[Federal Register Volume 62, Number 132 (Thursday, July 10, 1997)]
[Notices]
[Pages 37014-37027]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-18114]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-201-805]


Circular Welded Non-Alloy Steel Pipe and Tube From Mexico: 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 December 30, 1996, the Department of Commerce (the 
Department) published the preliminary results of its administrative 
reviews of the antidumping duty order on circular welded non-alloy 
steel pipe from Mexico covering exports of this merchandise to the 
United States by certain manufacturers. Based on our preliminary review 
of these exports during the period November 1, 1994 through October 31, 
1995, we found margins for all reviewed companies. We invited 
interested parties to comment on the preliminary results. We received 
comments and rebuttals from petitioners and from TUNA and Hylsa 
(respondents). We have now completed our final results of review and 
determine that the results have changed with respect to one respondent.

EFFECTIVE DATE: July 10, 1997.

FOR FURTHER INFORMATION CONTACT: John Drury, Robin Gray or Linda 
Ludwig, Enforcement Group III--Office 8, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, N.W., Room 7866, Washington, D.C. 
20230; telephone (202) 482-0414 (Drury), (202) 482-0196 (Gray), or 
(202) 482-3833 (Ludwig).

SUPPLEMENTARY INFORMATION:

Applicable Statute

    Unless otherwise indicated, all citations to the Tariff Act of 
1930, as amended (the Act) are references to the provisions effective 
January 1, 1995, the effective date of the amendments made to the Act 
by the Uruguay Round Agreements Act (URAA). In addition, unless 
otherwise indicated, all references to the Department's regulations are 
to Part 353 of 19 CFR (1997).

Background

    The Department published an antidumping duty order on circular 
welded non-alloy steel pipe and tube from Mexico on November 2, 1992 
(57 FR 49453). The Department published a notice of ``Opportunity to 
Request an Administrative Review'' of the antidumping duty order for 
the 1994/95 review period on November 1, 1995 (60 FR 55541). On 
November 29, 1995, respondent Hylsa S.A. de C.V. (``Hylsa'') requested 
that the Department conduct an administrative review of the antidumping 
duty order on circular welded non-alloy steel pipe and tube from 
Mexico. On November 30, 1995, respondent Tuberia Nacional S.A. de C.V. 
(``TUNA'') requested that the Department conduct an administrative 
review of this order. We initiated this review on December 8, 1995. See 
60 FR 44414 (September 15, 1995).
    Under section 751(a)(3)(A) of the Act, the Department may extend 
the deadline for completion of administrative reviews if it determines 
that it is not practicable to complete the review within the statutory 
time limit of 365 days. On July 19, 1996, the Department extended the 
time limits for preliminary and final results in this case. See 
Extension of Time Limit for Antidumping Duty Administrative Reviews, 61 
FR 40603 (August 5, 1996).
    The Department is conducting this administrative review in 
accordance with section 751 of the Act.

Scope of the Review

    The review of ``circular welded non-alloy steel pipe and tube'' 
covers products of circular cross-section, not more than 406.4 
millimeters (16 inches) in outside diameter, regardless of wall 
thickness, surface finish (black, galvanized, or painted), or end 
finish (plain end, beveled end, threaded, or threaded and coupled). 
These pipes and tubes are generally known as standard pipe, though they 
may also be called structural or mechanical tubing in certain 
applications. Standard pipes and tubes are intended for the low 
pressure conveyance of water, steam, natural gas, air and other liquids 
and gases in plumbing and heating systems, air conditioning units, 
automatic sprinkler systems, and other related uses. Standard pipe may 
also be used for light load-bearing and mechanical applications, such 
as for fence tubing, and for protection of electrical wiring, such as 
conduit shells.
    The scope is not limited to standard pipe and fence tubing, or 
those types of mechanical and structural pipe that are used in standard 
pipe applications. All carbon steel pipes and tubes within the physical 
description outlined above are included within the scope of this 
review, except line pipe, oil country tubular goods, boiler tubing, 
cold-drawn or cold-rolled mechanical tubing, pipe and tube hollows for 
redraws, finished scaffolding, and finished rigid conduit. In 
accordance with the Final Negative Determination of Scope Inquiry (56 
FR 11608, March 21, 1996), pipe certified to the API 5L line pipe 
specification, or pipe certified to both the API 5L line pipe 
specifications and the less-stringent ASTM A-53 standard pipe 
specifications, which fall within the physical parameters as outlined 
above, and entered as line pipe of a kind used for oil and gas 
pipelines, are outside of the scope of the antidumping duty order.
    Imports of these products are currently classifiable under the 
following Harmonized Tariff Schedule (HTS) subheadings: 7306.3010.00, 
7306.30.50.25, 7306.30.50.32, 7306.30.50.40, 7306.30.50.55, 
7306.30.50.85, and 7306.30.50.90. These HTS item numbers are provided 
for convenience and customs purposes. The written descriptions remain 
dispositive.

Analysis of Comments Received

    We invited interested parties to comment on our preliminary results 
of the reviews. We received both comments and rebuttals from 
petitioners, TUNA, and Hylsa. The

[[Page 37015]]

following is a summary of comments by company.

Hylsa

    Comment 1: Stating that Hylsa's responses contained numerous errors 
and unverifiable information, petitioners believe that the Department 
should base the final results on total facts available under sections 
776 and 782 of the Act. Petitioners cite numerous alleged errors and 
omissions on the part of Hylsa as support for their contention that the 
response as a whole should be rejected and the results based on facts 
available. The examples include allegations that Hylsa did not provide 
actual dates of payment and thus distorted credit costs; that it failed 
to report packing expenses in either market; that it did not properly 
report freight charges; that it did not properly match CONNUMs; that 
the Department was unable to verify advertising and warranty expenses; 
that certain sales traces contained errors; and that comparisons 
between actual and theoretical weight were distortive.
    In addition, petitioners state that the cost response and the 
information found at verification also contained numerous errors, 
specifically in the proper allocations and use of costs. The sum of the 
errors and the quality of information presented, according to 
petitioners, is sufficient for the Department to find that Hylsa failed 
to cooperate by not acting to the best of its ability to comply with 
the Department's information requests. Petitioners cite Circular Welded 
Non-Alloy Steel Pipe from South Africa, 61 FR 24271 at 24274 (May 14, 
1996) as precedent to support this course of action.
    Hylsa maintains that the verification conducted by the Department 
affirmed the overall accuracy of its responses, and that any actual 
problems can be easily remedied with minor programming changes. Hylsa 
maintains that it has cooperated to the best of its ability to comply 
with the Department's requests for information, and that the 
application of facts available is not warranted. Hylsa states that, 
even if petitioners had been able to demonstrate that Hylsa had not 
acted to the best of its ability to comply with the Department's 
information requests, section 776(b) of the Act indicates merely that 
the Department may make an adverse inference, not that it is obligated 
to do so.
    DOC Position: We agree with respondent that the final results 
should not be based on total facts available. Section 782(e) of the Act 
provides that the Department shall not decline to consider information 
that is submitted by an interested party and is necessary to the 
determination but does not meet all the applicable requirements 
established by the Department if: (1) The information is submitted by 
the deadline established for its submission; (2) the information can be 
verified; (3) the information is not so incomplete that it cannot serve 
as a reliable basis for reaching the applicable determination; (4) the 
interested party has demonstrated that it acted to the best of its 
ability in providing the information and meeting the requirements 
established by the Department with respect to the information; and (5) 
the information can be used without undue difficulties. Accordingly, in 
using the facts available, the Department may disregard information 
submitted by a respondent if any of the five criteria has not been met.
    While the Department agrees that there are errors and omissions in 
Hylsa's responses, we do not believe that the scope and impact of the 
errors in question are sufficient to warrant the application of facts 
available to the case as a whole. In Circular Welded Non-Alloy Steel 
Pipe from South Africa, 61 FR 24271 at 24274 (May 14, 1996), the 
Department noted that errors in the sales traces drew into question the 
completeness and accuracy of the respondent's remaining sales. The 
Department also noted that certain home market and U.S. sales were not 
reported, and concluded that ``[t]he misreporting and inaccuracies of 
the information were so material and pervasive as to make the responses 
unreliable within the meaning of section 782(e)(3) of the Act.'' In 
this case, the quantity and value of sales reported are not under 
contention. With appropriate corrections, the Department believes that 
Hylsa's responses are sufficiently usable for the purpose of margin 
calculations. Pursuant to sections 776(a) and 782(d) and (e) of the 
Act, the Department will use the facts otherwise available when 
necessary. The Department will address each of the comments stated by 
petitioners below.
    Comment 2: Petitioners contend that the Department should base 
Hylsa's home market credit expense on facts available. Petitioners 
believe that Hylsa has over-reported or has otherwise distorted home 
market credit expense in three different ways. First, petitioners 
contend that the calculation of a hypothetical date of payment by Hylsa 
for home market sales with multiple payment dates distorts credit 
expenses in a hyperinflationary environment. Petitioners believe that 
the methodology used by Hylsa is contrary to the Department's 
instructions and that Hylsa had the ability to report separate payment 
dates without undue burden. Second, petitioners contend that Hylsa 
erred in calculating credit expenses by including the IVA (VAT tax) in 
the base price for such calculations. In other words, Hylsa included 
the VAT tax in the total amount due to them by their customers for the 
purposes of calculating the credit expense on each transaction. 
Petitioners state that section 773 (a)(6)(B)(iii) requires that the 
Department deduct any taxes included in the price of a foreign like 
product from normal value so that the Department calculates a tax-
neutral margin. Petitioners cite the Statement of Administrative Action 
to the Uruguay Round Agreements Act (``the SAA'') (H. Doc. No. 316 
(Vol. 1), 103d Cong., 2d Sess. (1994) at 827) in support of their 
contention. Third, petitioners state that the calculation of the credit 
expense using a 360-day year for home market sales and a 365-day year 
for U.S. sales results in a similar overstatement of home market credit 
expenses. Therefore, petitioners believe that the Department should not 
deduct home market credit expenses from normal value, nor make a 
circumstance-of-sale adjustment, but should deduct corrected U.S. 
credit expenses from export price. If the Department does use Hylsa's 
reported credit expense, petitioners recommend that the Department 
correct for the existing problems by reducing the base rate on which 
credit is calculated by the IVA and by applying a credit calculation 
based on a 365-day year.
    Hylsa answers, first, that it followed the Department's 
instructions in the original questionnaire to calculate credit expense 
on a transaction-by-transaction basis, and in a supplemental 
questionnaire to calculate this expense using monthly interest rates. 
Second, Hylsa contends that since it extends credit to its customers on 
the IVA amount, it should be used in the credit calculation as the 
Department did for the preliminary results. Hylsa cites Certain Fresh 
Cut Flowers from Mexico, 56 FR 1794 at 1798 (January 17, 1991) and Shop 
Towels from Bangladesh, 57 FR 3996 at 4001 (February 3, 1992) in 
support of its position. Third, Hylsa states that it adjusted for the 
difference in the 360/365 day credit calculations for home market sales 
and that the Department verified that adjustment while examining home 
market sales traces. Therefore, in respondent's view, no changes should 
be made to the credit calculation methodology used by the Department in 
the preliminary determination.
    DOC Position: We agree in part with petitioners. Concerning the 
issue of the

