[Federal Register Volume 63, Number 115 (Tuesday, June 16, 1998)]
[Notices]
[Pages 32825-32833]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-15873]
-----------------------------------------------------------------------
DEPARTMENT OF COMMERCE
International Trade Administration
[A-533-502]
Certain Welded Carbon Steel Pipes and Tubes From India; 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.
-----------------------------------------------------------------------
SUMMARY: On February 9, 1998, the Department of Commerce published the
preliminary results of administrative review of the antidumping duty
order on certain welded carbon steel pipes and tubes from India. The
review covers two manufacturers/exporters. The period of review is May
1, 1996, through April 30, 1997.
Based on our analysis of the comments received, we have made
changes, including corrections of certain inadvertent programming and
clerical errors, in the margin calculation. Therefore, the final
results differ from the preliminary results. The final weighted-average
dumping margin is listed below in the section entitled ``Final Results
of Review.''
EFFECTIVE DATE: June 16, 1998.
FOR FURTHER INFORMATION CONTACT: Davina Hashmi, at (202) 482-5760, or
Greg Thompson, at (202) 482-0410, of the Import Administration,
International Trade Administration, U.S. Department of Commerce.
SUPPLEMENTARY INFORMATION:
The 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 citations to the Department's regulations are
to 19 CFR Part 353 (1997).
Background
On February 9, 1998, the Department of Commerce (the Department)
published the Preliminary Results of Administrative Review of the
Antidumping Duty Order on Certain Welded Carbon Steel Pipes and Tubes
from India, 63 FR 6531. The review covers two manufacturers/exporters.
The period of review (POR) is May 1, 1996, through April 30, 1997. We
invited interested parties to comment on the preliminary results of
review. At the request of one respondent, Rajinder Pipes Ltd. and
Rajinder Steel Ltd. (collectively called ``RSL''), we held a public
hearing on April 6, 1998. The Department has conducted this
administrative review in accordance with section 751 of the Act.
Scope of Reviews
The products covered by this review include circular welded non-
alloy steel pipes and tubes, of circular cross-section, with an outside
diameter of 0.372 inch or more but 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,
bevelled 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-conditioner 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 in the scope of this order,
except for 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.
Imports of the products covered by this review are currently
classifiable under the following Harmonized Tariff Schedule of the
United States (HTSUS) subheadings: 7306.30.10.00, 7306.30.50.25,
7306.30.50.32, 7306.30.50.40, 7306.30.50.55, 7306.30.50.85,
7306.30.50.90. Although the HTSUS subheadings are provided for
convenience and customs purposes, the written description of the scope
of this proceeding is dispositive.
Changes Since the Preliminary Results
Based on our analysis of comments received, we have made certain
corrections that changed our preliminary results. A discussion of the
arguments raised in the case and rebuttal briefs submitted to the
[[Page 32826]]
Department is contained in the following section entitled, ``Analysis
of Comments Received.''
Analysis of Comments Received
Comment 1: The petitioners argue that the Department should apply
facts available to those selling expenses and costs that could not be
verified due to Rajinder's failure to prepare for verification
properly. Specifically, the petitioners posit that the Department
should disallow the deduction from normal value (NV) certain unverified
home-market (HM) selling expenses and should deduct from the price in
the United States the highest reported expense for certain unverified
U.S. selling expenses.
The petitioners state that, in accordance with sections 776 and
782(i) of the Act and Olympic Adhesive Inc. v. United States (899 F.2d
1565, 1572 (Fed. Cir. 1990)), the Department may disregard respondent's
information if such information cannot be verified and where
manipulation of the margins may occur because a respondent may provide
information selectively that the Department requested. The petitioners
argue that there is no justification for Rajinder's failure to prepare
for verification properly and for the frequent delays the Department
encountered at verification. The petitioners point out that Rajinder
had been given, in advance, an itinerary of the topics to be covered
during verification and posit that Rajinder had ample time to prepare
adequately for the verification. The petitioners also note that
Rajinder has previous verification experience and, therefore, should
have known what was needed and expected.
Finally, the petitioners state that it is Department practice to
make an adverse inference and to apply facts available in cases where
respondent impedes the progress of the review and fails to act to the
best of its ability to comply with the Department's request for
information. The petitioners contend that, in the instant proceeding,
the situation warrants the application of adverse facts available.
Rajinder refutes the petitioners' argument that facts available
should be applied to certain HM and U.S. selling expenses and argues
that the petitioners have distorted the facts as they relate to the HM
verification. Rajinder contends that, although it could have been
better prepared for verification, its lack of preparation does not
warrant the use of facts available, nor does it suggest that Rajinder
in any way has impeded this review or failed to cooperate with the
Department. Rajinder states that, on the contrary, most of the claimed
adjustments were verified with very few discrepancies. Rajinder points
to the verification report as support for the number of tests performed
and the number of adjustments the verifiers examined, most of which had
no discrepancies and some of which had discrepancies that were
disadvantageous to Rajinder.
