[Federal Register Volume 61, Number 13 (Friday, January 19, 1996)]
[Notices]
[Pages 1328-1339]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-623]



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DEPARTMENT OF COMMERCE
[A-549-502]


Certain Circular Welded Carbon Steel Pipes and Tubes From 
Thailand; Final Results of Antidumping Duty Administrative Review

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

ACTION: Notice of final results of antidumping duty administrative 
review.

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SUMMARY: On November 22, 1994, the Department of Commerce published the 


[[Page 1329]]
preliminary results of review of the antidumping duty order on certain 
circular welded carbon steel pipes and tubes from Thailand. The review 
covers the period March 1, 1992, through February 28, 1993.
    We gave interested parties an opportunity to comment on the 
preliminary results. Based on our analysis of the comments received, we 
have changed the final results from those presented in the preliminary 
results of review.

EFFECTIVE DATE: January 19, 1996.

FOR FURTHER INFORMATION CONTACT: Joseph Hanley or Zev Primor, Office of 
Antidumping Compliance, International Trade Administration, U.S. 
Department of Commerce, Washington, D.C. 20230; telephone (202) 482-
3058/4114.

SUPPLEMENTARY INFORMATION:

Background

    On November 22, 1994, the Department of Commerce (the Department) 
published in the Federal Register (59 FR 60128) the preliminary results 
of its administrative review of the antidumping duty order on certain 
circular welded carbon steel pipes and tubes from Thailand (51 FR 8341, 
March 11, 1986) for the period March 1, 1992, through February 28, 
1993.

Applicable Statute and Regulations

    The Department has completed this administrative review in 
accordance with section 751 of the Tariff Act of 1930, as amended (the 
Tariff Act). Unless otherwise indicated, all citations to the statute 
and the Department's regulations are in reference to the provisions as 
they existed on December 31, 1994.

Scope of the Review

    The products covered by this administrative review are shipments of 
certain circular welded carbon steel pipes and tubes from Thailand. The 
subject merchandise has an outside diameter of 0.375 inches or more, 
but not exceeding 16 inches. These products, which are commonly 
referred to in the industry as ``standard pipe'' or ``structural 
tubing,'' are hereinafter designated as ``pipe and tube.'' The 
merchandise is classifiable under the Harmonized Tariff Schedule (HTS) 
item numbers 7306.30.1000, 7306.30.5025, 7306.30.5032, 7306.30.5040, 
7306.30.5055, 7306.30.5085, and 7306.30.5090. The item numbers are 
provided for convenience and U.S. Customs Service purposes. The written 
description remains dispositive as to the scope of the order.
    The review period is March 1, 1992, through February 28, 1993. This 
review involves one company, Saha Thai Steel Pipe Company, Ltd. (Saha 
Thai).

Consumption Tax Methodology

    In light of the Federal Circuit's decision in Federal Mogul v. 
United States, CAFC No. 94-1097, the Department has changed its 
treatment of home market consumption taxes. Where merchandise exported 
to the United States is exempt from the consumption tax, the Department 
will add to the U.S. price the absolute amount of such taxes charged on 
the comparison sales in the home market. This is the same methodology 
that the Department adopted following the decision of the Federal 
Circuit in Zenith v. United States, 988 F. 2d 1573, 1582 (1993), and 
which was suggested by that court in footnote 4 of its decision. The 
Court of International Trade (CIT) overturned this methodology in 
Federal Mogul v. United States, 834 F. Supp. 1391 (1993), and the 
Department acquiesced in the CIT's decision. The Department then 
followed the CIT's preferred methodology, which was to calculate the 
tax to be added to U.S. price by multiplying the adjusted U.S. price by 
the foreign market tax rate; the Department made adjustments to this 
amount so that the tax adjustment would not alter a ``zero'' pre-tax 
dumping assessment.
    The foreign exporters in the Federal Mogul case, however, appealed 
that decision to the Federal Circuit, which reversed the CIT and held 
that the statute did not preclude Commerce from using the ``Zenith 
footnote 4'' methodology to calculate tax-neutral dumping assessments 
(i.e., assessments that are unaffected by the existence or amount of 
home market consumption taxes). Moreover, the Federal Circuit 
recognized that certain international agreements of the United States, 
in particular the General Agreement on Tariffs and Trade (GATT) and the 
Tokyo Round Antidumping Code, required the calculation of tax-neutral 
dumping assessments. The Federal Circuit remanded the case to the CIT 
with instructions to direct Commerce to determine which tax methodology 
it will employ.
    The Department has determined that the ``Zenith footnote 4'' 
methodology should be used. First, as the Department has explained in 
numerous administrative determinations and court filings over the past 
decade, and as the Federal Circuit has now recognized, Article VI of 
the GATT and Article 2 of the Tokyo Round Antidumping Code required 
that dumping assessments be tax-neutral. This requirement continues 
under the new Agreement on Implementation of Article VI of the General 
Agreement on Tariffs and Trade. Second, the URAA explicitly amended the 
antidumping law to remove consumption taxes from the home market price 
and to eliminate the addition of taxes to U.S. price, so that no 
consumption tax is included in the price in either market. The 
Statement of Administrative Action (p. 159) explicitly states that this 
change was intended to result in tax neutrality.
    While the ``Zenith footnote 4'' methodology is slightly different 
from the URAA methodology, in that section 772(d)(1)(C) of the pre-URAA 
law required that the tax be added to United States price rather than 
subtracted from home market price, it does result in tax-neutral duty 
assessments. In sum, the Department has elected to treat consumption 
taxes in a manner consistent with its longstanding policy of tax-
neutrality and with the GATT.

Analysis of Comments Received

    We gave interested parties an opportunity to comment on the 
preliminary results. We received comments from petitioners and from 
Saha Thai. The petitioners in this case are the Allied Tube & Conduit 
Corporation, Sawhill Tubular Division of Armco, Inc., American Tube 
Company, Inc., Laclede Steel Company, Sharon Tube Company, Wheatland 
Tube Company, and Eagle Pipe Company.
    Unlike the preliminary results, all margins for these final results 
were determined using price to price comparisons; therefore, the 
calculation of foreign market value (FMV) using constructed value (CV) 
was not necessary. Thus, we have not addressed comments regarding the 
calculation of CV for these final results.
    Comment 1: Petitioners argue that the Department should reverse its 
preliminary finding that Saha Thai's home market sales of pipe and tube 
made to American Society of Testing Materials (ASTM) specifications 
were not in the ordinary course of trade. According to petitioners, the 
Department's finding is based on analysis contrary to law and lacks 
factual support.
    Petitioners assert that when determining whether sales are outside 
the ordinary course of trade, the Department considers whether the 
sales were made for unusual reasons or under unusual circumstances. The 
purpose of this exercise is to ensure that the sale price is a bona 
fide, market-determined price that accurately reflects the value of 

