[Federal Register Volume 60, Number 117 (Monday, June 19, 1995)]
[Notices]
[Pages 31981-31992]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-14939]



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DEPARTMENT OF COMMERCE
[A-475-814]


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 Italy

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

EFFECTIVE DATE: June 19, 1995.

FOR FURTHER INFORMATION CONTACT: Dolores Peck or James Terpstra, Office 
of Antidumping Investigations, Import Administration, International 
Trade Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW., Washington, DC 20230; telephone (202) 482-
4929 or 482-3965, respectively.

FINAL DETERMINATION: The Department of Commerce (the Department) 
determines that small diameter circular seamless carbon and alloy 
steel, standard, line and pressure pipe (seamless pipe) from Italy is 
being, 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 weighted-average margins are shown 
in the ``Suspension of Liquidation'' section of this notice.

Case History

    Since our negative preliminary determination on January 19, 1995 
(60 FR 5358, January 27, 1995), the following events have occurred:
    On February 1, 1995, we initiated a sales below cost investigation 
of the respondent, Dalmine, S.p.A. (``Dalmine''). We instructed Dalmine 
to respond to the complete cost questionnaire which it had previously 
used to only report constructed value data. Dalmine submitted its 
response to this questionnaire on March 7. Supplemental cost and sales 
responses and revisions were submitted in February, March, and April 
1995.
    On February 8, 1995, we postponed the final determination until not 
later than June 12, 1995 (60 FR 9012, February 16, 1995).
    We conducted verifications of Dalmine's sales and cost 
questionnaire responses in Italy and the United States in March and 
April 1995. Verification reports were issued in May 1995.
    On April 27, 1995, Koppel Steel Corporation, an interested party to 
this investigation, requested that it be granted co-petitioner status, 
which the Department granted.
    The petitioner and the respondent submitted case briefs on May 18 
and rebuttal briefs on May 24, 1995.
    On May 22, and May 30, 1995, respectively, the Department returned 
the respondent's case and rebuttal briefs and instructed the respondent 
to refile the briefs redacting new information. The respondent did so 
on May 25, and June 2, 1995.
Scope of the 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, 
[[Page 31982]] 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 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, [[Page 31983]] 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.
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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 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 [[Page 31984]] 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. 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. [[Page 31985]] 
    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 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 Fed. Reg. 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 Fed. Reg. 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, 1994, through 
June 30, 1994.
Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute and the 
Department's regulations refer to these 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. We made fair value comparisons on this basis. In 
accordance with the Department's standard methodology, we first 
compared identical merchandise. Referencing Appendix V of our 
questionnaire, Dalmine states that the physical characteristics for the 
majority of the merchandise exported to the United States are identical 
to the physical characteristics of merchandise sold in the home market. 
We verified this claim. Where there were no sales of identical 
merchandise in the home market to compare to U.S. sales, we based 
foreign market value (``FMV'') on constructed value (``CV'') because 
the difference in merchandise adjustment (``difmer'') for any similar 
product comparison exceeded 20 percent. See 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 sales of certain seamless pipe from Italy to 
the United States were made at less than fair value, we compared the 
United States price (USP) to the FMV, as specified in the ``United 
States Price'' and ``Price-to-Price Comparisons'' sections of this 
notice.

United States Price

    We calculated USP according to the methodology described in our 
preliminary determination, with the following exceptions:
    We corrected certain clerical errors found at verification, 
including: (a) the reduction of the marine insurance expense for one 
sale (see U.S. verification report); b) an increase in the U.S. 
interest rate used to calculate imputed credit expenses (see U.S. 
verification report); and c) an increase in the percentage used to 
calculate an offset for home market commissions (See Comment 5 below). 
We also limited VAT adjustments to those sales on which VAT was paid on 
the comparison home market sale.

Cost of Production

    Based on the petitioner's allegations, the Department found 
reasonable grounds to believe or suspect that sales in the home market 
were made at prices below the cost of producing the merchandise. As a 
result, the Department initiated an investigation to determine whether 
Dalmine made home market sales during the POI at prices below their 
cost of production (COP) within the meaning of section 773(b) of the 
Act. See memorandum from the Team to Barbara Stafford dated February 1, 
1995.

A. Calculation of COP

    We calculated the COP based on the sum of the respondent's cost of 
materials, fabrication, general expenses, and home market packing in 
accordance [[Page 31986]] with 19 CFR 353.51(c). We relied on the 
submitted COP data, except in the following instances where the costs 
were not appropriately quantified or valued:
    1. We recalculated the weighted average costs for two control 
numbers (``CONNUM''). CONNUM's are used to identify a group of products 
considered to be identical. See Comment 18 below.
    2. We adjusted depreciation expenses to reflect mill- specific 
costs. See Comment 13 below.
    3. We used the revised total indirect costs submitted at 
verification to recalculate the indirect cost allocation rate.
    4. We disallowed the portion of the reported variance which 
resulted from reversals of prior period accounting entries. See Comment 
17 below.
    5. We used Instituto per la Ricostruzione Industriale S.p.A.'s 
(``IRI'') consolidated financing costs. IRI is the parent of Dalmine's 
parent company. See Comment 14 and 15 below.

