[Federal Register Volume 60, Number 117 (Monday, June 19, 1995)]
[Notices]
[Pages 31960-31974]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-14937]



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DEPARTMENT OF COMMERCE
[A-351-826]


Notice of Final 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: June 19, 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, N.W., 
Washington, D.C. 20230; telephone (202) 482-6320 or 482-3853, 
respectively.

Final Determination

    The Department of Commerce (the Department) determines that small 
diameter circular seamless carbon and alloy steel, standard, line and 
pressure pipe from Brazil (seamless pipe) is being sold, or is likely 
to be 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'') 
(1994). The estimated margins are shown in the ``Suspension of 
Liquidation'' section of this notice.

Case History

    Since the notice of preliminary determination on January 27, 1995 
(60 FR 5351, January 27, 1995), the following events have occurred.
    On February 10, 1995, we issued a supplemental questionnaire to 
respondent Mannesmann S.A. (MSA) and its affiliated Brazilian and U.S. 
sales organizations, Mannesmann Comercial S.A. (MCSA) and Mannesmann 
Pipe & Steel Corporation (MPS), respectively (collectively 
``Mannesmann''), concerning certain items in its December 9, 1994, 
response, which we deemed required further clarification and/or 
information prior to verification. On February 28, and March 9, 1995, 
Mannesmann submitted its responses to this questionnaire, including 
revised home market and U.S. sales listings.
    In response to respondent's request, we postponed the final 
determination until June 12, 1995, pursuant to section 735(a)(2)(A) of 
the Act (60 FR 9012, February 16, 1995).
    In our notice of preliminary determination we stated that we would 
solicit further information on various scope-related issues, including 
class or kind of merchandise. On February 10, 1995, we issued a 
questionnaire to interested parties to request further information on 
whether the scope of the investigation constitutes more than one class 
or kind of merchandise. Responses to this questionnaire were submitted 
on March 27, 1995.
    In March and April, 1995, we conducted verification of Mannesmann's 
questionnaire responses. Our verification reports were issued in May, 
1995.
    On April 27, 1995, Koppel Steel Corporation, a U.S. producer of 
subject merchandise which appeared as an interested party from the 
outset of this investigation, requested co-petitioner status, which the 
Department granted.
    Case and rebuttal briefs were submitted on May 19, 1995, and May 
25, 1995, respectively. In its rebuttal [[Page 31961]] brief, 
petitioner maintained that the Department should not consider certain 
information in respondent's case brief because it allegedly constituted 
an ``untimely submission of factual information.'' MSA disagreed with 
petitioner in a letter submitted on June 5, 1995. However, we 
determined that MSA's case brief did not contain new factual 
information. On June 6, 1995, the Department returned MSA's June 5, 
1995, letter, because it constituted an unsolicited submission untimely 
filed after the briefing period.
    Because no requests were received from interested parties, we did 
not hold a public hearing in this proceeding.

Scope of Investigation

    The following scope language reflects certain modifications made 
for purposes of the final determination, where appropriate, as 
discussed in the ``Scope Issues'' section below.
    The scope of this investigation includes seamless pipes produced to 
the ASTM A-335, ASTM A-106, ASTM A-53 and API 5L specifications and 
meeting the physical parameters described below, regardless of 
application. The scope of this investigation also includes all products 
used in standard, line, or pressure pipe applications and meeting the 
physical parameters below, regardless of specification.
    For purposes of this 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. Pipes 
produced in non-standard wall thicknesses are commonly referred to as 
tubes.
    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, 
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 seamless pipe meeting 
the physical parameters described above and produced to one of the 
specifications listed above, regardless of application, and whether or 
not also certified to a non-covered specification. Standard, line and 
pressure applications and the above-listed specifications are defining 
characteristics of the scope of this investigation. Therefore, seamless 
pipes meeting the physical description above, but not produced to the 
A-335, A-106, A-53, or API 5L standards shall be covered if used in a 
standard, line or pressure application.
    For example, there are certain other ASTM specifications of pipe 
which, because of overlapping characteristics, could potentially be 
used in A-106 applications. These specifications generally include A-
162, A-192, A-210, A-333, and A-524. When such pipes are used in a 
standard, line or pressure pipe application, such products are covered 
by the scope of this investigation.
    Specifically excluded from this investigation are boiler tubing and 
mechanical tubing, if such products are not produced to A-335, A-106, 
A-53 or API 5l specifications and are not used in standard, line or 
pressure applications. In addition, finished and unfinished OCTG are 
excluded from the scope of this investigation, if covered by the scope 
of another antidumping duty order from the same country. If not covered 
by such an OCTG order, finished and unfinished OCTG are included in 
this scope when used in standard, line or pressure applications. 
Finally, also excluded from this 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

    Interested parties in these investigations have raised several 
issues related to the scope. We considered these issues in our 
preliminary determination and invited additional comments from the 
parties. These [[Page 31962]] issues, which are discussed below, are: 
(A) whether to continue to include end use as a factor in defining the 
scope of these investigations; (B) whether the seamless pipe subject to 
these investigations constitutes more than one class or kind of 
merchandise; and (C) miscellaneous scope clarification issues and scope 
exclusion requests.

A. End Use

    We stated in our preliminary determination that we agreed with 
petitioner that pipe products identified as potential substitutes used 
in the same applications as the four standard, line, and pressure pipe 
specifications listed in the scope would fall within the class or kind 
of subject merchandise and, therefore, within the scope of any orders 
issued in these investigations. However, we acknowledged the 
difficulties involved with requiring end-use certifications, 
particularly the burdens placed on the Department, the U.S. Customs 
Service, and the parties, and stated that we would strive to simplify 
any procedures in this regard.
    For purposes of these final determinations, we have considered 
carefully additional comments submitted by the parties and have 
determined that it is appropriate to continue to employ end use to 
define the scope of these cases with respect to non-listed 
specifications. We find that the generally accepted definition of 
standard, line and pressure seamless pipes is based largely on end use, 
and that end use is implicit in the description of the subject 
merchandise. Thus, end use must be considered a significant defining 
characteristic of the subject merchandise. Given our past experience 
with substitution after the imposition of antidumping orders on steel 
pipe products,\1\ we agree with petitioner that if products produced to 
a non-listed specification (e.g., seamless pipe produced to A-162, a 
non-listed specification in the scope) were actually used as standard, 
line, or pressure pipe, then such product would fall within the same 
class or kind of merchandise subject to these investigations.

    \1\ See Preliminary Affirmative Determination of Scope Inquiry 
on Antidumping Duty Orders on Certain Welded Non-Alloy Steel Pipes 
from Brazil, the Republic of Korea, Mexico and Venezuela, 59 FR 
1929, January 13, 1994.
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    Furthermore, we disagree with respondents' general contention that 
using end use for the scope of an antidumping case is beyond the 
purview of the U.S. antidumping law. The Department has interpreted 
scope language in other cases as including an end-use specification. 
See Ipsco Inc. v. United States, 715 F.Supp. 1104 (CIT 1989) (Ipsco). 
In Ipsco, the Department had clarified the scope of certain orders, in 
particular the phrase, ``intended for use in drilling for oil and 
gas,'' as covering not only API specification OCTG pipe but, `` `all 
other pipe with [certain specified] characteristics used in OCTG 
applications * * *' '' Ipsco at 1105. In reaching this determination, 
the Department also provided an additional description of the covered 
merchandise, and initiated an end-use certification procedure.
    Regarding implementation of the end use provision of the scope of 
these investigations, and any orders which may be issued in these 
investigations, we are well aware of the difficulty and burden 
associated with such certifications. Therefore, in order to maintain 
the effectiveness of any order that may be issued in light of actual 
substitution in the future (which the end-use criterion is meant to 
achieve), yet administer certification procedures in the least 
problematic manner, we have developed an approach which simplifies 
these procedures to the greatest extent possible.
    First, we will not require end-use certification until such time as 
petitioner or other interested parties provide a reasonable basis to 
believe or suspect that substitution is occurring.2 Second, we 
will require end-use certification only for the product(s) (or 
specification(s)) for which evidence is provided that substitution is 
occurring. For example, if, based on evidence provided by petitioner, 
the Department finds a reasonable basis to believe or suspect that 
seamless pipe produced to A-162 specification is being used as pressure 
pipe, we will require end-use certifications for imports of A-162 
specification. Third, normally we will require only the importer of 
record to certify to the end use of the imported merchandise. If it 
later proves necessary for adequate implementation, we may also require 
producers who export such products to the United States to provide such 
certification on invoices accompanying shipments to the United States. 
For a complete discussion of interested party comments and the 
Department's analysis on this topic, see June 12, 1995, End Use 
Decision Memorandum from Deputy Assistant Secretary Barbara Stafford 
(DAS) to Assistant Secretary Susan Esserman (AS).

