[Federal Register Volume 63, Number 52 (Wednesday, March 18, 1998)]
[Notices]
[Pages 13217-13227]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-7017]
[[Page 13217]]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-428-820]
Small Diameter Circular Seamless Carbon and Alloy Steel Standard,
Line and Pressure Pipe From Germany: Final Results of Antidumping Duty
Administrative Review
AGENCY: Import Administration, International Trade Administration,
Commerce.
ACTION: Notice of final results of antidumping duty administrative
review.
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SUMMARY: On September 9, 1997, the Department of Commerce (``the
Department'') published the preliminary results of its 1995-96
administrative review of the antidumping duty order on Small Diameter
Circular Seamless Carbon and Alloy Steel Standard, Line and Pressure
Pipe From Germany (62 FR 47446). This review covers one manufacturer/
exporter of the subject merchandise, Mannesmannroehren-Werke AG
(``MRW''), and Mannesmann Pipe & Steel Corporation (``MPS'')
(collectively ``Mannesmann''), for the period January 27, 1995 through
July 31, 1996.
EFFECTIVE DATE: March 18, 1998.
FOR FURTHER INFORMATION CONTACT: Nancy Decker or Hollie Mance, Office
of AD/CVD Enforcement, Group III, Import Administration, International
Trade Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, NW, Washington, D.C. 20230; telephone (202) 482-
0196 or 482-0195, respectively.
SUPPLEMENTARY INFORMATION:
Background
On September 9, 1997, the Department published in the Federal
Register the preliminary results of the 1995-96 review (62 FR 47446) of
the antidumping duty order on Small Diameter Circular Seamless Carbon
and Alloy Steel Standard, Line and Pressure Pipe From Germany (60 FR
39704; August 3, 1995).
Under section 751(a)(3)(A) of the Tariff Act of 1930, as amended
(``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
December 31, 1997, the Department extended the time limits for the
final results in this case. See Extension of Time Limit for Antidumping
Duty Administrative Reviews (62 FR 68258). The Department has now
completed this administrative review in accordance with section 751 of
the Act.
Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute are
references to the provisions effective January 1, 1995, the effective
date of the amendments made to the Tariff Act of 1930 by the Uruguay
Round Agreements Act (``URAA''). In addition, unless otherwise
indicated, all references to the Department's regulations are to 19 CFR
Part 353 (April 1, 1997).
Scope of the Order
The scope of this review includes small diameter seamless carbon
and alloy standard, line and pressure pipes (``seamless pipes'')
produced to the American Society for Testing and Materials (``ASTM'')
standards A-335, A-106, A-53, and American Petroleum Institute
(``API'') standard API 5L specifications and meeting the physical
parameters described below, regardless of application. The scope of
this review also includes all products used in standard, line, or
pressure pipe applications and meeting the physical parameters below,
regardless of specification.
For purposes of this review, seamless pipes are seamless carbon and
alloy (other than stainless) steel pipes, of circular cross-section,
not more than 114.3 mm (4.5 inches) in outside diameter, regardless of
wall thickness, manufacturing process (hot-finished or cold-drawn), end
finish (plain end, beveled end, upset end, threaded, or threaded and
coupled), or surface finish. These pipes are commonly known as standard
pipe, line pipe, or pressure pipe, depending upon the application. They
may also be used in structural applications. Pipes produced in non-
standard wall thicknesses are commonly referred to as tubes.
The seamless pipes subject to this review are currently
classifiable under subheadings 7304.10.10.20, 7304.10.50.20,
7304.31.60.50, 7304.39.00.16, 7304.39.00.20, 7304.39.00.24,
7304.39.00.28, 7304.39.00.32, 7304.51.50.05, 7304.51.50.60,
7304.59.60.00, 7304.59.80.10, 7304.59.80.15, 7304.59.80.20, and
7304.59.80.25 of the Harmonized Tariff Schedule of the United States
(``HTSUS'').
The following information further defines the scope of this review,
which covers pipes meeting the physical parameters described above:
Specifications, Characteristics and Uses: Seamless pressure pipes
are intended for the conveyance of water, steam, petrochemicals,
chemicals, oil products, natural gas, and other liquids and gasses in
industrial piping systems. They may carry these substances at elevated
pressures and temperatures and may be subject to the application of
external heat. Seamless carbon steel pressure pipe meeting the ASTM
standard A-106 may be used in temperatures of up to 1000 degrees
Fahrenheit, at various American Society of Mechanical Engineers
(``ASME'') code stress levels. Alloy pipes made to ASTM standard A-335
must be used if temperatures and stress levels exceed those allowed for
A-106 and the ASME codes. Seamless pressure pipes sold in the United
States are commonly produced to the ASTM A-106 standard.
Seamless standard pipes are most commonly produced to the ASTM A-53
specification and generally are not intended for high temperature
service. They are intended for the low temperature and pressure
conveyance of water, steam, natural gas, air and other liquids and
gasses in plumbing and heating systems, air conditioning units,
automatic sprinkler systems, and other related uses. Standard pipes
(depending on type and code) may carry liquids at elevated temperatures
but must not exceed relevant ASME code requirements.
Seamless line pipes are intended for the conveyance of oil and
natural gas or other fluids in pipe lines. Seamless line pipes are
produced to the API 5L specification.
Seamless pipes are commonly produced and certified to meet ASTM A-
106, ASTM A-53 and API 5L specifications. Such triple certification of
pipes is common because all pipes meeting the stringent ASTM A-106
specification necessarily meet the API 5L and ASTM A-53 specifications.
Pipes meeting the API 5L specification necessarily meet the ASTM A-53
specification. However, pipes meeting the A-53 or API 5L specifications
do not necessarily meet the A-106 specification. To avoid maintaining
separate production runs and separate inventories, manufacturers
triple-certify the pipes. Since distributors sell the vast majority of
this product, they can thereby maintain a single inventory to service
all customers.
The primary application of ASTM A-106 pressure pipes and triple-
certified pipes is in pressure piping systems by refineries,
petrochemical plants and chemical plants. Other applications are in
power generation plants (electrical-fossil fuel or nuclear), and in
some oil field uses (on shore and off shore) such as for separator
lines, gathering lines
[[Page 13218]]
and metering runs. A minor application of this product is for use as
oil and gas distribution lines for commercial applications. These
applications constitute the majority of the market for the subject
seamless pipes. However, A-106 pipes may be used in some boiler
applications.
The scope of this review includes all seamless pipe meeting the
physical parameters described above and produced to one of the
specifications listed above, regardless of application, and whether or
not also certified to a non-covered specification. Standard, line and
pressure applications and the above-listed specifications are defining
characteristics of the scope of this review. Therefore, seamless pipes
meeting the physical description above, but not produced to the ASTM A-
335, ASTM A-106, ASTM A-53, or API 5L standards shall be covered if
used in a standard, line or pressure application.
For example, there are certain other ASTM specifications of pipe
which, because of overlapping characteristics, could potentially be
used in A-106 applications. These specifications generally include A-
162, A-192, A-210, A-333, and A-524. When such pipes are used in a
standard, line or pressure pipe application, such products are covered
by the scope of this review.
Specifically excluded from this review are boiler tubing and
mechanical tubing, if such products are not produced to ASTM A-335,
ASTM A-106, ASTM A-53 or API 5L specifications and are not used in
standard, line or pressure applications. In addition, finished and
unfinished oil country tubular goods (``OCTG'') are excluded from the
scope of this review, if covered by the scope of another antidumping
duty order from the same country. If not covered by such an OCTG order,
finished and unfinished OCTG are included in this scope when used in
standard, line or pressure applications. Finally, also excluded from
this review are redraw hollows for cold-drawing when used in the
production of cold-drawn pipe or tube.
Although the HTSUS subheadings are provided for convenience and
customs purposes, our written description of the scope of this review
is dispositive.