[[Page 1330]]
the merchandise. Petitioners note that the Department has performed an 
ordinary course of trade analysis when a respondent has demonstrated 
that certain sales were sample or trial sales, spot sales, sales of 
damaged merchandise, obsolete or discontinued models, or merchandise 
resulting from production overruns (overrun sales).
    Petitioners argue that only when it has been established that 
certain sales are overruns will the Department conduct an ordinary 
course of trade analysis by considering all the circumstances of the 
sale. Citing Certain Welded Carbon Steel Standard Pipes and Tubes from 
India; Final Results of Antidumping Duty Administrative Review, 56 FR 
64753 (December 12, 1991) (Pipe from India), and Circular Welded Non-
Alloy Steel Pipe from the Republic of Korea; Final Determination of 
Sales at Less Than Fair Value, 56 FR 42942 (September 17, 1992) (Pipe 
from Korea), petitioners claim that the Department considers: 1) 
whether the sales were of overrun merchandise or seconds; 2) the volume 
of sales and number of buyers; 3) differences in product standards and 
uses between overrun and ordinary production; and 4) the price and 
profit differentials between overrun and ordinary merchandise in the 
home market.
    While petitioners acknowledge that under certain conditions the 
Department has determined overrun sales to be outside the ordinary 
course of trade (see Pipe from India), they note that under other 
conditions the Department has determined sales of overrun merchandise 
to be within the ordinary course of trade (see Pipe from Korea).
    Petitioners argue that none of the reasons stated by the Department 
in the preliminary results, taken alone or collectively, can support a 
finding that Saha Thai's ASTM sales were made outside the ordinary 
course of trade. Furthermore, petitioners contend that since the 
Department's preliminary analysis only considered the volume of sales 
and differences in standards and uses between ASTM merchandise and 
other related goods, it represented only a partial application of the 
four-part analysis used in Pipe from India and Pipe from Korea. While 
petitioners acknowledge that the two factors considered in the 
preliminary results relate to the existence of a viable separate market 
for ASTM goods, they argue that such factors should not be considered 
determinative.
    Petitioners argue that Saha Thai must first establish that its home 
market ASTM sales were not normal commercial transactions. Petitioners 
assert that Saha Thai claimed only a portion of its home market ASTM 
sales as overrun production originally intended for export and failed 
to submit evidence to support its claim. Thus, petitioners conclude 
that the fundamental threshold condition needed to trigger an ordinary 
course of trade analysis is lacking. However, petitioners contend that 
if the Department decides to analyze all home market ASTM sales as 
potential overruns, it must nevertheless find that such sales were 
within the ordinary course of trade.
    According to petitioners, the record indicates that Saha Thai sells 
a significant amount of ASTM pipe in the home market. Petitioners claim 
that such sales are at prices which support rather than detract from 
the inference that home market ASTM sales are in the ordinary course of 
trade. Additionally, petitioners argue that Saha Thai's admission that 
it produced ASTM pipe in response to specific requests by home market 
customers is further evidence that an indigenous consumer-driven market 
for ASTM pipe exists, warranting its production and marketing for 
ordinary commercial reasons. Petitioners argue that while the use of 
ASTM pipe in the home market may be less common than the use of British 
Standard (BS) pipe, there is nothing on the record to indicate that the 
conditions and practices of sale of ASTM pipe were commercially unusual 
by the standards of the trade for all standard pipe in the home market.
    Saha Thai argues that it has met its burden of demonstrating that 
ASTM sales were outside the ordinary course of trade and that the 
Department has properly excluded such sales from the calculation of 
FMV. Saha Thai claims that the four-part test established in Pipe from 
India, and affirmed by the Court of International Trade (CIT) in 
Mantex, Inc. v. United States, 841 F. Supp. 1290, 1305-1309 (CIT 1993) 
(Mantex), controls the disposition of the issue before the Department, 
because it addresses the question of when the sale of pipe not made to 
the governing local standard can be considered to be within the 
ordinary course of trade. Saha Thai argues that application of the 
four-part test to the facts of this case confirms that domestic ASTM 
sales by Saha Thai were outside the ordinary course of trade.
    First, Saha Thai notes that the British standard, not the ASTM 
standard is the governing standard for pipe sold in Thailand. According 
to Saha Thai, ASTM pipes are sold in Thailand on the basis of special 
orders or for special projects in which the entire project is supplied 
with ASTM pipe. ASTM pipes cannot be used in most piping systems in the 
home market or to replace existing piping systems except in those 
limited instances in which an entire project was built to ASTM 
standards. Saha Thai argues that these same conditions were present in 
Pipe from India, and the CIT upheld the Department's consideration of 
product use in determining that certain sales were outside the ordinary 
course of trade. See Mantex.
    Second, Saha Thai notes that the volume of sales and the number of 
buyers for ASTM pipe in the home market is significantly smaller than 
for BS pipe. Saha Thai claims that reliance on low sales volumes and a 
limited number of buyers in an ordinary course of trade analysis was 
expressly approved by the CIT in Mantex.
    Third, Saha Thai claims that the significant price and profit 
differential between ASTM and BS pipe sold in Thailand is indicative of 
sales outside the ordinary course of trade. Saha Thai notes that price 
and profit differentials were considered by the Department in Pipe from 
India, and upheld by the CIT in Mantex. Saha Thai acknowledges that, 
unlike Pipe from India, price and profit levels of ASTM pipe in 
Thailand are substantially higher than domestic standard pipe. However, 
it argues that it is not important that the prices of ASTM pipe are 
higher than the local standard, but rather that a significant 
difference exists. Saha Thai claims that this phenomenon of higher 
profit and price levels for ASTM pipe is attributable to the very 
narrow market segment represented by sales of ASTM pipe.
    Finally, Saha Thai notes that the value and volume of ASTM pipe 
produced by Saha Thai is primarily destined for export.
    Department's Position: We have determined that, after re-examining 
the facts on the record in light of the four-factor test of Mantex, 
Saha Thai's sales of ASTM pipe in the home market were not made outside 
the ordinary course of trade. Therefore, with the exception of ASTM 
``punched hole'' irrigation pipe, we have used sales of ASTM pipe in 
the home market as the basis for FMV in these final results.
    As stated in the preliminary results of this review, when 
determining whether sales were made outside the ordinary course of 
trade we do not rely on one factor taken in isolation but rather 
consider all the circumstances surrounding the sales in question. 
Consistent with Pipe from India, and Pipe from Korea we have examined 
for these final results: (1) The different standards and product uses 
of ASTM 

[[Page 1331]]
and BS pipe; (2) the comparative volume of sales and number of buyers 
of ASTM and BS pipe in the home market; (3) the price and profit 
differentials between ASTM and BS pipe sold in the home market; and (4) 
the issue of whether ASTM pipe sold in the home market consisted of 
production overruns or seconds. It should be noted that our examination 
of the circumstances of the sales in question is not limited to the 
factors listed above and no one factor is determinative.
    While we agree with Saha Thai that there are similarities between 
this case and Pipe from India, there are a number of important factors 
which distinguish this case. First, there is no information on the 
record which indicates that the ASTM sales in question are production 
overruns of merchandise that was originally intended for export. 
Indeed, the record in this case indicates that Saha Thai produced and 
sold ASTM pipe in response to specific orders placed by customers in 
the home market. While sales of merchandise other than overruns may be 
found to be outside the ordinary course of trade, the fact that the 
merchandise was produced in response to specific orders indicates that 
Saha Thai made these ASTM sales under ``conditions and practices * * * 
which have been normal in the trade under consideration.'' (section 
771(15) of the Tariff Act).
    Second, while ASTM pipe is less common in the home market than BS 
pipe, and is not compatible with BS pipe, there is nothing on the 
record to indicate that ASTM pipe sold in the home market is being used 
for purposes other than those for which it was intended. Unlike this 
case, in Pipe from India, the Department found that ``customers for 
ASTM pipe in India used the pipe for a very limited number of purposes 
quite different from its intended standard purposes'' (56 FR at 
64755)(emphasis added).
    Third, the record indicates that the average sales quantity of ASTM 
pipe sold in the home market did not differ significantly from the 
average sales quantity of BS pipe. Furthermore, while the total volume 
of ASTM sales and the number of customers purchasing ASTM pipe may be 
small in comparison to BS pipe, the level of ASTM sales activity in the 
home market is significant enough to dispel the notion that such sales 
are spot sales, sales of obsolete merchandise or periodic attempts to 
liquidate ASTM merchandise originally produced for export. Indeed the 
CIT has clearly stated that ``[w]hether an importer has made sales in 
the ordinary course of trade depends on whether the importer made the 
sales under conditions that are normal for the product that is being 
sold, not whether the importer normally sells the subject 
merchandise.'' See, East Chilliwack Fruit Growers Co-Operative v. 
United States, 11 CIT 104, 108, 655 F.Supp. 499, 504 (1987) (emphasis 
added).
    Fourth, we disagree with Saha Thai that its higher price and profit 
levels on sales of home market ASTM pipe in comparison to BS pipe 
indicate that its ASTM sales are outside the ordinary course of trade. 
Just as it is not a requirement that different price and profit levels 
be demonstrated in order for sales to be determined outside the 
ordinary course of trade, (see, Pipe from India), the existence of 
different price and profit levels does not necessarily indicate that 
sales are outside the ordinary course of trade.
    Finally, the fact that Saha Thai produces the majority of ASTM pipe 
for export does not in any way indicate that the circumstances 
surrounding its sales of ASTM pipe in the home market are not normal. 
Unlike Pipe from India where it was determined that a ready market did 
not exist for production overruns of ASTM pipe that was originally 
produced for export, the record in this case indicates that Saha Thai 
produces and sells ASTM pipe in the home market specifically in 
response to orders placed by its home market customers. Such 
circumstances further indicate that a ready market for ASTM pipe exists 
in the home market.
    As demonstrated above, when the factors are properly considered in 
their totality, the claimed similarities between Pipe from India and 
this case prove to be unfounded. Therefore, based on the analysis 
articulated above, we have determined that sales of ASTM pipe in the 
home market were not made for unusual reasons or under unusual 
circumstances but rather were made in response to genuine domestic 
demand. Thus we have included sales of such merchandise in our 
calculation of FMV for these final results.
    Comment 2: Petitioners argue that if the Department finds that home 
market sales of the identical or most similar merchandise were not made 
in the contemporaneous 90/60 window, it must use CV as the basis for 
FMV. Petitioners contend that the Department's decision not to use CV 
and instead select the next most similar merchandise sold within the 
90/60 window violates Department policy.
    Petitioners argue that, although it is clear that prices for 
matched merchandise sold outside the 90/60 window cannot be the basis 
for FMV, section 773 of the Tariff Act does not allow the Department to 
redefine such or similar merchandise as another, less similar product 
sold in the 90/60 window. Petitioners contend that to do so would be to 
incorrectly read into section 771(16) of the Tariff Act an added 
requirement that the Department select not only the most similar 
product under its hierarchy, but also one that was sold in a 
contemporaneous time frame.
    Petitioners argue that the Department has consistently rejected 
attempts to condition the determination of such or similar on any basis 
other than similarity of the merchandise. Petitioners note that the 
Department has explained its policy of matching such and similar 
merchandise on the basis of the similarity of the merchandise without 
regard to the results of the test for sales below cost. See 
Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts 
Thereof from France; et al.; Final Results of Antidumping Duty 
Administrative Reviews, 57 FR 28360 (June 24, 1992) (AFBs from France). 
Petitioners also argue that, in Cyanuric Acid and Its Chlorinated 
Derivatives from Japan Used in the Swimming Pool Trade; Final 
Determinations of Sales at Less Than Fair Value, 49 FR 7424 (February 
29, 1984) (Cyanuric Acid), the Department refused to allow an ordinary 
course of trade requirement to influence product matching. 
Additionally, petitioners cite Timken Co. v. United States, 673 F. 
Supp. 495 (CIT 1987), and NTN Bearing Corp. v. United States, 747 F. 
Supp. 726, 736 (CIT 1990) as support for the practice of disregarding 
the level of trade at which products are sold and determining 
similarity solely on the basis of physical similarity. Finally, 
petitioners contend that, in Color Television Receivers from the 
Republic of Korea; Preliminary Results of Antidumping Duty 
Administrative Review, 58 FR 52262 (October 7, 1993) (CTVs from Korea), 
the Department refused to consider matching sales to the next most 
similar merchandise, and instead based FMV on CV, when sales of the 
identical or most similar merchandise were not made in a 
contemporaneous time frame.
    Therefore, petitioners contend that the preliminary decision to 
allow the timing of the home market sale to influence the selection of 
identical or similar merchandise is inconsistent with the Department's 
practice of identifying such or similar merchandise solely on the basis 
of physical characteristics and using CV as the basis for FMV when such 
sales are disqualified due to other reasons. 