    \2\ This approach is consistent with petitioner's request.
B. Class or Kind

    In the course of these investigations, certain respondents have 
argued that the scope of the investigations should be divided into two 
classes or kinds. Siderca S.A.I.C., the Argentine respondent, has 
argued that the scope should be divided according to size: seamless 
pipe with an outside diameter of 2 inches or less and pipe with an 
outside diameter of greater than 2 inches constitute two classes or 
kinds. Mannesmann S.A., the Brazilian respondent, and Mannesmannrohren-
Werke AG, the German respondent, argued that the scope should be 
divided based upon material composition: carbon and alloy steel 
seamless pipe constitute two classes or kinds.
    In our preliminary determinations, we found insufficient evidence 
on the record that the merchandise subject to these investigations 
constitutes more than one class or kind. We also indicated that there 
were a number of areas where clarification and additional comment were 
needed. For purposes of the final determination, we considered a 
significant amount of additional information submitted by the parties 
on this issue, as well as information from other sources. This 
information strongly supports a finding of one class or kind of 
merchandise. As detailed in the June 12, 1995, Class or Kind Decision 
Memorandum from DAS to AS, we 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) expectations of the ultimate purchaser; (3) the 
ultimate use of the merchandise; (4) the channels of trade in which the 
merchandise moves; and (5) the cost of that merchandise.
    In the past, the Department has divided a single class or kind in a 
petition into multiple classes or kinds where analysis of the 
Diversified Products criteria indicates that the subject merchandise 
constitutes more than one class or kind. See, for example, Final 
Determination of Sales at Less than Fair Value; Anti-Friction Bearings 
(Apart from Tapered Roller Bearings) from Germany, 54 Fed. Reg. 18992, 
18998 (May 3, 1989) (``AFBs from Germany''); Pure and Alloy Magnesium 
from Canada: Final Affirmative Determination; Rescission of 
Investigation and Partial Dismissal of Petition, 57 Fed. Reg. 30939 
(July 13, 1992).
1. Physical Characteristics
    We find little meaningful difference in physical characteristics 
between seamless pipe above and below two inches. Both are covered by 
the same technical specifications, which contains 
[[Page 31963]] detailed requirements.3 While we recognize that 
carbon and alloy pipe do have some important physical differences 
(primarily the enhanced heat and pressure tolerances associated with 
alloy grade steels), it is difficult to say where carbon steel ends and 
alloy steel begins. As we have discussed in our Class or Kind Decision 
Memorandum of June 12, 1995, carbon steel products themselves contain 
alloys, and there is a range of percentages of alloy content present in 
merchandise made of carbon steel. We find that alloy grade steels, and 
pipes made therefrom, represent the upper end of a single continuum of 
steel grades and associated attributes.4

    \3\  The relevant ASTM specifications, as well as product 
definitions from other independent sources (e.g., American Iron and 
Steel Institute (AISI)), describe the sizes for standard, line, and 
pressure pipe, as ranging from \1/2\ inch to 60 inches (depending on 
application). None of these descriptions suggest a break point at 
two inches.
    \4\  The Department has had numerous cases where steel products 
including carbon and alloy grades were considered to be within the 
same class or kind. See, e.g., Preliminary Determination of Sales at 
Less than Fair Value: Oil Country Tubular Goods from Austria, et 
al., 60 Fed. Reg. 6512 (February 2, 1995); Final Determination of 
Sales at Less than Fair Value: Certain Alloy and Carbon Hot-Rolled 
Bars, Rods, and Semi-Finished Products of Special Bar Quality 
Engineered Steel from Brazil, 58 Fed. Reg. 31496 (June 3, 1993); 
Final Determination of Sales at Less than Fair Value: Forged Steel 
Crankshafts from the United Kingdom, 60 Fed. Reg. 22045 (May 9, 
1995).
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    In those prior determinations where the Department divided a single 
class or kind, the Department emphasized that differences in physical 
characteristics also affected the capabilities of the merchandise 
(either the mechanical capabilities, as in AFBs from Germany, 54 Fed. 
Reg. at 18999, 19002-03, or the chemical capabilities, as in Pure and 
Alloy Magnesium from Canada, 57 Fed. Reg. at 30939), which in turn 
established the boundaries of the ultimate use and customer 
expectations of the products involved.
    As the Department said in AFBs from Germany,

    [t]he real question is whether the physical differences are so 
material as to alter the essential nature of the product, and, 
therefore, rise to the level of class or kind distinctions. We 
believe that the physical differences between the five classes or 
kinds of the subject merchandise are fundamental and are more than 
simply minor variations on a theme.

54 Fed. Reg. at 19002. In the present cases, there is insufficient 
evidence to conclude that the differences between pipe over 2 inches in 
outside diameter and 2 inches or less in outside diameter, rise to the 
level of a class or kind distinction.
    Furthermore, with regard to Siderca's allegation that a two-inch 
breakpoint is widely recognized in the U.S. market for seamless pipe, 
the Department has found only one technical source of U.S. market data 
for seamless pipe, the Preston Pipe Report. The Preston Pipe Report, 
which routinely collects and publishes U.S. market data for this 
merchandise, publishes shipment data for the size ranges \1/2\ to 4\1/
2\ inches: it does not recognize a break point at 2 inches. 
Accordingly, the Department does not agree with Siderca that ``the U.S. 
market'' recognizes 2 inches as a physical boundary line for the 
subject merchandise.
    In these present cases, therefore, the Department finds that there 
is insufficient evidence that any physical differences between pipe 
over 2 inches in outside diameter and 2 inches or less in outside 
diameter, or between carbon and alloy steel, rise to the level of class 
or kind distinctions.
2. Ultimate Use and Purchaser Expectations
    We find no evidence that pipe above and below two inches is used 
exclusively in any specific applications. Rather, the record indicates 
that there are overlapping applications. For example, pipe above and 
below two inches may both be used as line and pressure pipe. The 
technical definitions for line and pressure pipe provided by ASTM, 
AISI, and a variety of other sources do not recognize a distinction 
between pipe over and under two inches.
    Likewise, despite the fact that alloy grade steels are associated 
with enhanced heat and pressure tolerances, there is no evidence that 
the carbon or alloy content of the subject merchandise can be 
differentiated in the ultimate use or expectations of the ultimate 
purchaser of seamless pipe.
3. Channels of Trade
    Based on information supplied by the parties, we determine that the 
vast majority of the subject merchandise is sold through the same 
channel of distribution in the United States and is triple-stenciled in 
order to meet the greatest number of applications.
    Accordingly, the channels of trade offer no basis for dividing the 
subject merchandise into multiple classes or kinds based on either the 
size of the outside diameter or on pipe having a carbon or alloy 
content.
4. Cost
    Based on the evidence on the record, we find that cost differences 
between the various products do exist. However, the parties varied 
considerably in the factors which they characterized as most 
significant in terms of affecting cost. There is no evidence that the 
size ranges above and below two inches, and the difference between 
carbon and alloy grade steels, form a break point in cost which would 
support a finding of separate classes or kinds.
    In conclusion, while we recognize that certain differences do exist 
between the products in the proposed class or kind of merchandise, we 
find that the similarities significantly outweigh any differences. 
Therefore, for purposes of the final determination, we will continue to 
consider the scope as constituting one class or kind of merchandise.

C. Miscellaneous Scope Clarification Issues and Exclusion Requests

    The miscellaneous scope issues include: (1) Whether OCTG and 
unfinished OCTG are excluded from the scope of these investigations; 
(2) whether pipes produced to non-standard wall thicknesses (commonly 
referred to as ``tubes'') are covered by the scope; (3) whether certain 
merchandise (e.g., boiler tubing, mechanical tubing) produced to a 
specification listed in the scope but used in an application excluded 
from the scope is covered by the scope; and (4) whether redraw hollows 
used for cold drawing are excluded from the scope. For a complete 
discussion of interested party comments and the Department's analysis 
on these topics, see June 12, 1995, Additional Scope Clarifications 
Decision Memorandum from DAS to AS.
    Regarding OCTG, petitioner requested that OCTG and unfinished OCTG 
be included within the scope of these investigations if used in a 
standard, line or pressure pipe application. However, OCTG and 
unfinished OCTG, even when used in a standard, line or pressure pipe 
application, may come within the scope of certain separate, concurrent 
investigations. We intend that merchandise from a particular country 
not be classified simultaneously as subject to both an OCTG order and a 
seamless pipe order. Thus, to eliminate any confusion, we have revised 
the scope language above to exclude finished and unfinished OCTG, if 
covered by the scope of another antidumping duty order from the same 
country. If not covered by such an OCTG order, finished and unfinished 
OCTG are included in this scope when used in a standard, line or 
pressure pipe application, and, as with other non-listed 
specifications, may be subject to end-use certification if there is 
evidence of substitution. [[Page 31964]] 
    Regarding pipe produced in non-standard wall thicknesses, we 
determine that these products are clearly within the parameters of the 
scope of these investigations. For clarification purposes, we note that 
the physical parameters of the scope include all seamless carbon and 
alloy steel pipes, of circular cross-section, not more than 4.5 inches 
in outside diameter, regardless of wall thickness. Therefore, the fact 
that such products may be referred to as tubes by some parties, and may 
be multiple-stenciled, does not render them outside the scope.
    Regarding pipe produced to a covered specification but used in a 
non-covered application, we determine that these products are within 
the scope. We agree with the petitioner that the scope of this 
investigation includes all merchandise produced to the covered 
specifications and meeting the physical parameters of the scope, 
regardless of application. The end-use criteria included in the scope 
is only applicable to products which can be substituted in the 
applications to which the covered specifications are put i.e. standard, 
line, and pressure applications.
    It is apparent that at least one party in this case interpreted the 
scope incorrectly. Therefore, we have clarified the scope to make it 
more explicit that all products made to ASTM A-335, ASTM A-106, ASTM A-
53 and API 5L are covered, regardless of end use.
    With respect to redraw hollows for cold drawing, the scope language 
excludes such products specifically when used in the production of 
cold-drawn pipe or tube. We understand that petitioner included this 
exclusion language expressly and intentionally to ensure that hollows 
imported into the United States are sold as intermediate products, not 
as merchandise to be used in a covered application.