B. Test of Home Market Sales Prices

    After calculating COP, we tested whether, as required by section 
773(b) of the Act, the respondent's home market sales of subject 
merchandise were made at prices below COP, over an extended period of 
time in substantial quantities, and whether such sales were made at 
prices which permit recovery of all costs within a reasonable period of 
time in the normal course of trade. On a product-specific basis, we 
compared the COP (net of selling expenses) to the reported home market 
prices, less any applicable movement charges, rebates, and direct and 
indirect selling expenses. To satisfy the requirement of section 
773(b)(1) of the Act that below-cost sales be disregarded only if made 
in substantial quantities, we applied the following methodology. If 
over 90 percent of the respondent's sales of a given product were at 
prices equal to or greater than the COP, we did not disregard any 
below-cost sales of that product because we determined that the below-
cost sales were not made in ``substantial quantities.'' If between ten 
and 90 percent of the respondent's sales of a given product were at 
prices equal to or greater than the COP, we discarded only the below-
cost sales, provided sales of that product were also found to be made 
over an extended period of time. Where we found that more than 90 
percent of the respondent's sales of a product were at prices below the 
COP, and the sales were made over an extended period of time, we 
disregarded all sales of that product, and calculated FMV based on CV, 
in accordance with section 773(b) of the Act.
    In accordance with section 773(b)(1) of the Act, in order to 
determine whether below-cost sales had been made over an extended 
period of time, we compared the number of months in which below-cost 
sales occurred for each product to the number of months in the POI in 
which that product was sold. If a product was sold in three or more 
months of the POI, we do not exclude below-cost sales unless there were 
below-cost sales in at least three months during the POI. When we found 
that sales of a product only occurred in one or two months, the number 
of months in which the sales occurred constituted the extended period 
of time, i.e., where sales of a product were made in only two months, 
the extended period of time was two months; where sales of a product 
were made in only one month, the extended period of time was one month. 
See Final Determination of Sales at Less Than Fair Value: Certain 
Carbon Steel Butt-Weld Pipe Fittings from the United Kingdom, 60 FR 
10558, 10560 (February 27, 1995).

C. Results of COP Test

    We found that for certain products more than 90 percent of the 
respondent's home market sales were sold at below COP prices over an 
extended period of time. Because Dalmine provided no indication that 
the disregarded sales were at prices that would permit recovery of all 
costs within a reasonable period of time in the normal course of trade, 
for all U.S. sales left without a match to home market sales as a 
result of our application of the COP test, we based FMV on CV, in 
accordance with section 773(b) of the Act.

D. Calculation of CV

    In accordance with section 773(e)(1) of the Act, we calculated CV 
based on the sum of the respondent's cost of materials, fabrication, 
general expenses and U.S. packing costs as reported in the U.S. sales 
database. In accordance with section 773(e)(1)(B) (i) and (ii) of the 
Act, we included: (1) for general expenses, the greater of the 
respondent's reported general expenses, adjusted as detailed in the 
``Calculation of COP'' section above, or the statutory minimum of ten 
percent of the cost of manufacture; and (2) for profit, the statutory 
minimum of eight percent of the sum of COM and general expenses because 
actual profit on home market sales for the respondent was less than 
eight percent. We recalculated the respondent's CV based on the 
methodology described in the calculation of COP above.

Price-to-Price Comparisons

    We calculated FMV according to the methodology described in our 
preliminary determination with the following exceptions:
    1. We excluded from our analysis reported home market sales that 
were sold for shipment to third countries. See Comment 5 below.
    2. We revised the imputed credit calculation for transactions 
without reported payment dates, using the earliest verified payment 
date from the preselected sales in our verification report. See Comment 
10 below.
    3. We limited VAT adjustments to those sales on which VAT was paid.
    4. We decreased the interest rate used to calculate imputed credit 
based on verified data. See home market verification report.

Price-to-CV Comparisons

    Where we made CV to purchase price comparisons, we deducted from CV 
the weighted-average home market direct selling expenses and added the 
U.S. product-specific direct selling expenses. We adjusted for 
differences in commissions in accordance with 19 CFR 353.56(a)(2). 
Because commissions were paid on some, but not all home market sales, 
we deducted from CV both (1) indirect selling expenses attributable to 
those sales on which commissions were not paid; and (2) weighted 
average commissions. The total deduction was capped by the amount of 
indirect expenses paid on the U.S. sales in accordance with 19 CFR 
353.56(b)(1) (1994).

Currency Conversion

    We made currency conversions based on the official exchange rates 
in effect on the dates of the U.S. sales as certified by the Federal 
Reserve Bank of New York, pursuant to 19 CFR 353.60.

Verification

    As provided in section 776(b) of the Act, we verified information 
provided by Dalmine 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

Sales Issues

Comment 1

    The petitioner contends that a margin based on the best information 
available (BIA) should be assigned to each of the 
[[Page 31987]] unreported sales of subject merchandise discovered at 
verification; stating that there is no evidence on the record that 
Dalmine made a request to have these sales excluded. Additionally, the 
petitioner asserts that the respondent's unilateral exclusion of 
certain pipe sales without notice to or permission from the Department 
was a deliberate and material omission which affected the Department's 
decision to excuse the respondent from reporting certain categories of 
sales. Had the Department known about the totality of the exclusion 
being requested, it would not have excused the respondent from 
reporting these sales.
    The respondent argues that its non-reported sales fall into the 
category of merchandise produced to a subject specification, but which 
are used in a non-subject application. Thus, these sales are outside 
the scope and therefore need not be reported. Since these unreported 
sales involved non-subject merchandise, no exclusion request was 
necessary. The respondent contends it only requested exclusions for 
products produced to subject specifications and used in subject 
applications, in accordance with the Department's published scope 
language.