Fair Value Comparisons
On January 8, 1998, the Court of Appeals for the Federal Circuit
issued a decision in CEMEX v. United States, 1998 U.S. App. LEXIS 163.
In that case, based on the pre-URAA version of the Act, the Court ruled
that the Department may not resort immediately to constructed value
(``CV'') as the basis for foreign market value (now normal value, or
``NV'') when the Department finds home market sales of the identical or
most similar merchandise to be outside the ``ordinary course of
trade.'' This issue was not raised by any party in this proceeding.
However, the URAA amended the definition of sales outside the ordinary
course of trade to include sales below cost. See Section 771(15) of the
Act. Consequently, the Department has reconsidered its practice in
accordance with this court decision and has determined that it would be
inappropriate to resort directly to CV as the basis for NV where the
Department finds foreign market sales of merchandise identical or most
similar to that sold in the United States to be outside the ordinary
course of trade. Instead, the Department will use other sales of
similar merchandise to compare to the U.S. sales if such sales exist.
The Department will use CV as the basis for NV only when there are no
above-cost sales that are otherwise suitable for comparison.
Accordingly, in this proceeding, when making comparisons in accordance
with section 771(16) of the Act, we considered all home market sales of
the foreign like product that were in the ordinary course of trade for
purposes of determining appropriate product comparisons to U.S. sales.
Where there were no sales of identical merchandise in the home market
made in the ordinary course of trade to compare to U.S. sales, we
compared U.S. sales to sales of the most similar foreign like product
made in the ordinary course of trade, based on the characteristics
listed in Sections B and C of our antidumping questionnaire. Thus, we
have implemented the Court's decision in CEMEX to the extent that the
data on the record permitted.
Analysis of Comments Received
We gave interested parties an opportunity to comment on the
preliminary results of review. The Department received briefs and
rebuttal briefs from petitioner, Gulf States Tube Division of Quanex
Corporation, and the respondent in this case, Mannesmann. At the
request of petitioner, we held a hearing on November 6, 1997. Based on
our analysis of the issues discussed in these briefs, we have changed
these final results of review from those published in our preliminary
results.
Comment 1
Mannesmann maintains that the Department improperly invoked the
special rule for major inputs in section 773(f)(3) of the Act when it
ignored Mannesmann's verified billet costs in calculating the company's
cost of production (``COP''). Mannesmann objects to the Department's
revaluation of major inputs based on one purchase of billets from an
unaffiliated supplier. According to Mannesmann, the Department should
have treated the production of billets by Huttenwerke Krupp Mannesmann
GmbH (``HKM''), an affiliate, as integrated with Mannesmann's
production of seamless pipe. At the hearing as well as at verification,
Mannesmann asserted that HKM is not, in fact, an affiliate in the
traditional sense of the word, but that it is run as a cost center.
Mannesmann points out that the Department conducted a separate
verification of HKM, and that the Department confirmed that HKM sold
billets to two MRW plants, Mannesmannrohr (``MWR'') and
Mannesmannrohren-Werke Sachsen GmbH (``MWS''), at cost, and that the
affiliate had reported accurate and complete cost data.
Mannesmann contends that the Department has no legal basis for
disregarding reported costs and instead applying the major input rule.
Mannesmann argues that this provision has no relevance when the
Department has verified COP data. Mannesmann argues that the Court of
International Trade (``CIT'') has held that, when costs of production
have been provided, ``this part of the statute is inapplicable'' (SKF
USA Inc. and SKF GmbH v. United States, 888 F. Supp. 152, 156 (CIT
1995)). Mannesmann argues that costs are merely being passed along, and
that HKM operates as though it were a division of Mannesmann.
Therefore, according to Mannesmann, section 773(f)(3) of the Act does
not apply. Mannesmann maintains that the purpose of the major input
provision is to allow the Department to use the ``the best available
evidence as to * * * costs of production if the Department has
reasonable grounds to believe or suspect that the transfer price of an
input is less than the cost of producing it.'' In this instance,
Mannesmann holds that the rule has no application if the best available
evidence as to the cost of producing the billets is the verified actual
cost of the affiliate. Mannesmann states that sections 773(f)(2) and
(3) provide that the Department may only disregard ``transfer price''
transactions if, based on the information considered, the transfer
prices do not reflect a fair price. Mannesmann notes that the CIT has
stated that this provision permits Commerce ``to use best evidence
available when it has reasonable grounds to suspect below cost sales''
of a major input have occurred (NSK Ltd. v. United States, 910 F. Supp.
663, 670 (CIT 1995)). Mannesmann further notes
[[Page 13219]]
that the CIT upheld the Department's application of the major input
rule in NSK because NSK failed to provide COP data, and that had NSK
provided cost data, that data would have been the best evidence
available.
According to Mannesmann, the Department had no reasonable basis for
applying an across-the-board percentage price increase on all billets
based on one exceptional purchase of a steel grade that was not sold in
the United States and would not, in any event, be utilized in the
calculation of NV.
Moreover, Mannesmann states that its representatives explained at
verification that MWR and MWS only purchased from unaffiliated
suppliers on occasions when the related party did not produce a
specific grade or purity of steel or when a small volume was ordered.
Mannesmann claims it must go to unaffiliated parties in these instances
and purchase it at a higher price. Therefore, Mannesmann claims that no
adjustment to billet costs is warranted. However, if the Department
makes any adjustments for billet costs, Mannesmann asserts that the
adjustment should be less punitive. Mannesmann maintains that such an
adjustment could only be applied to the relevant steel grade billet,
conforming to SPEC2H 61 and 62, that was sold to Mannesmann by both
affiliated and unaffiliated suppliers. At the hearing, Mannesmann also
proposed a third alternative which it claimed was the most adverse
methodology that could reasonably be applied to this situation.
Mannesmann suggested applying the same adjustment made in the
preliminary results to the billets purchased from unaffiliated parties.
Petitioner argues that the statute plainly allows the Department to
disregard transactions between affiliated parties (1) for any element
of cost for which the transaction price between the parties ``does not
fairly reflect'' the normal market prices under section 773(f)(2) and
(2) where it has reasonable grounds to believe or suspect that a
``major input'' has been provided at less than the COP under section
773(f)(3).
Petitioner states that Mannesmann's citations to NSK and SKF are
misplaced. According to petitioner, NSK dealt with the question of
whether the Department could require a respondent to provide cost
information, not for the proposition that the Department must rely on
cost information to the exclusion of market value information (see NSK,
910 F. Supp. at 669). Petitioner states that in SKF, the court merely
upheld the Department's discretion to apply the COP of the major input
and, contrary to Mannesmann's characterization, did not find that the
Department must apply the COP rather than the transfer price or market
value.
Further, petitioner states that the Department's calculation of
market value was supported by substantial evidence on the record and
supported by law. According to petitioner's reasoning, the Department
sought information ``as to what the amount would have been if the
transaction had occurred between parties who were not affiliated.''
Further, the only information on the record available to the Department
about what the market value would have been if bought from an
unaffiliated producer was a single purchase of billets. This price
difference was used as an adjustment factor for the billets purchased
from the affiliated producer in the preliminary results. Petitioner
states that the Department has discretionary authority to determine the
best evidence available as to market value in a manner that is not
inconsistent with the statute, citing Chevron USA, Inc. v. Natural
Resources Defense Counsil, 467 U.S. 837, 842-43 (1984). Petitioner also
cites Daewoo Elec. Co. v. Int'l Union of Elec., Technical, Salaried and
Mach. Workers, 6 F.3d 1511, 1516 (Fed. Cir. 1993), which petitioner
claims indicates that considerable weight is accorded to the
Department's construction of the statute. According to petitioner,
Commerce's choice of methodology will be upheld absent a showing by
Mannesmann that the methodology was unreasonable. Petitioner claims
that nothing in the record indicates that the chosen methodology was
unreasonable.