Rajinder also refutes the petitioners' assertion that it provided
requested information selectively. Rajinder explains that, with respect
to those adjustments that the Department did not examine at
verification, the verifiers were simply not able to cover those topics
in the time allotted for the verification. Rajinder argues that, had it
wanted to select adjustments that it did not want the Department to
verify, it would have selected the large adjustments, not the minor
ones.
Department's Position: We agree with the respondent in part. With
the exception of HM indirect selling expenses and duty drawback (see
comment 4), we have accepted all of Rajinder's submitted information.
Our determination in this regard is consistent with the statute and our
practice. We have concluded, in accordance with section 776(a) of the
Act, that the use of facts available for Rajinder's HM indirect selling
expenses is appropriate because we were unable to verify the accuracy
of the information Rajinder submitted despite numerous requests on our
part to obtain the data. By not providing certain basic verification
documents that were essential to the establishment of the accuracy of
the data submitted, Rajinder did not cooperate to the best of its
ability to comply with our requests for such information. Accordingly,
we are using an adverse inference with respect to this item in full
accordance with law. See section 776(b) of the Act. While we have
determined that Rajinder did not cooperate to the best of its ability
with respect to the HM indirect selling expenses, we do not find that
this undermines the credibility of the other information Rajinder
submitted during this review. See Monsanto Co. v. United States, 698 F.
Supp. 275 281 (CIT 1988). Accordingly, we have calculated Rajinder's
margin using all the data it submitted with the exception of the two
items mentioned above.
As for the petitioners' concerns that Rajinder manipulated the
process, it should be noted that, from the outset of verification, we
selected adjustments out of the order from which they were listed in
the verification outline. In other words, we conducted a ``spot check''
of various expense items which would preclude Rajinder from
``manipulating'' the process and selectively providing information to
certain adjustments. In this manner, we were able to ensure that all
items we selected were covered in time.
Comment 2: The petitioners argue that certain letters Rajinder
submitted to the Department (dated January 13, 14, 15, 20, and 26,
1998) were untimely filed and should be removed from the official
record in this review and not considered by the Department for the
final results of this review. The petitioners also contend that the
verifying officials did not request information contained in the
respective January letters as stated by the respondents. The
petitioners state further that even the first of the series of January
letters (dated January 13, 1998) was submitted beyond the normal seven-
day period for submitting information after the date on which
verification is completed.
Rajinder contends that the January submissions with which the
petitioners take issue should not be removed from the official record.
Rajinder states that the letter dated January 13, 1998, was submitted
at the request of the Department for the purpose of clarifying
Rajinder's calculations for its reported variable costs of manufacture.
Rajinder also states that, in accordance with 19 CFR 353.31(b)(1), the
Department may solicit information from respondents at any time.
Rajinder states further that the letters dated January 14, 15, and 20,
1998, pertain to information contained in Rajinder's Duty Exemption
Entitlement Certificate (DEEC) book which was in the possession of the
Customs Authority at the time of verification. Rajinder contends that,
with respect to the letter dated January 26, 1998, the content of the
letter was already examined at verification and that Rajinder should
not be penalized for submitting a document that was not in existence at
the time of verification. Rajinder points out, however, that, in the
event that the Department rejects the letters dated January 14, 15, 20,
and 26, 1998, that these letters are not necessary to demonstrate the
validity of Rajinder's duty-drawback claim.
Department's Position: In accordance with 19 CFR 353.31(a)(2) we
have rejected the January 14, 15, 20, and 26, 1998, letters because
they were untimely and we did not request the information they
contained. See letters to the respondent's counsel dated February 12,
1998, and April 16, 1998. We accepted Rajinder's January 13 letter
because the information contained in that letter was submitted at our
request.
Comment 3: The petitioners contend that the Department erroneously
found two levels of trade (LOTs) in the HM and argue that the
Department should
[[Page 32827]]
rescind the LOT adjustment it granted Rajinder in the preliminary
results of review. The petitioners argue that Rajinder prevented the
examination of the existence of two HM LOTs at verification, despite
the Department's intention to examine this topic, and therefore, the
information upon which the Department based its findings of two HM LOTs
is unsupported.
The petitioners take issue with the Department's reasoning behind
its categorization of Rajinder's customers into two channels of
distribution and assert that such reasoning does not establish two HM
LOTs. The petitioners argue that, rather than base the determination of
different LOTs in the HM properly on selling activities of the
producer, the Department instead considered the selling functions of
the purchaser. The petitioners also assert that the record does not
support qualitatively or quantitatively the differences in selling
activities and functions made between Channel One (sales to government
agencies, OEMs, and end-users) and Channel Two (sales to local
distributors and trading companies) customers.
In addition, the petitioners assert that, if the Department finds
that two HM LOTs exist, Rajinder has not fulfilled its burden of
providing evidence that established the claimed price differential
between sales at the different LOTs, citing the URAA, the Statement of
Administrative Action (103d Cong. 2d Session, House Doc. 103-316 at 829
(1994)), and Koyo Seiko Co. Ltd. v. United States, 18 ITRD 1867 at 1870
(CIT June 19, 1996). The petitioners point out that the CIT has upheld
the Department's decision to deny respondent's claimed price
differential where a respondent fails to provide such information
(citing NTN Bearing Corp. v. United States, 905 F. Supp. 1083, 1093-4
(Ct. Int'l Trade 1995)).