DOC Position

    We agree in part with the petitioner. With respect to certain 
unreported sales of merchandise which was the subject of the 
respondent's exclusion request, we agree that BIA is appropriate. In 
the early stages of this investigation, the respondent made several 
requests to be excused from reporting particular categories of U.S. 
sales which were clearly covered by the scope of this investigation. 
The respondent based this exclusion request on the claim that these 
sales represented a certain percentage of total U.S. sales. Based on 
this representation, we granted the request but indicated that the 
claim would be subject to verification. At verification we found 
additional unreported sales of the same merchandise that was the 
subject of the respondent's exclusion request. These additional 
unreported sales constitute a significant additional quantity than was 
represented in the exclusion request. Accordingly, we have assigned a 
margin based on BIA to the U.S. sales involved in the exclusion 
request, as well as the additional unreported sales of the same 
merchandise.
    With regard to the other unreported sales discovered at 
verification, we agree that the merchandise is within the scope of this 
investigation. However, we have decided that the use of adverse BIA for 
these unreported sales is unwarranted. As discussed above (see the 
Miscellaneous Scope Clarification Issues and Exclusion Requests section 
of this notice) the scope language, as published in the notice of 
initiation and the preliminary determination, was unclear as to whether 
the products in question are subject merchandise. The respondent did 
not report these sales based on its reading of the scope of the 
initiation. Since the scope language in the initiation is ambiguous 
(and hence has been clarified in the final determination), it is not 
appropriate to penalize the respondent.

Comment 2

    The petitioner urges the Department to apply a BIA margin to one 
unreported U.S. sale of subject merchandise discovered during 
verification. According to the petitioner, the Department should view 
Dalmine's failure to report this sale against the background of the 
respondent's failure to report other sales of subject merchandise, and 
apply an adverse BIA margin.
    The respondent acknowledges that it inadvertently failed to report 
this sale. According to the respondent, the order for this unreported 
sale appeared to be filled when it reported its U.S. sales data. 
However, two months later, the respondent made an additional shipment 
pursuant to this order, which was mistakenly not loaded with the first 
two parts of the order. The respondent claims it did not attempt to 
identify subsequent shipments pursuant to this order, since it 
considered this order filled at the time it prepared the sales listing. 
Only in the course of preparing for verification did the additional 
invoice amount come to the company's attention.

DOC Position

    We agree with the petitioner, in part. The respondent made several 
shipments of subject merchandise pursuant to a customer's order. Each 
of the shipments were separately invoiced. Two of the invoices were 
reported in the respondent's sales listing. However, the respondent 
failed to report one invoice for a small amount of subject merchandise 
sold pursuant to this order. The facts do not support applying an 
adverse BIA margin to this sale. Instead, as BIA, we applied the 
average of all positive margins calculated for the remaining U.S. 
sales.

Comment 3

    The petitioner claims the respondent misreported home market 
freight charges because it reported a calculated amount based on 
certain assumptions rather than an actual amount. Therefore, the 
petitioner urges the Department to use the lowest freight expense in 
the home market response as the freight expense for all sales for its 
price to price comparisons. For the Department's price to cost 
comparisons, the Department should consider the highest freight charge 
for any home market sale to be the freight charge for all home market 
sales.
    In reply, the respondent argues that it would have been 
extraordinarily burdensome, if not impossible, to match specific 
freight invoices to specific shipments because freight invoices are not 
computerized. At verification, the respondent demonstrated it was 
impractical to link thousands of freight invoices to the specific 
shipments to which the invoices related. Therefore, the respondent 
calculated the reported freight charges from published tariff rates by 
assuming all shipments were part of a full truck load that was 
delivered to more than one location. The respondent claims that the 
Department verified that its freight estimates are reasonable and any 
differences between estimated amounts and actual freight charges are 
minor.

DOC Position

    We agree with the respondent. At verification, we noted that, while 
Dalmine maintained computerized databases regarding all sales and cost 
information, it did not maintain invoice-specific expense data in its 
computerized sales database. At verification the invoice-specific 
actual expenses, calculated to check the information in the sales 
response, had to be calculated manually and there was some difficulty 
in obtaining source documentation.
    At verification, we examined the respondent's methodology for 
calculating estimated freight expenses. We compared actual freight 
expenses with the reported estimated freight expenses, and noted only 
minor discrepancies between these two figures. Therefore, the use of 
BIA for this adjustment is not warranted.

Comment 4

    The petitioner urges the Department to disallow the home market 
credit expense adjustment in its dumping margin calculation because the 
respondent overstated substantially credit costs by reporting March 6, 
1995, as the payment for all sales unpaid as of November 1994. The 
petitioner also claims the home market credit expense adjustment should 
be disallowed because verified credit differed from the actual credit 
for six of the eight [[Page 31988]] preselected sales. Further, the 
petitioner asserts that the respondent failed to take into account 
certain outstanding short-term loan balances in its calculation of the 
interest rate used to compute credit costs. Finally, the petitioner 
cites page 54 of the Department's Italian verification report where it 
claims the Department notes that the payment dates reported by Dalmine 
were either incorrect or not available.
    The respondent admits that it did not update payment data in its 
home market sales listing after the submission of December 19, 1994 
(which reported all payments as of November 25, 1994). Nevertheless, 
the respondent acknowledges that, for purposes of calculating imputed 
credit costs in its March 6, 1995, filing, it assumed incorrectly that 
all sales unpaid as of November 1994 remained unpaid as of March 6, 
1995. As a result, the imputed credit calculation was wrong for sales 
paid between November 25, 1994, and March 6, 1995. The respondent urges 
the Department to calculate the imputed credit cost adjustment for all 
sales for which no home market payment date was reported using November 
1, 1994, as the date of payment, since this is a more conservative 
approach than that employed in the Preliminary Determination.