Standing

    The Argentine, Brazilian, and German respondents have challenged 
the standing of Gulf States Tube to file the petition with respect to 
pipe and tube between 2.0 and 4.5 inches in outside diameter, arguing 
that Gulf States Tube does not produce these products.
    Pursuant to section 732(b)(1) of the Act, an interested party as 
defined in section 771(9)(C) of the Act has standing to file a 
petition. (See also 19 C.F.R. Sec. 353.12(a).) Section 771(9)(C) of the 
Act defines ``interested party,'' inter alia, as a producer of the like 
product. For the reasons outlined in the ``Scope Issues'' section 
above, we have determined that the subject merchandise constitutes a 
single class or kind of merchandise. The International Trade Commission 
(ITC) has also preliminarily determined that there is a single like 
product consisting of circular seamless carbon and alloy steel 
standard, line, and pressure pipe, and tubes not more than 4.5 inches 
in outside diameter, and including redraw hollows. (See USITC 
Publication 2734, August 1994 at 18). For purposes of determining 
standing, the Department has determined to accept the ITC's definition 
of like product, for the reasons set forth in the ITC's preliminary 
determination. Because Gulf States is a producer of the like product, 
it has standing to file a petition with respect to the class or kind of 
merchandise under investigation. Further, as noted in the ``Case 
History'' section of this notice, on April 27, 1995, Koppel, a U.S. 
producer of the product size range at issue, filed a request for co-
petitioner status, which the Department granted. As a producer of the 
like product, Koppel also has standing.
    The Argentine respondent argues that Koppel's request was filed too 
late to confer legality on the initiation of these proceedings with 
regard to the products at issue. Gulf States Tube maintains that the 
Department has discretion to permit the amendment of a petition for 
purposes of adding co-petitioners who produce the domestic like 
product, at such time and upon such circumstances as deemed appropriate 
by the Department.
    The Court of International Trade (CIT) has upheld in very broad 
terms the Department's ability to allow amendments to petitions. For 
example, in Citrosuco Paulista, S.A. v. United States, 704 F. Supp. 
1075 (Ct. Int'l Trade 1988), the Court sustained the Department's 
granting of requests for co-petitioner status filed by six domestic 
producers on five different dates during an investigation. The Court 
held that the addition of the co-petitioners cured any defect in the 
petition, and that allowing the petition to be amended was within 
Commerce's discretion:

    [S]ince Commerce has statutory discretion to allow amendment of 
a dumping petition at any time, and since Commerce may self-initiate 
a dumping petition, any defect in a petition filed by [a domestic 
party is] cured when domestic producers of the like product [are] 
added as co-petitioners and Commerce [is] not required to start a 
new investigation.

Citrosuco, 704 F. Supp. at 1079 (emphasis added). The Court reasoned 
that if Commerce were to have dismissed the petition for lack of 
standing, and to have required the co-petitioners to refile at a later 
date, it ``would have elevated form over substance and fruitlessly 
delayed the antidumping investigation * * * when Congress clearly 
intended these cases to proceed expeditiously.'' Id. at 1083-84.
    Koppel has been an interested party and a participant in these 
investigations from the outset. The timing of Koppel's request for co-
petitioner status and the fact that it made its request in response to 
Siderca's challenge to Gulf States's Tube's standing does not render 
its request invalid. See Final Affirmative Countervailing Duty 
Determination; Live Swine and Fresh, Chilled, and Frozen Pork Products 
from Canada, 50 FR 25097 (June 17, 1985). The Department has rejected a 
request to add a co-petitioner based on the untimeliness of the request 
only where the Department determined that there was not adequate time 
for opposing parties to submit comments and for the Department to 
consider the relevant arguments. See Final Affirmative Countervailing 
Duty Determination: Certain Stainless Steel Hollow Products from 
Sweden, 52 FR 5794, 5795, 5803 (February 26, 1987). In this 
investigation, the respondents have had an opportunity to comment on 
Koppel's request for co-petitioner status, and the Argentine respondent 
has done so in its case brief. Therefore, we have determined that, 
because respondents would not be prejudiced or unduly burdened, 
amendment of the petition to add Koppel as co-petitioner is 
appropriate.

Period of Investigation

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

Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute and to the 
Department's regulations are in reference to the provisions as they 
existed on December 31, 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. Where there were no sales of identical merchandise in the 
home market to compare to U.S. sales, we made similar merchandise 
comparisons, when verified data permitted, 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.

Fair Value Comparisons

    To determine whether Mannesmann's 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 [[Page 31965]] States Price'' and ``Foreign 
Market Value'' sections of this notice.
    In accordance with past practice and consistent with our decision 
in the preliminary determination, we considered Brazil's economy to be 
hyperinflationary during the POI. 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 CFR 353.58, we made comparisons at the same 
level of trade. For those U.S. sales where there were no comparable 
sales at the same level of trade in the home market, we used home 
market sales at a different level of trade as the basis of our less 
than fair value comparisons. Based on our analysis of Mannesmann's 
questionnaire response, we have accepted its claim that MSA's sales 
from its factory to unrelated customers and its sales through its 
related distributor MCSA represent two distinct levels of trade. 
However, because we could not determine that the difference in level of 
trade affects price comparability, we made no adjustment to FMV. See 
Comment 5 of the ``Company-specific Issues'' sub-section of the 
``Interested Party Comments'' section of this notice.
    We also made adjustments for differences-in-merchandise (difmer), 
where possible, in accordance with 19 CFR 353.57. At verification, we 
found that respondent's reported variable cost of manufacture data 
included cost differences not attributable to physical differences in 
the merchandise. Therefore, we modified the submitted cost data where 
we had information on the record to eliminate cost differences 
unrelated to physical differences.
    For those products for which difmer cost modification was not 
possible and those U.S. sales with no comparable home market products 
and no cost data, we based our analysis, pursuant to section 776(C) of 
the Act, on the best information available (BIA). As BIA, we used a 
calculated margin that is sufficiently adverse to fulfill the statutory 
purpose of the BIA rule. See June 12, 1995, Final Determination 
Concurrence Memorandum. See also DOC Position to Comment 2 of the 
``Company-specific Issues'' sub-section of the ``Interested Party 
Comments'' section of this notice.

United States Price

    We calculated USP according to the methodology described in our 
preliminary determination, with the following exceptions:
    1. We corrected certain clerical errors found at verification, 
including: (a) The reported product codes for four products; (b) the 
reported sales date and end-finish for one transaction; (c) the level 
of trade reported for one customer; and (d) the reported U.S. duty 
charges for certain transactions.
    2. We revised the reported ocean freight, U.S. brokerage, and U.S. 
inland freight amounts for certain transactions to reflect actual 
expenses.
    3. We recalculated credit expenses using respondent's revised U.S. 
shipment dates submitted in the March 9, 1995, response. These dates 
reflect the approximate date on which the merchandise left the factory.
    4. We made a deduction for foreign inland freight charges that were 
previously not reported in respondent's sales listing.
    5. We made a deduction for bank fees paid by MSA for entering into 
foreign exchange contracts, which had not been reported in respondent's 
sales listing. See Comment 8 of the ``Company-specific Issues'' sub-
section of the ``Interested Party Comments'' section of this notice.

Foreign Market Value

    As stated in the preliminary determination, we determined that 
respondent's home market was viable with respect to sales of seamless 
pipe during the POI to serve as the basis for FMV.
    Based on the results of the Department's related party sales test 
as set forth in Appendix II of the Final Determination of Sales at Less 
Than Fair Value: Certain Cold-Rolled Carbon Steel Flat Products from 
Argentina, 58 FR 37062 (July 9, 1993), we excluded respondent's related 
party sales from our analysis, and used only those sales made to 
unrelated parties.
    We calculated FMV according to the methodology described in our 
preliminary determination with the following exceptions:
    1. Where we had verified transaction-specific data on the record, 
we excluded from our analysis those home market sales that were found 
to have been returned, and incorrectly included in respondent's sales 
listing.
    2. For both MSA's and MCSA's sales, we revised the reported 
insurance charges, where appropriate, based on the applicable, verified 
insurance percentage rates prevailing during the POI.
    3. We corrected clerical errors made with respect to the reported 
interest revenue amounts for two transactions.
    4. For MSA's sales, we reduced the reported inland freight charges 
by the amount by which they exceeded the actual amounts charged by 
MSA's freight supplier.
    5. With respect to MCSA's sales, we corrected the surface treatment 
codes for those products reported incorrectly as corrosion-resistant.
    6. We made no adjustment for inflation value in addition to an 
adjustment for the reported, verified credit expenses which included an 
inflation factor. See Comment 4 in the ``Company-specific Issues'' sub-
section of the ``Interested Party Comments'' section of this notice.
    7. Because the reported U.S. and home market packing expenses did 
not verify, we used BIA for these expenses. As BIA for home market 
packing expenses, we used the lowest domestic packing expense noted on 
the record. As BIA for U.S. packing expenses, we used the highest 
export packing expense noted on the record. See Comment 6 in the 
``Company-specific Issues'' sub-section of the ``Interested Party 
Comments'' section of this notice.
    8. Where possible, we made difmer adjustments based on the 
submitted cost data, modified to eliminate cost differences unrelated 
to physical differences between the merchandise being compared. See 
Comment 2 in the ``Company-specific Issues'' sub-section of the 
``Interested Party Comments'' section of this notice.

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, as well as the UFIR 5 index, published by the 
Central Bank of Brazil which were provided by respondent in its 
February 28, 1995, response and verified by the Department.

    \5\ The UFIR is an inflationary neutral currency unit.
---------------------------------------------------------------------------

Verification

    As provided in section 776(b) of the Act, we verified information 
provided by Mannesmann by using standard verification procedures, 
including the examination of relevant sales and financial records, and 
selection of original source documentation containing relevant 
information.

Interested Party Comments

General Issues

Comment 1

    Mannesmann argues that petitioner lacks standing to seek the 
imposition of antidumping duties on products that it does not produce. 
According to Mannesmann, petitioner has admitted [[Page 31966]] that it 
is incapable of manufacturing seamless pipe and tube in dimensions 
above two inches in outside diameter. Therefore, respondent maintains 
that petitioner is not an ``interested party'' with respect to this 
merchandise. Accordingly, the Department should amend the scope of the 
investigation to limit it only to those dimensions and pipe types that 
petitioner has a proven ability to manufacture.
    Gulf States Tube contends that the antidumping statute neither 
requires nor permits the Department to limit the scope of the 
investigation to products that the petitioner itself produces. Gulf 
States Tube also maintains that respondent's standing claim is untimely 
and may not be considered by the Department at this stage of the 
proceeding. Nevertheless, Gulf States Tube asserts that the issue is 
rendered moot by the request of Koppel Steel Corporation, a domestic 
producer of subject merchandise in sizes larger than two inches in 
outside diameter, for co-petitioner status.