The petitioners also argue that Rajinder has not demonstrated a
causal link between the reported selling functions and the claimed
differences in price. The petitioners argue further that, on a model-
specific basis, Rajinder's data reveals a highly inconsistent and
disparate pattern of price differences across different models which,
the petitioners assert, cannot be attributed to differences in the
claimed LOTs. The petitioners assert that such disparate price
differences are attributable to premiums that the Indian government is
willing to pay for such merchandise. The petitioners argue further that
an analysis of the weighted-average HM prices of Channels One and Two
sales are not commensurate with the number of selling activities
associated with each LOT. For instance, petitioners argue that, given
the large number of selling activities associated with Channel One
sales, it does not make sense that the HM prices for Channel Two sales
are higher than the HM prices for Channel One sales. The petitioners
state that, because Rajinder has not provided evidence demonstrating a
consistent pattern of price differences attributable to Rajinder's
claimed LOTs, the Department should not grant Rajinder a LOT adjustment
for the final results of review.
Rajinder argues that, contrary to the petitioners' assertion, the
record does support a finding of two HM LOTs. Rajinder refutes the
petitioners' argument that it prevented the Department from examining
LOT information at verification and asserts that the petitioners
mischaracterized the events that took place at verification. Rajinder
notes that, because nearly every adjustment the Department examined at
verification was accurate with no discrepancies found, there is no
reason to question the selling activities listed in Rajinder's selling-
functions chart.
In addition, Rajinder argues that both its original and
supplemental questionnaire responses demonstrate that a price
differential at the two claimed LOTs does exist. Rajinder argues
further that it has explained the causal link between the reported
selling functions and the claimed differences in price. Regarding the
petitioners' model-specific analysis, Rajinder notes that this analysis
incorporates sales that took place over a number of months. Rajinder
points out that variances in price differences across different models
over time is a normal phenomenon. Rajinder notes further that its sales
made to the government involve state government agencies which desire
lower prices and therefore would not pay premiums as alleged by the
petitioners.
Rajinder argues that, with respect to the petitioners' assertion
that its HM weighted-average prices are not commensurate with the
number of selling activities associated with each LOT, the petitioners'
analysis is flawed. Rajinder contends that the wrong months and, thus,
the incorrect sales were used in the analysis. Rajinder states that,
because its sales were made in months that have nearly six-month
intervals between the sales compared, it is likely that prices will
vary. Finally, Rajinder argues that the petitioners used net HM prices
which distorted their analysis. Rajinder concludes that, because the
petitioners' analysis is flawed and is therefore invalid, the
Department should maintain its finding of two LOTs in the HM and make a
LOT adjustment for the final results of review.
Department's Position: We disagree with the petitioners. For the
final results of review, we have granted Rajinder a LOT adjustment.
Although we did not specifically examine the issue of LOT at
verification, the record supports Rajinder's claim of two channels of
distribution in the HM. As noted previously, the purpose of
verification is to ensure that a respondent reported the information
the Department requested accurately (see our response to comment 1). In
any given proceeding, the information we request from a respondent can
be extensive. The examination of such information subject to
verification is an extensive process, particularly given that a HM
verification of a company's sales or cost information is normally
conducted within a period of one week or less. The Department,
therefore, cannot examine each and every adjustment that is included in
the verification outline. See Monsanto Co. v. United States, 698 F.
Supp. 275 281 (CIT 1988). In the instant case, Department officials
selected adjustments to examine randomly and Rajinder was never put in
a position to control the Department's verification of its response.
Furthermore, the adjustments we examined at verification were accurate,
with a few minor exceptions. The fact that we did not examine the issue
of LOT does not lead us to question the validity of Rajinder's selling
activities, channels of distribution, or the narrative response
discussing such selling functions.
We also disagree with the petitioners' claim that the record lacks
evidence of two separate LOTs in the HM. In its narrative response,
Rajinder explained that it sells the foreign like product through two
channels of distribution (Channel One and Channel Two). In our
preliminary analysis memorandum, we stated that we grouped Rajinder's
reported customer categories into two channels of distribution for the
following reasons: (1) the level of involvement, selling functions and
expenses for the two categories of customers are significantly
different; (2) a number of OEM and end-user customers are departments
within the Indian government and, therefore, we found that it is
appropriate to place these customers in the same category as state
government agencies; and (3) Channel One customers use merchandise for
their own consumption, whereas Channel Two customers resell the
merchandise purchased from Rajinder. The
[[Page 32828]]
petitioners argue factors two and three do not establish different
LOTs. However, the categorization of such customers into two channels
of distribution does not, in and of itself, establish two different
LOTs. Rather, the three factors emphasize similarities between
different customer types so that they can be placed in categories for
the purpose of determining whether different LOTs exist. Further, while
the significance of the three factors may vary across customer types,
we have determined, based on an analysis of these three factors, that
the customers fall into two distinct groups.