[[Page 1332]]

    Saha Thai argues that there is no support in either the statute or 
case law for petitioners' argument. Saha Thai argues that the statute 
does not require that the Department first determine which merchandise 
is such or similar and then determine if sales of that merchandise are 
contemporaneous.
    Saha Thai argues that the preliminary results need not be read as 
applying section 771(16) of the Tariff Act to determine such or similar 
merchandise a second time after concluding that certain sales 
originally determined to be such or similar were made outside the 90/60 
window. Rather, Saha Thai asserts, it can just as easily be interpreted 
as applying section 771(16) only once after excluding merchandise sold 
outside the 90/60 window.
    Additionally, Saha Thai contends that the cases cited by 
petitioners are not on point. According to Saha Thai, in AFBs from 
France the Department merely determined that it will not search for 
such or similar merchandise a second time after the identical or most 
similar merchandise is determined to be below cost. The Department did 
not address the issue of whether sales outside the 90/60 window could 
be designated as such or similar merchandise. Additionally, Saha Thai 
claims that petitioners' reliance on Cyanuric Acid is similarly 
misguided. According to Saha Thai, the Department determined in 
Cyanuric Acid that the sales in dispute were sold in the ordinary 
course of trade; otherwise, it could not have used them as FMV. 
Finally, Saha Thai argues that, aside from the fact that CTVs from 
Korea was a preliminary decision, it is not clear in that case that 
there were other contemporaneous sales of similar models available for 
comparison. According to Saha Thai, it is conceivable that, after 
application of the cost test, there were no sales of similar models to 
compare to the U.S. sales, forcing the Department to resort to CV.
    Saha Thai contends that a clearer statement of the Department's 
policy may be found in Certain Forged Steel Crankshafts from the United 
Kingdom; Final Results of Antidumping Duty Administrative Review, 56 FR 
5975, 5977 (February 14, 1991), where the Department stated that ``when 
there were no contemporaneous sales of the most similar home market 
model to compare to sales of a U.S. model, we examined the other 
similar models for contemporaneity.'' Saha Thai argues that not only is 
the Department's methodology in the preliminary determination 
consistent with the above-cited case, it is also consistent with 
previous administrative reviews concerning this product.
    Department's Position: We disagree with petitioners' argument that 
by limiting our search for such or similar merchandise to those home 
market sales made within the contemporaneous 90/60 window, we are 
inappropriately conditioning the selection of such or similar 
merchandise on factors other than the physical characteristics of the 
merchandise.
    In accordance with section 773(a)(1) of the Tariff Act, we must 
compare contemporaneous sales of such or similar merchandise. 
Accordingly, in making comparisons we must do so based on both the 
physical characteristics of the merchandise and the timing of the 
sales, since we are matching sales to sales, and not simply models to 
models. Thus, the timing of the sales limits the universe from which we 
make our selection. In contrast, the test for sales below cost is a 
test applied, when warranted, to the universe of sales selected under 
section 773(a)(1).
    The Department has implemented the contemporaneous 90/60 window in 
order to fulfill the statutory requirements in section 773(a)(1) of the 
Tariff Act that FMV be based on the price of contemporaneous sales of 
such or similar merchandise. See, Final Results of Antidumping Duty 
Administrative Review; Certain Valves and Connections, of Brass, for 
Use in Fire Protection Systems from Italy, 56 FR 5388 (February 11, 
1991).
    Therefore, for these final results we will continue to base our 
selection of such or similar merchandise on the physical 
characteristics of the merchandise. However, consistent with 
established Department practice, we will also continue to limit the 
universe of sales from which we select the comparison model to those 
sales made during the contemporaneous 90/60 window.
    Comment 3: Petitioners argue that the Department erred in making a 
circumstance-of-sale (COS) adjustment for warranty expenses Saha Thai 
claims it incurred on U.S. sales. Petitioners contend that Saha Thai 
failed to provide sufficient evidence to support its characterization 
of this expense as a warranty expense. Petitioners assert that the 
evidence on the record suggests that this expense was actually a 
discount that should be deducted from U.S. price (USP), rather than 
added to FMV.
    Petitioners also argue that Saha Thai's allocation of this expense 
was faulty because: (1) The expense was allocated over sales made prior 
to the period of review, and (2) the expense was allocated over all 
U.S. sales despite the fact that sales-specific data was available.
    Saha Thai argues that it provided ample evidence in both its 
original and supplemental questionnaire responses to substantiate its 
claim that the expenses in question were bona fide warranty expenses. 
Additionally, Saha Thai argues that the Department incorrectly 
classified its warranty expenses as direct selling expenses. According 
to Saha Thai, such expenses should be classified as indirect, and no 
adjustment should be made to USP since all U.S. sales were purchase 
price transactions within the meaning of section 772(b) of the Tariff 
Act.
    Saha Thai contends that, because its warranty expense was 
unanticipated at the time of the sale and has not been repeated since, 
it should be classified, according to established Department practice, 
as an indirect selling expense. Additionally, Saha Thai notes that 
warranty payments made during the POR are normally considered direct 
expenses only when such payments are indicative of warranty expenses 
that will likely be incurred later with regard to sales made during the 
period of review. Saha Thai notes that warranty claims are not 
anticipated at the time of the sale because the merchandise under 
review is manufactured to internationally recognized standards.
    Saha Thai asserts that, if the Department determines that its 
reported warranty expenses are direct expenses, it should employ for 
these final results the allocation methodology used in the preliminary 
determination. According to Saha Thai, allocating the warranty expenses 
over all sales during the 1987-92 period provides the best information 
available for the eventual warranty costs for sales in 1992. In 
addition, Saha Thai argues that allocating warranty expenses over all 
of its sales from 1987-1992 avoids the disproportionate allocation of 
the expenses to the relatively low export volume in 1992.
    Department's Position: It is the Department's practice to allow 
only those expenses related to quality-based complaints to be 
classified as a warranty expense. See, Final Determination of Sales at 
Less Than Fair Value: Fresh and Chilled Atlantic Salmon From Norway, 56 
FR 7661 (February 25, 1991). Because the record indicates that Saha 
Thai's payments are in response to a quality-based complaint, we 
disagree with petitioners that the expense should be classified as a 
discount, and have continued to classify it as a warranty expense. 
Additionally, since the warranty expenses incurred by Saha Thai are 
variable expenses, we have continued to classify them as direct selling 
expenses. 