[[Page 37016]]

360/365 days used to calculate credit expense, the worksheet in Exhibit 
27 indicates that Hylsa did make the adjustment so that it calculated 
credit expense in both markets using the same number of days as the 
denominator. As to the inclusion of IVA in the basis for the credit 
calculation, while we disagree with petitioners' claims that this is a 
tax neutrality issue, the Department believes that the methodology used 
by Hylsa is incorrect and should be exclusive of the IVA. Finally, the 
Department believes that the calculation of an average date of payment 
for home market sales in instances of multiple payments is distortive 
and contrary to the instructions of the Department (see discussion 
below). Therefore, the Department has used facts available for the 
credit expense as outlined below.
    Hylsa's statement that the credit expense ``reflects the 
opportunity cost when potential revenues from an immediate cash-for-
goods sale are exchanged for receipt of payment after some extended 
period'' (Hylsa's March 11 brief at 6) supports the Department's 
position on the VAT tax. The collection and payment of the IVA is not a 
revenue for the company, but for the government. The calculation of a 
credit expense for the company on what is plainly government revenue is 
inconsistent with the intent of the adjustment.
    In Certain Cut-to-Length Carbon Steel Plate from Brazil, the 
Department stated that ``[i]t is not the Department's current practice 
to impute credit expenses related to VAT payments. We find that there 
is no statutory or regulatory requirement for making the proposed 
adjustment.'' Certain Cut-to-Length Carbon Steel Plate from Brazil, 62 
FR 18486 at 18488 (April 15, 1997). See also Steel Wire Rope from 
Korea, 58 FR 11029 at 11032 (February 23, 1993).
    Concerning the reporting of a weighted-average hypothetical date of 
payment by Hylsa for certain home market sales, Hylsa has not complied 
completely with the Department's requests in this matter. The original 
questionnaire states in part that, when calculating credit expense, the 
respondent must ``[e]xplain the calculation and any other factors that 
affect net credit costs * * * `` (emphasis added). Obviously, multiple 
payments will affect net credit costs, especially in economies 
experiencing high inflation. Since the Department determined that 
Mexico experienced high inflation during the period of review, the 
proper reporting of expenses that reflect the effects of inflation is 
of paramount importance.
    Hylsa did report credit expense on a transaction-specific basis, 
and did use monthly interest rates as requested by the Department. 
However, Hylsa did not indicate that it received multiple payments 
until verification. It was also at verification that Hylsa first 
explained its methodology with regard to multiple payments. Of the 
three home market sales examined by the Department during verification, 
one of these had multiple payment dates. (See Sales Verification 
Exhibit 6.) As discovered at verification, Hylsa had the ability to 
report each separate payment and calculate a separate credit expense, 
but chose not to do so. Given that one-third of the sales traces 
examined by the Department contained multiple payments, the potential 
for distortion of credit expense using Hylsa's methodology is 
significant.
    Section 776(b) states that the Department has the authority to use 
an adverse inference in selecting from among facts otherwise available 
if an interested party has failed to cooperate by not acting to the 
best of its ability to comply with a request for information. The 
Department believes that the failure to report multiple payments, and 
the subsequent calculation of credit expense, constitutes grounds for 
the use of adverse facts available under this section. Therefore, as 
facts available, we calculated the lowest non-zero reported credit 
expense per ton by Hylsa and used this expense in all home market sales 
for purposes of calculating normal value. We have not made any 
adjustments to the credit expense calculation for U.S. sales for 
calculating export price.
    Comment 3: Petitioners state that, in accordance with the decision 
in the preliminary determination, the Department should not make an 
adjustment for a steel supplier rebate.
    DOC Position: We agree with petitioners, and have not altered our 
decision from the preliminary determination. See Circular Welded Non-
Alloy Steel Pipe from Mexico, 61 FR 68708 at 68710 (December 30, 1996).
    Comment 4: Petitioners argue that, to the extent that Hylsa acts as 
the importer of record on certain of its U.S. sales of subject 
merchandise and/or pays all duties due, the Department should presume 
reimbursement under 19 CFR 353.26 and deduct any duties paid by Hylsa 
from export price. Petitioners cite section 353.26(a) as applying 
directly to Hylsa's responsibilities for the payment of antidumping 
duties, stating that ``[w]hen Hylsa pays antidumping duties on its own 
behalf it is a producer paying the antidumping duties on behalf of the 
importer (itself) within the unambiguous meaning of 19 CFR 
353.26(a)(i). There is no requirement in the regulation that the 
importer and producer be separate entities.'' In arguing that the 
regulation should be applied to non-separate entities, petitioners 
state that ``[i]t would be ludicrous to apply the regulation where the 
producer and importer are affiliated (i.e., are related closely enough 
to be treated as a single entity for the purposes (of) calculating 
United States price) but not apply it where the producer and importer 
are a single entity in fact.'' Petitioners cite Certain Hot-Rolled Lead 
and Bismuth Carbon Steel Products from the United Kingdom, 61 FR 65022 
at 65023 (December 10, 1996) (prelim.) (``British Bar'') as 
demonstrating that where a producer/exporter and importer are the same 
entity, the Department treats them as being ``affiliated'' under the 
statutory provision on duty absorption (section 751(a)(4) of the Act). 
If a producer/exporter is deemed to be ``affiliated'' with itself for 
the purposes of duty absorption, reason petitioners, there is no reason 
why the same conclusion cannot be reached for the reimbursement 
provision.
    Petitioners contend that a requirement that the producer and 
importer be separate entities to apply section 353.26 is inconsistent 
with both the SAA and Department practice. In citing the SAA, 
petitioners concentrate on the statement that Commerce has full 
authority to increase duties ``[w]hen an exporter directly pays the 
duties due * * *,'' and state that the regulation applies as long as 
the producer pays the duties on behalf of the importer. Petitioners 
also cite Color Television Receivers from the Republic of Korea, 61 FR 
4408 at 4411 (February 6, 1996) as supporting their position. 
Petitioners further state that the provisions for duty absorption and 
duty reimbursement are separate and do not preclude the Department from 
applying section 353.26. Should the Department apply section 353.26, 
petitioners urge the Department to deduct the amount of antidumping 
duties paid from export price as required by the regulation.
    Hylsa counters that when it acts as importer of record, it does 
not, under any sense of the word, ``reimburse'' itself or pay the 
duties on behalf of another party. In addition, Hylsa states that any 
such adjustment must be made against antidumping duties assessed and 
reimbursed, rather than against cash deposits of estimated antidumping 
duties. Therefore, making any adjustment at this time would be 
improper.

[[Page 37017]]