The petitioners' argument that LOT is determined by the selling
activity of the producer, not the selling functions of the purchasers,
is true, but misplaced. In order to determine the LOT of U.S. sales and
comparison sales, we review and compare distribution systems that
include not only selling activities of the producer, but also the class
of its customer (point in the distribution chain). Furthermore, there
is a direct relationship between the classification of a given entity
and the function of that entity. Therefore, as part of our LOT
analysis, we classify the producer's customers (e.g., wholesaler,
retailer) based on the activities they perform in selling the product
under review. We do not, however, consider the selling functions of the
customer when determining whether different LOTs exist.
We have accepted the selling-function chart Rajinder provided as
part of its verified questionnaire response. As we stated in
preliminary results of review, we used six of the listed functions to
make a distinction between selling activities associated with Channels
One and Two: market research, professional services and business
systems development, engineering services, agent coordination, research
and development, and advertising. As the chart that the petitioners
included in their brief shows, there is a marked difference between the
selling functions being performed in the two channels of distribution.
Based on the above factors, we determined that there are two LOTs
in the HM. One of these (Channel Two) is equivalent to the sales made
at the constructed export price (CEP). However, since some of our U.S.
sales matched to the other LOT we reviewed the data to determine if a
LOT adjustment was appropriate.
Sales at the other channel are made at a more advanced level;
therefore, we next determined whether there was a pattern of consistent
price differences between the two HM LOTs and whether a LOT adjustment
was appropriate. The analysis we performed on Rajinder's information
indicated that an adjustment was appropriate. The petitioners' argument
regarding causation is misguided. The statute requires that the price
differences be ``wholly or partly due'' to differences in LOTs; it does
not require a determination of the exact price effect caused by LOT
differences and it would not be possible to do so, given the variety of
market forces that affect the sales price of each transaction we review
(see Antifriction Bearings (Other Than Tapered Roller Bearings) and
Parts Thereof From France et.al: Final Results of Antidumping Duty
Administrative Reviews, 62 FR 2081, 2108 (January 15, 1997) (AFBs)).
Comment 4: Rajinder argues that the Department's denial of its
claimed duty-drawback adjustment is unreasonable. Rajinder contends
that it met both parts of the Department's test: (a) Whether the import
duty and rebate are directly linked to, and dependent upon, one
another; and (b) whether the company claiming the adjustment can show
that there were sufficient imports of the imported raw materials to
account for the drawback received on the exported product. Rajinder
contends further that, for the purpose of satisfying part one of the
Department's two-part test, it provided record evidence demonstrating
how the import duty and the duty drawback are related to one another.
Rajinder indicates that it explained on the record how India's Advanced
Licensing system operates and that India's duty-exemption schemes are
well known by the Department and points to several administrative
reviews involving Indian companies that subscribe to India's Advanced
Licensing system. In addition, Rajinder indicates that it provided both
the duty-drawback calculation methodology it used to calculate the
adjustment and the respective advanced licenses under which it could
import raw materials free of duty, provided such materials were used in
the production of the exported product.
Rajinder points to the verification report and accompanying
exhibits as evidence of its eligibility for exemption from customs
duties. Rajinder states that the advanced licenses state explicitly
that the respective materials would be ``eligible'' for exemption from
customs duties and that the underlying licenses are replete with the
term ``Duty Exemption.'' Rajinder contends that the verification team
did not indicate that additional information was necessary to satisfy
part one of the Department's two-part test. Rajinder also argues that
it supplemented the record with the very information that prompted the
Department to deny the claimed duty-drawback adjustment for the Final
Results of the New Shippers Antidumping Duty Administrative Review 62
FR 47632, (September 10, 1997).
Rajinder contends further that it satisfied part two of the
Department's two-part test. Rajinder points to the verification report
and accompanying exhibits which it asserts demonstrate that it imported
sufficient amounts of hot-rolled coil and steel to qualify for duty
drawback. Rajinder refers to the check marks and notations on the
verification exhibits that the Department's verifiers made which,
Rajinder asserts, is an indication that the Department verified the
quantities of hot-rolled coil Rajinder imported.
Rajinder argues that the Department misstated the purpose of
Rajinder's January 20, 1998, submission of Rajinder's DEEC book.
Rajinder indicates that, in the preliminary analysis memorandum, the
Department stated that the purpose of submitting the DEEC book was to
provide evidence that sufficient imports of raw materials were received
for the final exported product. Rajinder contends that, contrary to the
Department's statement regarding the purpose of the DEEC book, the
actual purpose of submitting this book was merely to corroborate the
data already on the record. Rajinder argues that the relevant
verification exhibit already demonstrates the sufficiency of import
quantities.
Rajinder states that it submitted the DEEC book for the record
because the Department requested it at verification. Rajinder points
out that it explained to the verifiers that only the completed DEEC
book, which was at that time in the possession of the Indian Customs
Service, would satisfy the additional information they sought.