DOC Position

    We disagree with both the petitioner and the respondent. During the 
Italian verification, we were able to verify the payment dates for 
preselected and surprise home market sales. The petitioner's reference 
to page 54 of the Italian sales verification report in support of its 
statement that payment dates were not available for sales not paid 
after November 23, 1994, is incorrect. The Italian sales verification 
report in its entire discussion of payment dates and credit expenses 
makes no statement regarding the unavailability of payment dates. We 
used the earliest verified payment date, November 18, 1994, as the 
payment date in the credit expense calculation for sales without 
reported payment dates which were shipped before November 18, 1994. We 
assumed no credit expenses were incurred for sales without reported 
payment dates which were shipped after November 18, 1994.

Comment 5

    The petitioner argues that the respondent incorrectly based its 
commission offset on U.S. indirect selling expenses taken from 
Dalmine's U.S. subsidiary's (TAD USA's) 1993 SG&A expenses. The 
petitioner maintains that the Department must use the verified 1994 
SG&A expenses to the extent that it offsets home market commissions.
    According to the respondent, it acted reasonably in basing the 
indirect selling expenses in its questionnaire response on 1993 SG&A 
expense data, given that 1994 data was unavailable at the time the 
response was being prepared. The respondent concedes that the 1994 data 
obtained at verification would be more useful to the Department than 
the 1993 data.

DOC Position

    It is the Department's practice to use the most recent verified 
data for indirect selling expenses in our margin calculations. 
Accordingly, we used the verified 1994 SG&A figures in our final 
determination calculations.

Comment 6

    The petitioner claims that Dalmine incorrectly reported average 
rather than actual foreign inland freight on U.S. sales. The petitioner 
also claims that the respondent could have reported actual foreign 
inland freight charges because its records are computerized. Therefore, 
the petitioner urges the Department to assign the highest foreign 
inland freight charge observed at verification to all U.S. sales.
    In reply, the respondent claims the difference between the highest 
foreign inland freight charge used in its calculation of average 
freight and the average foreign inland freight reported for all U.S. 
sales is immaterial. Moreover, the respondent maintains that its inland 
and ocean freight documents are not computerized.

DOC Position

    We agree with the respondent. There is no evidence that the 
respondent's automated system allowed it to link individual sales with 
the freight charges incurred for those sales. At verification, we noted 
the actual per unit foreign inland freight charges for the U.S. 
preselected sales did not differ materially from the average charge 
reported in the sales listing.

Comment 7

    In its case brief, the respondent requests that the Department 
clarify which of its customers are related within the meaning of the 
U.S. antidumping duty law.
    In its rebuttal brief, the petitioner claims that there is no need 
to make this distinction for the purposes of the final determination. 
Should the Department address such an issue, the petitioner requests 
that it do so in a manner consistent with any findings made in the 
Antidumping Duty Investigation of Oil Country Tubular Goods from Italy 
(A-475-816).

DOC Position

    We agree with the petitioner that such a finding is unnecessary. 
The respondent identified all related parties in its questionnaire 
response. We verified the accuracy of that response (see page 6 of our 
home market verification report). No further determination is 
necessary.
Comment 8

    The respondent argues that tubes and pipes are distinct products, 
and urges the Department to clarify that the scope of this proceeding 
is limited to pipes. In its case brief, the respondent included an 
affidavit from a steel pipe and tube expert in which the expert 
explains that hollow steel products known as ``pipe'' have specific 
technical and commercial characteristics distinct from those hollow 
steel products commonly known as ``tubes.'' According to this expert, 
the pipe producing and consuming industries consider pipe to be a 
product with any combination of outside diameter (``OD'') and wall 
thickness set forth in the American Society for Testing Materials 
(``ASTM'') standard B36.10. This expert reports that hollow steel 
products that do not correspond to the OD and wall specifications set 
forth in this standard are not pipes. The respondent's expert also 
cites numerous reasons why products produced to non-pipe sizes are 
normally not used in subject pipe applications. Finally, the respondent 
notes that according to the American Iron & Steel Institute, tubing, as 
distinguished from pipe, is normally produced to outside or inside 
diameter dimensions and to a great variety of diameters and wall 
thicknesses, and to chemical compositions and mechanical properties not 
commonly available in pipe. Therefore, the respondent requests that the 
Department clarify that products produced to non-pipe dimensions are 
not subject to this investigation.
    The petitioner argues that the petition and the published scope 
expressly state that subject seamless pipe includes all outside 
diameters not exceeding 4.5 inches regardless of wall thickness. The 
petitioner contends that the specifications covered by the scope of 
this investigation allow products to be made to non-standard dimensions 
and notes that neither the petition, nor the published scope, 
distinguishes between pipes and tubes. In addition, the petitioner 
states that the ITC found a single like product containing both pipes 
and tubes using an analysis [[Page 31989]] similar to that employed by 
the Department. Finally, the petitioner argues that respondent's own 
sales invoices and internal records refer to products made to non-
standard dimensions as pipes.

DOC Position

    We agree with the petitioner. See Scope clarification discussion in 
the body of this notice above.

Comment 9

    The petitioner maintains that pipe and tube subject to this 
investigation constitutes a single class or kind of merchandise. The 
respondent did not comment on the class or kind issue in its case or 
rebuttal briefs.