    DOC Position: The Department closely analyzed all sales made by 
Hylsa to the U.S. during the period of review. In our analysis, we 
found that none of the sales where Hylsa acted as its own importer were 
sold at less than normal value. Therefore, the issue is moot in this 
instance.
    Comment 5: Petitioners contend that, as in the preliminary 
determination, the Department should not adjust normal value for 
additional inland freight. Petitioners believe that the methodology 
presented by Hylsa is inaccurate and distortive, given that Hylsa could 
not tie specific freight charges to certain sales, that the amount of 
total additional inland freight allocated to all home market sales was 
questionable due to the non-reporting of certain small freight charges, 
and that additional inland freight was allocated to certain home market 
sales that would not normally incur freight (e.g., pick-up by the 
customer). In addition, petitioners note that the verification report 
indicated that it was possible for Hylsa to tie specific freight 
charges to specific sales transactions. As a result, petitioners argue 
that the Department should not make an adjustment to home market sales. 
For the purposes of the cost-price comparison, petitioners believe that 
the Department should allocate a minimum amount to all sales where the 
reported freight was zero, and increase the overall value of home 
market freight by taking the percentage of such sales that had 
additional unreported freight, multiplying that by the total freight 
charges, and allocating the result over all sales. These extra charges 
should be deducted from all home market sales in the cost-price 
comparison.
    Hylsa contends that while it was possible to tie specific freight 
charges to individual sales transactions, the lack of computerized 
records of inland freight at the time of the review would have 
necessitated a level of preparation that would be unreasonable. 
Furthermore, Hylsa asserts that the allocation of additional inland 
freight charges to sales that would incur no freight can be corrected 
easily by setting the additional inland freight field to zero and 
calculating additional freight using the cost methodology advocated by 
petitioners in their case brief. Finally, Hylsa states that the 
methodology of allocating additional inland freight, using the 
corrections mentioned above, is the only reasonable method of making an 
adjustment for the freight charges incurred.
    DOC Position: We disagree with respondent in part. While the 
Department agrees that requiring Hylsa to manually tie specific freight 
charges to sales in this proceeding would be an undue burden, due to 
the lack of computer records, the problems which still exist with the 
data submitted on the record render it impossible to clarify these 
freight charges. Even if they could be corrected, there would still be 
unacceptable distortions.
    As mentioned in the verification report, Hylsa has five separate 
categories of freight charges. Additional inland freight was allocated 
over all home market sales, regardless of the category of freight 
charge. One of the freight categories is for pick-up, which would by 
definition not incur a freight charge. Therefore, the allocation of 
additional inland freight to these sales is inappropriate. We also note 
that the total additional inland freight figure to be allocated is 
incorrect, because Hylsa did not take into account certain freight 
charges for local delivery sales. While included in Hylsa's calculation 
for the total freight, these local delivery charges were not reported 
for individual sales. Therefore, the total additional inland freight 
figure (total freight incurred by Hylsa minus total freight charged to 
customer) is inaccurate. Consequently, we agree with petitioners and 
are disallowing the adjustment.
    Finally, we note that Hylsa does maintain computer records that 
would allow the company to tie freight charges to individual sales, but 
that these records are usually destroyed after a short period of time. 
The Department intends to examine this issue more closely in future 
reviews.
    Comment 6: Petitioners argue that the Department should not adjust 
normal value for either advertising or warranty expenses. Petitioners 
cite the verification report as indicating that the Department was 
unable to verify the accuracy of these expenses.
    Hylsa argues that Verification Exhibit 25 demonstrates that the 
expenses were calculated accurately and that the Department verified 
their accuracy.
    DOC Position: We agree with petitioners. Hylsa prepared 
verification Exhibit 25 and submitted it late on the last day of 
verification. As stated in the verification report, ``[t]he 
verification team sampled the calculation of advertising and warranty 
for this sale. After attempting to calculate advertising and warranty 
expenses, the company indicated that it could not reconcile the amounts 
reported for this transaction. Company officials submitted a hand-
written calculation sheet which they stated showed the correct 
calculation for these expenses.'' (Sales Verification Report, sales 
trace at 20.) The verifiers did not have sufficient time to check the 
accuracy and completeness of the worksheet. Therefore, we are 
disallowing these adjustments.
    Comment 7: Petitioners assert that the Department must adjust all 
home market sales prices and adjustments for A-500 pipe to a 
theoretical weight basis for comparison to the U.S. price. Petitioners 
point to the verification report as affirming the fact that Hylsa made 
sales of A-500 pipe in one market on a theoretical weight basis and in 
the other on an actual weight basis. Since the variance between actual 
and theoretical weight could be as much as ten percent, petitioners 
advocate a specific adjustment based on the actual size of the pipe 
sold in the home market.
    Hylsa counters that petitioners assume that all pipe sold in the 
home market is undersized, and that petitioners wish to penalize Hylsa 
for information that it does not have on actual weights. In fact, Hylsa 
states that pipe sold in the home market can be undersized or oversized 
and still be within tolerance specifications. Therefore, no adjustment 
should be made.
    DOC Position: We disagree with petitioners. Hylsa is correct in 
stating that the tolerances for A-500 pipe allow for both the under- 
and over-statement of weight on a theoretical basis. Information on the 
record is insufficient to indicate that Hylsa systematically produces 
pipe which is undersized. Consequently, we are not making any 
adjustment.
    Comment 8: Petitioners assert that the Department must use facts 
available for both U.S. and home market packing expenses. Petitioners 
note that, while Hylsa claims that it uses only three straps for 
packing a bundle of merchandise, the verification team observed 
identical merchandise with different numbers of straps per bundle. 
Petitioners also refer to Hylsa's U.S. product brochure, which 
indicates that a bundle of pipe could have between six and eight straps 
(see April 22, 1996 Section A questionnaire response, Exhibit 18). 
Finally, petitioners state that Hylsa had the ability to calculate 
actual packing costs. As facts available, petitioners advocate that the 
Department calculate one packing cost for three straps for home market 
sales, and a separate one for eight straps for U.S. sales.
    Hylsa states that it could not report a separate packing cost for 
different types of pipe. Regardless of the number of straps per bundle, 
Hylsa maintains that the costs of packing for both the home and U.S. 
markets are identical. Hylsa questions the observations of the

[[Page 37018]]

verification team, and states that the problem was not brought to the 
attention of company officials. Therefore, Hylsa maintains that there 
are a number of scenarios that could disprove the observations of the 
team. Such scenarios include the possibility that the bundles may have 
been wrapped with less than the normal number of straps while the pipes 
were still in process, or that the pipes were bundled with fewer straps 
than should have been used. Finally, Hylsa notes that the number of 
straps per bundle is eight only when the bundle in question is double-
length pipe. Since the cost of packing is the same in both markets, 
Hylsa continues to maintain that no further adjustment is necessary.
    DOC Position: We agree with petitioners in part. As noted in the 
sales verification report at 31, Hylsa stated that ``[i]n all 
instances, each bundle of pipes is supposed to have three straps. 
However, during the plant and storage facility tour, we noted that two 
bundles of identical merchandise had different types of packing. One 
bundle had three straps, while a second one had five. Company officials 
had no explanation as to why this difference existed.'' On the other 
hand, the U.S. product brochure indicates that six straps per bundle 
are used for normal lengths of pipe for ASTM A-53 and A-500 (Hylsa 
April 22 Sec. A response, Exhibit 18 at 7 and 20) (``Hylsa uses high 
strength galvanized metal straps, 1.25 in (31.8 mm) wide. Single 
Length: 6 Straps (double straps on each end and 2 single straps 
distributed at the middle)''). Eight straps are used for double 
lengths, according to the brochure. We also note that the brochure 
states that A-500 is oiled and wrapped in paper. Information on the 
record therefore indicates that the number of straps (and possibly 
other packing materials) is different depending upon the market. Since 
the number of straps is different, it is reasonable to assume that 
labor and materials costs will be greater with the greater number of 
straps. Therefore, total packing costs for each market are different.
    Section 776(b) states that the Department has the authority to use 
an adverse inference in selecting from among facts otherwise available 
if an interested party has failed to cooperate by not acting to the 
best of its ability to comply with a request for information. The 
Department believes that the failure to report packing costs for both 
markets constitutes grounds for the use of adverse facts available 
under this section. Therefore, in accordance with section 776(b) of the 
Act, the Department has examined cost verification Exhibit 19 and taken 
the total historical peso figures for all cost centers involved in 
packing, summed the total, and divided it by the total production of 
pipe and tube as derived from sales Exhibit 19. The result is a per-ton 
peso cost, which we have applied as adverse facts available to home 
market sales and doubled for U.S. market sales.
    Comment 9: Petitioners believe that the Department should make a 
circumstance-of-sale adjustment for certain differences in discounts 
between the U.S. and Mexico under 19 CFR 353.56. The differences, argue 
petitioners, are clearly attributable to the differences between the 
two markets with respect to the higher rates of interest in Mexico and 
the attendant higher cost of carrying accounts receivable.
    Hylsa states that petitioners assume that discounts are adjustments 
to a price which has already been determined, while in reality they 
determine the actual price. Hylsa cites previous Department rulings 
that categorized discounts as reductions in the prices paid by 
consumers, and not circumstances-of-sale adjustments. In particular, 
Hylsa points to Industrial Belts from Italy, 57 FR 8295 (March 9, 1992) 
to support its position.
    DOC Position: We agree with respondent, and have not made any 
circumstance-of-sale adjustments for differences in discounts. As 
Industrial Belts from Italy states, ``[c]ash discounts represent 
reductions in the price paid by the customer; they are not circumstance 
of sale adjustments.'' (57 FR 8295, Comment 3). The CIT decision in 
Mantex v United States, 841 F. Supp. 1290 at 1300 (CIT 1993) also 
supports this position: ``This Court has consistently interpreted the 
``directly related'' standard (under section 353.56(a)(1)) to require 
(an interested party) to show the item for which the claim a COS 
adjustment accounts for the differences in the prices of the sales 
under review. In other words, to be entitled to a COS adjustment, an 
(interested party) must demonstrate a `` `causal link' * * * between 
the differences in circumstances of sale and the differential between 
United States price and foreign market value''.'' Petitioners have not 
established this link.
    Comment 10: Petitioners believe that the Department should not 
compare U.S. sales to home market sales which received the co-export 
rebate, and that the Department may exclude such sales because they are 
not sold for consumption in the exporting country and/or are not made 
within the ordinary course of trade. As proof, petitioners cite the 
nature of the co-export rebate program that these sales are neither 
home market sales nor sales within the ordinary course of trade. The 
fact that the price is lower for such sales, conditioned upon export of 
a non-subject product, is evidence enough that these sales are not 
normal home market sales and should be excluded.
    Specifically, petitioners argue that the program is not a rebate at 
all, but a separate price list for customers that prove they have 
exported the transformed product to the U.S. Therefore, the co-export 
price is not ``the price at which the foreign like product is first 
sold * * * for consumption in the exporting country'' within the 
section 773(a)(1)(B)(i) of the Act. Petitioners reason that since the 
statute does not define `consumption in the exporting country, the 
Department may give that phrase meaning at its discretion within the 
antidumping law. In citing Chevron U.S.A. v. Natural Resources Defense 
Council, 467 U.S. 837, 842-43 (1984), petitioners argue that the 
meaning of ``consumption in the exporting country'' is ambiguous and 
that the Department should not apply a rigid and unchanging set of 
criteria to each and every case when deciding whether or not a product 
is ``consumed'' in the exporting country. Rather, the Department should 
examine each case and set of circumstances with the intention of 
upholding the purpose of the antidumping statute, which is to prevent 
injurious price discrimination on sales to the U.S. from foreign 
countries.
    Alternatively, petitioners argue that co-export sales were not made 
in the ordinary course of trade. In defining ordinary course of trade 
as ``the conditions and practices, which for a reasonable period of 
time prior to the exportation of subject merchandise, have been normal 
in the trade under consideration with respect to merchandise of same 
class or kind,'' petitioners assert that the normal practice for 
Hylsa's sales of standard pipe is to provide different prices for the 
same product in the foreign market based upon subsequent re-export of a 
transformed product. Petitioners further outline a set of criteria for 
consideration of whether standard pipe is outside of the ordinary 
course of trade based on the criteria that the Department used in 
Laclede Steel Co. v. United States, Slip Op. 95-144 (CIT, August 11, 
1995), 17 ITRD 2184 at 2187. That case involved sales of circular 
welded non-alloy steel pipe from Korea. Those criteria included 
differences in prices, profit, the number of customers who purchase