The petitioners contend that the Department denied Rajinder's
claimed duty-drawback adjustment correctly because Rajinder failed to
meet either part of the Department's two-part test. The petitioners
assert that, despite the fact that Rajinder was on notice from the New
Shippers Review as to the information necessary to demonstrate its
claimed duty-drawback adjustment adequately, Rajinder missed the
opportunities to supplement the record with the necessary information.
The petitioners point out that, throughout this review, the Department
informed Rajinder of its need to provide additional information to
satisfy the two-part test. The petitioners state, however, that in
accordance with the
[[Page 32829]]
Department's regulations and practice, Rajinder failed to provide the
necessary evidence to satisfy the requirements of its claimed duty
drawback, citing Nachi-Fujikoshi v. U.S., 890 F. Supp. 1008, 1015
(1992).
The petitioners argue that the fact that the Department recognizes
India's Advanced Licensing scheme is irrelevant to the instant case.
The petitioners contend that Rajinder merely provided a general
description of the Advanced Licensing scheme and that the possession of
the advanced licenses alone does not demonstrate the linkage between
the import duty and the drawback.
The petitioners indicate their support for the Department's
decision to require Rajinder to provide historical documentation
demonstrating how Rajinder received advanced licenses and satisfied the
requirements of those licenses. The petitioners point out that the
advanced licenses stipulate the submission of quarterly reports to the
government of India and that such reports should provide detail of the
goods imported against the licenses. The petitioners assert that such
reports or other similar documentation demonstrating that Rajinder
fulfilled the obligations of the advanced license could have been
submitted as proof of entitlement to the claimed duty drawback. The
petitioners explain further that, because importation of raw materials
may occur before or after exportation, historical records documenting
how the program was applied to a specific company and product are
necessary to demonstrate linkage. The petitioners contend that the
advanced licenses alone do not serve as proof that the drawback was
received, but instead establish the right to import raw materials.
The petitioners argue that Rajinder also failed to satisfy the
second part of the Department's two-part test. With respect to the
verification exhibit with which Rajinder claims the Department was
satisfied, given the check marks placed on it, the petitioners assert
that the check marks are merely indications that the numbers on the
respective worksheets reconciled with the reported figures. The
petitioners also argue that the record does not demonstrate adequately
that the amount of steel coil Rajinder claims to have imported
qualified for duty-free status under the advanced license.
In addition, the petitioners argue that, even if the Department
permits Rajinder's steel duty-drawback adjustment, it should deny
Rajinder's claim for the zinc duty-drawback adjustment. The petitioners
argue that Rajinder did not import zinc during the POR and, instead,
used the calculation it provided in the previous New Shippers Review.
The petitioners contend that the zinc information submitted in January
constitutes new information, which was illegible and should have been
submitted prior to verification if Rajinder desired due consideration
of the information. The petitioners contend further that Rajinder has
not provided any evidence that the imports of zinc met the Department's
two-part test. Specifically, the petitioner states that Rajinder did
not provide any evidence that sufficient quantities of zinc were
imported to cover the zinc incorporated into the pipe or that
qualifying inputs of zinc were made within twelve months of the date of
issuance of its advanced licenses.
Department's Position: For both steel and zinc, we agree with the
petitioners that Rajinder has not satisfied either part of our test.
While Rajinder is correct in stating that we found the figures in the
verification exhibits we reviewed to be accurate, the figures did not
establish a direct link between the import duty and the drawback
Rajinder claimed it received. Based on our understanding of the system,
as explained at verification, the imported goods may enter free of
duties, but the company must prove to Indian Customs that the goods
were used in a product that was or will be exported or the importer of
the goods will be liable for the foregone duty. This is why we
requested documentation from the DEEC book. Without such information
there is no established link between the import duty and the drawback.
Inasmuch as Rajinder knew that it would not have the documents needed
to establish this link at verification, Rajinder should have explained
to us in advance that we would not be able to review such documents
until after verification. Rajinder's arguments concerning part two of
the test are irrelevant since both parts of the test must be met in
order to receive the adjustment.
Comment 5: Rajinder contends that the model-match methodology that
the Department employed in the preliminary results is inaccurate and
does not provide a fair comparison between U.S. and HM models. Rajinder
argues that it provided the Department with the best possible matches
between HM and U.S. models sold during the POR subject to the
Department's model-match hierarchy set forth in the Department's
original questionnaire. Rajinder argues, however, that the Department
disregarded its own hierarchical model-match methodology and instead
grouped certain models into ``families'' based on the model's nominal
pipe size. Rajinder contends that the Department's family model-match
methodology is unfair because it includes models that are not the most
similar to the products sold to the United States.