[[Page 1333]]

    Furthermore, regarding the proper allocation methodology, since 
warranty expenses associated with subject merchandise sold during the 
POR are usually not identifiable until well after the POR, it is the 
Department's general practice to make a COS adjustment using warranty 
expenses incurred during the period as the best available information 
for future warranty claims. See, Color Television Receivers from the 
Republic of Korea; Final Results of Antidumping Duty Administrative 
Review, 56 FR 12701 (1991). However, where there are special 
circumstances, the Department has accepted alternative calculation 
methodologies that provide a reasonable estimate of future warranty 
expenses associated with sales made during the POR. See, Final 
Determination of Sales at Less Than Fair Value: Mechanical Transfer 
Presses from Japan, 55 FR 335 (1990). In the instant case, we agree 
with Saha Thai that allocating its current warranty expenses over the 
relatively low export volume in this review would likely result in an 
overstated warranty adjustment. Such an approach would be inappropriate 
because it would not provide an accurate prediction of the warranty 
expenses that are likely to be incurred in the future on sales made 
during the POR. Therefore, we have accepted Saha Thai's methodology of 
allocating warranty expenses incurred over the past five years over 
sales made during the past five years as a reasonable estimate of 
future warranty expenses that will be incurred on sales made during the 
POR.
    Comment 4: Petitioners argue that the Department erred in making a 
duty drawback adjustment to USP. Petitioners argue that Saha Thai is 
not entitled to a duty drawback adjustment because it provided no 
evidence that the drawback it receives is based on duties paid on 
materials which are suitable for use in those ASTM products exported. 
Petitioners also argue that if the Department grants the duty drawback 
adjustment, it should be reduced to a lesser amount than that claimed 
by Saha Thai because there is evidence that Saha Thai's claimed amount 
is not representative of the actual duties paid on coil incorporated 
into the exported pipe.
    Saha Thai argues that it has provided adequate information to 
support its claimed duty drawback adjustment and its method of 
calculation and that the duty drawback adjustments claimed in the 1987-
88 and 1988-89 reviews were granted in full. Additionally, Saha Thai 
argues that petitioners' analysis of Saha Thai's duty drawback claim is 
flawed because it failed to account for the fact that Saha Thai sources 
some of its material inputs from domestic suppliers. This flaw, Saha 
Thai argues, invalidates the petitioner's argument.
    Department's Position: We disagree with petitioners' argument that 
Saha Thai's reported duty drawback adjustment should be disallowed. 
Saha Thai provided in its questionnaire response an adequate 
explanation and demonstration of how it calculated the reported duty 
drawback adjustment. Additionally, we agree with Saha Thai that 
petitioners' estimate of its duty drawback appears flawed because it 
failed to account for the fact that Saha Thai sources some of its 
material inputs from domestic suppliers. Furthermore, because there is 
no information on the record to indicate that the drawback Saha Thai 
receives on duties paid on materials used in the production of ASTM 
products differs from other materials, there is no basis to deny Saha 
Thai's duty drawback adjustment on such grounds.
    Comment 5: Petitioners and Saha Thai agree that the Department 
misread the computer data in the field OCNFRTP (ocean freight). 
Petitioners request that this error be corrected for these final 
results of review.
    Department's Position: We agree that we misread the computer data 
in the OCNFRTP field, and have corrected this error for these final 
results of review.
    Comment 6: Petitioners assert that Saha Thai incorrectly allocated 
its home market freight expenses and therefore no delivery charges 
should be deducted from the home market price. According to 
petitioners, Saha Thai's allocation methodology is flawed because it 
assumes that each sale, regardless of the delivery location, has the 
same inland freight costs. Additionally, petitioners argue that the 
methodology used to calculate freight expenses assumes that pipe and 
steel sheets have the same cost per ton for delivery. Finally, 
petitioners assert that Saha Thai has not indicated whether it delivers 
its own products or hires outside parties to deliver pipe. Petitioners 
argue that if an outside delivery service is used, there is no evidence 
on the record of the tariffs of the outside company and hence no basis 
for making the adjustment.
    Saha Thai asserts that, in its supplemental response, it provided a 
complete explanation as to why calculation of an average cost per ton 
is accurate. Additionally, Saha Thai notes that it clearly stated in 
its supplemental response that it uses an outside delivery service.
    Department's Position: Saha Thai stated in its November 15, 1993, 
supplemental response that it ``engages an outside delivery service at 
a fixed fee per truck per day, plus an overcharge when the weight 
loaded in the truck exceeds a specified maximum'' (p.6). We have 
determined that, based on the manner in which Saha Thai incurs its home 
market freight expenses, an allocation methodology based on weight is a 
reasonable calculation of Saha Thai's per-unit freight cost. Therefore, 
we have accepted Saha Thai's reported home market freight expenses for 
these final results.
    Comment 7: Petitioners contend that Saha Thai's reported home 
market packing costs have not been properly allocated. According to 
petitioners, the allocation is incorrect because it does not account 
for the different number of pieces per ton and the different number of 
tons per bundle. Petitioners argue that packing costs should be 
allocated by the number of pieces packed since each size of pipe has a 
different number of pieces per ton, requiring a different amount of 
handling, materials and overhead expenses for packing.
    Petitioners also argue that Saha Thai's packing labor allocation 
methodology fails to account for the fact that black, threaded and 
coupled pipe and all galvanized pipe for export receives plastic 
packing, while home market sales do not. As a result, petitioners 
argue, total packing labor costs are over-allocated to home market 
sales. Finally, petitioners contend that the preliminary results fail 
to account for any overhead in packing expenses.
    Saha Thai argues that its allocation of packing costs is reasonable 
and that petitioners' comments raise issues that are normally addressed 
in a deficiency questionnaire or at verification. Additionally, Saha 
Thai notes that, with the exception of wrapping each end of pipe for 
export with plastic wrap, all three kinds of pipe (export black, export 
galvanized, and domestic galvanized) receive the same type of packing.
    Department's Position: Saha Thai's methodology for calculating its 
packing expenses is consistent with the methodology verified and 
accepted by the Department in previous reviews. Furthermore, the record 
in this review does not indicate that Saha Thai's packing allocation 
methodology distorts our antidumping calculations. Therefore, we have 
accepted Saha Thai's reported packing expenses for these final results.
    Comment 8: Petitioners argue that the annual coil purchase quantity 
that Saha Thai reported in its November 15, 1993, deficiency response 
at exhibit 12A is inconsistent with the monthly coil purchase 
quantities Saha Thai reported elsewhere in its deficiency response. 