DOC Position

    We disagree with respondent for the reasons outlined in the 
``Standing'' section of this notice.

Comment 2

    Mannesmann contends that including an end-use certification 
requirement in the scope would be both illegal and unworkable. 
Respondent maintains that petitioner is effectively seeking to 
circumvent the established legal procedure by arguing for an open-ended 
scope definition that encompasses products that it does not manufacture 
and that petitioner has conceded are not causing present injury. In 
addition, respondent states that it is clear that any end-use 
certification procedure designed to implement such a scope definition 
is wholly unworkable because of the manner in which the subject 
products are sold. That is, in almost all cases the importer of record 
does not know the ultimate use of the pipe products it sells, and in 
many instances, neither do its customers. According to respondent, as a 
practical matter, the effect of an end-use certification requirement 
would be to ask the impossible of importers. Furthermore, respondent 
states that the anticircumvention procedures of the antidumping law 
provide ample remedy to petitioner in cases of order circumvention via 
product substitution. Respondent emphasizes that absent the detailed 
inquiry required by anti-circumvention legal provisions, the Department 
cannot include within the scope of this investigation other merchandise 
simply because such other products might in theory be utilized for the 
same purposes as pipe meeting the listed specifications. According to 
respondent, to do otherwise is contrary to the antidumping law and 
deprives respondents of their right to a full and fair hearing on any 
circumvention allegations that might be advanced by petitioner at some 
later date.
    Petitioner argues that there is no factual or legal basis for 
eliminating end use as a defining element of the scope of the 
investigation. Furthermore, not only is the feasibility of specific 
enforcement mechanisms irrelevant to the scope determination, but it is 
also untrue that any end use certification procedure would be 
unworkable. According to petitioner, there is no evidence on the record 
of this investigation that an end-use certification program must 
require the submission of an end-use certificate by the importer at the 
time of importation. Rather, petitioner proposes a program whereby the 
end-use certificate travels with the pipe to the ultimate end-user, who 
may then send it back up the line of distribution. When final duties 
are assessed, the Department may assume that any pipe for which no 
certificates can be produced was used in subject applications. Contrary 
to Mannesmann's arguments, petitioner maintains that the Department and 
the U.S. Customs Service are perfectly capable of administering an 
order that includes end use in its scope definition. In the event that 
products meeting the physical description of subject merchandise, but 
which are not certified to one or more of the covered specifications, 
are being substituted into one of the listed applications, the burden 
would be on the petitioner, other domestic producers or interested 
parties to notify Customs and the Department with some objective 
evidence supporting a reasonable belief that substitution is occurring. 
Accordingly, it is both unnecessary and inappropriate at this point to 
engage in debate about the feasibility and desirability of specific 
end-use certification procedures. According to petitioner, the facts 
and policy considerations relevant to such a debate are not available 
on this record, and the selection of a specific enforcement mechanism 
is beyond the Department's responsibilities in this proceeding.
DOC Position

    We disagree with respondent's assertion that including end-use in 
the scope of the investigation would be unlawful. The Department has 
interpreted scope language in other cases as including an end-use 
specification. See Ipsco Inc. v. United States, 715 F. Supp. 1104 (CIT 
1989). See ``Scope Issues'' section of this notice for further 
discussion on end-use.

Comment 3

    Mannesmann contends that the carbon and alloy pipe products subject 
to investigation are distinct classes or kinds of merchandise. 
Mannesmann asserts that the criteria set out in Diversified Products 
support a division between carbon and alloy products. Specifically, 
Mannesmann argues that carbon and alloy pipes differ in terms of 
physical characteristics, uses, customer expectations and cost. With 
respect to physical characteristics, alloy seamless pipes contain 
higher grade steel than carbon seamless pipe, and because of their 
different chemistries, these products have different performance 
characteristics. With respect to end use which, according to 
respondent, is inherently tied to physical characteristics, carbon pipe 
is not as versatile as alloy steel pipe and is not suited for the more 
sophisticated applications, such as operations in high temperature 
environments. Respondent asserts that the Department has consistently 
emphasized the relationship between physical characteristics and end 
use in past cases (e.g., Torrington Co. v. United States, 745 F.Supp. 
718, 726 (CIT 1990) (Torrington)). In addition, respondent states that 
customer expectations vary depending upon the ability of specific 
merchandise to perform a given task. With regard to alloy and carbon 
steel pipe, the ultimate purchaser does not expect these two types of 
pipe to be interchangeable, and is willing to pay more for alloy steel 
pipe because it must perform under more adverse conditions than the 
conditions for which carbon pipe is suited. With respect to cost, 
respondent states that the cost of alloy pipe is higher than that of 
carbon pipe because of the more expensive raw materials and production 
costs incurred in producing alloy pipe. Finally, with respect to 
channels of trade, respondent states that carbon and alloy pipe move in 
similar channels, but that this factor is not determinative as to class 
or kind of merchandise.
    Petitioner maintains that the subject merchandise constitutes a 
single class or kind. With respect to Mannesmann's proposal for a split 
in class or kind on the basis of material composition, petitioner 
asserts that the factual evidence does not support such a division. 
Petitioner states that the application of the criteria employed by the 
Department in Diversified Products [[Page 31967]] compels the 
conclusion that there is a single class or kind of merchandise. 
According to petitioner, the physical characteristics of carbon and 
alloy pipe represent a continuum of products produced with varying 
chemical compositions to meet a range of heat, pressure and tensile 
requirements. According to petitioner, there is simply no bright 
dividing line between the physical characteristics of the products. 
Petitioner states that the customer's expectations and use of the 
product are dictated by the engineering specification required by the 
intended application. Because the majority of all subject seamless pipe 
is triple-certified, the pipe may be put to any of the uses that apply 
to each of the individual specifications to which it is certified. 
Petitioner points out that the vast majority of seamless pipe is sold 
through the same channel of trade--distributors. Finally, petitioner 
adds that, because the majority of seamless pipe is triple-certified, 
it has identical costs regardless of the customer to whom it is sold.

DOC Position

    We agree with petitioner that the subject merchandise constitutes a 
single class or kind for the reasons outlined in the ``Scope Issues'' 
section of this notice. Furthermore, respondent's reliance on 
Torrington is misplaced. In Torrington, the Court of International 
Trade found that the Department's division of antifriction bearings 
into five classes or kinds, based in large part on the physical 
characteristics of the different types of antifriction bearings, was 
supported by substantial evidence on the record. In this case, as we 
stated in our ``Scope Issues'' section, that there is insufficient 
evidence to show that the difference between carbon and alloy steel 
rises to a class or kind distinction. See ``Scope Issues'' section of 
this notice for further discussion on class or kind.
Company-Specific Issues

Comment 1

    Petitioner argues that BIA must be applied to Mannesmann's 
responses for the following reasons:
    (a) the Department was unable to verify the accuracy or 
completeness of Mannesmann's sales listings;
    (b) MSA's difmer data is erratic and contains serious errors; and
    (c) the information for various sales charges and adjustments 
reported by respondent could not be verified.
    Petitioner maintains that Mannesmann's home market sales response 
must be considered unreliable when viewed in the context of the 
totality of problems identified at verification and the additional 
opportunities Mannesmann had prior to verification to provide an 
accurate response.
    With respect to reason (a) above, petitioner states that the 
Department's verification report confirms that Mannesmann omitted 
certain sales of subject merchandise from its home market sales 
listing, often characterizing these omissions as insignificant in terms 
of the percentage they constitute of total reported sales. Petitioner 
asserts that since only a portion of Mannesmann's total reported sales 
will be matched to U.S. sales in dumping margin analysis and the 
Department's standard hyperinflation methodology requires separate FMV 
calculations for each month, omissions such as those observed by the 
Department can have a significant impact on the ultimate margin 
calculation. According to petitioner, the Department must examine each 
of the errors and omissions noted in the verification report in the 
context of its potential impact on monthly sales matches.
    In addition to these sales omissions, petitioner notes further that 
certain sales were reported incorrectly because of errors in accounting 
for merchandise returns and invoice price corrections. Also, the gross 
prices for numerous transactions and the surface treatment codes for 
certain products were reported incorrectly.
    With respect to reason (b), petitioner maintains that the cost data 
submitted by respondent remains erratic and unusable even after the 
Department's request for its revision in a deficiency letter issued 
subsequent to the preliminary determination. Reason (b) is discussed in 
detail under Comment 2 below.
    With respect to reason (c), petitioner takes issue with 
verification findings for certain charges and adjustments, i.e., that 
MSA's home market inland freight and insurance expenses were 
overstated, that foreign inland freight charges incurred by MSA on U.S. 
sales were not reported, that home market and U.S. packing costs were 
not verified, MPS' reporting of estimated movement charges for certain 
U.S. transactions, and U.S. shipment date.
    Respondent argues that the discrepancies noted by the Department in 
the verification reports either do not have appreciable effects on 
antidumping analysis or serve to disadvantage respondent. Therefore, 
its responses should be used in the Department's final analysis. For 
example, respondent asserts that a portion of the unreported sales 
would be irrelevant to product comparisons in the Department's analysis 
because it did not make any sales of those same products in the United 
States during the POI.
    With respect to the transactions which were omitted inadvertently 
from MCSA's February 28, 1995, sales listing due to programming errors, 
respondent points out that these sales were originally reported to the 
Department in the December 9, 1994, sales listing, and considered in 
the Department's preliminary analysis. Respondent states that these 
omitted sales fall into two categories: (1) sales of products which 
were not matched to U.S. products in the preliminary determination and 
were irrelevant in the margin calculation; and (2) sales of products 
which were potential matches for products sold to the United States. 
However, the sales of potentially matchable products were either not 
made in the same month as the corresponding U.S. products to which they 
were matched, or the Department has the necessary data from the 
December 9 response to utilize the sales for matching purposes. With 
respect to certain sales of cold-drawn pipe which were never reported 
to the Department, respondent argues that this is an insignificant 
portion of total reported home market sales, and that examining these 
sales within the context of the Department's preliminary determination 
product concordance indicates that none of the unreported sales should 
be treated as the most similar match to U.S. sales of cold drawn pipe. 
With respect to another group of products that were not reported to the 
Department because of a product selection error made during response 
preparation, respondent argues that these products are irrelevant to 
product comparisons on the basis of specification.
    Furthermore, respondent notes that any other discrepancies found at 
verification are minor and/or disadvantage respondent. Such 
discrepancies include: the incorrect reporting of four U.S. product 
codes for certain transactions; the overstatement of MSA's home market 
inland freight and insurance charges; MSA's omission of foreign inland 
freight charges for U.S. sales; and certain estimated U.S. movement 
charges which were not updated to reflect actual charges incurred.

