii) of the Act, we (1) included the
greater of Interfit's reported general expenses or the statutory
minimum of ten percent of the cost of manufacture (``COM''), as
appropriate, and (2) for profit, we used the statutory minimum of eight
percent of the sum of COM and general expenses.
Price-to-Price Comparisons
For price-to-price comparisons, we calculated FMV based on ex-
factory or delivered prices, inclusive of packing to home market
customers. We deducted rebates, where appropriate. We also deducted
home market packing costs and added U.S. packing costs in accordance
with section 773(a)(1) of the Act.
In light of the Court of Appeals for the Federal Circuit's decision
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), the
Department can no longer deduct home market movement charges from FMV
pursuant to the Department's inherent power to fill in gaps in the
antidumping statute. Instead, we adjust for direct movement expenses
under the circumstance-of-sale provision of 19 CFR 353.56(a).
Accordingly, in the present case, 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 and insurance.
For both price-to-price comparisons and comparisons to CV, we made
circumstance-of-sale adjustments, where appropriate, for differences in
credit expenses, pursuant to 19 CFR 353.56(a)(2). In calculating U.S.
credit expense, we used the respondent's cost of borrowing in U.S.
dollars during the POI. In instances where Interfit had not reported a
shipment and/or payment date, we recalculated Interfit's reported
credit expense.
We have not made a deduction for direct selling expenses reported
by respondent because we determined that these expenses (product
liability and inventory carrying costs) are, in fact, indirect selling
expenses. However, we have deducted indirect selling expenses, capped
by the commissions paid to Vallourec Inc., a related party in the U.S.
market. For the preliminary determination, we did not recognize these
commissions because we did not have an appropriate benchmark against
which to test whether the commission arrangement was at arm's length.
However, we verified that Interfit pays the same commissions to both
related and unrelated parties, with the exception of a single unrelated
party that receives a higher rate. In LMI-La Metalli Industriale,
S.p.A. v. United States, 912 F.2d 455, 459 (Fed. Cir. 1990) (LMI), the
CAFC indicated that related party commissions can and should be
adjusted for if the commissions are at arm's length and are directly
related to the sales under review. Because the vast majority of
commissions to related and unrelated parties are at a single rate, we
find these conditions are met in this case. Therefore, we deducted
indirect expenses incurred for home market sales up to the amount of
the U.S. commission. We then added the U.S. commission to the FMV or
CV, as appropriate.
We adjusted for VAT in the home market in accordance with our
practice. (See the United States Price section of this notice, above.)
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. See 19 CFR 353.60.
Final Negative Determination of Critical Circumstances
Petitioner alleged that critical circumstances exist with respect
to imports of pipe fittings from France. In our preliminary
determination, pursuant to section 733(e)(1) of the Act and 19 CFR
353.16, we analyzed the allegation using the Department's standard
methodology. Because no additional information has been submitted since
the preliminary determination, the Department performed the same
analysis as explained in its preliminary finding. Based on this
analysis, the Department determines, in accordance with section
735(a)(3) of the Act, that critical circumstances do not exist with
respect to imports of certain carbon steel butt-weld pipe fittings from
France.
Verification
As provided in section 776(b) of the Act, we verified information
provided by the respondent using standard verification procedures,
including the [[Page 10541]] examination of relevant sales, cost and
financial records, and selection of original source documentation. The
public versions of the January 10, 1995, verification reports are
available in the Central Unit located in room B-99 of the Department's
main building, the Herbert C. Hoover building.
Interested Party Comments
Comment 1
Petitioner contends that Interfit willfully refused, on four
separate occasions, to provide from its related party, Vallourec
Industries (``Vallourec''), the actual cost of producing carbon steel
pipe, a major input in the production of the subject merchandise.
Petitioner argues that by repeatedly refusing to respond to the
Department's requests for this information, Interfit has not allowed
the Department to properly conduct this investigation. Therefore, the
Department should apply adverse best information available (``BIA'') in
the final determination. Petitioner notes that the BIA approach
employed at the preliminary determination (i.e., the assumption that
all home market sales are below COP) rewards Interfit for its failure
to cooperate. Accordingly, as BIA, the Department should use the margin
reported for France in the petition or, in the alternative, the highest
non-aberrational margin calculated for Interfit in the preliminary
determination.