[[Page 1334]]
Because of this discrepancy, petitioners argue that the Department 
should reject Saha Thai's cost calculation, or, in the alternative, 
recalculate Saha Thai's coil costs based on the monthly purchase data.
    Saha Thai agrees that there is an error in exhibit 12A of its 
deficiency response, but argues it was a clerical error committed while 
preparing exhibit 12A and not an indication of inconsistencies in its 
accounting data. Saha Thai further argues that the error in exhibit 12A 
is easily correctable.
    Department's Position: The information on the record indicates that 
Saha Thai committed a clerical error when compiling the annual coil 
purchase amounts in exhibit 12A of its deficiency response. Therefore, 
for these final results, we have recalculated Saha Thai's annual coil 
purchase amounts using the 1992 monthly coil purchase amounts found in 
exhibit 11A of its November 13, 1993 deficiency response.
    Comment 9: Petitioners argue that the Department erred in allowing 
a credit to Saha Thai's material costs for revenue derived from the 
sale of flat bar. Petitioners argue that Saha Thai has presented no new 
information that should cause the Department to change its 
determination in the most recent administrative review of Saha Thai 
that flat bar is not a by-product of the manufacture of pipe and tube, 
but is instead a product resulting from further manufacture of steel 
scrap. See Certain Circular Welded Carbon Steel Pipes and Tubes from 
Thailand; Final Results of Antidumping Duty Administrative Review, 57 
FR 38668, 38669, (August 26, 1992). Therefore, petitioners argue, the 
Department should allow a credit only for revenue derived from the sale 
of steel scrap, and not from the sale of flat bar.
    Saha Thai acknowledges that the Department denied the flat bar 
credit in the 88-89 review, but argues that it should accept it in this 
review because flat bar qualifies as a by-product under the criteria 
articulated in Titanium Sponge from Japan, 51 FR 45495, 45496 (December 
19, 1986), Frozen Concentrated Orange Juice from Brazil, Final 
Determination of Sales at Less than Fair Value, 52 FR 8324 (March 17, 
1987), and Fall Harvested White Potatoes from Canada, Final 
Determination of Sales at Less than Fair Value, 48 FR 51660, 51673-74 
(November 10, 1983). Saha Thai argues that the Department should 
consider the fact that, during the administrative review, it was unable 
to recover its costs through its sales of flat bar. In addition, its 
sales of flat bar were minuscule in comparison to its sales of pipe.
    Finally, Saha Thai notes that it included in its submitted pipe 
costs the costs of coil used to produce flat bar. Therefore, Saha Thai 
argues, if the Department finds that flat bar is a co-product and 
declines to offset its pipe production costs for revenues realized on 
the sale of flat bar, it must remove the coil costs attributable to 
flat bar from its reported coil cost for the production of pipe and 
tube.
    Department's Position: We agree with petitioners. The Department 
determined in the 1987-88 and 1988-89 administrative reviews that flat 
bar sold by Saha Thai is properly considered a co-product, not a by-
product, of the steel pipe production process. Further, in response to 
the remand order issued by the CIT pursuant to Saha Thai Steel Pipe 
Co., Ltd. v. United States, Slip Op. 95-21 (CIT February 14, 1995), the 
Department submitted a redetermination maintaining that flat bar is 
properly considered a co-product. In that redetermination the 
Department explained that flat bar produced by Saha Thai is properly 
considered a co-product because: (1) Saha Thai accounts for flat bar as 
a separate finished product; (2) the production of flat bar is not an 
unavoidable consequence of producing the subject merchandise; (3) Saha 
Thai intentionally controls the production of flat bar and markets it 
as a separate end product; (4) significant further processing of the 
scrap is necessary for sale as flat bar, and; (5) flat bar and the 
subject merchandise are produced on separate machines. Because the 
facts in this review do not differ from the facts in the previous 
reviews, we have determined, consistent with the previous reviews, to 
treat the production of flat bar as a co-product for these final 
results. Therefore we have corrected Saha Thai's reported coil costs by 
adjusting the yield loss and by-product credit attributable to flat 
bar.
    Comment 10: Petitioners argue that the Department should not allow 
Saha Thai to deduct the weight of zinc and coupling from the weight of 
pipe when calculating coil costs. According to petitioners, the record 
demonstrates that the weight of zinc and coupling is not included in 
the reported weight of the pipe in the first place, therefore deducting 
an amount for zinc and coupling results in an understatement of the 
true amount of coil consumed in the production of galvanized or 
threaded and coupled pipe.
    According to petitioners, Saha Thai submitted a single unit weight 
for each size of pipe, without differentiation for being black plain-
end, galvanized, or coupled and threaded. Petitioners assert that this 
is because the unit weight is based on the pipe's weight at the forming 
stage when all pipe is black plain-end. According to petitioners, the 
steel consumed in producing black plain-end, galvanized, or threaded 
and coupled pipe weighs exactly the same. Therefore, petitioners 
contend, any further finishing such as galvanization and threading and 
coupling represents extra weight, above the weight of the black plain-
end pipe recorded in Saha Thai's records. Petitioners request that for 
these final results of review the Department deny Saha Thai an 
adjustment for zinc and coupling weight and base the cost of production 
(COP) and CV calculations on unadjusted coil cost data.
    Saha Thai argues that, consistent with previous administrative 
reviews, the Department should make an adjustment to coil costs for the 
weight of zinc and coupling. Saha Thai argues that its coil costs are 
computed on an actual weight basis because it purchases coil on an 
actual weight basis. Saha Thai contends that in building up the cost 
per ton on an actual weight basis, it is necessary to take account of 
the fact that a portion of an actual ton of galvanized, or coupled and 
threaded pipe is attributable to zinc coating and/or coupling. Saha 
Thai asserts that in order to identify the amount of coil in an actual 
ton of pipe it is necessary to first remove from the total actual 
weight any amounts attributable to zinc and coupling.
    Saha Thai further explains that its coupling weight adjustment is 
made entirely on a theoretical basis. According to Saha Thai, it takes 
into account the fact that in one theoretical weight ton of threaded 
and coupled pipe a portion of the ton is attributable to the weight of 
the coupling. For example, due to the weight of coupling, the standard 
theoretical weight of a two inch plain-end pipe is less than the 
standard theoretical weight of a two inch threaded and coupled pipe. 
Therefore, Saha Thai argues, the calculation of the COP must take into 
account the fact that, in one theoretical ton of threaded and coupled 
pipe, there is less than one ton of coil.
    Department's Position: We disagree with petitioners. It is 
necessary to adjust the coil costs to produce a theoretical ton of 
black, plain-end pipe when calculating the coil costs to produce a 
theoretical ton of galvanized and/or threaded and coupled pipe. This is 
because, unlike black, plain-end pipe, a portion of the weight of a ton 
of galvanized and/or threaded and coupled pipe is attributable to the 
weight of zinc and coupling. Therefore, for these final results we have 
continued to accept Saha Thai's downward adjustment to 

[[Page 1335]]
coil costs used to produce galvanized and/or threaded and coupled pipe.
    Comment 11: Petitioners argue that even if the Department 
determines that a zinc adjustment is valid, it still must deny such an 
adjustment because the methodology used by Saha Thai grossly overstates 
the weight of zinc on the pipe. According to petitioners, Saha Thai 
calculated the weight of zinc on the pipe by allocating total net zinc 
consumed over the entire surface area galvanized. Petitioners assert 
that it is clear from Saha Thai's reported zinc unit cost calculation 
that while the reported zinc consumed is net of excess zinc termed 
dross and ash, it fails to net out a significant quantity of excess 
zinc, known in the industry as coarse and fine dust. Petitioners argue 
that Saha Thai has completely ignored this substantial source of zinc 
loss and thus overstated the amount of zinc on the pipe and understated 
the claimed coil weight.
    Petitioners claim that its argument that Saha Thai's zinc weight 
claim is overstated is supported by Saha Thai's own records which 
indicate that it coats both ASTM and BS pipe with the same amount of 
zinc. Petitioners argue that it is not credible that Saha Thai would 
coat both ASTM and BS pipe with the same thickness of zinc, given the 
wide difference in the two industry standards, the high cost of zinc, 
and the fact that Saha Thai can easily control the amount of zinc on 
the pipe. Petitioners assert that comparison of zinc usage by an 
efficient domestic producer of galvanized standard pipe to Saha Thai's 
reported zinc usage demonstrates that Saha Thai's calculation of zinc 
use produces results that are clearly excessive. Petitioners assert 
that the Department should use as the best information available (BIA) 
within the meaning of section 776(c) of the Tariff Act, the standard 
weight of zinc as set by ASTM and BS product specifications.
    Saha Thai contends that petitioners' arguments are unsupported by 
the record. Saha Thai questions the usefulness of petitioners' analysis 
of a domestic producer's zinc recovery rates without evidence that the 
recovery rates experienced by the domestic producer are comparable to 
Saha Thai's experience. Saha Thai also argues that petitioners' claim 
that Saha Thai does not recover zinc dust as a by-product is 
unsupported by the record. According to Saha Thai, there is no proof 
that Saha Thai does not include zinc dust in what it calls ash. 
Finally, Saha Thai does not dispute the fact that its zinc coating 
weight exceeds the standard coating weight, and asserts that 
petitioners claims regarding the credibility of its zinc usage are more 
properly addressed through a deficiency questionnaire or at 
verification.
    Department's Position: We disagree with petitioners' argument that 
the record indicates that the methodology used by Saha Thai grossly 
overstates the weight of zinc on the pipe. The fact that Saha Thai's 
zinc recovery rates are not comparable to those of a domestic producer 
does not serve as the basis for disregarding Saha Thai's methodology 
and resorting to BIA. Furthermore, the Department verified and accepted 
the same methodology used by Saha Thai to report zinc costs in the 
1987-88 administrative review. See, Certain Circular Welded Carbon 
Steel Pipes and Tubes from Thailand; Final Results of Antidumping Duty 
Administrative Review, 56 FR 58355 (November 19, 1991). Therefore, we 
have continued to accept Saha Thai's reported zinc costs for these 
final results of review.
    Comment 12: Petitioners argue that Saha Thai improperly deducted 
the interest expenses on coil purchases from its cost of materials and 
included them in the pool of selling, general and administrative (SG&A) 
expenses. Petitioners argue that these expenses are part of the 
acquisition cost of the coil and are not a general expense of the 
company as claimed by Saha Thai.
    Petitioners claim that the Department's practice is to calculate 
the COP based on generally accepted accounting principles (GAAP) in the 
home market as long as these principles do not significantly distort 
the firm's financial position or actual costs. According to 
petitioners, the record indicates that GAAP in the home market requires 
that interest expenses on Saha Thai's coil purchases be allocated to 
the cost of manufacture (COM), not SG&A. While petitioners acknowledge 
that the Department allowed financing charges to be classified as 
general expenses in the original investigation, they argue that because 
such a finding does not comport with the practice of basing cost 
methodology on the GAAP of the home market, it must be ignored. 
Additionally, petitioners assert that the finding in the original 
investigation does not control in this case because the facts on the 
record indicate that these interest expenses are not a fungible expense 
but rather are an integral part of the coil price and thus are tied 
directly to the coil cost.
    Saha Thai asserts that because reliance on home market GAAP would 
significantly reduce its SG&A expenses and therefore distort its actual 
costs, the Department should remain consistent with the original 
investigation and allow it to classify financing costs as general 
expenses. Saha Thai argues that had it chosen to finance its purchases 
of coil through a bank or some third party the interest expenses would 
have automatically been included in SG&A. The fact that financing in 
this instance was received from a supplier does not change its 
character from interest expense into raw material costs. According to 
Saha Thai, it is still a financial cost associated with paying its 
suppliers on other than a sight basis, and as such, a general expense 
of the corporation. Saha Thai claims that petitioners' arguments fail 
to distinguish this review from the original investigation and that the 
financing is fungible in the sense that obtaining seller financing 
relieves it of the obligation to secure financing elsewhere.
    Department's Position: We disagree with petitioners. We consider 
the cost of raw materials to be the price reflected in the supplier's 
invoice for those materials. Any financing charges itemized on the 
supplier's invoice are properly regarded as interest expenses, not 
material costs. See, Oil Country Tubular Goods From Israel; Final 
Results of Antidumping Duty Administrative Review, 57 FR 1140 (April 3, 
1992). We consider the expenses Saha Thai incurs to finance its 
material purchases through its supplier to be fungible and, therefore, 
a general expense of operating the company. See, Circular Welded Carbon 
Steel Pipes and Tubes from Thailand; Final Determination of Sales at 
Less Than Fair Value, 51 FR 3384 (January 27, 1986). Therefore we have 
continued to classify Saha Thai's interest expenses as SG&A expenses 
for these final results of review.
    Comment 13: Petitioners argue that Saha Thai is not entitled to an 
adjustment to coil costs for alleged differences between actual and 
theoretical weights of pipe. Petitioners contend that if the Department 
determines that such an adjustment is appropriate, it must be 
recalculated on a product-by-product basis in order to avoid 
distortions caused by averaging.
    Petitioners argue that Saha Thai's adjustment is distorted because 
it based the actual pipe weight used in the adjustment calculation on 
the nominal invoiced thickness of the coil rather than the actual scale 
weight of the coil consumed to produce the pipe. Petitioners also argue 
that Saha Thai's application of a single average adjustment factor 
across all products should be rejected because it is clear from the 
record that: (1) Saha Thai could have provided the factor on a 