DOC Position

    We disagree with petitioner that Mannesmann's responses cannot be 
used for the final determination. While we noted several discrepancies 
at verification, these discrepancies were neither pervasive nor 
representative of a [[Page 31968]] pattern of misrepresentation which 
would merit the rejection of the questionnaire response in total.
    It is true that respondent omitted certain home market sales from 
its February 28, 1995, sales listing for a variety of reasons, ranging 
from incorrect product code selection to inadvertent programming errors 
(see MSA/MCSA Verification Report at 49-55). However, we were able to 
verify the nature and magnitude of these errors, and found that they 
are not significant with respect to either the percentage of total home 
market sales reported or potential home market matches. In order to 
arrive at this conclusion, we conducted a comparative analysis between 
the characteristics (and weighted-average prices) of the omitted home 
market products originally reported in Mannesmann's December 9, 1994, 
sales listing, and those of the reported home market products in 
respondent's February 28, 1995, sales listings. As a result of this 
exercise, we found that for some of the omitted sales, there did not 
exist contemporaneous sales of identical products reported in 
respondent's February 28, 1995, sales listings. We then compared the 
product characteristics of the omitted sales to those of the U.S. 
sales, and found that none of the omitted home market sales would be 
comparable to the U.S. products sold during the POI on the basis of 
grade. Regarding those sales of another group of products that were not 
reported to the Department because of a product selection error, we 
found that, regardless of the month in which they were sold, these 
products would not be comparable to those sold to the United States on 
the basis of specification. Finally, we have determined to apply BIA to 
respondent's U.S. sales of cold-drawn pipe made during the POI for the 
reasons outlined in Comments 2 and 9 below.
    Furthermore, with respect to those home market sales affected by 
merchandise returns which were verified not to be usable for margin 
analysis, we found that the home market sales quantity affected was 
insignificant in terms of total reported home market sales quantity. 
Because these sales were incorrectly included in respondent's home 
market sales listing, we excluded them from our analysis where we could 
clearly identify the affected individual transactions from data 
contained in verification exhibits.
    In addition, regarding the gross prices of those transactions which 
were found to be overreported, we included these sales in our analysis, 
but did not make any adjustments to price. Our decision to make no 
adjustment is based on the fact that the prices at issue represent an 
overstatement of actual prices charged and any revision of such prices 
would not only be burdensome given the number of affected transactions, 
but would also require the revision of other sales-related data (e.g., 
taxes) which are calculated based upon price and were not examined 
specifically at verification within the context of overreported gross 
prices.
    As for the other areas stated by petitioner in which discrepancies 
were found (e.g., difmer, packing, etc.), we made appropriate 
adjustments in accordance with verification findings based on 
information on the record, as discussed in the ``United States Price,'' 
``Foreign Market Value'' and ``Interested Party Comments'' sections of 
this notice.

Comment 2

    Petitioner contends that Mannesmann's difmer cost data remains 
erratic and unusable for the final determination and, therefore, the 
Department should apply BIA to calculate the margin for any U.S. sale 
for which there is no contemporaneous identical match in the home 
market. According to petitioner, Mannesmann's difmers are deficient 
because they are not based on replacement costs in the month of 
shipment; rather Mannesmann's costs have been reported on a historical 
basis. Petitioner points out that the fact that Mannesmann has recorded 
its historical costs in UFIRs does not transform them into replacement 
costs, and that this approach has been rejected in previous cases by 
the Department (e.g., Final Determination of Sales at Less Than Fair 
Value: Silicon Metal from Brazil, 59 FR 42806, August 19, 1994) 
(Silicon Metal from Brazil). Even though the Department changed its 
hyperinflationary methodology in 1994 by providing for indexing of 
costs across different months, petitioner maintains that the costs that 
are indexed still must be replacement costs during the month of 
shipment, and must not represent historical costs. Petitioner argues 
that UFIR indexation is no substitute for the reporting of actual 
monthly replacement costs.
    Petitioner also maintains that the fluctuations in cost are not 
limited to the materials component of the reported costs; there are 
also significant variations in the reported labor and variable overhead 
costs from month to month for the same products, indicating that the 
data is unreliable. According to petitioner, while the Department 
verified that the reported cost data was submitted in accordance with 
the exact methodology used in its normal cost accounting system, the 
Department did not verify that the system accurately states 
respondent's costs for purposes of this investigation. Citing Final 
Determination of Sales at Less Than Fair Value: Certain Hot-Rolled Lead 
and Bismuth Carbon Steel Products from the United Kingdom (58 FR 6207, 
January 27, 1993), petitioner emphasizes that the Department has 
rejected the use of cost differences unrelated to physical differences 
for difmer adjustment purposes in past cases.
    With respect to petitioner's request for the use of BIA, respondent 
asserts that petitioner ignores the facts on the record and that the 
Department was able to trace the reported cost data to source 
documentation, and tie them to financial statements.
    Furthermore, respondent asserts that petitioner's attempt to link 
the concepts of replacement costs and monetary correction in arguing 
that MSA's reported costs do not account for changes in replacement 
costs is confused. According to MSA, a monetary correction is merely an 
adjustment to financial statements to measure the cost for holding 
balances in certain accounts during periods of inflation. Such an 
adjustment has nothing to do with production costs or difmer 
calculations. Respondent notes that the Department has confirmed this 
in past cases by treating such monetary corrections as offsets or 
additions to financing expenses (e.g., Final Results of Administrative 
Review: Gray Portland Cement from Mexico, 58 FR 47253 (1993)).
    Respondent asserts that, contrary to petitioner's attempt to 
confuse the significance of MSA's UFIR-based cost system, this system 
accounts for the effects of changes in replacement costs. In addition, 
respondent opposes petitioner's characterization that a UFIR-based 
system is tantamount to reporting historical costs. According to 
respondent, the historical method contrasts sharply with the UFIR 
system, which carries costs forward on a steady currency basis and, in 
effect, reaches the same result as a replacement cost system. The UFIR-
based methodology is applicable for both finished goods and inputs and 
ensures that MSA's costs reflect market conditions. Because this 
methodology tracks the inflation rate, material and finished goods are 
constantly inflated when expressed in Brazilian currency. According to 
respondent, this result is precisely the intent of the replacement cost 
accounting system, i.e., to express costs in real terms. Therefore, 
respondent's UFIR-based system accurately tracks cost on a replacement 
basis and is not, [[Page 31969]] as petitioner suggests, on a 
historical cost basis.

DOC Position

    We agree in part with both petitioner and respondent. At 
verification, we noted that respondent's reported UFIR-based material 
and fabrication costs varied substantially for the same product 
produced in different months. We were able to establish that this cost 
variance was due to a combination of factors which are unrelated to 
physical differences: (1) the nature of MSA's cost accounting system; 
(2) the process used to produce the input bar consumed in the 
production of subject merchandise (whether it was produced using ingot 
or a continuous caster); and (3) whether the material was purchased 
(imported) or produced in-house by the respondent.
    Contrary to petitioner's contention that replacement costs must be 
used when indexing costs between different months, for difmer purposes, 
we consider it appropriate to have cost data submitted in UFIR, as 
maintained by the company in its ordinary course of business. (See 
Department Policy Bulletin No. 94.5 dated March 25, 1994.) The UFIR is 
not a methodological creation of the respondent; UFIR- denominated 
costs must be kept in the ordinary course of business for reporting 
purposes to the ``Junta Comercial'' (the Brazilian equivalent of the 
Securities and Exchange Commission). Also, we find that petitioner's 
cite to Silicon Metal from Brazil as case precedence for the Department 
rejecting submitted UFIR costs is misplaced. In Silicon Metal from 
Brazil, unlike the instant case, there was no UFIR type indexation 
scheme in effect. Rather, the ``monetary correction'' methodology 
(i.e., year-end restatement of assets/liabilities) used by respondent 
was deemed inappropriate.
    Furthermore, we disagree with petitioner's contentions that MSA's 
submitted variable fabrication costs are unreliable and that the 
differences in fabrication costs cannot be explained by alleged 
differences in input steel costs. As stated above, we verified that 
MSA's submitted cost data was extracted directly from its normal cost 
accounting system which records the actual costs incurred to 
manufacture each batch of pipe produced. We thus have no reason to 
believe that MSA's submitted cost data is unreliable in general. 
Second, we observed at verification that steel bar produced from ingot 
versus a continuous caster will affect both material and fabrication 
costs.
    However, notwithstanding the fact that respondent's variable costs 
were reported in accordance with its normal cost accounting system, we 
agree with petitioner that we must use variable costs for difmer 
adjustment purposes which are not distortive in margin analysis. For 
difmer purposes, it is the Department's practice to consider only those 
cost differences associated with physical differences in the products 
under comparison. The flaw we found in MSA's reporting methodology was 
one of not neutralizing the cost differences resulting from different 
production processes or supply sources for input bar, which is an 
inherent result of its normal cost accounting system. Therefore, for 
purposes of the final determination, we have modified respondent's 
variable costs of manufacture for those products for which we had 
information on the record to enable us to compute a difmer adjustment 
exclusive of the cost differences unrelated to physical differences. 
For the material costs of these products, we computed a POI weighted-
average bar cost for all subject merchandise using the same material 
grade bar. We then determined the product-specific material costs by 
multiplying product-specific POI average yield rates by the POI 
weighted average bar cost. For fabrication costs, we had available a 
breakout of the quantity of continuous casted versus ingot bar used in 
production for specific products for each month of the POI. From this 
data, we identified for similar product matches, which months used 
comparably sourced bar.
    However, for certain products we did not have the information 
concerning the POI monthly quantity of input bar produced via the 
continuous-casted versus ingot methods. Additionally, we were unable to 
determine the percentage of such products produced from imported tube 
versus MSA-produced tube. We note that the vast majority of the U.S. 
products that are affected by this lack of information on the record 
are cold-drawn pipes. See Comment 9 below. Therefore, for a small 
percentage of U.S. sales quantity, we were unable to eliminate the 
fabrication cost differences resulting from the different production 
processes and/or sources of input bar. For those sales of U.S. products 
where we did not have reliable fabrication costs, we used a margin 
based on BIA. As BIA, we used a calculated margin that is sufficiently 
adverse to fulfill the statutory purpose of the BIA rule (section 
776(c) of the Act) and which is indicative of, and bears a rational 
relationship to, the respondent's sales. See National Steel v. United 
States, 870 F.Supp. 1130 (CIT 1994).