Petitioner refutes each of Mannesmann's three arguments as to why
the choice of methodology was unreasonable. First, petitioner states
that to base the adjustment upon a small volume purchase was, in fact,
appropriate. Petitioner asserts that the Department is directed by the
statute to use the ``information available'' to determine market value
and that the information chosen was the only information available.
Petitioner concludes that there are no more favorable or detrimental
options available to the Department.
Second, petitioner contends that the fact that the grade used to
calculate the adjustment factor was not sold in the U.S. does not
invalidate the Department's chosen methodology. Petitioner asserts that
there is no evidence on the record to suggest that another quantity
would have not also shown a similar price differential.
Third, petitioner argues that, even though actual cost data has
been provided, that is irrelevant to a determination of what an arm's-
length market price from an unaffiliated supplier would be. Petitioner
cites section 773(f)(2), which they claim requires a determination of
the market value in addition to the COP. Furthermore, petitioner states
that the major input rule in section 773(f)(3) allows the Department to
use the producer's actual cost only where ``such cost is greater than
the amount that would be determined for such input under paragraph
(2),'' which is the market value.
Petitioner concludes that the Department should continue to value
billets purchased from its affiliate at the highest of COP, transfer
price, or market value. Petitioner states that the Department's use of
market value, when it was higher than cost, was consistent with the
statutory directive.
Department's Position
The Department agrees with petitioner and maintains its position as
stated in the preliminary determination. We disagree with Mannesmann's
assertion that the Department improperly invoked the special rule for
major inputs. Sections 773(f)(2) and (3) of the Act specify the
treatment of transactions between affiliated parties for purposes of
reporting cost data (for use in determining both COP and CV) to the
Department. Section 773(f)(2) indicates that the Department may
disregard such transactions if the amount representing that element
(the transfer price) does not fairly reflect the amount usually
reflected (typically the market price) in the market under
consideration (where the production takes place). Under these
circumstances, the Department may rely on the market price to value
inputs purchased from affiliated parties.
Section 773(f)(3) indicates that, if transactions between
affiliated parties involve a major input, then the Department may value
the major input based on the COP if the cost is greater than the amount
(higher of transfer price or market price) that would be determined
under 773(f)(2). Section 773(f)(3) applies if the Department ``has
reasonable grounds to believe or suspect that an amount represented as
the value of such input is less than the COP of such input.'' The
Department generally finds that such ``reasonable grounds'' exist where
it has initiated a COP investigation of the subject merchandise.
Because a COP investigation was conducted in this case, the
Department requested in its Supplemental Section D questionnaire that
Mannesmann provide COP information for the billet rounds.
[[Page 13220]]
That cost information was provided by the affiliated party and was
verified. In accordance with sections 773(f)(2) and (3), we used the
highest of transfer price, COP or market value to value the billets.
The Department disagrees with Mannesmann's claim that it had no
reasonable basis to apply an across-the-board percentage price increase
on all billets based upon one exceptional purchase of a steel grade
that was not sold in the United States. Market price information was
requested in the Section D questionnaire for any purchases of the
identical input from unaffiliated suppliers, but Mannesmann did not
respond to this portion of the questionnaire. In the second
Supplemental D questionnaire response at question 4, Mannesmann made a
specific claim regarding purchases of inputs from affiliated and
unaffiliated parties. (See proprietary Final Analysis Memo; March 9,
1998) At verification the Department attempted to verify this claim by
examining Mannesmann's purchases of billets in one sample month. We
discovered one such purchase in this month, and utilized this purchase
price as market value. (See Cost Verification Report at V.5.B.3)
Further, as there is no other information on the record, we have used
this information as facts available to determine market values for
other types of billets.
Section 776(a)(2) of the Act provides that ``if an interested party
or any other person--(A) withholds information that has been requested
by the administering authority; (B) fails to provide such information
by the deadlines for the submission of the information or in the form
and manner requested, subject to subsections (c)(1) and (e) of section
782; (C) significantly impedes a proceeding under this title; or (D)
provides such information but the information cannot be verified as
provided in section 782(i), the administering authority * * * shall,
subject to section 782(d), use the facts otherwise available in
reaching the applicable determination under this title.''
In addition, section 776(b) of the Act provides that, if the
Department finds that 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 may use information that is adverse to
the interests of the party as the facts otherwise available. The
statute also provides that such an adverse inference may be based on
secondary information, including information drawn from the petition.
The use of adverse facts available is appropriate. Therefore, for
the final results, as adverse facts available, we have continued to
apply this market value adjustment to all purchases from affiliated
suppliers.
Comment 2
Mannesmann states that the Department improperly rejected its claim
for a startup adjustment pursuant to section 773(f)(1)(c) of the Act in
its preliminary results in spite of the fact that it met the statutory
requirement for this adjustment. Mannesmann states that it
substantially retooled the push bench operations at Zeithain, and that
production levels were substantially limited by technical factors
associated with the initial phase of commercial production. According
to Mannesmann, when the statutory criteria are fulfilled, the
Department must make a startup adjustment. Mannesmann cites Notice of
Preliminary Determination of Sales at Less Than Fair Value: Static
Random Access Memory Semiconductors From Taiwan, 62 FR 51442, 51447-48
(Oct. 1, 1997), as a case in which the startup adjustment was
preliminarily granted when the ``threshold criteria'' of the statute
were met.
The Department's denial, in Mannesmann's view, is not supported by
the record and the Department's Preliminary Analysis Memorandum of
September 2, 1997 indicates that the Department misunderstood the
evidence Mannesmann submitted to support its claim.
According to Mannesmann, the Department incorrectly equated the
push bench machine with the push bench operation. Mannesmann states
that the push bench operations encompass much more than one machine as
implied by the Department. Mannesmann states that the Department's Cost
Verification Report documents and describes the substantial investments
made by Mannesmann in retooling and replacing the push bench operation
at Zeithain (see Cost Verification Exhibit Z-4).
In addition, Mannesmann contends that it documented and the
Department verified that a substantial percentage of the total fixed
assets at the Zeithain mill consisted of push bench operations. See
Supplemental Section D Response at 12, and Exhibit D-6; Cost
Verification Exhibit Z-25.
Mannesmann claims that record evidence clearly documents the
reduced productivity of the push bench operations during the startup
period. In Mannesmann's opinion, the Department's conclusion that
production and manufacturing activity levels were substantially the
same during 1995 and the claimed startup period in 1996 is erroneous.
According to Mannesmann, the machine operating time shown in Exhibit 5
of the Department's Cost Verification Report is not a measure of actual
operating time and, therefore, does not provide an accurate factual
basis of productivity. Instead, Mannesmann states that the Department
must evaluate the efficiency of the plant measured in output over a
given time period in order to gauge accurately the impact of retooling
the push bench operations. Mannesmann points out that the Efficiency
Comparison Table provided at the Zeithain cost verification documents
the clear drop in productivity during the first seven months of 1996,
compared to production in 1995. See Cost Verification Exhibit Z-25.
Mannesmann refers to a graph which they included in their brief as an
illustration of the substantial lower production efficiency of the push
bench operations during the startup period when new and retooled
equipment was being brought on line.
Moreover, Mannesmann points out that it has met the requirement
that a company is entitled to a startup adjustment if it properly
identifies the technical problems encountered during startup that
resulted in reduced productivity. See Statement of Administrative
Action (``SAA'') accompanying the URAA, H.R. Rep. No. 103-316 (1994) at
168 (838).
Mannesmann concludes that the investment at the Zeithain mill has
been substantial, and the startup problems well-documented.
Accordingly, Mannesmann believes that the Department must grant it the
requested adjustment in the final results of this review.