[[Page 1336]]
product-by-product basis, and (2) the difference between Saha Thai's 
reported actual and theoretical pipe weights varies greatly from 
product to product and size to size. Petitioners further contend that 
Saha Thai's methodology does not account for build-up in the wall 
thickness of the coil that occurs in the production process. Finally 
petitioners allege that many of Saha Thai's arithmetic calculations of 
actual and theoretical weights used in the adjustment calculation are 
incorrect.
    Saha Thai responds that since home market and U.S. prices are 
divided by theoretical weights and coil costs are initially calculated 
on an actual weight basis, an adjustment must be made to convert coil 
costs to a theoretical weight basis. Saha Thai argues that it 
calculated the actual weight of the coil by multiplying the thickness, 
width and length of the coil by a factor that represents the weight of 
the steel per cubic meter. Saha Thai contends that this is the standard 
method in the steel business of calculating the weight of a coil. Saha 
Thai contends that there is no evidence that it used nominal 
thicknesses as opposed to actual thicknesses in making its calculation. 
Saha Thai contends further that, even if it did use nominal 
thicknesses, there is no evidence on the record to support petitioners 
claim that such a methodology would result in variations that would 
have a meaningful effect on the calculation. Finally, Saha Thai asserts 
that the use of average variances is an accepted practice in cost 
accounting and the Department did not request that it submit more 
detailed calculations. Saha Thai contends that petitioners' request for 
a product-by-product calculation is simply aimed at increasing the 
burden on respondent.
    Department's Position: We disagree with petitioners' argument that 
Saha Thai is not entitled to a theoretical weight adjustment. Since 
Saha Thai's U.S. and home market prices are reported on a theoretical 
weight basis, it is necessary to convert Saha Thai's coil costs, which 
are initially calculated on an actual weight basis, to a theoretical 
weight basis. Furthermore, while we acknowledge that the actual 
thickness of the steel coils used in production may be different than 
the nominal thickness, within allowable tolerances, and that the 
production process may have an effect on the thickness of the pipe, 
there is no information on the record to indicate that these 
calculations necessarily understate the actual weight of the pipe, and 
thus the cost. Absent evidence that the calculation methodology 
distorts the dumping calculation, we will not disregard Saha Thai's 
approach and resort to BIA. See, Pipe and Tube from Korea. However, we 
agree with petitioners that the use of a single average adjustment 
factor across all products does not provide an accurate reflection of 
the weight variances. Therefore, for these final results, we have 
recalculated Saha Thai's reported material costs using a grade-specific 
theoretical weight adjustment (corrected for any computational errors).
    Comment 14: Petitioners argue that Saha Thai has improperly 
included value-added taxes (VAT) paid on the purchases of raw material 
inputs and variable overhead items in the calculation of SG&A. 
Petitioners argue that since such expenses are incurred directly in 
relation to production, it is clearly not an SG&A expense and should be 
included in the calculation of the cost of manufacturing.
    Petitioners also assert that Saha Thai's improper classification of 
VAT taxes also results in the Department having no accurate method to 
determine difference in merchandise adjustments from Saha Thai's 
reported variable cost information. Petitioners suggest that, if the 
Department does not reject Saha Thai's submitted cost data, it must 
increase the reported cost of manufacture and difference in merchandise 
data to account for the VAT taxes and decrease the reported SG&A 
expenses by the same amount.
    Saha Thai responds that it properly characterized VAT as an SG&A 
expense. Saha Thai explains that the net VAT it pays to the government 
is equal to the excess of the amount of VAT collected from customers 
over the amount of VAT paid to suppliers. Thus Saha Thai claims that 
the VAT is not a tax on raw materials, it is a tax on the value added 
by Saha-Thai's manufacturing operations and therefore does not belong 
in the cost of goods sold or the cost of manufacturing.
    Department's Position: We agree with Saha Thai that VAT is a tax on 
the value added by its manufacturing operations. For example, if a 
company buys materials for $100, adds value to those materials and 
sells them for $120 in a country with a VAT rate of ten percent, that 
company would pay ten dollars VAT on its material purchases and collect 
$12 VAT on its sales. The difference of $2 represents the tax on the 
value-added operations of the company. Furthermore, the company would 
be required to pay the $2 difference to the government. Due to this 
fact, there is no net VAT expense incurred as all VAT paid to the 
government is the difference between VAT payments for raw materials and 
VAT collections on sales. Therefore, no VAT has been included in the 
calculation of COP for these final results.
    Comment 15: Petitioners claim that Saha Thai should have allocated 
varnishing material costs by surface area rather than by tonnage 
produced. Petitioners claim that since the surface area per ton varies 
with the size of the pipe being varnished, only an allocation by 
surface area accurately reflects Saha Thai's varnishing material costs. 
Petitioners claim that Saha Thai has the information necessary to 
perform such an allocation and should have done so in its response.
    Saha Thai claims that it already reallocated its varnishing 
material expenses by surface area in its supplemental response. Saha 
Thai explains that while it failed to note this change in the narrative 
text, it was included in exhibit 10 of the supplemental response, the 
corresponding cost build-ups and in a subsequent letter to the 
Department dated November 24, 1993.
    Department's Position: We agree with petitioners that varnishing 
expenses should be allocated according to surface area. However, 
because Saha Thai allocated varnishing expenses in this manner in its 
supplemental response, there is no need to recalculate varnishing 
expenses for these final results.
    Comment 16: Petitioners claim that Saha Thai failed to include 
certain variable production costs on the computer tape it submitted and 
that the Department did not input the corrected values for the 
preliminary results. Petitioners argue that, because it is not the 
Department's responsibility to manually input data that should have 
been submitted by the respondent in the first place, and because there 
are numerous other deficiencies in the submitted cost data, the 
Department should reject the entire cost response and base these final 
results on BIA. At the very least, petitioners request that the 
Department correct Saha Thai's costs for these final results.
    Saha Thai acknowledges that certain costs were excluded from the 
final cost build-up submitted to the Department and notes that the 
Department was informed of this inadvertent omission in a letter filed 
shortly after its supplemental response. Saha Thai argues that, since 
it immediately offered to correct its response, and the information 
necessary to make the correction is already on the record, its cost 
response should not be rejected and the Department should input the 
corrected data for these final results. 