Rajinder also points out that the Department did not provide an
explanation as to why its family model-match methodology provides
better results and the Department did not explain why it did not use
the model matches Rajinder provided in its response. Rajinder asserts
further that grouping models into families has never been employed in
other standard pipe and tube cases and was not the approach employed in
the previous New Shippers Review in which Rajinder participated. In
addition, Rajinder asserts that the Department's model-match
methodology does not provide the most similar comparisons and is
contrary to antidumping law and to the CIT's ruling that comparisons
should be based on the most similar merchandise, absent identical
merchandise sold in either the home or U.S. markets (citing Torrington
Co. v. United States, 881 F. Supp. 622, 634 (Ct. Int'l Trade 1995)).
In addition, Rajinder argues that the Department is using only one
physical attribute, the nominal pipe size, as the basis for model
matching and is disregarding another significant attribute, wall
thickness, which, in the Department's model-match hierarchy, is one of
the most important factors next to nominal pipe size. Rajinder asserts
that matching models using only the nominal pipe size rather than
including wall thickness as an important criterion by which to find the
most similar matches produces an apples-to-oranges comparison.
Rajinder asserts further that the Department apparently selected HM
models as matches to U.S. models based on size of the difference-in-
merchandise adjustments associated with the selected models. Rajinder
contends that differences in costs are not physical characteristics and
that such figures should not be relied upon for the purpose of matching
models. Moreover, Rajinder argues that the HM models that the
Department selected as matches to U.S. models did not produce the
smallest difference-in-merchandise adjustments.
Rajinder also points out that pipes sold in India are categorized
by light, medium, and heavy pipe which is reflective of the wall
thickness. Rajinder explains that the uses of the pipes are a direct
determinant of whether light,
[[Page 32830]]
medium, or heavy pipe is necessary. Rajinder explains further that a
light pipe cannot be compared with a medium pipe, as was done in the
preliminary results.
For the above-mentioned reasons, Rajinder argues that the
Department should use the models that Rajinder selected as the most
similar HM models to the models sold in United States for the final
results of review.
The petitioners claim that the Department's model-match methodology
is not unreasonable and is not contrary to the statute. The petitioners
assert that there is no reason for the Department to alter its approach
for the final results of review. The petitioners argue that, in
accordance with section 771(16) of the Act, the HM models the
Department selected as potential matches meet the definition of foreign
like product. The petitioners also argue that, although this model-
match methodology deviates from that employed in other standard pipe
cases, the Department has wide discretion in determining model matches
in antidumping cases (citing Torrington Co. v. United States, 881 F.
Supp. 622 at 634 (Ct. Int'l Trade 1995); (Smith-Corona v. United
States, 713 F. 2d 1568, 1571 (Fed Cir. 1983), cert. denied, 465 U.S.
1022(1984)). The petitioners explain that the Department's methodology
selects the most similar models that match as closely as possible the
five physical characteristics in the hierarchy, classifies models into
families on the basis of nominal pipe size, and selects the models that
produce the smallest difference-in-merchandise adjustment. The
petitioners point out that selecting model matches on the basis of
difference-in-merchandise takes into account a combination of physical
characteristics and, moreover, it is in accordance with section 771
(16)) of the Act, which calls for finding the closest possible match.
The petitioners contend that, although the Department's model-match
methodology is different from the methodology employed in the previous
New Shippers Review and other pipe cases, the use of this methodology
in the instant case does not preclude it from being a reasonable model-
matching approach. The petitioners contend further that, while
controversy has arisen in the antifriction bearings proceedings
regarding the family model-match methodology, such controversy is
irrelevant given that the methodology was approved by the Court of
International Trade, citing Torrington Co. v. United States, 881 F.
Supp. 622 (CIT 1995). The petitioners note that the Department's model
matching meets the statutory goal of matching products with the most
similar characteristics.
The petitioners also rebut Rajinder's claim that the Department
disregarded wall thickness that Rajinder claims to be the most
important factor. The petitioners point out that determining whether
certain characteristics are more important over others has been an
ongoing controversial topic between the Department and certain domestic
interested parties and various respondents in other proceedings. The
petitioners note that the Department's methodology takes into account a
combination of physical characteristics, including wall thickness.
In addition, the petitioners argue that differences in cost are
reflective of differences in physical characteristics which is the
premise behind the difference-in-merchandise adjustments. The
petitioners also contend that, despite whether the pipe is light,
medium, or heavy, all of the products used for comparison purposes have
the same end use--the conveyance of gases and liquids and light
structural uses. The petitioners argue that the Department's
hierarchical approach to matching models that are most similar as set
forth in its original questionnaire arbitrarily assigned a level of
importance to certain characteristics and did not take into account
differences in physical characteristics. The petitioners assert that a
change in any one of the characteristics included in the hierarchy
causes changes in other characteristics included in the hierarchy. The
petitioners explain that a change in wall thickness can alter the
thickness as well as the costs associated with end and surface finish,
both of which are characteristics included in the hierarchy.
The petitioners point out that, under the hierarchical approach,
the Department would, in ascending order, find matches at the highest
level of the hierarchy and would, thereby, disregard any changes in
characteristics at the lower levels as a result of finding a match at
the higher level. The petitioners argue that, in essence, this approach
may find matches at higher levels within the hierarchy with a higher
difference-in-merchandise even though another match might yield a lower
adjustment.