[[Page 37019]]

the product, the types of assurances given to these customers, the 
basis of how the merchandise is sold, whether the end-users of the 
merchandise are different from other sales, the quantity and size of 
the sales, the percentage of such sales to all sales in the home 
market, and the type of markings. According to petitioners, the co-
export rebate sales differ in price, the percentage of home market 
sales, profitability, and the number of customers. Additionally, 
petitioners propose that dual invoicing and the recording of such sales 
on the ledgers separate from other domestic sales means that the 
bookkeeping system is different for these sales.
    Finally, petitioners state that even if the Department does not 
consider these sales to be outside of the ordinary course of trade, it 
has the authority under 19 CFR Sec. 353.44(b) or (c) to exclude sales 
from consideration if their inclusion would not serve the purposes of 
the antidumping statute. It then states, without further elaboration, 
that the exclusion of co-export sales would be consistent with the 
statute in this case.
    Hylsa counters that the merchandise is clearly sold for consumption 
in the home market, and that such consumption occurs (i.e., a 
transformation of the product) prior to exportation. Hylsa also 
maintains that other aspects of the sales, such as the quality 
assurance, size of pipe, etc., are the same as other home market sales. 
Finally, Hylsa notes that this program has been in existence for some 
time and that the Department verified it during the original 
investigation without making any further adjustments. Therefore, these 
are ordinary home market sales and should be used in the calculation.
    DOC Position: The Department closely analyzed all sales made by 
Hylsa to the U.S. and in the home market during the period of review. 
In our analysis, we found that none of the co-export sales by Hylsa in 
the home market were used for the purposes of calculating normal value. 
Specifically, they did not occur in the same months as the U.S. sales 
and were not used for matching purposes. Therefore, the issue is moot 
in this instance.
    Comment 11: Petitioners state that, due to its finding that Mexico 
experienced high inflation during the period of review, the Department 
must compare U.S. sales to home market sales made in the same month.
    DOC Position: We agree with petitioners and have correspondingly 
adjusted the programming to compare U.S. sales to home market sales 
made in the same month.
    Comment 12: Petitioners note that the home market database for 
Hylsa shows certain sales that are outside of the reporting window. 
Petitioners request that the Department exclude these sales from its 
analysis.
    Hylsa notes that these are all co-export rebate sales, and that, in 
following the guidelines set forth by the Department, the first invoice 
date is reported as well as the second invoice date. Hylsa explains 
that it is for this reason that these sales appear to be outside of the 
reporting window. Hylsa argues that the actual date of sale is the 
second invoice date, which is within the reporting window; therefore 
the sales should not be excluded.
    DOC Position: We agree with respondent. The Department has 
consistently set the date of sale as the date when all terms of the 
sale are finalized. Due to the nature of the co-export rebate program, 
certain items (e.g. freight) might be modified or changed at the time 
that the second invoice is issued. Therefore, we are not excluding 
these sales on the basis of the date of the original invoice.
    Comment 13: Hylsa states that the unit prices which it reported for 
U.S. sales are net of movement charges. Therefore, respondent argues 
that the Department should not deduct these charges a second time. 
Hylsa indicates that its questionnaire response of June 24, 1996, for 
this, the third administrative review, makes plain that the unit price 
on U.S. sales listings is net of movement charges. It also points to 
documents observed at verification, which indicate that the invoice 
format breaks out the movement expenses. Hylsa provides an equation in 
its case brief which it states proves that the gross unit price is 
reported net of movement charges.
    Petitioners note that the record is unclear, but that Hylsa's 
responses strongly suggest that movement charges are included in the 
unit price. Petitioners in particular point to Hylsa's May 30, 1996 
submission as making statements in two instances that, in effect, the 
gross unit prices of the U.S. sales were not net of movement charges. 
While petitioners acknowledge that one verification exhibit seems to 
indicate that the unit price is net of movement expenses, it also 
stated that just because ``a single sale (Verification Exhibit 30) 
appears to be listed without freight charges * * *'' does not mean that 
the Department should assume that all other U.S. sales have the same 
circumstances.
    DOC Position: We reviewed Hylsa's questionnaire responses, the 
verification report and the accompanying exhibits, and both Hylsa's and 
petitioners' briefs on the issue. We can find no record of a June 24, 
1996 submission by Hylsa for this review, as it references in its March 
3, 1997 brief. There is, however, a June 24, 1996 submission for the 
first and second reviews. Furthermore, an examination of Hylsa's May 
30, 1996 submission for this review presents an unclear picture. In 
describing the gross unit price for the U.S. sales, Hylsa stated that 
the gross unit price ``[r]epresents the invoiced price to the customer 
for one meter of material.''
    At verification, the Department examined two sales by Hylsa to the 
United States. Only one of these sales shows U.S. inland freight 
charges on the invoice. As Hylsa noted in its March 3, 1997 brief, the 
gross unit price reported to the Department for this one sale is net of 
U.S. movement charges.
    For these final results, the Department will not deduct U.S. 
movement expenses for this single U.S. sale. Otherwise, the Department 
will not deviate from its methodology in the preliminary results of 
review of deducting inland freight charges from all of Hylsa's U.S. 
sales where the reported terms of sale indicated that freight was 
included in the price paid by the customer. This methodology is 
consistent with Hylsa's statements on the record that the gross unit 
price is the priced for one meter of pipe invoiced to the customer, and 
with the terms of sale reported to the Department.
    Comment 14: Petitioners argue that, since Hylsa did not report 
packing costs for either market, and U.S. packing costs are 
significantly different from those in the home market, the Department 
should assign additional packing costs to constructed value on a facts 
available basis. Barring the assignment of additional packing costs, 
petitioners maintain that the Department should base the entire 
constructed value figures on facts available. As previously stated, 
petitioners rely in part on the observations of the verification team 
as written in the verification report and on Hylsa's product brochure 
to note that the difference between packing costs in the U.S. and home 
market could be as great as 8/3 (eight straps used for bundling as 
opposed to three). Petitioners also assert that Hylsa was able to 
calculate packing costs, but chose not to do so. Finally, petitioners 
state that all sales that must be compared to constructed value should 
receive the original investigation rate as facts available.
    Hylsa asserts, first, that it was not possible to calculate packing 
for each individual product. Second, Hylsa states

[[Page 37020]]

that the Department's verification team did not raise the issue of 
apparently identical merchandise with different straps and that it was 
thus unable to substantiate whether the bundles in question were indeed 
the same merchandise or in the same stage of production. Regardless, 
Hylsa states that only the total aggregate cost of packing is important 
to them and that there is no difference between the packing methods 
used for identical merchandise sold in both markets. In addition, Hylsa 
states that its brochure indicates that eight straps are used only for 
bundles of double-length pipe. Finally, Hylsa states that the 
Department can calculate normal value by using packed home-market 
prices to compare to a packed U.S. price since the two packing costs 
are identical.
    DOC Position: We agree with petitioners. As partial adverse facts 
available, we have calculated an average per-ton cost of packing in the 
home market (as discussed in comment 8 above) and doubled it in the 
U.S. market for the purposes of calculating both normal value and 
export price. Rather than having no packing cost for the U.S., we have 
included a figure that is twice that of the calculated packing cost in 
the home market. For Cost of Production (``COP'') and Constructed Value 
(``CV''), since the cost of packing is already incorporated indirectly 
into the RCOM and CVCOP figures, we have not added additional packing 
to the TOTCOM but have added half of the PACKU costs to CV to reflect 
the doubling of packing costs in the United States.
    Comment 15: Petitioners state that, since Hylsa did not report all 
freight costs, or assign the freight costs properly when it had the 
means to do so, the Department should base the entire cost-price 
comparison on facts available and assume that all home market sales 
were made at less than the cost of production. Barring this action, 
petitioners believe that the Department should assign a minimum freight 
cost to certain home market sales and increase the overall freight 
charges by the percentage of home market sales with additional 
unreported freight and deduct this from all home market sales.
    Hylsa maintains that while it is able to assign freight accurately 
on a transaction-specific basis, to do so would be labor intensive and 
would not be a reasonable reporting option. In addition, Hylsa believes 
that ``minor'' adjustments by the Department to the reported additional 
inland freight charges will correct many of the extant problems.
    DOC Position: As stated above, we agree with petitioners in part. 
While we agree with Hylsa that assigning additional inland freight 
accurately on a transaction-specific basis would be an undue burden for 
this review, we believe that the reporting of all inland freight is 
distortive for the reasons cited in comment 5 above. As noted in the 
sales verification report (at 19), Hylsa had the ability to accurately 
report certain types of freight unrelated to the additional inland 
freight. In particular, the company did not report freight charges for 
local delivery. Therefore, as adverse facts available, we are 
increasing the movement expenses deducted from home market sales in the 
cost/price comparison by a minimum freight charge where the reported 
freight charge was zero for local delivery sales.
    Comment 16: Petitioners argue that respondent's cost and 
constructed values should be rejected as not properly capturing 
accurate costs for the period. Petitioners cite a number of alleged 
problems in support of their argument. First, petitioners state that 
Hylsa did not calculate monthly costs of production properly. Rather 
than calculating the costs based on the cost of iron ore through to the 
finished pipe production, which petitioners believe is the proper 
method of calculating said costs, petitioners allege that Hylsa used 
the cost of coil transferred from the flat-rolled division and built 
its cost calculation from that point. Petitioners note that this does 
not represent a fully loaded monthly cost of production.
    Second, petitioners maintain that the adjustments to the monthly 
cost of the flat coil products were based on average annual data, 
rather than monthly replacement costs, and thus result in a mis-
allocation of costs. Third, petitioners argue that Hylsa did not 
correctly calculate the costs for iron ore purchased from affiliated 
suppliers. Petitioners cite a loss made by one supplier in one month of 
1995 and the effects of inflation.
    Fourth, petitioners argue that Hylsa did not include scrap costs in 
raw materials but rather in overhead. Petitioners assert that this 
means that the coil cost adjustments in Appendix D-10 of the November 
5, 1996 submission are not being applied to a fully yielded material 
cost. Fifth, petitioners note that all costs were based on a single 
average monthly coil cost (for all characteristics and grades of coil), 
which, the petitioners assert, means Hylsa's cost are distorted since 
thinner coil used for thinner pipe costs more than thicker coil for 
thicker pipe.
    Sixth, petitioners maintain that the flat products division 
allocated all indirect costs in 1995 based on budgeted direct costs for 
that year. Petitioners note that budgeted costs for 1995 were based on 
the actual costs for 1994. Petitioners point out that actual direct 
costs for 1995 were available at the time Hylsa submitted its section D 
response. Petitioners maintain that Hylsa should have allocated 
indirect steelmaking and rolling costs using its actual direct costs 
for 1995, and that the failure to use these figures distorts the 
reported costs, but it is impossible to determine how much.
    Finally, petitioners believe that the allocation of product-
specific costs in the tubular products division by tonnage, rather than 
by processing time or some other manner that acknowledges the extra 
time needed to produce small diameter pipe, distorts the tube 
processing costs. The sum of these errors and omissions, according to 
petitioners, materially distorts the reported costs of production and 
constructed value figures to the point that it renders them unusable 
for the final results. Therefore, the Department should assign to Hylsa 
the margin from the original investigation.
    Respondent counters by stating that, contrary to petitioners' 
claims, Hylsa began its calculation with the Flat Product division's 
actual costs of manufacturing steel coil in each month. The 
calculation, according to Hylsa, was based on the actual amounts paid 
by the Flat Products division for raw materials inputs in the current 
month, as well as actual fabrication costs incurred in the month. 
Respondent notes that G&A and exchange gains and losses on purchases 
were added to get a fully loaded cost of manufacturing for coil for the 
month. Once this cost is transferred to the tubular products division, 
respondent notes that it is used as the basis for calculating the 
reported cost of materials for pipe production, as well as to determine 
the scrap loss at each production stage. In summary, the respondent 
asserts that the calculation is based on all actual costs incurred by 
Hylsa starting with raw materials purchased from outside suppliers.
    Respondent also counters that the costs of a raw material supplied 
by an affiliate have been properly calculated. Respondent notes that 
one affiliated iron ore supplier was profitable throughout the period 
and for all of 1995. Respondent notes that there was a loss in only one 
month and that the loss was not due to unrealistically low transfer 
prices but an unscheduled disruption of production. Respondent goes on 
to point out that the suppliers unit costs were 50 percent above 
average during that month, since fixed costs were allocated over a 
small quantity. Respondent argues that the