[[Page 1337]]

    Department's Position: We disagree with petitioners that we should 
base these final results on BIA. Because Saha Thai immediately informed 
the Department of the cost calculation error in its supplemental 
response, and correction of the error does not place an undue burden on 
the Department, we have corrected the error for these final results by 
including those costs that were originally excluded from Saha Thai's 
original cost build-up.
    Comment 17: In addition to their comments regarding the treatment 
of VAT and interest expenses on material purchases, petitioners claim 
that Saha Thai's reported SG&A expenses used in the calculation of COP 
and CV have been allocated incorrectly. According to petitioners, a 
portion of Saha Thai's reported SG&A expenses consist of expenses 
incurred only on home market sales and thus are improperly allocated 
over the cost of goods for both home market and export sales. 
Petitioners also claim that the cost of goods sold over which SG&A 
expenses are allocated should not be increased by the reverse drawback 
credit since, by definition, drawback is received only on exported 
pipe. Petitioners contend that due to the numerous deficiencies in Saha 
Thai's SG&A calculation, the Department must either reject the cost and 
CV information in its entirety or apply BIA to the SG&A calculation.
    Saha Thai claims that petitioners arguments regarding the 
calculation of SG&A are meritless. Saha Thai asserts that petitioner 
has offered no proof to support the claim that it has improperly 
allocated SG&A expenses. Additionally, Saha Thai argues that since the 
product-specific COM to which the SG&A factor is applied includes full 
import duties, it is proper to add those duties to the cost of goods 
sold (COGS) used in the denominator of the SG&A calculation. Saha Thai 
argues that the fact that duties drawn back relate to production for 
export, not for domestic consumption, is irrelevant. What is important, 
according to Saha Thai, is that the denominator used in the calculation 
of the SG&A factor corresponds to the build-up of the product COM to 
which the SG&A factor will be applied.
    Department's Position: For an explanation of our treatment of VAT 
and interest expenses in calculating COP for these final results, 
please refer to our response to Comment 14 and Comment 12 respectively. 
We disagree with petitioners assertion that Saha Thai's allocation of 
its SG&A expenses results in an understated SG&A expense factor. Saha 
Thai allocated SG&A expenses over the cost of sales to which they 
applied. Furthermore, because the COM to which the SG&A factor is 
applied is duty inclusive, it is proper, when calculating COP, to 
include such duties in the COGS.
    Comment 18: Petitioner argues that the Department should not have 
removed from the home market data base any sales for which Saha Thai 
failed to submit cost information. Petitioners argue that rather than 
remove such sales from the dumping analysis, which potentially rewards 
a respondent for failure to provide information, any matches to such 
sales should be based on BIA.
    Saha Thai acknowledges that it did not provide cost information for 
one home market sale. Saha Thai also notes that the model for which 
cost data was missing was not sold in the United States and was not 
used as FMV for any of the Department's price comparisons.
    Department's Position: We agree with petitioners and have not 
removed any sales from the home market data base for which Saha Thai 
failed to submit cost information. However, since no U.S. sales matched 
to such sales, it was not necessary to calculate a margin using BIA.
    Comment 19: Petitioners claim that a comparison of Saha Thai's 
reported profit levels on the subject merchandise under review compared 
to the profitability reported in its financial statement clearly 
indicates that Saha Thai's reported costs for subject merchandise are 
inaccurate. Petitioners claim that in a review where no verification is 
performed and the Department must base its determination solely on 
information on the record, a discrepancy of the type demonstrated by 
the petitioners' analysis should be the basis for completely rejecting 
the cost response.
    Saha Thai asserts that petitioners claims are false and that there 
are three significant problems with petitioners' analysis. According to 
Saha Thai: (1) Petitioners failed to take account of the effect of 
drawback on export profits; (2) petitioners applied the incorrect SG&A 
ratio to export sales in calculating net export profits; and (3) 
petitioners failed to deduct warranty expenses from export profits. 
Saha Thai claims that, when these corrections are made, petitioners' 
calculations yield an overall profit that is within one half of one 
percent of the net profit shown in Saha Thai's 1992 financial 
statement.
    Department's Position: We have concluded that, for the reasons 
stated in Saha Thai's comment, petitioners' analysis is flawed and Saha 
Thai's reported profit levels are comparable to the profitability 
reported in its financial statements. While it has been necessary to 
make certain corrections to Saha Thai's cost response, we disagree with 
petitioners that the record indicates discrepancies that warrant its 
complete rejection. Therefore, with the exception of corrections noted 
in these final results, we have used Saha Thai's cost response in our 
calculations.
    Comment 20: Saha Thai contends that, in cases such as this, where 
there are parallel antidumping and countervailing duty proceedings, 
USP, and thus any dumping margins, must be determined by making an 
adjustment pursuant to section 772(d)(1)(D) of the Tariff Act for 
countervailing duties imposed. Accordingly, Saha Thai argues that the 
cash deposit rate, which is based on the dumping margin of U.S. sales 
during the period of review, must also reflect the adjustment for 
countervailing duties imposed on the merchandise sold during the 
period. Saha Thai notes that the preliminary results provide for a 
prospective adjustment to the final liquidation rates by the U.S. 
Customs Service to account for countervailing duties that have yet to 
be determined. However, Saha Thai argues that there are two problems 
with the Department's proposed solution. First, Saha Thai claims that 
it will result in the establishment of an antidumping duty cash deposit 
rate that exceeds the dumping margin found on sales during the 
administrative review. Second, it improperly delegates to the U.S. 
Customs Service responsibility for calculating the final amount of the 
duty and deprives Saha Thai of the opportunity to review the final duty 
calculations for accuracy. Saha Thai argues that if the Department is 
to act in accordance with the statute it has two alternatives. The 
Department can either expedite the parallel countervailing duty review 
and link the two reviews so that their final results are published at 
the same time, or it can adjust the antidumping cash deposit rate by 
the amount of countervailing duties to offset export subsidies imposed 
in the most recent final countervailing duty administrative review.
    Petitioners respond that the statute and the Department's 
regulations provide that USP shall be increased by the amount of any 
countervailing duty imposed on the merchandise to offset an export 
subsidy (772(d)(1)(D) of the Tariff Act and 19 CFR 353.41(d)(iv)). 
Arguing that assessed and imposed are synonymous terms, petitioners 
contend that, since no countervailing duties have been assessed on the 
subject merchandise, Saha Thai is incorrect in asserting that an 
adjustment is required by the statute. Petitioners support the 