The petitioners argue that Rajinder has not provided evidence that
the differences in wall thickness and the claimed specialized uses of
the different wall thicknesses yield differences in market values. The
petitioners therefore argue that, for the foregoing reasons, the
Department should maintain the model-match methodology it used in the
preliminary margin calculations for the final results of review.
Department's Position: We agree with Rajinder in part. We agree
that we should alter the model-match methodology from what we used in
the preliminary results, but we do not agree that we should
automatically accept the matches that Rajinder suggested in its
response. In the preliminary results, we matched each U.S. model to a
``family'' of home-market models.
Sections 771(16)(B) and (C) of the Act define foreign like product
merchandise as identical products or products in the following two
categories:
(B) Produced in the same country and by the same person as the
merchandise which is the subject of the investigation, like that
merchandise in component material or materials and in the purposes
for which used and approximately equal in commercial value to that
merchandise.
(C) Produced in the same country and by the same person and of
the same general class or kind as the merchandise which is the
subject of the investigation, like that merchandise in the purposes
for which used, and which the administering authority determine may
reasonably be compared with that merchandise.
In accordance with section 771(16) of the Act, we modified our matching
methodology and applied the criteria as follows. We did not consider
grade and finish since those categories were the same for all HM
models. The remaining criteria are size, wall thickness, and end
finish. For size, we agree with the respondent, as we did in the
preliminary results, that the U.S. models should be matched to HM
models with a size of 32 mm or 40 mm. Each of the U.S. models fell
between two HM models with essentially equivalent differences in wall
thickness. For these four models, we reviewed the end finishes. All of
these models had the same end finish, so that was not a determinant.
This left two possible HM matches for each U.S. model. For these final
results, unlike the preliminary results, we compared the variable cost
of manufacture for all of these products and matched those products
with the smallest differences (see analysis memorandum dated May 20,
1998).
Comment 6: The petitioners argue that the Department should not
make a deduction from NV for Rajinder's reported HM credit expenses.
The petitioners assert that, based on Rajinder's methodology for
calculating credit expenses, one cannot discern the invoice against
which payment was being made because these expenses were not calculated
on an order-or product-specific basis. The petitioners
[[Page 32831]]
also note that Rajinder used an arbitrary method for determining
payment dates based on whether a certain customer owed Rajinder more or
less than fifty percent of its outstanding balance which, the
petitioners argue, does not correlate to a customer's actual payment
history. The petitioners suggest that the Department use instead a
customer-specific average credit period as it has done in the past with
cases in which a respondent's system utilized revolving accounts rather
than rely upon any arbitrary method for determining payment dates.
The petitioners also argue that Rajinder did not provide a reliable
HM short-term interest rate. The petitioners note that, at
verification, Rajinder provided the Department with statements from two
of its banks that specify the short-term interest rate charged to
Rajinder. However, the petitioners point out that Rajinder received a
number of short-term loans from various financial institutions and that
the interest rates charged by the two banks are not representative of
the interest rates incurred on the short-term loans that Rajinder has
outstanding with the various other financial institutions. The
petitioners assert that Rajinder is therefore manipulating the interest
rate used in the credit expense calculation by providing the interest
rates selectively. The petitioners argue that, because the cost of
working capital is fungible, the Department should calculate an average
short-term interest rate from all short-term loans Rajinder has
outstanding with the various financial institutions. In addition, the
petitioners contend that, because Rajinder has failed to provide the
Department with information necessary to calculate an average short-
term interest rate, the Department should disallow an adjustment to NV
for credit expenses.
Rajinder argues that credit expenses were verified with very few
discrepancies and notes that the few discrepancies the Department found
were disadvantageous to Rajinder. Rajinder argues, therefore, that
because the credit expense calculation was verified and found to be
accurate there is no reason to deny an adjustment to NV for this
expense. Rajinder also refutes the petitioners' assertion that Rajinder
used an arbitrary method to calculate its HM credit expenses. Rajinder
points out that the calculation methodology was reasonable and
consistent with the manner in which Rajinder's customers remit payment.
Rajinder also states that petitioners' suggested methodology is only
one of several methodologies that can be used to calculate credit
expenses. Rajinder also argues that, if the Department rejects
Rajinder's reported HM credit expenses, it should provide Rajinder with
an opportunity to use a different method.
Rajinder contends further that the short-term interest rate was
verified and found to be accurate. Rajinder argues that it did not
select the interest rate to be used in the calculation and there is
nothing on the record or in the verification report or accompanying
exhibits to suggest that it is unrepresentative of its short-term cost
of borrowing. Rajinder notes that high interest rates are common in
India, given the rate of inflation and devaluation. Rajinder asserts
that, for the final results of review, the Department should accept
Rajinder's credit expense calculation including the short-term interest
rate used in the calculation.