DOC Position

    We agree with the petitioner. See Class or Kind discussion in the 
body of this notice above.

Comment 10

    The petitioner asserts that the respondent's home market sales data 
contains a multitude of errors that render it unsuitable for 
calculating an accurate FMV. Combined with substantial unreported U.S. 
sales and misreported costs, the petitioner considers it appropriate 
for the Department to base the final determination on BIA (petitioner 
cites Final Determination of Sales at Less Than Fair Value: Circular 
Welded Non-Alloy Steel Pipe from Brazil, 57 FR 42940 (September 17, 
1992)).
    The respondent claims that the discrepancies mentioned by the 
petitioner are immaterial and the use of BIA is unwarranted.

DOC Position

    We agree with the respondent that the use of total BIA is 
unwarranted. Based on the facts on the record, we believe the errors 
discovered at verification are minor in nature, and resulted from 
oversight or mathematical rounding. In addition, the lack of clarity in 
the scope, as published in the notice of initiation and the preliminary 
determination, may have resulted in respondent misinterpretation. The 
possibility that some of the unreported sales discovered at 
verification were not reported because the respondent misinterpreted 
the scope cannot be overlooked in our decision to accept or reject the 
home market sales response.
    However, we made certain adjustments to the home market sales 
listing based on our findings at verification. Specifically, we deleted 
sales of small quantities of subject merchandise which were unlikely to 
be shipped and sales which the respondent believed would be exported to 
a country other than the United States. See the June 12, 1995 
concurrence memorandum to Barbara Stafford from the Team for a complete 
discussion of this issue.

Cost Issues

Comment 11

    The petitioner maintains that Dalmine understated its depreciation 
expense by excluding improperly the costs associated with 1993 fixed 
asset write-downs. Such costs, according to the petitioner, should be 
amortized over a number of years, including the POI. The petitioner 
argues that the Department should adjust the COP/CV figures by 
including a portion of the 1993 fixed asset adjustment.
    The respondent claims that the 1993 adjustment referred to by the 
petitioner is not related to fixed assets, but is the adjustment to 
Dalmine's investment in its subsidiaries. The amount of the adjustment 
represents the operating losses of those subsidiaries. The respondent 
argues that, even if the adjustment had involved the company's fixed 
assets or inventory, it still should not be included in COP/CV as none 
of the subject merchandise sold during the POI was produced in 1993.
DOC Position

    We agree with the respondent. The write-downs referred to by the 
petitioner are identified in Dalmine's 1993 annual report as write-
downs due to the operating results of subsidiaries, associated 
companies and to an adjustment of the shareholder's equity of two 
subsidiaries. Accordingly, these write-downs are not related to the 
respondent's production activities or the subject merchandise and, 
therefore, we did not adjust the reported COP/CV figures.

Comment 12

    The petitioner claims that Dalmine understated its depreciation 
expense by excluding improperly depreciation of its idle equipment. 
Although Italian generally accepted accounting principles (GAAP) may 
permit this practice, the petitioner argues that the Department should 
not allow the respondent to exclude depreciation of idle assets since 
this treatment creates distortions. The petitioner further states that 
the Department's long-standing practice is to include depreciation on 
idle assets in calculating COP and CV because such assets represent a 
cost to the company. To support this statement, the petitioner cites 
Antifriction Bearings and Parts Thereof from France, Germany, Italy, 
Japan, Romania, Singapore, Sweden, Thailand and the United Kingdom, 58 
FR 39729, 37756 (1993) (Antifriction Bearings). The petitioner asserts 
that the Department should write off the remaining book value of the 
idle assets and allocate the expense to the POI, because the petitioner 
is unable to determine their remaining useful lives.
    The respondent argues that it properly excluded depreciation 
expense relating to its assets because the facility is permanently 
closed and such accounting treatment is in accordance with Italian GAAP 
(Iron Construction Castings From India, 51 FR 9486, 1988). If the 
Department were to impute depreciation expense for the assets in the 
closed facility, the respondent argues we should allocate the imputed 
depreciation over 16 years, the average life of the fixed assets, 
rather than expensing the remaining book value of the idle assets 
during the POI.

DOC Position

    The fixed assets in question relate to one of the respondent's 
facilities which is no longer in operation. The land and building 
housing these fixed assets have been sold and the company is currently 
attempting to sell the equipment. Italian GAAP requires the recognition 
of a loss on discontinued operations in the income statement, but the 
appropriate period of recognition is not defined. The respondent, in 
its normal books and records, has yet to recognize a gain or loss from 
the remaining assets of the discontinued operation.
    The assets in question relate clearly to discontinued operations 
from a prior period and are no longer productive assets; they are 
merely awaiting sale. Accordingly, we do not consider the respondent's 
normal accounting treatment of these assets to be unreasonable. The 
Antifriction Bearings case cited by the petitioner is not controlling 
because it involved operations which were temporarily idle, while 
Dalmine's facility is permanently closed.
    Additionally, had we considered the respondent's accounting 
treatment to be unreasonable and treated the discontinued operations in 
accordance with U.S. GAAP, we would consider the loss to be related to 
the year in which the decision was made to discontinue the operations, 
which was prior to the POI. Upon disposal of these assets, the gain or 
loss on the sale will be included on the respondent's income statement 
and we will include the gain or loss in COP/CV, if an order is issued 
and an administrative review conducted. [[Page 31990]] 