Comment 3

    Petitioner argues that MSA and MCSA incorrectly reported invoice 
date as the date of sale for all home market sales. It maintains that 
the correct date of sale is Mannesmann's internal order date because it 
is at this time that final agreement on the essential terms of sale, 
including price and the manner in which it will be adjusted for 
inflation, is made. Petitioner asserts that the only changes in the 
essential terms of sale between Mannesmann's internal order and invoice 
dates are a currency conversion and an inflation adjustment, both of 
which are performed automatically by computer without negotiation with 
the customer; and that this was the only variance between order and 
invoice date noticed by the Department at verification. According to 
petitioner, the automatic restatement of the price by computer to 
account for inflation is not a substantive change in the material terms 
of sale. Petitioner cites Final Determination of Sales at Less Than 
Fair Value: Brass Sheet and Strip from France (52 FR 812, January 9, 
1987) (Brass Sheet and Strip) to support its position that it is the 
Department's established practice to use as the date of sale, the date 
on which basic terms become determinable, without regard to automatic 
mechanisms that might alter or establish specific terms.
    For the final determination, petitioner urges the Department to use 
the sales listings submitted on December 9, 1994, despite substantial 
alterations made to them (i.e., in the subsequent sales listings 
submitted on February 28, 1995). According to petitioner, these 
listings provide internal order dates and invoice numbers that can 
easily be matched to the invoice numbers reported in Mannesmann's 
February 28, 1995, response. For any sales in the February 28, sales 
listing which cannot be matched to an alleged ``proper'' date of sale 
using the December 9, listing, petitioner maintains that the Department 
should apply partial BIA by using the average time lag between order 
and invoice date for other sales to place the sale in the appropriate 
month. This method of partial BIA would entail deflating prices for 
such months because the prices and adjustments in the February 28, 
response are stated in cruzeiros valued for months later than the 
actual date of sale claimed by petitioner, so that they are restated in 
terms of the value of the cruzeiro during the month of sale. 
Alternatively, if the currency conversion is too burdensome, the 
Department should apply, as partial BIA to such sales, either the 
highest [[Page 31970]] calculated margin for the company or the highest 
margin alleged in the petition.
    Respondent argues that invoice date is the correct date of sale in 
accordance with the Department's normal methodology. It is also the 
date mandated by Brazilian law and accounting practices, which do not 
recognize a sale until the invoice is generated, and the date 
consistent with MSA and MCSA's recordkeeping system in the ordinary 
course of trade. Respondent takes issue with petitioner's assertion 
that the only subsequent changes in the essential terms of sale between 
MSA's internal order entry and shipment are a currency conversion and 
an inflation adjustment. Respondent states that not only did the high 
rate of inflation during the POI preclude any determination of the 
essential terms of sale (particularly price) until the time of 
invoicing, but also that there are significant fluctuations in price 
and quantity that typically occur between the order date and invoice 
date which the Department confirmed at verification. Citing the 
Preliminary Determination of Sales at Less Than Fair Value: Canned 
Pineapple Fruit from Thailand (60 FR 2734, January 11, 1995), 
respondent asserts that the Department has, under appropriate 
circumstances in past cases, specifically endorsed invoice date as the 
date of sale. In addition, respondent states that the purchase order is 
sometimes not received until after the invoice is generated by MCSA and 
the order shipped. According to respondent, invoice date is the most 
consistent and reliable basis for reporting comparable dates of sale in 
Brazil from both MSA and MCSA.

DOC Position

    We agree with respondent and have accepted its reported date of 
sale. At the verification of both MSA and MCSA, respondent provided 
source documentation substantiating its reasons for using invoice date 
as the date of sale. These reasons included not only the effects of 
inflation between purchase order date and invoice date, but also the 
fact that Mannesmann's internal order is subject to numerous 
fluctuations in price and quantity up until the date of invoice. (See 
Verification Report at 11-12 and 47.) Our decision in this instance is 
consistent with past cases. See Amended Final Determination of Sales at 
Less Than Fair Value: Ferrosilicon from Brazil, 59 FR 8598, February 
23, 1994).
    We also note that the facts in Brass Sheet and Strip are different 
from those in the instant case. In Brass Sheet and Strip, a formal 
contract between the buyer and seller established a price based upon a 
publicly quoted metal value source. The parties had agreed upon a time 
period during which the customer could lock in the publicly quoted 
rate; no further negotiations were necessary. In Brass Sheet and Strip, 
the price and quantity terms were sufficiently definite and effectively 
finalized as of the date of the initial contract, and the parties had 
no further ability to change the price by negotiation. In the instant 
case, not only are prices subject to fluctuation due to the 
hyperinflationary adjustment in Brazil, but customers often negotiate a 
different price or make material changes to quantity between the date 
of initial order entry and invoice date. While the Brass Sheet and 
Strip case involved long-term, fixed contracts where there was nothing 
left for the parties to negotiate, the instant case reflects the fact 
that when a purchase order to schedule production enters into MSA's 
system, the negotiating continues and a price adjustment often follows 
at the time of invoicing. With respect to this price adjustment, we 
could find no evidence in the source documentation examined at 
verification that, at the time of order, the customer had knowledge of 
the index (or indices) that would be used by respondent to make the 
adjustment for inflation, and that the customer therefore knew the 
exact price to which it had agreed. We also noted evidence of post-
order cancellations, indicating that the customer was not bound by the 
terms set in the order.
    We note that our decision in this case to accept the date of 
invoice as the date of sale is based upon the factual evidence on the 
record. In general, issues regarding the appropriate date of sale are 
examined on a case-by-case basis, and our decision in this case should 
not be interpreted as a general policy preference in future cases.

Comment 4

    Consistent with its contention that the appropriate date of sale is 
the date of respondent's internal order, petitioner maintains that the 
home market prices and other cruzeiro-denominated data reported by 
Mannesmann must be restated in terms of the value of the cruzeiro 
during the month of sale. Similarly, according to petitioner, an 
inflation factor should not be included in any credit expense 
adjustment. Petitioner argues that to some extent the inflator in the 
credit expense adjustment can be expected to offset the inflator in the 
price. However, since the two inflators are derived differently and 
serve different purposes, they are seldom, if ever, equal. Whereas the 
credit expense inflator reflects inflation from the invoice date to the 
actual date of payment, the price inflator is based on the number of 
days between the invoice and the expected date of payment. Furthermore, 
petitioner states that the Department verified that the rates used for 
the price inflator are not proportional across payment terms. 
Therefore, while the credit expense inflator should reflect the actual 
inflation rate, the price inflator may be higher or lower than the true 
rate depending on the date of actual payment. According to petitioner, 
the Department can determine the actual gross unit price in terms of 
cruzeiros during the month of sale by subtracting the reported 
inflation value from the reported gross unit price (invoice price). In 
addition, the indexed value of the reported (inflated) gross price 
should be compared to the price of the internal order, and any excess 
should be treated as interest revenue attributable to that sale because 
the price inflator may be higher than the true inflation rate.
    Petitioner suggests that the reported inflation value be subtracted 
from gross price to obtain the price in terms of cruzeiros as valued 
during the month of shipment, and the resulting values can be converted 
to cruzeiros as valued on the actual date of sale (i.e., the internal 
order date) using the exchange rates provided in Mannesmann's response. 
The indexed value of the reported (inflated) gross price should then be 
compared to the price of the internal order, and any excess should be 
treated as interest revenue attributable to that sale.
    Respondent maintains that the Department has verified the reported 
home market credit expenses and the rates for short-term loans 
available in Brazil during the POI without discrepancy and, therefore, 
should deduct these credit expenses as reported from FMV. Mannesmann 
disputes petitioner's allegation that interest revenue affects credit 
expenses and that, if a customer made a late payment, Mannesmann is not 
entitled to an adjustment for credit expenses because it would 
understate home market price. Respondent states that in the few 
instances when a customer did not pay on the expected date, interest 
revenue amounts were reported as an upward adjustment to the home 
market price, as verified by the Department. Also, if a customer did 
pay late, not only did Mannesmann incur the opportunity cost of not 
having the customer's money from the invoice date to the expected 
payment date, but it also suffered a [[Page 31971]] financial loss from 
delayed payment during the period between the payment date listed on 
the invoice and the actual payment date. Therefore, according to 
Mannesmann, denying an adjustment for credit expenses for the time 
following payment due date and actual payment is totally illogical.