[[Page 37021]]

Department has held that fixed costs should be calculated in a manner 
to avoid disruption of production quantities. The respondent cites Gray 
Portland Cement and Clinker from Mexico, 58 FR 47253 at 47256 
(September 8, 1993) and Gray Portland Cement and Clinker from Japan, 56 
FR 12156 at 12165 (March 22, 1991). Respondent argues that the 
Department should examine whether the affiliate recovered its costs 
over an extended period of time rather than base the affiliates 
profitability on one distortive month. Since the affiliate earned a 
profit on eleven of the twelve months in the POR and for the year as a 
whole, respondent argues that there is no reason to disregard the 
transfer prices reported by Hylsa.
    Respondent also states that it properly calculated the scrap cost 
based on actual cost of steel coil obtained from the flat products 
division. Respondent notes that it calculated the scrap loss amount for 
each process by applying the percentage scrap loss rate to the adjusted 
steel coil costs. The result is ``fully yielded materials costs.'' The 
fully yielded cost of actual material was reported in direct materials 
costs, the respondent notes, while the fully yielded cost of materials 
lost during production was included in the overhead costs of the 
appropriate process and allocated to products as they passed through 
the production process.
    Finally, respondent states that it used the normal accounting 
system and normal cost calculations for both the Tubular (regarding 
allocation based on tonnage rather than time) and Flat Rolled 
(regarding differentiation of coil costs by size of coil and allocation 
of certain overhead costs by standard percentages) divisions in 
calculating its reported costs. Respondent refers to section 773(f)(1) 
of the Act as evidence that the statute generally directs the 
Department to use a company's normal cost accounting system, and to 
Erasable Programmable Read-Only Memories from Japan, 51 FR 39680, 39688 
(October 30, 1986) as evidence that the Department is generally 
reluctant to deviate from a company's normal system.
    Respondent argues that it in no way hid or mis-described the 
methodologies used in its normal cost calculations. In closing, 
respondent notes that its normal accounting system does not result in 
the amount of distortion that petitioners suggest. Respondent notes its 
product-specific cost calculation does allocate overhead based on 
tonnage; however, the pipe sizes in each process are limited. 
Respondent argues that Hylsa does not assign the same pipe forming 
costs to all sizes of pipe. Respondent contends that each forming mill 
is a separate process and each handles a limited range of pipe sizes.
    DOC Position: We disagree with petitioners that Hylsa's COP and CV 
should be rejected. We address each of petitioners comments below.
    We found that Hylsa did report the actual cost of manufacturing 
coil by the flat products division and not the transfer price. It 
adjusted the cost of coil manufacturing by the flat product division's 
exchange loss, its G&A, and another loss adjustment from a related 
supplier, since these items were not included in the flat product 
division's COM.
    Second, while the above-mentioned exchange loss and G&A adjustments 
to COM for coil were based on annual rather than monthly data, the data 
were taken from constant currency financial statements. G&A is a period 
expense, so using an entire year eliminates seasonal fluctuations. 
Moreover, the respondent's use of constant currency financial 
statements in determining the G&A expense ratio neutralizes the effects 
of inflation in the calculation.
    Regarding the adjustments for loss by an iron ore producing 
affiliate, we asked the respondent to report the higher of the transfer 
price, market price or cost for all major inputs obtained from 
affiliated parties (including iron ore). The respondent used transfer 
price with one adjustment for loss. The loss adjustment was based on a 
constant currency financial statement, which takes into account the 
effects of inflation. The respondent noted that another supplier's loss 
in one month was caused by an unscheduled disruption.
    We have asked for monthly reporting in this case to account for the 
effects of inflation. We have taken reported conversion costs and 
indexed them to the end of the period, weight-averaged them, and then 
indexed the average unit cost for each product back to the month in 
question. This approach accounts for inflation and smooths out the 
conversion costs over the reporting period. We therefore have allowed 
Hylsa to apply the same approach to the loss adjustment by the 
affiliated supplier. Since the constant currency financial statements 
indicate no loss for the year, we are not making an adjustment.
    With respect to the issue of scrap cost accounting, the scrap used 
as input to the coil manufacturing process would be reported in direct 
materials. The scrap yield costs (less related revenue) were reported 
in variable overhead. The scrap yield percentage at the first stage was 
divided by cumulative yield and multiplied by the adjusted input coil 
costs (direct materials costs). The result was reported in variable 
overhead.
    Regarding the accounting for various costs, it is the Department's 
practice to calculate costs based on the records of the producer if 
such records are kept in accordance with the GAAP of the producing 
country and reasonably reflect the costs associated with the production 
of the merchandise. See New Minivans from Japan, 57 FR 21937, Comment 
21 (``The Department typically allows individual respondent companies 
to report the production costs of subject merchandise as valued under 
their normal accounting methods and following GAAP of their home 
country.'') At verification, the Department verified Hylsa's cost 
methodology and, based on the information on the record, found that it 
was in accordance with Mexican GAAP.
    We found at verification that Hylsa's pipe and tube division keeps 
in its records one cost for hot-rolled coil. Hylsa's flat product 
division's reported costs were based on its accounting system. 
Therefore, the allocation of indirect costs is based on Hylsa's books 
kept in the normal course of business. Regarding allocation of product-
specific costs on the basis of tonnage rather than time, based on the 
information on the record, we found that Hylsa's methodology was in 
again accordance with Mexican GAAP. In all three cases, we found no 
evidence that this methodology materially distorts the production costs 
for sales during this period of review. However, we intend to continue 
to examine these issues closely in future reviews.
    The respondent also used surface area to allocate zinc costs. Once 
again, the Department normally calculates costs based on the records of 
the producer if such records are kept in accordance with the GAAP of 
the producing country and reasonably reflect the costs associated with 
the production of the merchandise.
    For the above-mentioned reasons, the Department agrees with 
respondent and has used the submitted cost of production figures
    Comment 17: Petitioners argue that the Department should reject 
Hylsa's COP/CV response as unverified. Petitioners state that at the 
outset of verification Hylsa submitted a revised cost database that 
allegedly corrected errors. Petitioners note that this database did not 
correct an error in production quantities identified by the Department 
at verification. Petitioners state that the Department could not

[[Page 37022]]