Comment 13

    The petitioner argues that Dalmine improperly allocated 
depreciation expense using internal management reports instead of the 
mill-specific fixed asset ledgers which are kept in the normal course 
of business. The management reports, according to the petitioner, are 
used for allocating plant-wide depreciation expense to specific mills, 
but do not properly take into account the actual plant and equipment 
used in manufacturing. Instead, the petitioner claims, the submitted 
allocation method shifted costs from cost centers producing the subject 
merchandise to cost centers producing non-subject merchandise. The 
petitioner urges the Department to apply BIA because an analysis they 
performed suggests that the respondent applied an unusually slow rate 
of depreciation.
    The respondent claims that it did not understate reported 
depreciation costs, as the verification report suggested, and argues 
that it may, in fact, have overstated its reported depreciation costs. 
Dalmine asserts that the internal management reports used to calculate 
depreciation for the submission segregate separately depreciation by 
mill and are not used for company-wide allocations. It also maintains 
that the depreciation expense for equipment used to produce the subject 
merchandise, as reported in the company's fixed asset ledgers, is 
substantially less than the depreciation expense which was reported in 
the submitted COP/CV data.

DOC Position

    We agree with the petitioner, in part. The respondent reported its 
depreciation expense consistent with the way its cost accounting system 
allocates it to specific mills in the ordinary course of business. 
However, we believe that the use of its normal cost accounting 
methodology may not be a reasonable and accurate methodology as it does 
not properly take into account the actual plant and equipment used in 
manufacturing the subject merchandise. We consider the mill-specific 
fixed asset ledgers to be the most accurate basis for allocating 
depreciation expense to specific products. Therefore, we used the mill-
specific depreciation expense.
    We note that the petitioner's analysis regarding the unusually slow 
depreciation rate is flawed because it did not properly consider the 
cost of some fixed assets, such as land, which are not depreciated, and 
the cost of other fixed assets, which have long useful lives.

Comment 14

    The petitioner argues that the Department should reject Dalmine's 
reported financing costs because Dalmine failed to disclose the fact 
that its financial results are consolidated with the financial results 
of its parent, ILVA S.p.A., in liq. (ILVA). These financial results 
are, in turn, consolidated with the financial results of ILVA's parent, 
IRI. The petitioner asserts that the Department calculates interest 
expense on a consolidated basis, unless the financial structure of the 
parent and the operating subsidiary are clearly not integrated, or 
there are no reliable audited consolidated financial statements. 
According to the petitioner, neither of these exceptions are applicable 
in this case.
    The petitioner also contends that the Department should reject the 
respondent's argument that Dalmine's 1994 interest costs should be used 
instead of IRI's 1993 interest costs because the Dalmine-based figures 
are more closely correlated to the POI. The petitioner argues for the 
application of BIA in the final determination. However, if the 
Department determines that total BIA is inappropriate, then the 
petitioner believes the Department should calculate financing costs 
using IRI's 1993 audited financial statement information.
    The respondent claims that it properly reported interest expense 
based on the consolidated financing costs incurred at the Dalmine 
level, rather than at the consolidated IRI level. In support of its 
claim, the respondent states that IRI does not exercise control over 
Dalmine's operations or its capital structure. In addition, the 
respondent maintains that using IRI's consolidated financial expenses 
would distort Dalmine's true financing costs because IRI's financing 
costs include expenses for entities which are dissimilar to Dalmine. 
Additionally, the respondent points out that IRI's 1994 audited 
consolidated financial statements were not available at verification 
and only its 1993 audited consolidated financial statements are on the 
record. However, Dalmine's 1994 audited consolidated financial 
statements are on the record and, according to the respondent, they are 
more relevant because they encompass the entire POI. Lastly, the 
respondent objects to the petitioner's insinuation that it attempted to 
mislead the Department by failing to disclose that its financial 
results are consolidated with the financial results of IRI. The 
respondent asserts that this information was not provided since it was 
not requested in the Department's questionnaires. When the Department 
did request IRI's consolidated financial data at verification, the 
respondent provided this information.

DOC Position

    We agree with the petitioner, in part. The Department's long-
standing practice is to calculate interest expense for COP/CV purposes 
from the borrowing costs incurred by the consolidated group. Silicon 
Metal From Brazil, 56 Fed. Reg. at 26,986 (1991). This methodology, 
which has been upheld by the CIT in Camargo Correa Metals, S.A. v. 
U.S., Slip Op 93-163 (CIT 1993), is based on the fact that the 
consolidated group's controlling entity has the power to determine the 
capital structure of each member of the group. IRI has such power since 
it owns a substantial majority of Dalmine through ILVA. In addition, 
although the respondent claims that IRI does not exercise control over 
Dalmine's operations, it is the Department's position that majority 
equity ownership is prima facie evidence of corporate control. See, 
e.g., Final Determination of Sales at Less Than Fair Value: New 
Minivans from Japan, (Minivans) 57 FR 21946 (May 26, 1992) The 
respondent has not presented sufficient evidence to demonstrate that 
IRI's consolidated financing expense would distort Dalmine's financing 
costs. In Minivans, we determined that, as a member of a consolidated 
group of companies, the operations of a financing company remain under 
the controlling influence of the group. Like other members of the 
consolidated group, the financing company's capital structure is 
determined largely within the group. Consequently, its interest income 
and expenses are as much a part of the group's overall borrowing 
experience as any other member company.
    Lastly, we do not consider it more appropriate to use Dalmine's 
1994 consolidated figures over IRI's 1993 consolidated figures simply 
because Dalmine's audited information more closely relates to the time 
period of the POI. We have no reason to believe that IRI's 1993 audited 
financial statement interest expense data is not representative of the 
POI.