Petitioner counters that Mannesmann's investment amounts to a much
smaller portion of total assets for the period of review (``POR'') than
it claims. Petitioner maintains that section 773(f)(1)(c)(ii)(I) makes
clear that a substantial investment is not enough to trigger the
adjustment; the substantial adjustment must result in a new production
facility. According to petitioner, there is no evidence to indicate how
much of the additional expenditures were part of ongoing improvements
to the existing facility.
Petitioner also rejects Mannesmann's reliance on productivity in
terms of tons per hour as a measure of limited production levels rather
than reliance on total volume of production as stated in section
773(f)(1)(c)(ii) of the Act: ``the administering authority shall
consider factors unrelated to startup operations that might affect the
volume of
[[Page 13221]]
production processed * * *'' Petitioner maintains that the statute and
the regulations are concerned with reaching commercial production
levels and, in petitioner's view, Mannesmann had operated at commercial
production levels.
Petitioner agrees with the Department's finding that the record
does not show that production and manufacturing activity were
significantly different during the alleged startup period and the same
period in the previous year. Therefore, the Department should continue
to deny Mannesmann's requested startup adjustments for these final
results.
Department's Position
The Department agrees with petitioner that Mannesmann did not
adequately demonstrate its eligibility for a startup adjustment. Under
section 773(f)(1)(C)(ii) of the Act, Commerce may make an adjustment
for startup costs only if the following two conditions are satisfied:
(1) A company is using new production facilities or producing a new
product that requires substantial additional investment, and (2)
production levels are limited by technical factors associated with the
initial phase of commercial production. Here, neither prong of the test
has been satisfied.
Mannesmann did not construct new production facilities or produce a
new product. This case is thus unlike Gray Portland Cement and Clinker
From Mexico: Final Results of Antidumping Duty Administrative Review,
62 FR 17148, 17162 (April 9, 1997) or Notice of Final Determination of
Sales at Less Than Fair Value: Static Random Access Memory
Semiconductors From Taiwan, 63 FR 8909, 8930 (February 23, 1998), in
which respondents constructed entirely new facilities. Mannesmann could
not demonstrate the ``substantially complete retooling of an existing
plant,'' as required in the SAA at 166(836). The SAA states that
``substantially complete retooling involves the replacement or
equivalent rebuilding of nearly all production machinery.'' In Notice
of Final Determination of Sales at Not Less Than Fair Value: Collated
Roofing Nails From Korea, 62 FR 51420, 51425 (October 1, 1997), the
Department denied a startup adjustment where the ``substantially
complete retooling'' requirement was not met. Because the respondent
``merely relocated its production facility without replacing or
rebuilding nearly all of its machinery, and the record evidence does
not show that the relocation involved a substantial investment in
connection with the revamping or redesigning of collated roofing nails,
the first condition for the startup adjustment is not satisfied.''
Similarly, record evidence of the fixed asset expenditures in this case
does not demonstrate that the 1996 push-bench replacement represented a
``substantially complete retooling.'' The level of its investment which
was reviewed by the Department, while substantial, does not reach the
level where it could be classified as a complete retooling of the
plant. Further, the Department has viewed the push-bench during the
plant tour and has reviewed the plant layouts which were submitted in
the Supplemental Section D questionnaire response to gain further
understanding of the push-bench operation. While Mannesmann did work on
a number of machines within the push-bench operation, in many cases,
Mannesmann only replaced or rebuilt part of the machine (see page 19 of
the Sales Verification Report). This did not result in the replacement
or equivalent rebuilding of nearly all production machinery, and
coupled with the level of investment, leads us to conclude that
Mannesmann does not meet the criteria for new production facilities.
As stated in Collated Roofing Nails From Korea, 62 FR at 51426,
``because [respondent] does not meet the requirements outlined in the
first prong of the start-up provision, the Department is not required
to address whether or not [respondent's] production levels were limited
by technical factors associated with the initial phase of commercial
production''. The Department did, however, review evidence on the
record whereby Mannesmann attempted to demonstrate that production
levels at the Zeithain mill were substantially limited by technical
factors during the startup period. The Department has fully reviewed
the productivity, machine operating time, and efficiency data presented
by Mannesmann in responses and at verification for all of 1995 and
1996. While productivity and efficiency decreased from 1995 to 1996 as
shown in Cost Verification Exhibit Z-25, this decline was not
substantial enough to indicate that Mannesmann was unable to produce in
commercial quantities. Further, the decline in productivity occurred
throughout the year and not only during the alleged startup period.
Thus, we could not correlate the demonstrated decline in productivity
with the installation of the push-bench operation. Therefore, due to
the fact that neither the substantial retooling nor the reduced
productivity requirements has been adequately supported, we have
disallowed the startup adjustment.
Comment 3
Mannesmann claims that it has provided evidence on the record to
support its claimed offset to financial expenses from short-term
interest income. It states that the Preliminary Analysis Memorandum
indicates that the Department wrongly denied the offset because it
presumed that Mannesmann's reported financial income was from long-term
investment. According to Mannesmann, this presumption is inaccurate.
According to Mannesmann, its consolidated financial statements and
annual reports show that income from long-term loans and investments is
separately listed and distinguished from short-term interest and
investments. Mannesmann states that the amount of income earned from
working capital is, by definition, related to manufacturing and sales
operations, and cites a case in which this methodology was accepted
(Notice of Final Results of Antidumping Duty Administrative Reviews:
Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts
Thereof From France, et al., 60 FR 10900, 10925 (Feb. 28, 1995)).
Mannesmann states that its financial statements were verified for
accuracy and completeness, and that the data reported in those
financial statements should be used to calculate a short-term interest
income offset in the reported financial expense.
Further, Mannesmann states that the CIT has held that short-term
interest does not need to be exclusively related to the merchandise
subject to review in order to qualify as an offset to interest expense
(Timken Co. v. United States, 852 F. Supp. 1040, 1047-48 (CIT 1994)).
Accordingly, Mannesmann concludes that the Department must allow the
short-term interest income offset in the calculation of financial
expense because it was derived from its verified financial statements,
and it is related to the ordinary course of business.
Petitioner states that the Department properly denied the interest
income offset in computing financial expense. Petitioner asserts that,
because Mannesmann did not provide a requested schedule to support its
claim that the interest income was, in fact, short-term in nature, the
offset should be denied. It is petitioner's contention that, because
the account title ``other interest and similar income'' does not
describe the long or short-term nature of the account amount, that one
cannot conclude that it is short-term in nature. Thus, petitioner urges
the Department to
[[Page 13222]]
continue to deny the interest income offset in its final results.
Department's Position
We agree with Mannesmann. For these final results, the Department
has allowed the short-term interest income offset which Mannesmann
claimed in its calculation of financial expense. Although a schedule
which specifically supported this amount was not provided at
verification, we have concluded through further review of the financial
statements that the income is short-term in nature. Interest income
appears in two line items in the disclosure of interest income and
expense. One of the line items indicates that it is long-term in
nature, and the other line item, which has a general description that
does not specifically indicate that it is short-term, can reasonably be
assumed to be short-term interest income.
We agree that the financial statements were verified and have been
audited, thus providing a reliable basis for interest expense
calculation. Further, we agree that the short-term interest income does
not need to be exclusively related to the merchandise subject to review
in order to qualify as an offset to interest expense.
Comment 4
Mannesmann objects to the Department's application of the highest
duty reported to all U.S. sales as adverse facts available, when there
were only minor differences between the U.S. duty reported and the
verified amounts. At verification the Department examined the duty paid
on more than half of total U.S. sales and found only minor
discrepancies which, according to Mannesmann, were the result of
allocation and rounding methodologies.