DOC Position

    As discussed above in Comment 3, we have determined that invoice 
date is the appropriate date of sale in this case. Therefore, we 
consider moot petitioner's arguments with respect to the restatement of 
home market prices to reflect the value of the cruzeiro on the order 
date.
    In our preliminary determination, we adjusted FMV for inflation 
occurring between order and invoice date, which factors in expected 
payment terms, as well as credit expenses, which include an inflation 
factor based on actual payment terms. Based on verification findings 
and our acceptance of respondent's date of sales methodology, we have 
determined that this adjustment was incorrect because it double-counted 
the value of inflation. Therefore, for purposes of the final 
determination, we only made an adjustment to FMV for credit expenses as 
reported and verified.

Comment 5

    Mannesmann argues that the Department should compare U.S. sales by 
MPS with home market sales made by MSA, including sales to its related 
party MCSA, and that it provided evidence that MSA's sales to MCSA are 
arm's-length transactions. However, if the Department does not treat 
MSA's sales to MCSA as arm's-length transactions, the Department should 
make a level of trade adjustment to reflect the additional selling 
expenses (i.e., indirect selling expenses and inventory carrying costs) 
incurred by MCSA.
    Mannesmann asserts that 19 CFR 353.58 requires that a level of 
trade adjustment be made when FMV and U.S. price are not based on sales 
at the same commercial level of trade. According to respondent, MSA and 
MCSA operate at different levels of trade in Brazil. MCSA is a 
distributor that purchases from MSA and sells to customers from 
inventory, requiring MCSA to incur considerable inventory and selling 
expenses. In contrast, both MSA in Brazil and MPS in the United States 
are not made from inventory, but are manufactured to order. To support 
its argument, respondent cites Final Determination of Sales at Less 
Than Fair Value: Stainless Steel Bar from Spain (59 FR 66931, December 
28, 1994) (Stainless Steel Bar) where the Department granted such an 
adjustment under allegedly similar factual circumstances.
    Petitioner contends that Mannesmann did not provide the evidence it 
purports to have provided substantiating its claim regarding the arm's-
length nature of the transactions between MSA and MCSA. At the 
preliminary determination, the Department determined that sales to MCSA 
were not made at arm's length, and based FMV on MSA's and MCSA's sales 
to unrelated customers. According to petitioner, nothing in the 
verification report obligates the Department to change that finding. 
Furthermore, petitioner argues that Mannesmann has not proven its 
entitlement to a level of trade adjustment. Petitioner asserts that it 
has not been clearly established that two levels of trade exist. In 
addition, petitioner states that while Mannesmann argues that 
differences in selling expenses exist due to inventory costs, it has 
not proven that a correlation exists between both prices and selling 
expenses at each level of trade.
    According to petitioner, absent additional information concerning 
differences in the customer bases (e.g., relative size and purchasing 
power of customers), evidence that price differences correlate to level 
of trade differences, a level of trade adjustment is not appropriate. 
However, if the Department nonetheless decides to grant respondent the 
requested adjustment, it should be based on differences in actual 
expenses incurred on MCSA's sales; i.e., the adjustment should be made 
on the reported indirect selling expenses only, exclusive of the 
reported inventory carrying costs. Petitioner also adds that these 
selling expenses must be offset by the indirect selling expenses 
incurred by MSA on U.S. sales because the basic purpose of a level of 
trade adjustment is to account for differences in the level of trade 
between U.S. and home market sales.

DOC Position

    With regard to the arm's-length nature of related party sales, we 
agree with petitioner. Based on the results of our related party test 
(as described in the FMV section of this notice), we found that MSA's 
sales to MCSA are not at arm's length and, thus, we excluded them from 
our dumping analysis for purposes of the final determination. This 
result is consistent with that in our preliminary determination, and 
since that time, respondent has not provided any new evidence to 
justify a departure from our normal related party test.
    With regard to matching by level of trade, we have accepted 
respondent's level of trade classification because the record indicates 
that the alleged difference in level of trade involves different 
selling activities and expenses. However, with regard to the 
respondent's claim for a level of trade adjustment, we have determined 
that an adjustment is not warranted because we are uncertain whether 
the difference in level of trade affects price comparability.
    In analyzing the prices at the two levels of trade, we compared 
average prices, adjusted for all direct selling expenses, by product 
and month of sale for the POI. The results of this analysis indicate 
that prices overlap for a significant number of sales. However, because 
for each month only a small number of prices by product were available 
and the monthly inflation rate was high, we have concluded that the 
data does not provide a reliable indication of the pattern of prices at 
the two levels of trade. Therefore, we do not have a basis to conclude 
whether there is or is not a pattern of price differences attributable 
to level of trade. Accordingly, we have not made a level of trade 
adjustment.

Comment 6

    Petitioner maintains that Mannesmann's packing expenses are 
unverified and may not be relied upon for purposes of the final 
determination. Petitioner also maintains that these costs appear to 
have been based solely on labor and materials without any allocation of 
overhead costs, and MCSA failed to report any repacking costs 
associated with its sales. Therefore, petitioner advocates using BIA. 
As BIA, petitioner requests that the Department either not make any 
upward adjustment to U.S. price for packing or use the lower of the 
amounts reported in the U.S. sales listing and the lowest export 
packing amount reported on the chart on page 41 of the Department's May 
11, 1995, Verification Report. Additionally, petitioner proposes that 
the Department should (1) subtract the lowest of the packing amount 
reported for the home market sales listing and the lowest domestic 
packing amount from the verification report chart, and (2) add as an 
offset to FMV the higher of the amount of the highest U.S. packing 
amount reported in the sales listing and the highest amount of export 
packing reported on page 41 of the verification report.
    Respondent argues that the Department should apply an average per 
[[Page 31972]] unit packing cost based on MSA's simulated cost data 
provided at verification which tied to the cost data provided in 
Exhibit 18 of the December 9, 1994, response, as this is the most 
accurate and reliable data on which to calculate MSA's packing costs. 
MSA provides a monthly average packing cost calculation for each of the 
four products sold in each market in Exhibit 2 of its May 19, 1995, 
case brief. Therefore, the Department should match the resulting 
average monthly packing data to the sales listing based on the month of 
shipment for home market sales, as all home market shipments occurred 
between January and June 1994. For U.S. sales, many shipments of which 
occurred after the POI, respondent proposes using an average POI 
packing expense (also provided in Exhibit 2). For sales of products 
which do not match to one of the four product codes, the average 
packing expense of all four product codes should be applied.

DOC Position

    We agree with petitioner that the reported packing expenses were 
unverified. At verification, respondent explained that MSA's cost 
accounting system cannot separately identify packing costs incurred for 
export and domestic sales. Therefore, in order to derive the monthly 
per unit packing amounts reported in the U.S. and home market sales 
listings, MSA conducted packing simulation exercises for four 
products--three hot-finished and one cold-drawn. That is, they 
estimated the time it took to pack the products based on actual 
experience and derived the associated materials and labor costs from 
their accounting records. However, we could not tie the monthly packing 
costs resulting from this exercise to the reported monthly per unit 
packing amounts in respondent's home market and U.S. sales listings. 
Respondent could not explain the reason for the discrepancy. Therefore, 
we determine that these costs were not verified. Because the reported 
costs cannot be used for purposes of our analysis, we used BIA. As BIA 
for these costs, we subtracted from FMV, the lowest domestic packing 
amount reported on the record, and added to FMV, the highest export 
packing amount reported on the record.

Comment 7

    Respondent maintains that the Department verified that no 
galvanized, threaded or coupled products were sold to the United States 
during the POI. Therefore, MCSA's sales of such products will not be 
matched to U.S. products and are thereby irrelevant in the Department's 
margin analysis. With respect to the unreported bevelling costs, 
respondent states that MSA's cost for producing bevelled pipe was used 
as a surrogate value for MCSA's sales of bevelled product. Mannesmann 
states that it is logical that its cost of bevelling would be lower 
than the bevelling costs charged by a third party. The use of the third 
party bevelling cost would have resulted in higher home market variable 
costs which, in turn, would have resulted in a lower difmer to be added 
to FMV. According to Mannesmann, the use of MSA's bevelling costs as a 
surrogate for third party expenses incurred by MCSA was therefore 
conservative and reasonable.
    Petitioner contends that Mannesmann often reports significantly 
different costs in the same month for products that are identical 
except for end finish, and that these variations do not make sense, 
particularly because the differences between black plain-end pipe and 
bevelled-end pipe are insignificant especially in terms of material 
costs. According to petitioner, there is no consistency in the margins 
by which reported materials costs differ for otherwise identical 
products with different end finishes. Neither is there any evidence on 
the record to suggest a reason for attributing such widely varying 
costs to virtually identical products simply by reason of end finish. 
Petitioner notes that, in some instances, Mannesmann has reported 
identical costs for different end finishes. Petitioner maintains that 
these facts cast doubt on Mannesmann's entire cost accounting system.
    In addition, Mannesmann's principal contention concerning MCSA's 
third party bevelling costs (i.e., that they are higher than MSA's) 
constitutes non-record information upon which the Secretary may not 
rely. MCSA's bevelling costs have never been separately reported on the 
record and, therefore, could not have been verified. Thus, any 
bevelling cost attributed to products sold by MCSA must be based on 
BIA.

DOC Position

    We agree with petitioner and respondent in part. We verified that 
while MCSA failed to report third party galvanization, coupling and 
threading costs for certain products, no such products were sold to the 
United States during the POI and, therefore, were not used in product 
comparisons. Thus, the omission of these costs did not affect any 
difmer adjustments that were made for similar product comparisons. 
However, even if such products were used in product comparisons, MCSA's 
omission of these costs for difmer adjustment purposes would have the 
effect of underestimating home market costs and thereby overstating the 
upward difmer adjustment made to FMV. Therefore, we did not make any 
adjustment for the omitted costs at issue.
    With respect to bevelling costs, we note that there were U.S. sales 
of bevelled pipe during the POI. We also note that for MCSA's sales of 
bevelled products that were used in product comparisons, MSA's costs of 
bevelling were included in the reported variable costs of manufacture. 
This is consistent with the verified product coding methodology used by 
MCSA. That is, for those products that were further processed by third 
parties prior to sale, MCSA reported only its own internal product 
code, and for those products that did not undergo further processing, 
MCSA reported both MSA's product code and its own product code (see May 
11, 1995, Verification Report at 8). For the transactions consisting of 
the bevelled products sold by MCSA which were used in product 
comparisons, respondent reported both product codes, indicating that 
the bevelling was performed at MSA's mill. However, we modified these 
costs for difmer adjustment purposes for the reasons stated in DOC 
Position to Comment 2 above.