Comment 15

    The petitioner believes the Department should not allow the 
respondent to offset its IRI level financing costs with short-term 
interest income because the reported interest income included both 
short and long-term interest income.
    The respondent claims that the Department should reduce Dalmine's 
interest expenses by long and short-term [[Page 31991]] interest income 
since both long and short-term investments arise from the company's 
current operations. The respondent argues that it must earn revenue 
from its current operations in order to make long and short-term 
investments. Therefore, it is illogical for the Department to only 
consider short-term interest income to be related to current 
operations. Additionally, the respondent notes that treating short and 
long-term interest income differently contradicts the Department's 
fungibility of money argument. The respondent claims that the 
Department should recognize the symmetrical nature of interest income 
and expense and calculate a true net interest cost which would take 
long-term interest income into account.

DOC Position

    We agree with the respondent, in part. It is the Department's 
practice to allow a respondent to offset financial expenses with 
interest income earned from the general operations of the company. See, 
e.g., Timkin v. United States, 852 F. Supp. 1040, 1048 (CIT 1994). The 
Department does not, however, offset interest expense with interest 
income earned on long-term investments because long-term interest 
income does not relate to current operations. See, e.g., Antifriction 
Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From 
the Federal Republic of Germany: Final Results of Antidumping Duty 
Administrative Review, 56 FR 31734 (July 11, 1991). The company did not 
provide a break-down of short and long-term interest income for IRI. 
However, we were able to determine the amount of short-term interest 
income for the consolidated IRI group from verification exhibits and 
have applied short-term interest income as an offset to Dalmine's 
financing costs.

Comment 16

    The petitioner contends that the Department should not allow the 
respondent to offset production costs with foreign exchange gains 
because the gains were not verified by the Department.
    The respondent maintains that, contrary to the verification report, 
it does not associate exchange gains and losses with particular 
transactions. The respondent states that it classifies exchange gains 
and losses as part of the company's general expenses and it urges the 
Department to accept this treatment of these exchange gains and losses. 
As an alternative to including both foreign exchange gains and losses 
in its financing cost calculation, the respondent argues that the 
Department should exclude both gains and losses. The respondent states 
in its brief that it was not aware of the Department's treatment of 
exchange gains and losses until it received the verification agenda 
where the distinction was explicitly noted.

DOC Position

    We agree with the petitioner. It is the Department's normal 
practice to distinguish between exchange gains and loses from sales 
transactions and exchange gains and losses from purchase transactions. 
See, e.g., Final Determination of Sales at Less Than Fair Value; 
Silicomanganese from Venezuela, 59 FR 55436 (November 7, 1994) 
(Silicomanganese). Accordingly, the Department does not include 
exchange gains and losses on accounts receivable because the exchange 
rate used to convert third-country sales to U.S. dollars is that in 
effect on the date of the U.S. sale. (See 19 CFR 353.60). The 
Department includes, however, foreign exchange gains and losses on 
financial assets and liabilities in its COP and CV, calculation where 
they are related to the company's production. Financial assets and 
liabilities are directly related to a company's need to borrow money, 
and we include the cost of borrowing in our COP and CV calculations. 
See Silicomanganese. The respondent did not provide any substantiation 
for the exchange gains and losses reflected in either Dalmine's 
financial statements or IRI's financial statements. However, Dalmine 
did state at verification that exchange gains are generally from sales 
transactions and exchange losses are generally from purchase 
transactions. We therefore adjusted the interest expense rate 
calculation to include IRI's exchange losses and exclude IRI's exchange 
gains.

Comment 17

    The petitioner argues that the Department should disallow the 
portion of the LIFO variance adjustment which is comprised of reversals 
of accruals and other reserves. The petitioner claims that these 
accruals and reserves were established in prior accounting periods and 
do not relate to POI production. According to the petitioner, allowing 
such reversals provides companies that have advance knowledge of a 
dumping case with a simple means of shifting costs out of the POI.
    The respondent contends that it included properly reversals of 1993 
accruals and write-downs in its COP/CV costs. Dalmine claims that the 
Department's general practice is to include accruals which are 
recognized in the respondent's audited financial statements in the COP/
CV calculations. According to the respondent, this treatment 
necessitates the inclusion of any accrual reversals in COP/CV 
calculations for the period in which the respondent recognizes the 
reversal. Otherwise, the respondent claims, the Department would be 
overstating the company's total costs.

DOC Position

    We agree with the petitioner. We do not consider it appropriate to 
reduce current year production costs by the reversal of prior year 
operating expense accruals and write-downs of equipment and inventory. 
The subsequent year's reversal of these estimated costs does not 
represent revenue or reduced operating costs in the year of reversal. 
See Notice of Final Determinations of Sales at Less Than Fair Value: 
Certain Hot-Rolled Carbon Steel Flat Products, Certain Cold-Rolled 
Carbon Steel Flat Products, and Certain Cut-to-Length Carbon Steel 
Plate From France, 58 FR 37079 (July 9, 1993). Rather, they represent a 
correction of an estimate which was made in a prior year. If the 
Department is able to verify that an operating expense accrual or an 
equipment or inventory write-down recorded during the POI is 
subsequently adjusted because the company overestimated the cost, we 
will use the corrected figure, but only for the same period in which 
the accrual or write-down occurred. However, absent any verified 
information supporting the overestimation of cost, we have no choice 
but to rely on the amounts recorded by the company. The fact that a 
company is unable to determine that it over accrued certain costs in 
time for verification does not justify distorting the actual production 
costs incurred in a subsequent year by reducing subsequent year costs 
by the overestimated amount. In the present case, since the accruals 
and write-downs did not occur during 1994, it would be inappropriate to 
recognize the reversals of such entries in the reported costs.