Given that the Department verified the reliability and accuracy of
MPS' accounting system and record keeping (see U.S. Sales Verification
Report at 14-16), Mannesmann believes the Department should use the
duty data reported by Mannesmann for its final results. However, if the
Department chooses to adjust the reported duty amounts, Mannesmann
suggests that the Department add to the reported duty for all sales the
weighted average or difference between what was reported and what was
verified. Mannesmann believes this approach would result in a ``fair
comparison,'' the basic purpose of the URAA. According to Mannesmann,
the punitive approach of adverse facts available is unwarranted.
Mannesmann contends that the use of adverse facts available under
these circumstances is contrary to the purposes of the Act, the SAA and
established principles of dumping law. According to Mannesmann, the
Department's apparent rationale for choosing a punitive margin rate was
that certain sales trace documents in the home market were not
photocopied and provided promptly enough. Mannesmann reiterates that
they were subject to four and a half weeks of verification at different
locations, during which time the Department had every opportunity to
check the accuracy and completeness of the data submitted by the
Mannesmann companies. It is their contention that the Department simply
has no grounds to allege that Mannesmann has in any way been
``uncooperative.'' According to Mannesmann, the assertion that
Mannesmann has been uncooperative in any aspect of the administrative
review is contradicted by the factual record. Mannesmann argues that
the initial threshold for applying facts available, let alone adverse
facts available, is high. The Department is only authorized to use
adverse inferences in extreme situations, such as when it finds that an
interested party has failed to cooperate by not acting to the best of
its ability to comply with a request for information, in Mannesmann's
view. Mannesmann states that it did not engage in any activity during
the course of this administrative review that could even remotely be
characterized as uncooperative behavior deserving of adverse
inferences. Further, they claim that they have fully complied with the
Department's requests for information and they state that there is
ample information on the record that allows the Department to use more
accurate evidence as ``facts available'' than to apply facts available
based on adverse inferences. Mannesmann asserts that the Department is
under a legal obligation to use the most accurate information available
to make ``fair comparisons'' and obtain an accurate dumping margin.
Mannesmann concludes that the Department should base its calculations
for the final results on the factual evidence available in the records
of this review.
Petitioner argues that the application of facts available in this
case is justified because Mannesmann was unable to verify the
correctness of the reported duty amounts and did not have the
information to provide corrections to many of the sales. In addition,
petitioner maintains that correcting each of Mannesmann's sales
listings to account for these errors would have caused undue difficulty
to the Department.
Concerning Mannesmann's complaint that the application of the
highest duty constitutes adverse facts available out of proportion with
the discrepancies found, petitioner states that the choice of the facts
available is discretionary, and that both the Department's old and new
regulations permit the use of other information submitted by the
respondent as facts available. See 19 CFR 353.37(b) and 19 CFR
351.308(c) (62 FR 27296; May 19, 1997). Petitioner argues that the use
of adverse facts available is thus warranted in this case.
Department's Position
We agree in part with both Mannesmann and petitioner. In this case,
Mannesmann incorrectly reported U.S. duty for the majority of the U.S.
sales examined at verification (see U.S. Sales Verification Report at
21). In determining whether U.S. duty was properly reported, we summed
total U.S. duty paid on the entry we were examining and compared it to
total U.S. duty reported in the applicable observations. For several of
the entries (comprising numerous sales observations), we found that the
total U.S. duty across the associated observations was underreported.
This indicates that errors exist which are more pervasive than can be
explained by rounding or allocation methodologies. In addition, the
company could not recreate or explain the allocation methodologies used
in its submission.
For the sales for which we were able to verify that duty was
correctly reported, we are using the reported duty amounts for these
final results. For all other sales, we have applied as adverse facts
available one of two duty rates, depending upon product classification.
We applied the highest reported duty amount for carbon products to all
sales of carbon products, and we applied the highest reported U.S. duty
amount for alloy products to all sales of alloy products (see Final
Analysis Memorandum of March 9, 1998). While the Department has broad
discretion on the use of facts available (see Silicomanganese from
Brazil: Final Results of Antidumping Duty Administrative Review, 62 FR
37869, 37874 (July 15, 1997) and Allied Signal Aerospace Co. v. United
States, 996 F.2d 1185, 1191 (Fed. Cir. 1993)), we determined that it
was appropriate to consider the differences in value and duty rates for
the two classes of products in our choice of facts available.
By not providing verifiable information for U.S. duties when such
information was available to Mannesmann, we have determined that
Mannesmann failed to cooperate by not acting to the best of its ability
to comply
[[Page 13223]]
with a request for information. Therefore, the use of adverse facts
available is appropriate (see Notice of Final Determination of Sales at
Less Than Fair Value: Certain Cut-to-Length Carbon Steel Plate From
South Africa, 62 FR 61731, 61739 (Final, Nov. 19, 1997)).
Comment 5
Mannesmann maintains that the adverse assumptions made by the
Department about its U.S. sales data are not justified. Mannesmann
states that in its attempt to accurately reflect its normal business
practices in reporting U.S. sales data, it was necessary to allocate
certain movement expenses between subject and nonsubject merchandise.
Moreover, Mannesmann notes that it reported the actual inland freight
it was charged by its German affiliate, MH. These costs, however, often
differed slightly from the actual costs MH paid to outside unaffiliated
suppliers for services. As a result, slight discrepancies occurred
between the U.S. freight data submitted and the expenses reviewed at
verification.
Mannesmann also objects to the Department's use of the highest
reported amounts for foreign inland freight as partial facts available.
Although Mannesmann reported the amounts it is charged and actually
pays its affiliate for transportation, at verification the Department
was unable to tie these amounts to third-party payments by MH because
Mannesmann does not receive these third-party invoices, but simply pays
MH based on MH's allocation of freight charges.
Mannesmann argues the Department should use the amounts reported
or, alternatively, a freight amount that reflects the amounts verified
at Mannesmann, such as the higher of the reported amount or the average
of all foreign inland freight reported for each mill. In any case,
Mannesmann holds that the Department should not make a freight amount
adjustment where it is reported as zero. Further, Mannesmann states
that the use of adverse facts available is not appropriate.
Petitioner points out that this same inability to provide the
required information occurred in the original investigation and
prompted the Department to apply best information available (``BIA'')
(see Notice of Final Determination of Sales at Less Than Fair Value:
Small Diameter Circular Seamless Carbon and Alloy Steel Standard, Line
and Pressure Pipe from Germany, 60 FR 31980 (June 19, 1995)) (``German
seamless pipe LTFV final''). In petitioner's view, in the instant case
Mannesmann's failure even to attempt to provide payment records for
sample sales at verification constitutes a failure to cooperate with
the Department and justifies the use of adverse facts available.
Department's Position
We agree with petitioner. By not providing verifiable information
for inland freight, including actual payment records, when such
information was available to Mannesmann, we have determined that
Mannesmann failed to cooperate by not acting to the best of its ability
to comply with a request for information.
Mannesmann reported foreign inland freight in two fields: (1) Plant
to border and (2) border to port. We examined one sale in which one of
these fields was zero. The freight reported in the other field was
explained to include all freight from plant to port, but it was
incorrectly reported. Therefore, since the freight amounts reported
were inaccurate or could not be supported, we are continuing to apply
facts available. However, in these final results, we are using the
highest reported inland freight amount in each freight field by mill.
We realize that the mills are located hundreds of miles apart, and
therefore, there could very likely be differences in the cost of
freight from plant to port between the two plants. We were able to
verify production by mill, and the mill source reported for each sale.
Comment 6
Mannesmann maintains that the Department should not deduct indirect
selling expenses (DINDIRSU and RINDIRSU) (i.e., amounts related to
selling expenses incurred in the country of manufacture) from export
price (``EP'')/constructed export price (``CEP'') because these fields
do not contain expenses ``which result from, and bear a direct
relationship to, selling activities in the United States.'' See SAA at
153 (823). Mannesmann cites Gray Portland Cement and Clinker From
Mexico: Final Results of Antidumping Duty Administrative Review, 62 FR
17148, 171167 (April 9, 1997); Roller Chain, Other Than Bicycle, From
Japan: Final Results of Antidumping Duty Administrative Review, 61 FR
64322, 64326 (December 4, 1996); and Notice of Final Determination of
Sales at Less Than Fair Value: Certain Pasta From Italy, 61 FR 30326,
30352 (June 14, 1996). Mannesmann concludes that the Department should
correct its final calculations to conform with the statute and the
clear dictates of the SAA and not subtract these two fields from the
U.S. price.