Comment 8

    Petitioner alleges that a deduction to U.S. price should be made 
for the ``bank fees'' incurred by MSA for entering into exchange 
contracts in order to receive payment from MPS on its shipments to the 
United States. According to petitioner, such fees are a necessary and 
direct selling expense relating to U.S. sales. Since similar fees are 
not incurred for home market sales, the fees must be deducted from USP 
in order to obtain a proper comparison. Petitioner maintains that 
Mannesmann's claims that the fees do not affect the U.S. price and that 
Mannesmann invests a portion of these funds (which respondent has not 
quantified) is irrelevant to the Department's analysis.
    Respondent maintains that this proposal is incorrect for the 
following reasons: (1) The exchange contract transaction does not 
impact the U.S. customer, but is solely a mechanism whereby MSA can be 
paid in local currency for foreign currency sales as required by 
Brazilian law; and (2) throughout the POI, MSA chose to receive payment 
in Brazilian currency under the exchange contracts in advance (when the 
order was booked from the mill), a portion of which it 
[[Page 31973]] invested and gained returns which exceeded any fees paid 
to the bank. According to Mannesmann, the Department should treat the 
exchange contracts as intercompany transfers of funds between MSA and 
MPS that have no effect on the payment from the U.S. customer. 
Respondent claims that any bank fees incurred pre-shipment by MSA are 
administrative fees that have no bearing on U.S. price.

DOC Position

    We disagree with respondent that these fees are intracompany 
transfers. They are fees paid to third parties in the U.S. sales 
process which we conclude are included in the ultimate price between 
MPS and the U.S. customer. These types of fees are normally taken into 
account in the Department's margin analysis. Therefore, we made an 
adjustment to U.S. price in the amount of the fee reported in the 
sample exchange contract provided in Exhibit 10 of the December 9, 
1994, response.

Comment 9

    Petitioner states that respondent included in its sales listing 
sales of cold-drawn products finished from imported tube hollows. 
According to petitioner, such products are not subject merchandise 
produced in Brazil and should not have been included in the sales 
listing. Petitioner urges that the Department apply BIA to all sales of 
cold-drawn pipe in the final determination. In addition, petitioner 
maintains that none of the difmers provided for cold-drawn products can 
be used because it is not known how many are affected by the inclusion 
of imported tube hollows. There is no information on the record that 
would allow the Department to equate the cost of producing cold-drawn 
pipe with the cost of finishing cold-drawn tube hollows.
    Respondent asserts that the cold-drawn products referred to fall 
within the scope of the investigation. Mannesmann reported as subject 
merchandise sales of all products within the scope of the 
investigation, regardless of whether those products were made from 
ingots or billets, or in the case of the limited amount of cold-drawn 
products, purchased hollows. Therefore, unless the petitioner contends 
that pipe manufactured in Brazil from imported hollows are excluded 
from the scope of the investigation, Mannesmann asserts that it 
properly reported all shipments of subject merchandise, including small 
diameter cold-drawn product manufactured from hollows. Moreover, the 
Department verified the quantity and price of purchased hollow tubes, 
and traced the reliability of those material costs reported for cold-
drawn products.

DOC Position

    We agree with petitioner in part. Our verification findings 
revealed that respondent had properly reported sales of cold-drawn 
seamless pipe as subject merchandise in its sales listings (but for 
certain omissions discussed in Comment 1 above). We also found that 
respondent used imported tubes in the production of cold-drawn pipe 
during the POI. However, respondent failed to inform the Department 
that it used any material input other than in-house produced bar for 
the production of cold-drawn pipe during the POI, despite the 
Department's questions concerning the materials used in the production 
of the subject merchandise in its February 10, 1995, supplemental 
questionnaire. Consequently, we are unable to make a reliable difmer 
adjustment for U.S. sales of cold-drawn products because the variable 
costs reported include costs unassociated with physical differences. 
Therefore, because we cannot use or modify the reported difmer data for 
these cold-drawn products as we do not have the information on the 
record to do so, we have used BIA for the affected sales. See also DOC 
Position to Comment 2 above.
Comment 10

    Petitioner contends that approximately two-thirds of the exchange 
rates reported in MCSA's sales listing, which are necessary for the 
proper calculation of difmers and should reflect the average monthly 
rate for the month of shipment, are incorrect. Therefore, the 
Department should cross-check each reported exchange rate against the 
actual monthly rate, and make appropriate corrections for the final 
determination.
    Respondent maintains that petitioner's contention is incorrect. 
According to respondent, the rates at issue were adjusted to ensure 
that they matched the date of shipment from the factory, and this is 
the reason for the 22 day adjustment reflected in Mannesmann's 
response. Mannesmann reported all difmer data and the relevant exchange 
rates based on the month in which the pipe was shipped from MSA's mill. 
Because MSA does not maintain inventories of finished pipe, the month 
of shipment from MSA is also the month in which the pipe was produced. 
Similarly, in the case of U.S. sales, the Department asked MPS to 
revise its reported shipment date to reflect the date on which the pipe 
left the mill. Thus, in all cases involving sales by MSA or MPS, the 
reported date of shipment reflects the month in which pipe was produced 
and shipped.
    For sales by MCSA, pipe produced by MSA and shipped to MCSA is 
placed in MCSA's inventory from which it is subsequently resold to 
MCSA's customers. The reported shipment date for MCSA sales, therefore, 
does not reflect when the pipe was produced and shipped from MSA. In 
order to ascertain when a given quantity of pipe was produced and 
shipped from MSA, MCSA's average days in inventory (as reported in 
Exhibit 24 of the December 9, 1994, response) was subtracted from the 
reported shipment date. Therefore, all difmer data and exchange rates 
for MCSA were based on MCSA's date of shipment minus the average number 
of days in inventory in order to ensure that the difmer data and 
exchange rate reflected the date on which the merchandise was produced 
and shipped from the factory.

DOC Position

    We consider this issue raised by petitioner to be moot based on our 
treatment of difmer costs discussed in Comment 2 above. By using 
revised UFIR costs for difmer adjustment purposes, we no longer need to 
convert these costs to U.S. dollars using an average exchange rate. 
However, we note that we verified the daily CR/UFIR and US$/CR exchange 
rates reported by respondent in Exhibits 4 and 5 of the February 28, 
1995, response against source documentation and found that they were 
based on official government rates. (See May 11, 1995, Verification 
Report at 37.) Therefore, for purposes of converting home market 
prices, difmer costs and other adjustments to U.S. dollars on the date 
of the U.S. sale, we intend to use the verified government exchange 
rates that were verified. This is consistent with past practice. (See 
Silicon Metal from Brazil.)

Comment 11

    Petitioner maintains that Mannesmann has improperly submitted 
untimely new factual information in its case brief, including: (1) an 
affidavit by an MPS employee which presents evidence of differences 
between carbon and alloy pipe within the context of the criteria in 
Diversified Products relevant to the issue of whether the subject 
merchandise should constitute more than one class or kind; (2) portions 
of the record of proceedings before the International Trade Commission 
concerning the issue of whether to continue to include end use as a 
defining characteristic of the scope; and (3) factual information 
concerning the [[Page 31974]] manner in which it calculated MCSA's 
bevelling costs that had not been submitted to the Department 
previously. According to petitioner, the Department must strike this 
information from the record and may not consider it in the final 
determination.

DOC Position

    We disagree with petitioner. With respect to the portions of 
Mannesmann's case brief referred to above concerning class or kind and 
end use, we note that the information contained therein further 
corroborates data previously submitted on the record by respondent (see 
Mannesmann's submissions dated October 21, 1994, October 31, 1994, and 
March 27, 1994). With respect to bevelling costs, we did not rely on 
the information referred to by petitioner for purposes of the final 
determination (see DOC Position to Comment 7 above).

Continuation of Suspension of Liquidation

    In accordance with section 733(d)(1) of the Act 19 USC 1673b(d)(1), 
we directed 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 January 27, 1995.
    Pursuant to the results of this final determination, we will 
instruct the Customs Service to require a cash deposit or posting of a 
bond equal to the estimated dumping margin, as shown below, for entries 
of seamless pipe from Brazil that are entered, or withdrawn from 
warehouse, for consumption from the date of the publication of this 
notice in the Federal Register. The suspension of liquidation will 
remain in effect until further notice.

------------------------------------------------------------------------
             Manufacturer/producer/exporter               Margin percent
------------------------------------------------------------------------
Mannesmann S.A..........................................          125.00
All Others..............................................          125.00
------------------------------------------------------------------------

ITC Notification

    In accordance with section 735(d) of the Act, we have notified the 
ITC of our determination. The ITC will make its determination whether 
these imports materially injure, or threaten injury to, a U.S. 
industry, within 45 days of the publication of this notice. If the ITC 
determines that material injury, or threat of material injury, does not 
exist, the proceeding will be terminated and all securities posted as a 
result of the suspension of liquidation will be refunded or cancelled. 
If the ITC determines that material injury or threat of material injury 
does exist, the Department will issue an antidumping duty order.

Notification to Interested Parties

    This notice serves as the only reminder to parties subject to 
administrative protective order (APO) in these investigations of their 
responsibility covering the return or destruction of proprietary 
information disclosed under APO in accordance with 19 CFR 353.34(d). 
Failure to comply is a violation of the APO.
    This determination is published pursuant to section 735(d) of the 
Act (19 USC 1673(d)) and 19 CFR 353.20.

    Dated: June 12, 1995.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 95-14937 Filed 6-16-95; 8:45 am]
BILLING CODE 3510-DS-P