verify the first database, after which Hylsa submitted another database 
which also corrected other un-described minor errors. Petitioners argue 
that it is the Department's policy not to accept ``substantially new'' 
information at verification. Petitioners cite as precedent Circular 
Welded Carbon Steel Pipes and Tubes from Thailand, 51 FR 3384, 3386 
(January 27, 1986). Petitioner note that the Department's regulations 
state that new factual information will not be accepted more than 180 
days after the initiation of the review. Petitioners assert that the 
Department should therefore base the final results on facts available.
    Respondent counters that its errors were not intentional and do not 
call into question the integrity of Hylsa's response. Respondent notes 
that the product specific cost calculation, used to calculate 
individual pipe product costs, was not operational during 1995 because 
of a change in Hylsa's accounting system. Respondent asserts that to 
report costs to the Department Hylsa had to convert the product 
specific cost calculation to work with new accounting numbers on the 
new system, in place of old accounting numbers, and that this matching 
process took a lot of effort. Respondent notes that for a variety of 
reasons Hylsa was unable to completely check all account conversions 
before verification. Respondent goes on to note that some minor 
mistakes were discovered and promptly brought to the Department's 
attention. The respondent further argues that in the end it was able to 
provide corrected cost calculations. Respondent cites Ferrosilicon from 
Brazil, 59 FR 732, 736 (January 6, 1994) as precedent for accepting 
corrections to errors ``as long as those errors are minor and do not 
exhibit a pattern of systematic misstatement of fact.''
    DOC Position: We disagree with petitioners that Hylsa's cost 
response should be rejected as unverified. The practice of the 
Department is to accept minor corrections at the start of verification. 
When we received the first revised database at the outset of 
verification, Hylsa noted that it contained all minor error corrections 
which were due mainly to the account number conversion as cited by 
respondent above.
    The Department accepted a revised database (fixing the first and 
second set of minor errors, as well as the production quantity error) 
from the respondent, since the first and second set of errors were 
minor in nature and the production quantity error appeared to be 
inadvertent. In Ferrosilicon from Brazil, the Department found that the 
respondents mistakes found during the course of the investigation, when 
taken as a whole, did not support a claim of respondent's non-
cooperation. The Department also stated in that case that it followed 
its practice of correcting errors found at verification as long as 
those errors are minor and do not exhibit a pattern of systemic 
misstatement of fact. Therefore in the present case, we are continuing 
to use Hylsa's revised cost database.
    Comment 18: Petitioners assert that Hylsa misreported G&A expenses 
by reporting the G&A only for the Tubular Products division rather than 
the company as a whole. Petitioners cite to the Cost Verification 
report at 2 and 36-37. The petitioners note that Hylsa did this even 
though Hylsa claims that for coil cost reporting purposes the Tubular 
and Flat Product divisions are not separate entities. Petitioners argue 
that it is the Department's policy to use the G&A for the entire 
operating entity. Petitioners believe that G&A has thus been 
misreported, and asserts that if the Department does not base the final 
results on facts available, it should adjust G&A costs based on the 
reported unconsolidated G&A for Hylsa and corporate charges from the 
parent companies.
    Hylsa counters that it reported G&A expenses on a ``layered'' 
calculation that allocated G&A expenses for each company and division 
over the sales to which those G&A expenses related. Hylsa argues that 
petitioners' argument mis-describes Hylsa's G&A calculation and is also 
contrary to the Department's established practice.
    Hylsa states that there may have been some confusion due to the 
fact that the allocated G&A expenses of the Flat Products division were 
not included in the G&A expenses reported in the original cost 
submission. However, Hylsa states that the G&A expenses related to the 
Flat Products division were included in the cost of the coil produced 
and subsequently included into the Tubular Products division's cost of 
materials. Furthermore, Hylsa states that the Department has never held 
that G&A expenses at all levels of a corporation should be lumped 
together and allocated over the total cost of goods sold.
    Hylsa asserts that the Department has routinely adopted a layered 
approach in the past that allocates G&A expenses at each corporate 
level over the cost of goods sold at the same level, citing Flat Panel 
Displays from Japan, 56 FR 32376, 32398-99 (July 16, 1991) as an 
example. Therefore, Hylsa argues that there is no basis for rejecting 
the G&A calculation.
    DOC Position: We agree with petitioners that an adjustment to 
Hylsa's G&A is necessary. In the preliminary results of this review, we 
calculated an adjusted G&A as follows: Hylsa's unconsolidated G&A less 
corporate charges from Hylsa's parents, divided by Hylsa's 
unconsolidated cost of goods sold; plus a portion of the two parent 
companies' G&A (as calculated by Hylsa). We allowed the deduction of 
corporate charges from Hylsa's G&A since we were separately including a 
portion of each parent's G&A into the calculation. The Department's 
questionnaire stated that G&A expenses relate to the activities of the 
company as a whole rather than to the production process alone. It also 
stated that Hylsa should include an amount for administrative services 
performed on the company's behalf by its parent company. For these 
reasons, we are continuing to make the adjustment, as describe above, 
that we made in the preliminary results of this review.
    Comment 19: Petitioners argue that Hylsa did not report costs for 
adding lead to the galvanizing pot and for amortized costs of replacing 
the pot. Therefore, the petitioners assert that an appropriate 
adjustment to the reported galvanizing costs in COP and CV is 
necessary.
    DOC Position: We agree with petitioners that respondent did not 
include these costs. In the preliminary results of this review, we made 
an adjustment to variable overhead in COP and CV to account for these 
costs. We have continued to make this adjustment in this final 
determination.
    Comment 20: Petitioners maintain that the Department must adjust 
the July 1995 costs for capitalized fixed costs for Plant 2. 
Specifically, petitioners believe that Hylsa did not include any fixed 
costs for this plant due to it being in a start-up period. Therefore, 
the Department should substitute fixed costs for a period at the end of 
the start-up period in accordance with section 773(f)(1)(C)(iii) of the 
Act. Otherwise, July 1995 costs are understated.
    Hylsa responds that it reported the July 1995 costs according to 
its normal accounting practices and Mexican GAAP. Under the statute, 
the Department is required to use the costs as recorded in a 
respondent's normal accounting records. Since Hylsa reported the costs 
using its normal accounting records, there should be no adjustment. 
Finally, Hylsa argues that the revision advocated by petitioners would 
have an ``insignificant'' effect upon the Department's calculation.
    However, should the Department decide to apply December 1995 costs 
to

[[Page 37023]]

the July coils, Hylsa believes that the Department should restate the 
nominal December costs to eliminate the effects of inflation.
    DOC Position: We agree with petitioners. It is the Department's 
practice to calculate costs based on the records of the producer if 
such records are kept in accordance with the GAAP of the producing 
country and reasonably reflect the costs associated with the production 
of the merchandise. In this case, the costs to produce the merchandise 
for July are not fully reflected in reported costs, since no fixed 
costs are reported for plant #2 in July. After a further review of 
verification exhibits, we have found that products were also sourced 
from plant #2 in other months as well and no fixed costs were reported 
for those months either. The first month for which fixed costs are 
reported by Hylsa is in December.
    While this practice appears to conform with Mexican GAAP, we 
determine that it does not reasonably reflect the costs associated with 
production of the subject merchandise. Since this is the only 
information we have as to the fixed costs of plant #2, we have used the 
December unit fixed costs as a surrogate for July and other months for 
which no fixed costs were reported. Even if the effect of this 
adjustment is insignificant as respondent argues, we are still making 
the adjustment to ensure that all costs are reasonably reflected. In 
agreement with respondent, we have indexed these costs back to each 
applicable month by the CPI, which is used in other indexing throughout 
this review. The increase in unit coil costs in each month was then 
further yielded by the flat products division's exchange loss and G&A 
and the further loss adjustment made by Hylsa. The total increase in 
coil costs after other yields was added to the reported cost of 
manufacturing.

TUNA

    Comment 21: As with Hylsa, petitioners argue that the Department 
should presume reimbursement on the part of TUNA to Acerotex, since the 
two parties are affiliated and TUNA apparently exercises control over 
the operations of Acerotex. Additionally, petitioners state that 
Acerotex has virtually no other function in U.S. sales other than to 
post the cash deposit for estimated antidumping duties. In return for 
this function, Acerotex receives a commission that is far less than the 
amount of cash deposits posted. Because mechanisms for reimbursement 
exist and the fact that TUNA can exercise control over Acerotex (and 
thus manipulate prices in such away that the result would be 
circumvention) petitioners argue that the Department should collapse 
the two entities into one for the purposes of reimbursement analysis 
and presume reimbursement. Petitioners cite Color Television Receivers 
from the Republic of Korea, 61 FR 4408 at 4411 (February 6, 1996) in 
support of their contention.
    TUNA states that the Department did a thorough examination of 
Acerotex's books and found no evidence of reimbursement or an agreement 
to reimburse. TUNA further states that presuming reimbursement based on 
affiliation or what might happen in the future is improper as a matter 
of law. In addressing Korean TVs, TUNA states that the citation does 
not support petitioners' position but in fact supports its contention 
that the Department cannot presume reimbursement.
    DOC Position: We agree with respondent. Section 353.26 of the 
Department's regulations requires the Department to deduct from United 
States price (now EP or CEP) the amount of any antidumping duty paid, 
or reimbursed, by the producer or exporter, thereby increasing the 
amount of the duty ultimately collected. 19 CFR 353.26(a) (1996). The 
Department has interpreted this regulation as applying regardless of 
whether the importer is affiliated to the producer or exporter.
    As the Department stated in Korean TVs, however, ``[t]his does not 
imply that foreign exporters automatically will be assumed to have 
reimbursed related U.S. importers for antidumping duties by virtue of 
the relationship between them.'' 61 FR at 4411. The regulation requires 
``evidence beyond mere allegation that the foreign manufacturer either 
paid the antidumping duty on behalf of the U.S. importer, or reimbursed 
the U.S. importer for its payment of the antidumping duty.'' Federal-
Mogul Corp., 918 F. Supp. at 393 (citing Torrington Co. v. United 
States, 881 F. Supp. 622, 631 (CIT 1995)).
    In the present review, we found no evidence of inappropriate 
financial intermingling between TUNA and Acerotex. The Department 
verified that Acerotex is responsible for all cash deposits. 
Petitioners are correct that Acerotex had established a general ledger 
provision in its accounting records with respect to antidumping duties. 
However, we found no evidence that this account was in any way related 
to reimbursement of these duties.
    In Korean TVs, the Department specifically stated that it would not 
presume reimbursement between affiliated parties absent a clear and 
irrefutable reimbursement agreement between them. The Department found 
neither evidence of an agreement between TUNA and Acerotex for 
reimbursement of antidumping duties, nor the actual reimbursement of 
these duties between the two affiliated parties. Collapsing the two 
companies together for the purposes of reimbursement, as petitioners 
advocate, would be contrary to past practice. While the Department does 
sometimes ``collapse'' affiliated parties for purposes of the margin 
calculation, the Department has consistently treated such parties as 
separate entities when examining the question of reimbursement. 
Consequently, we are not presuming reimbursement.
    Comment 22: Petitioners state that the Department must compare U.S. 
sales to home market sales made in the same month, due to the effects 
of high inflation.
    TUNA states that, should the Department index for sales that are 
not within the same month, it should use the index used in indexing 
costs and also index the VCOM used to calculate the DIFFMER adjustment.
    DOC Position: We agree with petitioners, and have adjusted the 
programming accordingly. See also Comment 11. Because we matched each 
U.S. sale to home market sales in the same month, all VCOM and DIFFMER 
figures properly reflect costs for that month. Therefore, we are not 
making any further adjustment.
    Comment 23: Petitioners state that the Department should reaffirm 
its preliminary determination and not grant a level-of-trade 
adjustment. Petitioners state that the Department was correct in 
finding that there was not a ``consistent'' price differential between 
home market sales at different levels of trade. While there may have 
been differences, they varied greatly from month to month and did not 
indicate a consistent pattern of price differentials over the entire 
POR, even adjusting for inflation.
    TUNA argues that petitioners are incorrect and that information in 
its case brief demonstrates that there is in fact a consistent price 
difference based on different levels of trade.
    DOC Position: We agree with petitioners. While we found that two 
distinct levels of trade exist, our analysis does not show a pattern of 
consistent price differences between the two levels. In fact, the 
differences fluctuate greatly from month to month. Therefore, we are 
not changing our position from the preliminary results of review.
    Comment 24: Petitioners argue that the Department's position in the