Petitioner holds that Mannesmann's claim that the selling expense
must be incurred in the U.S. market in order to be deducted from CEP is
not supported by the statute. According to petitioner, the phrase ``in
the United States'' is a reference to the location of the affiliated
seller and not an attempt to limit the deduction to selling expenses
incurred in the United States. If such a limitation were intended,
petitioner states that the phrase ``in the United States'' would have
occurred immediately after the phrase ``generally incurred'' in section
772(d)(1) of the Act.
Department's Position
We agree in part with both Mannesmann and petitioners. The indirect
selling expenses incurred in Germany (RINDIRSU and DINDIRSU) are
associated both with sales of the merchandise from the producer/
exporter to the affiliated importer in the United States and with sales
from the affiliated importer to unaffiliated customers. See German
Sales Verification Report at 11-12, U.S. Sales Verification Report at
Exhibit 11, and Mannesmann's Section A Questionnaire Response at 24. As
we explained in Gray Portland Cement and Clinker From Mexico, 62 FR at
17167-68, we do not believe that section 772(d) of the Act requires us
to deduct selling expenses not associated with economic activities
occurring in the United States. See SAA at 153 (823). Accordingly, we
do not treat expenses associated with the sale of the merchandise from
the producer/exporter to the affiliated importer as U.S. selling
expenses.
Applying this practice here, we have deducted RINDIRSU (associated
with MRW's selling activities), but not DINDIRSU (associated with MH's
selling activities), from Mannesmann's CEP. We noted at verification
that MRW worked directly with unaffiliated U.S. customers in the
development of certain specifications. While MRW also incurred selling
expenses associated with sales to MPS, the affiliated U.S. importer,
the record nevertheless supports the deduction of RINDIRSU from CEP
given MRW's involvement with unaffiliated U.S. customers. See U.S.
Sales Verification Exhibit 20. MH's selling expenses, however, mainly
relate to transactions between MRW and MPS. For these reasons, we
believe that it is reasonable to deduct RINDIRSU, but not DINDIRSU, as
indirect selling expenses.
Comment 7
Mannesmann claims that the Department, in calculating the margin
for the preliminary results, assumed all products designated as low
temperature
[[Page 13224]]
in MPS' list were subject merchandise and incorrectly treated A-333
pipe used in low temperature applications as covered products.
Mannesmann states that at verification it provided the Department with
a printout of all sales in the three MPS material classes that could
possibly contain subject merchandise and noted why some sales were not
on the sales database. The Department spot-checked unreported
merchandise on the list and, according to Mannesmann, asked no further
questions. See U.S. Sales Verification Exhibits 15 and 16.
Mannesmann maintains that since A-333 is a specialized low
temperature pipe and more expensive than pipe used in standard, line
and pressure pipe applications, it would make no economic sense for a
customer to order the specialized low temperature pipe for a less
exacting specification. Mannesmann also notes that A-333 pipe is not
tested to perform at all levels of service required of A-106 pipe, and
would not customarily be substituted for A-106 applications. According
to Mannesmann, the Department erroneously assumed all products
designated as low temperature in MPS' list were subject merchandise.
Mannesmann explains that A-333 pipe is only covered by the scope of the
antidumping duty order if such pipe is used in standard, line or
pressure pipe applications. Mannesmann emphasizes that all A-333
invoices reviewed by the Department during verification confirmed that
MPS' sales of A-333 pipe were for low temperature applications only.
Mannesmann claims that the Department did not question nor voice
dissatisfaction with its spot-check of the invoices at verification. In
Mannesmann's view, the Department was obligated to provide it with some
notice at verification that the company's explanations did not satisfy
the Department.
Mannesmann states that the confusion concerning whether A-333 pipe
is covered by the antidumping order illustrates the difficulties
inherent in having end-use as a scope criterion. See Scope Inquiry on
Certain Circular Welded Non-Alloy Steel Pipe and Tube from Brazil, the
Republic of Korea, Mexico and Venezuela, 61 FR 11608 (March 21, 1996).
Mannesmann also claims that the Department decided in the original
investigation that no end-use certification would be required ``until
such time as petitioner or other interested parties provide a
reasonable basis to believe or suspect that substitution is occurring''
and that certifications would only be required for those products ``for
which evidence is provided that substitution is occurring.'' See German
seamless pipe LTFV final at 31975-6. Mannesmann argues that the
Department cannot assume that normally non-subject merchandise has been
utilized for standard, line, or pressure pipe purposes without some
evidence on the record to support such an assumption. Indeed, according
to Mannesmann all available evidence on the record is to the contrary
and the Department cannot as a matter of law include sales of non-
subject A-333 merchandise in its margin calculation.
Moreover, Mannesmann objects to the Department's application of the
margin rate from the initial investigation to sales of low temperature
merchandise. Mannesmann claims that section 776(c) of the Act requires
the Department to corroborate any secondary information used as facts
available from independent sources reasonably at its disposal.
Mannesmann states that the SAA makes clear that the Department ``will
satisfy [itself] that the secondary information to be used has
probative value.'' See SAA at 200 (870). Mannesmann notes that it
submitted information in the original investigation explaining why the
margin calculated in the petition and chosen by the Department as BIA
should not have been used. Mannesmann argues that petitioner's
calculations cannot be corroborated as required by the Act, and
applying the margin from the petition would be directly contrary to the
URAA. According to Mannesmann, in Fresh Cut Flowers From Mexico;
Preliminary Results of Antidumping Duty Administrative Review, 60 FR
49567, 49568 (September 26, 1995), the Department rejected the highest
rate from the previous review as BIA because it was not representative.
Mannesmann argues that the Department should not use adverse facts
available to calculate a margin on non-subject A-333 low-temperature
products. Mannesmann claims that it fully cooperated with the
Department and the standard for applying adverse facts available is
high. See Circular Welded Non-Alloy Steel Pipe and Tube From Mexico:
Final Results of Antidumping Duty Administrative Review, 62 FR 37014,
37019-20 (July 10, 1997); Porcelain-on-Steel Cooking Ware from the
People's Republic of China; Final Results of Antidumping Duty
Administrative Review, 62 FR 32757, 32 758 (June 17, 1997).
Petitioner argues that the Department properly applied facts
available to A-333 pipe that Mannesmann did not report in its U.S.
sales listing. Petitioner notes that Mannesmann unilaterally determined
that these sales were not within the scope of the order and the
Department did not learn about such sales until verification.
Petitioner notes that the scope of the order specifically includes
A-333 pipe when ``such pipes are used in a standard, line or pressure
pipe application.'' In petitioner's view, Mannesmann did not provide
the Department with any information on the use of A-333 products at
verification and the Department was unable to verify that these
products were not used in covered applications. Petitioner claims that
Mannesmann should have raised any doubts about the scope of the order
and its reporting requirements, as it is the Department who determines
what information is to be provided in a dumping review, not the
respondent. See Ansaldo Componenti, S.p.A. v. United States, 628
F.Supp. 198, 205 (CIT 1992). According to petitioner, respondents
cannot be allowed to make unilateral decisions about the information to
be provided when ambiguity exists. In Persico Pizzamiglio, S.A. v.
United States, 18 CIT 299, 303-304 (1994), petitioner points out that
the CIT held that application of BIA was appropriate because the
responding party had a duty to resolve the issue with the Department
prior to submitting its response.