Interfit argues that it informed the Department that it was willing
to accept the consequences of not supplying the cost information, as
this task would have required Interfit to provide cost information from
four separate related manufacturing units. Thus, Interfit is prepared
to accept a BIA finding that all home market sales were below COP.
DOC Position
In light of Interfit's cooperation in this investigation, we
disagree with petitioner's argument that the Department should use
total BIA in the form of the margin reported for France in the
petition, or the highest non-aberrant margin calculated for Interfit in
the preliminary determination. Our use of partial BIA is adequate
because it allows us to draw an adverse assumption only with respect to
the information that Interfit failed to provide. Because we were able
to perform a BIA cost test, we have adequately ensured that Interfit
does not benefit from its failure to provide information. Therefore,
total BIA is unnecessary.
Comment 2
Regarding the constructed value, petitioner contends that the
prices from Vallourec to Interfit for carbon steel pipe do not satisfy
the statutory requirements outlined in section 773(e)(2). According to
petitioner, section 773(e)(2) requires Interfit to demonstrate that:
(1) It has sales to unrelated customers in the market under
consideration (i.e., France); (2) the prices to those unrelated
customers are for pipe that was ``identical or demonstrably comparable
to the pipe used by Interfit;'' and (3) the prices that Interfit pays
Vallourec are at arm's length. By its own admission, Interfit cannot
satisfy the first two elements of the statute, because it concedes that
``Vallourec sells no similar pipe to unrelated customers in France.''
With respect to the third element, according to petitioner, the
Department's verification of the prices charged by Vallourec to
Interfit and to other unrelated customers demonstrate that the prices
to Interfit are preferential.
Thus, petitioner argues that the Department should disregard the
transfer prices and use the actual cost of producing the input supplied
by Vallourec (carbon steel pipe). However, because Interfit repeatedly
refused to provide Vallourec's actual cost of producing carbon steel
pipe, the Department is prevented from determining CV and conducting a
complete investigation. Therefore, the Department should apply best
information available (``BIA'') in the final determination. In
particular, the Department should use the margin reported for France in
the petition or, in the alternative, the highest non-aberrational
margin calculated for Interfit in the preliminary determination.
Lastly, Petitioner argues that even if the Department determines
that transfer prices between Vallourec and Interfit are at arm's
length, the Department has ``reasonable grounds to believe or suspect''
that the transfer price of the carbon steel pipe is less than the cost
of producing the pipe. Petitioner contends that several factors in this
investigation provide the Department with ``reasonable grounds to
believe or suspect'' that Interfit purchased the pipe from Vallourec at
less than the COP. Most notably, petitioner claims Interfit did not
provide evidence that Vallourec's price for the pipe was above the cost
of producing such pipe, even though the information was requested by
the Department numerous times.
Petitioner thus argues that, because the Department has
``reasonable grounds to believe or suspect'' that pipe is being sold at
less than COP, even if the transfer prices are accepted under section
773(e)(2), those prices cannot be used in determining CV. Rather, the
Department should apply adverse BIA in the final determination, as
detailed above.
Interfit claims that the prices it pays to Vallourec reflect the
market value (i.e., they are arm's length prices) and therefore, in
accordance with section 773(e)(2), should be used for purposes of
calculating constructed value. To substantiate its claim that the
transfer prices between Vallourec and Interfit are arm's length,
Interfit has provided the Department with prices of similar pipe sold
to unrelated customers in the European Union (``E.U.''). Interfit
argues that, because ``the E.U. is a fully integrated market, with no
barriers to trade between its members,'' these sales are, in fact, in
the same market (i.e., the market under consideration). Interfit also
contends that the term ``merchandise under consideration'' includes
both similar and identical merchandise, not only identical merchandise.
With respect to the arm's length nature of these sales, Interfit argues
that information submitted in this investigation demonstrates that the
prices Vallourec charges Interfit are comparable to the prices charged
to unrelated customers for almost identical pipe. Moreover, the pipe
sold to Vallourec's unrelated customers includes additional processing
costs which are not included in the pipe sold to Interfit. These
additional costs would more than account for the difference in price.