Comment 18

    The petitioner asserts that Dalmine has not reported the COP and CV 
for all of the subject merchandise sold in the U.S. during the POI. 
This assertion is based on the fact that Dalmine did not calculate a 
weighted average cost for CONNUM's 45 and 108, because the company did 
not produce those products during the POI. The petitioner claims that a 
significant percentage of U.S. sales during the POI were for control 
numbers not produced during the POI. The petitioner argues that the 
[[Page 31992]] Department should increase the submitted COP and CV for 
the two products sold in the U.S. during the POI, but produced prior to 
the POI, because Dalmine was less profitable in 1993.
    The respondent maintains that it calculated the average COP and CV 
for CONNUM's 45 and 108 by using a simple average of the cost of the 
products that comprise each CONNUM rather than a weighted average with 
a weighting factor for the cost of products not produced during the 
POI. Thus, the respondent contends that it properly reported actual 
contemporaneous cost information.
DOC Position

    We agree with the respondent. Dalmine used a simple average of the 
cost of the products that comprised CONNUM's 45 and 108 and our 
statement in the verification report that the respondent used a 
weighting factor for some of the products in its cost calculation for 
CONNUM's 45 and 108 is inaccurate. We calculated COP/CV by weight 
averaging the average costs of products classified within those 
CONNUM's by the production quantities which we obtained at 
verification.
    We disagree with the petitioner's claim that the Department should 
increase the submitted cost data for the products produced prior to the 
POI because the company was less profitable in the prior year. The 
Department tested Dalmine's standard costs as adjusted to actual costs 
at verification and determined that these costs actually reflect the 
costs incurred during the POI.

Comment 19

    The petitioner contends that Dalmine understated its reported 
general and administrative (G&A) expenses as it failed to include an 
allocation of G&A expenses incurred by ILVA and IRI. Because Dalmine 
failed to disclose that it was consolidated with ILVA and IRI, the 
petitioner believes that, as BIA, the Department should add the G&A 
expenses calculated from ILVA's 1992 financial statements and IRI's 
1993 financial statements to the amounts reported by Dalmine.
    The respondent maintains that the Department verified that an 
appropriate share of parent company management costs was included in 
the submitted COP/CV data.

DOC Position

    We agree with the respondent. It is the Department's practice to 
include a portion of the G&A expenses incurred by affiliated companies 
on the reporting entity's behalf in total G&A expenses for COP/CV 
purposes. Final Determination of Sales at Less Than Fair Value: Welded 
Stainless Steel Pipe from Malaysia, 59 Fed. Reg. 4023, 4027 (Jan. 28, 
1994); Final Determination of Sales at Less Than Fair Value: 
Ferrosilicon from Venezuela, 58 Fed. Reg. 27524 (May 10, 1993); Final 
Determination of Sales at Less Than Fair Value: Sweaters from Hong 
Kong, 55 Fed. Reg. 30733 (July 27, 1990); Final Determination of Sales 
at Less Than Fair Value: Certain Small Business Telephones and 
Subassemblies Thereof from Korea, 54 Fed. Reg. 53141 (Dec. 27, 1989). 
In the present case, the respondent included a portion of Dalmine's G&A 
expenses and the G&A expenses of its producing subsidiary in the 
submitted G&A expenses. We identified no parent company costs allocable 
to Dalmine.

Comment 20

    The petitioner questions whether all steel mill variances have been 
captured because steel bar costs have been reported exclusively on the 
basis of standard costs. The petitioner claims that price and 
efficiency variances for the steel mill were excluded from the ratio 
used to allocate variances to each product.
    The respondent claims that the Department verified that the steel 
mill variance was properly allocated to the subject merchandise.

DOC Position

    We agree with the respondent. The steel mill net profit reported on 
the respondent's management report was zero after all steel mill costs 
were allocated to producing mills, based on steel usage by the mills. 
Therefore, all steel mill activity, including variances, was properly 
allocated to the producing mills.

Suspension of Liquidation

    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 final dumping margin, as shown below, for 
entries of seamless standard, line and pressure pipe from Italy that 
are entered or withdrawn from warehouse, for consumption from the date 
of publication of this notice in the Federal Register. The suspension 
of liquidation will remain in effect until further notice. The 
weighted-average dumping margins are as follows:

------------------------------------------------------------------------
                                                              Weighted- 
                                                               average  
               Producer/manufacturer exporter                   margin  
                                                              (percent) 
------------------------------------------------------------------------
Dalmine....................................................         1.84
All Others.................................................         1.84
------------------------------------------------------------------------

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 will be 
refunded or cancelled. However, 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 protection order (``APO'') in these investigations of 
their responsibility covering the return or destruction of proprietary 
information disclosed under APO in accordance with 19 CFR 353.4(d). 
Failure to comply is a violation of the APO.
    This determination is published pursuant to section 735(d) of the 
Act (19 U.S.C. 1673(d))and 19 CFR 353.20.

    Dated: June 12, 1995.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 95-14939 Filed 6-16-95; 8:45 am]
BILLING CODE 3510-DS-P