Petitioner states that the cost differential between A-333 and A-
106 pipe would make substitution possible. Petitioner rejects
Mannesmann's contention that Exhibit 28 provides an indication that the
material was used for low-temperature service outside the scope of the
order. Petitioner contends that invoices merely show the product was
tested to meet low-temperature uses, but do not establish that the pipe
was actually used in that way. Petitioner states that Mannesmann was
obligated to fully report all sales of subject merchandise; it is not
incumbent on the Department to prove that Mannesmann's A-333 sales were
used for covered applications. Petitioner argues that, due to
Mannesmann's lack of adequate preparation for verification, Mannesmann
cannot reasonably expect the Department to have spent additional time
chasing down information on A-333 sales--information that Mannesmann
was obligated to provide in its questionnaire response.
Concerning Mannesmann's complaint that the Department cannot use
the rate from the petition as the facts available margin because the
rate cannot be corroborated, petitioner maintains that section 776 of
the Act requires corroboration of the information only ``to the extent
practicable.'' Moreover,
[[Page 13225]]
the SAA at 200 (870) specifically provides that ``the fact that
corroboration may not be practicable in a given circumstance, will not
prevent the Department from applying adverse inferences.'' Petitioner
points out that since Mannesmann's responses were unusable for purposes
of the final determination (see German seamless pipe LTFV final at
31978), they are equally unusable for purposes of corroborating the
final results of this review. Petitioner argues that the use of adverse
facts available is appropriate due to Mannesmann's unilateral decisions
about what information to provide to the Department.
Department's Position
We agree with Mannesmann. While it is true that the scope of this
order specifically includes A-333 pipe when such pipes ``are used in a
standard, line or pressure pipe application,'' the Department decided
in the original investigation that no end-use certification would be
required ``until such time as petitioner or other interested parties
provide a reasonable basis to believe or suspect that substitution is
occurring'' and that certifications would only be required for those
products ``for which evidence is provided that substitution is
occurring.'' See German seamless pipe LTFV final at 31975-6. Petitioner
has not provided the Department with any information which provides us
a reasonable basis to believe or suspect that A-333 pipe is being used
for standard, line or pressure applications in the context of this
review. In the absence of such information, we are considering
Mannesmann's U.S. sales of A-333 pipe to be non-subject merchandise for
these final results.
Comment 8
Mannesmann asserts that if there is a difference between the actual
functions performed by sellers at the different levels of trade in the
two markets and the difference affects price comparability, the
Department is required to make a level of trade (``LOT'') adjustment
pursuant to section 773(a)(7)(A) of the Act.
Mannesmann maintains that during the POR it made sales in the home
market at two distinct levels of trade, to end-users and to
distributors. According to Mannesmann, the Department examined in
detail documents demonstrating that products sold to end-users for
special projects required different market research, quality control,
delivery services, customer-specific R&D, engineering services, and
communications services than products sold to distributors. According
to Mannesmann, the fact that it devotes significantly greater resources
to one of the two sales levels confirms that sales to end-users and
distributors constitute separate levels of trade.
Mannesmann also claims that sales in the U.S. market also occur at
these two different levels of trade. Mannesmann states that the
Department verified its dedication of substantial resources and
technicians' time to maintain close quality control over special
project pipes manufactured for a major U.S. customer. In Mannesmann's
view, sales of commodity-type pipes to distributors do not require such
close collaboration or extensive customer-specific R&D and engineering
services.
Mannesmann references the statistical analysis provided to the
Department in Exhibit A-7 of its Supplemental Section A response as
evidence that the price of the identical control number sold to a
distributor is on average less than the prices to end-users.
Mannesmann concludes that the Department, pursuant to section
773(a)(7)(A) of the Act, must make an LOT adjustment to account for the
differences in selling functions in the two markets. Alternatively,
Mannesmann states that if the Department determines that its U.S. sales
were CEP sales, the Department must make a CEP offset adjustment
because the home market LOT is at a more advanced stage of distribution
than the LOT of the CEP sales (see Certain Welded Carbon Standard Steel
Pipes and Tubes from India; Final Results of New Shippers Antidumping
Duty Administrative Review, 62 FR 47632 (September 10, 1997)).
Petitioner argues that Mannesmann failed to substantiate its claim
that the two levels of trade in each market were different. Petitioner
additionally notes that LOT was never discussed at the U.S.
verification due to Mannesmann's lack of preparation in other areas
(see U.S. Sales Verification Report at 29) and no information was
provided at the home market verification to substantiate Mannesmann's
claim of differences in selling functions (see German Sales
Verification Report at 42).
Petitioner also points out that since Mannesmann did not provide in
its response or at verification any of the data from its statistical
analysis at Exhibit A-7, its claim of a pattern of consistent price
differences is unsubstantiated and unverified.
According to petitioner, contrary to Mannesmann's claim, a CEP
offset is not appropriate unless the Department finds more than one
LOT. Therefore, in petitioner's view, Mannesmann's failure to establish
the existence of two levels of trade renders a LOT adjustment under
section 773(a)(7)(A) or a CEP offset under section 773(a)(7)(B)
inappropriate.
Department's Position
We agree with petitioner. In determining whether separate levels of
trade actually existed in the U.S. and home markets, we examined
Mannesmann's marketing stages, reviewing the chains of distribution,
customer categories and selling functions reported in the home market
and in the United States. We agree with petitioner that Mannesmann did
not substantiate its claims relating to differences in LOT.
As we stated in our preliminary results, Mannesmann's questionnaire
response indicated that it provided higher levels of support to end-
users than to distributors, but Mannesmann did not explain what
distinguished high from low support or support these claims at
verification. At verification, when we asked about differences in LOT,
Mannesmann merely provided an organization chart. Mannesmann provided
no documentation, as requested in the sales verification outline,
regarding claimed differences or the extent of any differences in
selling functions for sales to end-users versus distributors and
between sales to its home market customers and the CEP LOT. We
determined for the preliminary results that sales within each market
and between markets are not made at different levels of trade. Of
necessity, the burden is on a respondent to demonstrate that its
categorizations of LOT are correct. Respondent must do so by
demonstrating that selling functions for sales at allegedly the same
level are substantially the same, and that selling functions for sales
at allegedly different LOTs are substantially different. Mannesmann has
not satisfied its burden in this case, and therefore the Department is
not required to address whether prices at the allegedly different home
market levels of trade resulted in a pattern of consistent price
differences. Accordingly, for these final results, we continue to
determine that Mannesmann's sales were at a single LOT in both markets.
We are not granting Mannesmann a LOT adjustment or a CEP offset.
Comment 9
Although the Department's questionnaire, consistent with the new
regulations, states that invoice date is generally to be considered the
date of sale, petitioner holds that, in this case, the order
confirmation date is more
[[Page 13226]]
appropriate than the shipment date as the date of sale. Petitioner
claims that the Department's choice of shipment date for sale date is
not in accordance with its past practice or its statement of current
policy. Petitioner notes that, until recently, the Department's
practice has been to require respondents to report the U.S. date of
sale based on the date on which the material terms of the sale between
the buyer and the seller were established. See Final Determination of
Sales at Less Than Fair Value: Certain Forged Steel Crankshafts from
the Federal Republic of Germany, 52 FR 28170, 28175 (July 28, 1987).
Petitioner points out that although the new regulations indicate a
preference for the invoice date, the Department recognizes that the
terms of sale may change or remain negotiable from the time of the
initial agreement.
Petitioner states that, in this case, the order confirmation
established the terms of sale. In petitioner's view, there is no
information on the record from Mannesmann indicating that the terms of
the U.S. sales change between the date of the order confirmation and
the date of shipment. Petitioner notes that Mannesmann reported the
order confirmation date as date of sale.