Thus, pursuant to section 773(e)(2), Interfit claims that the
Department should use the transfer prices in calculating CV.
With respect to section 773(e)(3), Interfit claims that this
section contains a presumption that transfer prices are valid for
purposes of calculating CV unless the Department has ``reasonable
grounds to believe or suspect'' that they are below COP. To support its
claim, Interfit cites Al Tech Specialty Steel Corporation v. United
States, 575 F.Supp. 1277, 1282 (C.I.T. 1983); FMC Corp. v. United
States, 3 F.3d 424 (CAFC 1993); and Antifriction Bearings (Other Than
Tapered Roller Bearings) and Parts Thereof From the Federal Republic of
Germany, 54 FR 18992, 19020, Comment 4 (1989). Therefore, where
constructed value is concerned, petitioner, not respondent, must first
provide evidence that the transfer prices are below COP; a simple
allegation by petitioner is not sufficient. Interfit also argues that
its failure to provide evidence that the transfer prices were
[[Page 10542]] above COP does not imply that they were below cost.
Interfit claims that the concurrence memorandum from the
preliminary determination (September 26, 1994, at page 3) and a
November 15, 1994 letter from the Department to the counsel for
Interfit, led the company to believe that the transfer prices would be
used so long as they were determined to be at arm's length. Interfit
assumed that if the Department had at that time ``reasonable grounds''
to believe that the pipe was sold to Interfit at less than the COP, the
Department would have stated that cost was an issue.
DOC Position
The fact that Interfit failed to provide evidence that Vallourec's
price for the input pipe was above the cost of producing the pipe,
despite numerous requests from the Department for this information,
provides the Department with ``reasonable grounds to believe or
suspect'' that the transfer prices paid by Interfit were less than
Vallourec's cost of production. Therefore, in computing the CV, we have
valued the pipe on the basis of the BIA used to calculate COP for the
home market sales below cost test. Because the transfer prices have
been disregarded in accordance with section 773(e)(3) of the Act, we do
not need to address the issue of whether the transfer prices satisfy
the criteria under section 773(e)(2). The Department's preliminary
determination expressly noted that whether the transfer prices were at
arm's length would be examined at verification. In addition, the
Department continued to pursue data that would confirm that the
transfer prices are above COP. See, Supplemental/Deficiency Section D
Questionnaire (November 15, 1994), Section D Verification Agenda
(December 5, 1994), Fax to Counsel for Interfit (December 8, 1994), and
Section D Verification Report (January 12, 1995). Therefore, contrary
to Interfit's claims, the question of cost remained an issue.
Suspension of Liquidation
In accordance with section 735(c)(4) of the Act, we are directing
the U.S. Customs Service to continue to suspend liquidation of all
entries of butt-weld pipe fittings from France, as defined in the
``Scope of Investigation'' section of this notice, that are produced
and sold by Interfit and that are entered, or withdrawn from warehouse,
for consumption on or after October 4, 1994.
The Customs Service shall require a cash deposit or the posting of
a bond equal to the estimated weighted-average amount by which the
foreign market value of the subject merchandise exceeds the United
States price as shown below. The suspension of liquidation will remain
in effect until further notice. The weighted-average dumping margins
are as follows:
------------------------------------------------------------------------
Margin
Manufacturer/producer/exporter (percent)
------------------------------------------------------------------------
Interfit, S.A.............................................. 32.58
All Others................................................. 32.58
------------------------------------------------------------------------
ITC Notification
In accordance with section 735(d) of the Act, we have notified the
ITC of our determination.
Notice to Interested Parties
This notice also serves as the only reminder to parties subject to
administrative protective order (APO) of their responsibility
concerning the return or destruction of proprietary information
disclosed under APO in accordance with 19 CFR 353.35(d). Failure to
comply is a violation of the APO.
This determination is published pursuant to section 735(d) of the
Act (19 U.S.C. 1671(d)).
Dated: February 16, 1995.
Barbara R. Stafford,
Acting Assistant Secretary for Import Administration.
[FR Doc. 95-4724 Filed 2-24-95; 8:45 am]
BILLING CODE 3510-DS-P