[[Page 37024]]

preliminary determination of excluding home market sales with missing 
or negative values from consideration was incorrect. Instead, 
petitioners argue that such sales should be based on facts available. 
Petitioners believe that the verification of TUNA uncovered numerous 
small errors and omissions, which in their totality compel the use of 
facts available.
    TUNA responds that the Department's treatment of home market sales 
with missing or negative values is consistent with past practice and 
reasonable. Therefore, no changes should be made. TUNA notes that the 
sales disregarded are those with zero values in the QTYH and GRSUPRH 
fields, and that the total number of sales under consideration is 
seven; an extremely small number in comparison to the entire home 
market data set. Finally, of the seven with missing values, TUNA notes 
that none of these was used in the calculation of normal value. 
Therefore, petitioners' statement that it was impossible to state what 
prejudicial effect these sales would have is incorrect.
    DOC Position: We agree with respondent. While the Department did 
discover small errors and omissions during verification, most of these 
were corrected easily and do not merit, in our opinion, the use of 
facts available (except as otherwise noted). Finally, the seven sales 
in question were not used in the calculation of normal value since they 
did not match in the month of a U.S. sale and thus have no impact on 
the margin. Therefore, this issue is moot.
    Comment 25: TUNA contends that the Department erred in conducting a 
sales-below-cost investigation. The basis for this error, according to 
TUNA, is that petitioners' request was untimely. TUNA takes issue with 
the Department's August 7, 1996 decision memorandum regarding the 
initiation of this cost investigation, particularly with the 
Department's decision that TUNA's initial section A, B and C responses 
were both untimely and incomplete and therefore the 120-day deadline 
for filing a below-cost allegation did not apply (19 CFR 353.31(c)(1)). 
TUNA contends that its responses were timely and complete, and that 
they were filed prior to the allegation of sales below cost. Finally, 
TUNA states that petitioners failed to preserve their right to submit a 
cost allegation by failing to submit an extension request prior to the 
expiration of the 120-day deadline.
    Petitioners claim that the Department properly initiated a sales-
below-cost investigation. First, petitioners state that the cost 
investigation has already proven the validity of the initial 
allegation. Second, petitioners state that portions of the filing made 
by TUNA occurred subsequent to the expiration of the 120-day deadline. 
Using TUNA's logic, petitioners claim, any respondent that delays its 
filing until after the expiration of the 120-day time limit is immune 
from a below-cost investigation.
    DOC Position: We agree with petitioners that its allegation was not 
untimely. As stated in our cost initiation memorandum of August 8, 
``[w]ith respect to the respondent's claim that petitioners'' 
allegation was untimely filed, we note that TUNA's questionnaire 
response was not received until after the 120-day deadline for COP 
allegations set out by 19 CFR 353.31(c)(ii).'' The Department's 
established practice in such situations is to use its discretion in 
determining what constitutes a reasonable time limit for making a sales 
below cost allegation. See Certain Forged Steel Crankshafts From the 
United Kingdom, 60 FR 52150 at 52153 (Oct. 5, 1995). See also 
Memorandum from Linda Ludwig to Richard Weible, August 8, 1996 at 3). 
Therefore, the cost investigation was properly initiated.
    Comment 26: TUNA asserts that the Department erred in disregarding 
certain below-cost sales without first determining whether all costs 
were recovered ``within a reasonable period of time.'' TUNA states that 
the margin program used by the Department had no test for determining 
recovery of costs, and that the Department should include program 
language that will perform the test and account for inflationary 
effects.
    Petitioners state that the Department properly applied the test in 
the margin calculation program, and has already accounted for the 
effects of inflation by having monthly historical costs indexed to 
December, summed, averaged, then indexed back by month.
    DOC Position: We disagree with respondent. As we stated in our 
preliminary results, ``[w]here 20 percent or more of a respondent's 
sales of a given product during the POR were at prices less than the 
COP, we found that sales of that model were made in `substantial 
quantities' within an extended period of time, in accordance with 
sections 773(b)(2) (B) and (C) of the Act, and were not at prices which 
would permit recovery of all costs within a reasonable period of time, 
in accordance with section 773(b)(1)(B) of the Act.''
    Section 773(b)(2)(D), cited by TUNA in its case brief, states the 
following: ``Recovery of costs.--If prices which are below the per unit 
cost of production at the time of sale are above the weighted average 
per unit cost of production for the period of investigation or review, 
such prices shall be considered to provide for recovery of costs within 
a reasonable period of time.'' This section therefore defines 
``reasonable period of time'' as outlined in section 773(b)(1)(B) as 
being the period of review or investigation.
    In a non-inflationary economy, the Department calculates a single 
weight-average cost of production per product for the entire POR. By 
inference, any sales which are below the per unit cost of production at 
the time of sale would remain below the weighted average per unit cost 
of production for the POR, since the cost of production would not 
change over the POR. The only time that the cost of production might 
change within the same POR is in cases where a respondent has provided 
multiple costs of production per product within a single POR. In such 
instances, sales below the per unit cost of production for one reported 
cost period might be above the average per unit costs for the entire 
POR.
    In this case, TUNA did report multiple per unit costs for the same 
product. Specifically, in accordance with instructions from the 
Department, TUNA reported monthly per unit costs for each product due 
to the effects of high inflation. However, as noted by petitioners, the 
Department did index each of these per unit costs for inflation and 
then calculated a weight-average, per unit cost for the POR as it would 
normally do in a non-inflationary review. Therefore, the Department has 
already compared individual home market sales to a weighted average 
cost for the entire POR. Thus, as explained above, we have performed a 
recovery of cost test which takes into account the effects of 
inflation. For these reasons, no further test is necessary.
    Comment 27: Petitioners state that the COP and CV in the final 
results should be based on facts available, saying that problems found 
at verification render TUNA's cost and CV data unusable. Petitioners 
note that TUNA allocated finishing line costs on the basis of weight, 
since TUNA claimed that finishing takes the same time regardless of the 
diameter for each pipe, since each has the same length. Petitioners 
argue that this proposition is wrong. The petitioners assert that while 
each individual pipe may have the same length, pipe of different 
diameters have different total lengths per ton and a different number 
of pieces per ton. Therefore, the petitioners assert that smaller 
diameter pipe will require more finishing time and expense. Petitioners 
argue that despite the fact that the

[[Page 37025]]

Department found all costs are being absorbed on a macro basis, those 
costs are being allocated inaccurately in a way that benefits TUNA and 
prejudices an accurate dumping margin calculation. The petitioners note 
the same problem exists for threading line expenses. The petitioners 
argue that TUNA originally claimed that it allocated these costs by 
time, but now states that such an allocation is not possible because 
time is not recorded by diameter. Petitioners assert that TUNA could 
have allocated threading time over the total number of pieces threaded, 
which would have provided a more accurate allocation than weight. 
Petitioners further state that varnishing line allocations were also 
based on weight and suffer the same defect as threading and finishing 
allocations. The petitioners argue that the amount of time it takes to 
varnish a particular type of pipe depends on either the number of 
pieces varnished or the surface area of the pipe, further arguing that 
an allocation based on number of pieces varnished would be the most 
accurate.
    Petitioners further assert that TUNA rounded zinc consumption, 
which may have caused an under-or over-allocation of galvanizing costs. 
In addition, petitioners note that when the Department found that it 
could not reconcile TUNA's reported packing costs with those in the 
sales response, TUNA revised the cost exhibit to match the figures in 
the sales response. The petitioners argue that TUNA incorrectly based 
its packing labor on historical rather than indexed replacement costs. 
Also, petitioners argue that TUNA indexed coil prices using the 
consumer price index rather than the wholesale price index. Petitioners 
assert that since wholesale prices were growing faster than consumer 
prices during the period, the use of the consumer price index tends to 
understate the indexed monthly costs. The petitioners argue that the 
Department generally prefers the wholesale or producer price indices 
for costs other than labor costs. The petitioners assert that if the 
Department does not base the final results on the facts available, it 
should re-index costs using the wholesale price index.
    The petitioners assert that these problems are not insignificant 
and seriously prejudice the calculation of COP and CV. The petitioners 
argue that the Department should determine that the necessary 
information is not on the record and that COP and CV could not be 
completely verified as a result, and therefore the petitioners further 
assert that the Department should base its final results on facts 
available pursuant to sections 776(a) and 782(e) of the Act.
    TUNA asserts that, except for a few minor errors, the Department 
verified the accuracy of the reported information. TUNA states that use 
of weight-based allocations of fabrication expenses is reasonable and 
has been used by the Department in the past. TUNA cites Certain Welded 
Stainless Steel Pipes from Taiwan, 57 FR 53705 (November 12, 1992), in 
which, TUNA notes, the Department allocated direct labor and factory 
overhead costs based on the relative weight of each pipe. TUNA asserts 
that the Department concluded that allocating fabrication expenses 
equally over production tonnage was a reasonable allocation base 
because these costs are primarily a function of tonnage, not steel type 
or size. TUNA further notes that in its final determination in Pipe 
from Taiwan, the Department stated that such an allocation did not 
materially affect the cost calculation because labor and factory 
overhead represented a small part of the total cost of production. TUNA 
also cites Welded Stainless Steel Pipe from Malaysia, 59 FR 4023 at 
4026-27 (January 28, 1994), in which the Department determined that 
allocation of processing costs was reasonable. TUNA argues that the 
Department's conclusion in past proceedings that a weight-based 
allocation is reasonable applies equally in this review. TUNA notes 
that the cases cited are also for welded pipe. TUNA also notes that the 
costs involved represent a small part of both the total processing 
costs and total cost of production.
    Furthermore, TUNA argues that there is no evidence that the use of 
weight-based allocations is distortive. TUNA further notes that its 
methodology is used in its normal course of business. TUNA argues that 
the unsupported theory that allocating fabrication expenses might be 
distortive does not provide a legitimate basis for rejecting its 
methodology. TUNA cites The Timken Company v. United States, 809 F. 
Supp. 121, 124 (CIT 1992), in which the court rejected petitioner's 
argument that respondent's allocation methodology should be rejected 
because petitioner offered no evidence to show that Koyo's information 
was unreliable, nor had petitioners offered any data more probative 
than Koyo's. In addition TUNA notes that the fact that there might be 
other equally valid ways to allocate fabrication expenses does not 
provide a legitimate basis for rejecting TUNA's verified response. TUNA 
also asserts that the Court of International Trade has stated that 
allocation is necessarily an inexact science and is simply a way to 
estimate costs incurred by the firm to manufacture the product. Such 
costs vary even among firms in the same industry (Floral Trade Council 
v. United States, 822 F. Supp. 766, 722 (CIT 1993)).
    Concerning zinc, TUNA maintains that any distortion created by the 
rounding of its zinc consumption is immaterial. TUNA notes that there 
is no evidence to conclude that consumption was systematically rounded 
up or down and that rounding caused any inaccuracy. TUNA argues that 
even in the worst case scenario the effect on materials costs per 
metric ton would be negligible.
    TUNA argues that petitioners misinterpret the verification of its 
packing expenses. TUNA asserts that it based its packing costs on 
historical costs after conferring with the Department. As to the 
inflation indices, TUNA states that the index used is the same as that 
used under Mexican GAAP to prepare annual financial statements and the 
same as it uses in the ordinary course of business. In addition, TUNA 
asserts that petitioners have no evidence that its index is inaccurate.
    DOC Position: We disagree with the petitioners' contention that the 
methodologies used by TUNA to prepare its COP/CV responses warrant 
wholesale rejection of those responses and the use of facts available. 
Section 776(a)(1) of the Act states that if necessary information is 
not available on the record, the Department ``[s]hall, subject to 
section 782(d), use the facts otherwise available in reaching the 
applicable determination under this title.''
    We conducted numerous tests, described in our cost verification 
report, which supported the overall reasonableness of the reported 
data. Since TUNA's reported costs are in general reliable, we find that 
the application of total facts available is not warranted. Below, we 
discuss each of the points raised by petitioners as enumerated above.
    Regarding the allocation of finishing line, threading line, and 
varnishing line costs on the basis of weight, we agree with respondent. 
In this instance, the costs at issue represent only a small portion of 
the total production cost of the subject merchandise. Thus, there is no 
evidence on the record of this review that would suggest that TUNA's 
normal allocation method would materially distort costs in this review 
period. Moreover, the Department's December 17, 1996, cost verification 
report indicates that adequate records of time by diameter were not 
kept by TUNA for threading and varnishing and, therefore,