Moreover, since the Department has determined that Mannesmann's
U.S. sales are CEP sales, petitioner holds that it is more appropriate
to use the order confirmation date because the date of export from the
German producer is somewhat arbitrary. Petitioner notes that the
Department has stated its preference to use dates other than the date
of shipment for date of sale See Notice of Final Rule, 62 FR 27296,
27349 (May 19, 1997).
Petitioner states that any delay between the order confirmation
date and the shipment date should not affect price analysis because
Germany does not suffer from hyperinflation. Even more significant,
according to petitioner, is the fact that the Department's goal is to
compare prices that have been set in the same contemporaneous period,
and by using the order confirmation date for U.S. sales and the invoice
date for home market sales, the terms of sale in the two relevant
markets would have been set in the same month. Petitioner concludes
that it is clear that, in the preliminary results, the Department
incorrectly chose to align the dates of shipment rather than the dates
the terms of sale were set.
Mannesmann terms petitioner's arguments regarding the proper U.S.
and home market dates of sale without merit. It maintains that,
consistent with the Department's preferred approach, it used the
invoice date as the date of sale when reporting home market sales
because the terms of the sale and the quantity are often not finally
fixed until the invoice is generated (see Section A Response at 23).
Since the Department did not permit Mannesmann to report the invoice
date as the U.S. date of sale (the Mannesmann invoice is issued post-
shipment in Germany), Mannesmann maintains that the Department's
determination to use the shipment date as the U.S. date of sale is
entirely appropriate.
Given that several months often elapse between order confirmation
date and shipment date, Mannesmann agrees that the shipment date for
U.S. sales is most comparable to the home market invoice date because
it most closely corresponds to the invoice date. Mannesmann notes that
the Department has utilized shipment date as date of sale, rather than
the order or order confirmation date, when the shipment date most
closely corresponded to the invoice date. See Certain Internal-
Combustion Industrial Forklift Trucks from Japan; Final Results of
Antidumping Duty Administrative Review, 62 FR 34216, 34227 (June 25,
1997). Mannesmann argues that the Department has also used shipment
date as date of sale when there was a potential for the terms of sale
to change. Mannesmann claims that the Department reviewed numerous
change orders in this case, making shipment date the most logical
choice for the U.S. date of sale. See Final Determination of Sales at
Less Than Fair Value: Industrial Nitrocellulose From the Federal
Republic of Germany, 55 FR 21058, 21059 (May 22, 1990). Mannesmann
further states that the Department has used the shipment date as the
date of sale when a respondent utilized this date for purposes of its
financial reporting. Mannesmann claims that, in the normal course of
business, it generates invoices on the date of shipment and that this
date is used for purposes of recording sales and financial accounting
in both markets.
Mannesmann also rejects petitioner's argument that any price
analysis would not be affected by the time interval between order
confirmation date and shipment because Germany does not suffer from
``hyperinflation.'' Mannesmann states that many other factors (e.g.,
market price fluctuations, a new competitor, a movement in exchange
rates) can have substantial impact on the price analysis over the
period of several months.
Department's Position
We agree with Mannesmann. Although we recognize that the
Department's practice is normally to use the invoice date (see
Memorandum from Susan G. Esserman, ``Date of Sale Methodology Under New
Regulations,'' March 29, 1996), we are continuing to use shipment date
as the date of sale for U.S. sales for these final results. As we
explained in the preliminary results, 62 FR at 47448, our questionnaire
to Mannesmann stated that in no case could the date of sale be later
than the date of shipment. The invoice date for each of Mannesmann's
U.S. sales was later than the shipment date. Further, at verification
we observed changes in U.S. terms of sale after the order confirmation
date. See U.S. Sales Verification Exhibits 20, 21. We are thus
satisfied that the date of shipment best reflects the date on which the
material terms of Mannesmann's U.S. sales were established. This is
also consistent with our preference of using comparable events in
establishing the date of sale in both markets. As we also noted in the
preliminary results, we used invoice date (which is the same as date of
shipment) as date of sale in the home market. We are continuing to do
so for the final results. See Notice of Preliminary Determination of
Sales at Less Than Fair Value and Postponement of Final Determination:
Fresh Tomatoes From Mexico, 61 FR 56608, 56611 (Nov. 1, 1996) (``We
based date of sale on shipment date to avoid the potential for
distortion of cost and price comparisons that occur when there is a
significant lag time between date of shipment and date of invoice
within the same market and/or between the two markets.'').
Comment 10
Petitioner maintains that Mannesmann did not report any warehousing
expenses associated with those sales the Department discovered at
verification to be in inventory. If the information on warehousing is
not available, petitioner believes the Department should make an
adjustment to CEP based on the facts available pursuant to section 776
of the Act. If the Department does not have sufficient information to
make a facts available determination as to warehousing expenses,
petitioner believes the margin for the affected sales should be based
entirely on facts available.
Mannesmann counters that no adjustments to the reported sales data
were necessary to account for warehousing expenses because none were
incurred (see Sections B and C Response at 43).
[[Page 13227]]
For those observations specifically noted by petitioner, Mannesmann
points out that complete documentation for these sales was provided to
the Department at verification and a review of these documents
confirmed the absence of warehousing expenses.
Department's Position
We agree in part with Mannesmann and with petitioner. We have no
evidence that Mannesmann incurred warehousing expenses and we did not
ask about them at verification. Mannesmann's brief indicates that if
they had warehousing expenses, they would have appeared on the
unloading invoice in the sales trace package. However, we do know the
merchandise arrived in the U.S. and did not get sold until a later
date. Therefore, while we cannot prove the existence of warehousing
expenses, we agree with petitioner that these sales remained in
inventory for a period of time. Therefore to account for this fact, we
have calculated inventory carrying costs for these final results (see
Final Analysis Memorandum of March 9, 1998).
Results of Review
We determine that the following weighted-average margin exists:
------------------------------------------------------------------------
Margin
Manufacturer/exporter Period of review (percent)
------------------------------------------------------------------------
Mannesmann.............................. 1/27/95-7/31/96 22.12
------------------------------------------------------------------------
The Department shall determine, and the Customs Service shall
assess, antidumping duties on all appropriate entries. Individual
differences between EP/CEP and NV may vary from the percentage 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 small diameter circular seamless carbon and alloy steel
standard, line and pressure pipe from Germany, within the scope of the
order, entered, or withdrawn from warehouse, for consumption on or
after the publication date, as provided by section 751(a)(1) of the
Act: (1) The cash deposit rate for the reviewed company will be the
rate listed above; (2) for previously reviewed or investigated
companies not listed above, the 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 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) for all other producers and/or exporters of
this merchandise, the cash deposit rate of 57.72 percent, the all-
others rate, established in the LTFV investigation, shall remain in
effect until publication of the final results of the next
administrative review.
We will calculate importer-specific ad valorem duty assessment
rates based on the entered value of each entry of subject merchandise
during the POR.
Notification of Interested Parties
This notice serves as a final reminder to importers of their
responsibility under 19 CFR 353.26 to file a certificate regarding the
reimbursement of antidumping duties prior to liquidation of the
relevant entries during this review period. Failure to comply with this
requirement could result in the Secretary's presumption that
reimbursement of antidumping duties occurred and subsequent assessment
of double antidumping duties.
This notice also serves as a reminder to parties subject to
administrative protective order (``APO'') of their responsibility
concerning the disposition of proprietary information disclosed under
APO in accordance with 19 CFR 353.34(d). Timely written notification of
return/destruction of APO materials or conversion to judicial
protective order is hereby requested. Failure to comply with the
regulations and the terms of an APO is a sanctionable violation. Timely
written notification of the return/destruction of APO materials or
conversion to judicial protective order is hereby requested.
This administrative review and notice are in accordance with
Section 751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1)) and 19 CFR
353.22.
Dated: March 9, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-7017 Filed 3-17-98; 8:45 am]
BILLING CODE 3510-DS-U