[[Page 1338]]
Department's preliminary decision to delay liquidation of entries until 
the countervailing duty review is completed and instruct the U.S. 
Customs Service to reduce antidumping duties collected by the amount of 
countervailing duties to the extent such duties are based on export 
subsidies. According to petitioners, the arithmetic task of reducing 
antidumping duties by the amount of countervailing duties is a simple 
ministerial act well within the U.S. Customs Services' authority and is 
not an improper delegation of authority that denies significant rights 
to Saha Thai.
    Department's Position: Section 772(d)(1)(D) of the Tariff Act 
authorizes the Department to make an upward adjustment to USP for ``the 
amount of any countervailing duty imposed on the merchandise* * *to 
offset an export subsidy.'' The Department has interpreted this 
language to mean that it will make an upward adjustment to USP only if 
the U.S. Customs Service has actually assessed countervailing duties on 
the U.S. sales examined in an administrative review. See, Pipe and Tube 
from Turkey; Final Results of Antidumping Administrative Review, 53 FR 
39632 (October 11, 1988). See also, Final Determination of Sales at 
Less than Fair Value: Antifriction Bearings (Other Than Tapered Roller 
Bearings) and Parts Thereof From the Federal Republic of Germany, 54 FR 
18992 (May 3, 1989). The CIT has endorsed the Department's 
interpretation. See, Serampore Industries Pvt., Ltd. v. United States, 
65 F. Supp. 1354 (1987).
    For assessment of antidumping duties on merchandise subject to this 
review, we will increase the USP by the amount of assessed 
countervailing duties attributable to the export subsidies found in the 
current countervailing duty reviews. We will calculate the potential 
uncollected dumping duties (PUDD) using this increased USP. See, 
Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts 
Thereof From France; et al.; Final Results of Antidumping Duty 
Administrative Reviews, 57 FR 28360 (June 24, 1992).
    This administrative review covers the period March 1, 1992 through 
February 28, 1993. The Department recently completed the corresponding 
countervailing duty administrative review covering the period January 
1, 1992, through December 31, 1992. See, Certain Circular Welded Carbon 
Steel Pipes and Tubes from Thailand: Final Results of Countervailing 
Duty Administrative Review, 60 FR 33791 (June 29, 1995). However, the 
countervailing duty review for the period January 1, 1993, through 
December 31, 1993, has not yet been completed. Therefore, there is not 
yet a countervailing duty assessment rate for the last two months of 
this review period (January 1, 1993, through February 28, 1993) by 
which to adjust the assessment of antidumping duties to account for 
export subsidies. However, liquidation of entries during those two 
months is suspended until the final results of the countervailing duty 
review. Therefore, we will not forward to the U.S. Customs Service 
assessment rates for entries of the subject merchandise from Thailand 
during that two month period until issuance of the final results of the 
next countervailing duty review.
    The antidumping duty cash deposit rate established in this review 
will be reduced by 0.73 percent which is Saha Thai's current 
countervailing duty cash deposit rate attributable to export subsidies. 
Upon completion of the next countervailing duty review, the antidumping 
duty cash deposit rate for Saha Thai will be adjusted by the portion of 
the countervailing duty cash deposit rate established in that review 
that is attributable to export subsidies.
    We disagree with Saha Thai that our instructions to the U.S. 
Customs Service regarding the proper assessment of antidumping duties 
and the collection of cash deposits in instances where there is a 
concurrent countervailing duty review is an improper delegation of 
authority and prevents interested parties from participating fully in 
the process. The Department's instructions to the Customs Service are 
nothing more than direction for the application of rates established in 
antidumping and countervailing duty proceedings in which Saha Thai was 
given the opportunity to fully participate. Our specific instructions 
to the U.S. Customs Service regarding the collection and assessment of 
duties reflect the decisions made by the Department pursuant to its 
statutory and regulatory authority and thus cannot be construed as an 
improper delegation of the Department's authority.
    Comment 21: Saha Thai contends that the Department should not have 
deducted inland freight expenses from the home market price it compared 
to COP to determine sales below cost. According to Saha Thai, both its 
original and supplemental questionnaire responses demonstrate that it 
included freight expenses in the calculation of the SG&A portion of the 
COP. Therefore such expenses should remain in the home market price 
used to determine sales below cost.
    Petitioners claim that Saha Thai's questionnaire responses fail to 
identify any freight expenses included in the calculation of SG&A 
expenses. Therefore, petitioners contend that the Department should 
make no adjustments for freight expenses to the home market price used 
to determine sales below cost.
    Department's Position: We agree with Saha Thai. Saha Thai's 
questionnaire response indicates that freight expenses were included in 
the reported SG&A expenses used to calculate cost of production. 
Therefore, for these final results, we have not deducted freight 
expenses from the home market price used in the test for sales below 
cost.
    Comment 22: Saha Thai suggests that, because the Department used 
fiscal-year average costs for purposes of the cost test, it should 
consider also using fiscal-year averages for the purposes of the difmer 
adjustment rather than quarterly average costs.
    Department's Position: We agree with Saha Thai and have used 
fiscal-year average cost data to adjust for differences in merchandise 
for these final results.
    Comment 23: Saha Thai argues that the Department should apply its 
test pursuant to section 773(b) of the Tariff Act to determine whether 
below cost sales were made in substantial quantities on an aggregate 
rather than a model-specific basis. Although Saha Thai notes several 
cases where the Department administered the cost test on an aggregate 
basis, Saha Thai acknowledges that in recent cases the Department has 
changed its practice and administered the cost test on a model-specific 
basis. Saha Thai argues that there are several problems with the 
Department's change in policy.
    First, Saha Thai argues that the Department failed to apply its new 
policy consistently in every case that followed the Department's use of 
a model-specific cost test in Color Television Receivers from the 
Republic of Korea; Final Results of Antidumping Duty Administrative 
Review, 55 FR 26255 (June 27, 1990).
    Second, Saha Thai argues that the test is not consistent with the 
statutory requirement that below-cost sales be ``substantial'' and made 
``over an extended period of time'' in order to be disregarded in the 
determination of FMV. According to Saha Thai, application of the cost 
test on a model-specific basis can result in disregarding below cost 
sales of certain models even when the amount of below cost sales of the 
model in question occurred during only one quarter and is minuscule in 

[[Page 1339]]
relation to all such or similar merchandise sold during the POR.
    Third, Saha Thai argues that the Department has failed to explain 
adequately its deviation from prior practice or why the model-specific 
cost test better implements the statutory mandate. According to Saha 
Thai, the fact that the Department's price-to-price comparisons focus 
on model matches is irrelevant. Saha Thai argues that because all home 
market sales are used to determine FMV, application of the cost test to 
all such sales on an aggregate basis would satisfy the requirement that 
the test be focused on sales used in determining FMV. According to Saha 
Thai, in this case nearly all models sold in the home market could be 
compared to all models sold in the United States. Accordingly, Saha 
Thai argues that it would be more appropriate to conduct the cost test 
on an aggregate basis since potential price-to-price comparisons are 
not limited to sales of specific models but rather extend to the entire 
group of such or similar merchandise.
    Petitioners argue that a December 1992 Policy Bulletin issued by 
the Department recognized that its varied approach to administering the 
cost test created an inconsistent and unpredictable practice. According 
to petitioners, the Department determined in its Policy Bulletin that 
application of the test on a model specific-basis was the better 
approach to implementing the statute. Petitioners claim that any 
subsequent final results that failed to conform to the policy bulletin 
were incorrectly issued.
    Department's Position: We disagree with Saha Thai's position that 
the cost test should be administered on an aggregate rather than model-
specific basis. As stated in our Policy Bulletin dated December 15, 
1992, Section 773(b) of the Tariff Act directs us to disregard below-
cost sales in calculating FMV. Because FMV is model-specific, employing 
a model-specific methodology is the most appropriate approach to 
determine if sales below cost were made in substantial quantities. See, 
Sweaters Wholly or in Chief Weight of Man-Made Fiber From Korea; Final 
Results of Antidumping Duty Administrative Review, 59 FR 17513 (April 
13, 1994). If we were to adopt Saha Thai's position and administer the 
cost test on an aggregate level, we would risk comparing U.S. sales to 
model-specific FMVs where all sales of the model are below cost as long 
as total home market sales below cost remained under 10 percent. The 
statute did not intend to allow for such comparisons. For these 
reasons, we have rejected using an aggregate cost test and have 
continued to test individual models for sales below cost for these 
final results.
    Comment 24: Saha Thai argues that the Department's regulations (19 
CFR 353.60), require that the official exchange rates certified by the 
Federal Reserve Bank be used in the Department's antidumping 
calculations. Saha Thai argues that the exchange rates used in the 
preliminary determination do not conform to the quarterly exchange 
rates published by the Federal Reserve Bank. Saha Thai requests that 
the Department use the Federal reserve Bank's quarterly exchange rates 
for the final results of review.
    Department's Position: Contrary to Saha Thai's assertion, we did 
use the quarterly exchange rates, certified by the Federal Reserve 
Bank, and supplied to us by the U.S. Customs Service for the 
preliminary results. Therefore, we will continue to use the same rates 
for these final results.

Final Results of Review

    Based on our analysis of the comments received, we determine that a 
margin of 18.04 percent exists for Saha Thai for the period March 1, 
1992, through February 28, 1993.
    The Department shall determine, and the U.S. Customs Service shall 
assess, antidumping duties on all appropriate entries. Individual 
differences between USP and FMV may vary from the percentage stated 
above. The Department will issue appraisement instructions directly to 
the U.S. Customs Service.
    Furthermore, the following deposit requirements will be effective 
upon publication of these final results of administrative review for 
all shipments of pipe and tube from Thailand entered, or withdrawn from 
warehouse, for consumption on or after the publication date, as 
provided by section 751(a)(1) of the Tariff Act, and will remain in 
effect until the final results of the next administrative review: (1) 
The cash deposit rate for Saha Thai will be 18.04 percent; (2) for 
previously investigated companies not named above, the cash deposit 
will continue to be the company-specific rate published for the most 
recent period; (3) if the exporter is not a firm covered in this 
review, or the original investigation, but the manufacturer is, the 
cash deposit rate will be the rate established for the most recent 
period for the manufacturer of the merchandise; and (4) the cash 
deposit rate for all other manufacturers or exporters will be the ``all 
others'' rate established in the final notice of the less-than-fair-
value (LTFV) investigation of this case, in accordance with the CIT's 
decisions in Floral Trade Council v. United States, 822 F. Supp. 766 
(CIT 1993) and Federal Mogul Corporation and Torrington Company v. 
United States, 822 F. Supp. 782 (CIT 1993). The all others rate is 
15.67 percent. These deposit requirements when imposed, shall remain in 
effect until publication of the final results of the next 
administrative review.
    This notice serves as a final reminder to importers of their 
responsibility under 19 CFR 353.26 to file a certificate regarding the 
reimbursement of antidumping duties prior to liquidation of the 
relevant entries during this review period. Failure to comply with this 
requirement could result in the Secretary's presumption that 
reimbursement of antidumping duties occurred and the subsequent 
assessment of double antidumping duties.
    This notice also serves as a reminder to parties subject to 
administrative protective order (APO) of their responsibility 
concerning the disposition of proprietary information disclosed under 
APO in accordance with 19 CFR 353.34(d). Timely written notification of 
return/destruction of APO materials or conversion to judicial 
protective order is hereby requested. Failure to comply with the 
regulations and the terms of an APO is a sanctionable violation.
    This administrative review and notice are in accordance with 
section 751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1)) and 19 CFR 
353.22(1993).

    Dated: December 14, 1995.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 96-623 Filed 1-18-96; 8:45 am]
BILLING CODE 3510-DS-P