[[Page 37026]]

it was not possible for the company to allocate costs in the manner 
suggested by petitioners. Accordingly, we find TUNA's allocation 
methodology is reasonable in light of the specific circumstances of 
this case.
    With regard to zinc consumption, we agree with respondent. Even if 
the zinc consumption was overestimated as petitioner contends, the 
effect on the company's total zinc material costs would be negligible.
    With regard to the packing labor being reported on a historical 
basis, we disagree with petitioners. For purposes of cost, the packing 
labor is deducted from other costs and reported separately in a packing 
field. When this deduction is made, the other conversion costs are on a 
historical basis (reported in the currency value of the month in which 
they are incurred); therefore, the packing labor must also be on a 
historical basis for a proper deduction.
    Finally, regarding the use of the consumer price index for indexing 
coil costs, we agree with respondent. We found that TUNA uses the 
consumer price index in its normal course of business and it is 
required by Mexican GAAP to prepare constant currency financial 
statements. As such, the consumer price index has been used throughout 
the response for materials costs, conversion costs, G&A, and interest. 
We do not find it unreasonable to use the index accepted by Mexican 
GAAP to index costs in this case.
    Comment 28: Petitioners state that the Department should adjust 
July 1995 materials cost for a credit that did not relate to raw 
materials purchases, as it did in the preliminary determination.
    DOC Position: We agree with petitioners and have continued to make 
the adjustment that we made in the preliminary results of this review.
    Comment 29: Petitioners note that TUNA amortized major maintenance 
and shutdown costs over the remainder of the year and that, at 
verification, TUNA provided a reallocation of those costs to months in 
which they were incurred. The petitioners urge that the Department use 
reallocated costs if it relies on TUNA's submitted costs for the final 
results.
    DOC Position: We agree with petitioners. TUNA submitted a revised 
cost database (containing the reallocated major maintenance and 
shutdown costs to the months in which they were incurred) after 
verification and before the preliminary results. We used the 
reallocated costs in our preliminary results of review and have 
continued to use them in this final results of review.
    Comment 30: Petitioners state that the Department should base G&A 
on TUNA's G&A, rather than the rate for all group companies. The 
petitioners note that for the preliminary results, the Department 
calculated a revised G&A percentage, and petitioners assert the 
Department should apply this rate in the final results as well.
    DOC position: We agree with petitioners and, as in the preliminary 
results of this review, have continued to use the revised G&A (for TUNA 
only) percentage.
    Comment 31: Petitioners assert that TUNA recorded all foreign 
exchange rate gains and losses as part of financing costs and was 
unable to differentiate foreign exchange gains and losses on raw 
materials purchases from other types of foreign exchange gains and 
losses. Therefore, petitioners state that all exchange rate gains and 
losses should be excluded from the calculation of interest expense.
    TUNA contends that it properly accounted for exchange rate gains 
and losses in the interest expense calculation. TUNA points to the cost 
verification report as affirming that it had excluded gains or losses 
relating to receivables from the interest expense calculation, citing 
cost verification Exhibit 37 as illustrating how gains and losses 
relating to carrying receivables were excluded from the calculation. 
TUNA notes that it removed from the total net interest expense the 
gain/loss in monetary position and on foreign exchange related to 
accounts receivable. TUNA concludes that petitioners have apparently 
misinterpreted the line item ``exchange (gain) loss customers'' as 
representing all foreign exchange gains and losses, not just those 
associated with receivables. TUNA notes that petitioners' argument is 
therefore based on erroneous analysis and should be disregarded.
    DOC Position: We disagree with petitioners that all exchange rate 
gains and losses should be excluded from the calculation of interest 
expense.
    It is the Department's normal practice to distinguish between 
exchange gains and losses from sales transactions and exchange gains 
and losses from purchase transactions. Accordingly the Department does 
not include exchange gains and losses on accounts receivable. 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, e.g., Small Diameter Circular Seamless Carbon and Alloy Standard, 
Line and Pressure Pipe from Italy, 60 FR 31981 at 31991 (June 19, 
1995). Also, it is the Department's normal practice that foreign 
exchange gains and losses on the purchase of raw materials used in 
production of subject merchandise relate directly to the acquisition of 
input materials and should be included in the cost of manufacture. See, 
e.g., Silicomanganese from Venezuela, 59 FR 55436 (November 7, 1994).
    In the present case, TUNA has excluded from reported costs exchange 
gains/losses related to customers, i.e. those related to accounts 
receivable or sales transactions. It included exchange gains/losses 
related to purchase of raw materials as part of interest expense rather 
than cost of manufacturing, because it does not distinguish between 
exchange gains and losses on raw materials and exchange gains and 
losses on other payables in its normal course of business. Since the 
company did not include exchange gains and losses on accounts 
receivable / sales in its reported costs and since it cannot 
distinguish exchange gains and losses related to raw materials from 
those related to other payables, we have made no adjustment to 
respondent's interest expense calculation.
    Comment 32: Petitioners state that since all of TUNA's costs appear 
to be presented on a theoretical weight basis, the Department should 
not make an adjustment to reported costs for differences between actual 
and theoretical weight. The petitioners note that TUNA could not state 
definitely whether the reported costs were based on actual or 
theoretical weights, finally settling on claiming that it had reported 
costs on an actual weight basis and presented a conversion factor. The 
petitioners note that TUNA did not document its conclusion with 
records. The petitioners assert that the record reveals costs were 
allocated on a theoretical weight basis. The petitioners note that 
while the unit costs were based on actual costs of acquisition, 
allocations were based on nominal dimensions of the pipe produced. 
Therefore, the petitioners assert such allocation is based on 
theoretical weight.
    DOC Position: We agree with petitioners. While unit costs were 
based on actual costs of acquisition, allocations were often made on 
nominal dimensions of the pipe produced. Therefore, we have not made 
any adjustment.

[[Page 37027]]

Final Results of the Review

    As a result of this review, we determine that the following 
weighted-average dumping margins exist:

             Circular Welded Non-Alloy Steel Pipes and Tubes            
------------------------------------------------------------------------
                                                              Weighted- 
               Producer/manufacturer/exporter                  average  
                                                                margin  
------------------------------------------------------------------------
Hylsa......................................................         2.99
TUNA.......................................................         1.77
------------------------------------------------------------------------

    The Department shall determine, and the Customs Service shall 
assess, antidumping duties on all appropriate entries. Individual 
differences between United States price and foreign market value may 
vary from the percentages stated above. The Department will issue 
appraisement instructions directly to the Customs Service. Furthermore, 
the following deposit requirements will be effective upon publication 
of this notice of final results of review for all shipments of circular 
welded carbon steel pipe from Mexico entered, or withdrawn from 
warehouse, for consumption on or after the publication date, as 
provided for by section 751(a)(1) of the Act: (1) The cash deposit 
rates for the reviewed company will be the rate for that firm as stated 
above; (2) for previously reviewed or investigated companies not listed 
above, the cash deposit rate 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 less than fair value 
(LTFV) 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) if neither the exporter nor 
the manufacturer is a firm covered in this review, the cash rate will 
be 36.00 percent. This is the ``all others'' rate from the LTFV 
investigation. 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 Sec. 353.26 of the Department's regulations 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 Sec. 353.34(d) of the Department's regulations. 
Timely 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 Sec. 
751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and Sec. 353.22.

    Dated: June 30, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-18114 Filed 7-9-97; 8:45 am]
BILLING CODE 3510-DS-P