Department's Position: We agree with Rajinder. Rajinder calculated
credit periods based on the manner in which its payment system
operates. Many companies have revolving lines of credit for their
customers. Despite the fact that such a system may make it difficult to
tie specific sales to subsequent payments from the customer,
calculation of average credit periods based on such a system is not
unreasonable. In fact, as the verification report alludes, Rajinder's
reported figures generally erred on the conservative side.
We have also accepted Rajinder's reported interest rate. Rajinder
did not, as the petitioners suggest, supply the verifiers with
interest-rate information selectively for two of its bank loans. The
verifiers reviewed all of Rajinder's outstanding loans (short-and long-
term) and traced the short-term loans to entries in the general ledger
and Rajinder's financial statements showing outstanding balances and
payments. In addition, the verifiers randomly chose two of the loans
and reviewed all of the supporting documentation from which the
interest rates were drawn. The interest rate charged on the two loans
reviewed by the Department in detail corresponded with the rate
Rajinder used in its calculation of credit expenses.
Comment 7: Rajinder contends that, while the Department deducted
U.S. selling expenses from U.S. prices, it failed to deduct HM indirect
selling expenses from NV, creating an apples-to-oranges comparison.
Rajinder states that, for the final results of review, the Department
should deduct HM indirect selling expenses subject to the amount
permissible under the CEP-offset provision.
The petitioners refute Rajinder's argument that HM indirect selling
expenses should be deducted from NV. The petitioners argue that,
because the Department made a LOT adjustment which accounts for
differences in selling expenses, including indirect selling expenses,
the Department cannot make a CEP offset for HM indirect selling
expenses. The petitioners point out that, if the Department compared
sales at the same LOT, a CEP offset could not be performed (citing
Antidumping Duties, Final Rule, 62 FR 27296, 27372 (May 19, 1997)).
Department's Position: The statute directs us to adjust NV for HM
indirect selling expenses where we are not able to make a LOT
adjustment. See sections 773(a)(7)(A)(i) and (ii) and section
773(a)(7)(B) of the Act. Since we made a LOT adjustment to NV for the
final results of review, we may not deduct HM indirect selling expenses
from NV as an offset to U.S. indirect selling expenses.
Comment 8: The petitioners argue that, for the final results of
review, the Department should not make a deduction from NV for
Rajinder's claimed HM indirect selling expenses.* The petitioners
contend that Rajinder has not documented these selling expenses
adequately and has not clarified its calculation of how it allocated
such expenses to black and galvanized pipe, despite the Department's
request for additional information in its supplemental questionnaire.
The petitioners also argue that company officials provided conflicting
information on this subject at verification.
---------------------------------------------------------------------------
* Given the lack of clarity from both parties, we assume the
comments in this section are referring to the use of indirect-
selling expenses as the commission offset.
---------------------------------------------------------------------------
Rajinder argues that there is no basis for disallowing a deduction
from NV for these selling expenses merely because they were not
verified. Rajinder notes that, for those expenses that were examined,
the Department found such expenses to be reported accurately. Rajinder
argues that it did respond to the Department's request for additional
information in its supplemental questionnaire response by providing a
breakdown of the expenses attributable to HM indirect selling expenses,
including worksheets demonstrating the calculation of pipe based on the
weight and type of the pipe.
Department's Position: As discussed in our response to Comment One,
we have not accepted Rajinder's HM
[[Page 32832]]
indirect selling expenses. Therefore, this argument is moot.
Comment 9: The petitioners contend that the Department should
revise the CEP-profit ratio calculated in the preliminary results of
review. The petitioners assert that the cost of goods sold (total costs
minus the change in inventory) should be subtracted from the total
revenues because only those products that were sold generated revenue.
The petitioners point out that incorporating this change into the
calculation will increase the CEP-profit ratio considerably.
Rajinder refutes the change in the numerator of the CEP-profit
ratio that the petitioners propose, arguing that profit is the
difference between revenue and expenses which includes the cost for
inventory that has not yet been sold. Rajinder contends, however, that
the CEP-profit ratio is overstated because the Department deducted an
amount for imputed expenses incorrectly. Rajinder also points out that
the Department deducted an incorrect figure for ``Total Costs'' which
erroneously yields a profit, instead of a loss, for the period.
Department's Position: We agree with both the petitioners and
Rajinder in part. We agree that the cost of goods sold should be
subtracted from the total revenue (see Calculation of Profit for
Constructed Export Price Transactions Policy Bulletin, dated September
4, 1997). The calculations that we performed added the change-in-
inventory figure to the total revenue after deducting the total costs.
This calculation produces the same results that the petitioners
suggest.
We also agree with Rajinder that we made some arithmetic errors in
the calculation. We have corrected these errors (see analysis
memorandum, dated May 20, 1998).
Comment 10: Rajinder argues that the Department incorrectly
included imputed credit expenses and inventory carrying costs in the
CEP-profit calculation.
The petitioners agree with Rajinder that the CEP-profit calculation
is incorrect and provide suggested changes to correct the calculation.
Department's Position: We disagree with both the respondent and the
petitioners. The suggested approaches blur the definition of U.S.
expenses, as defined in section 772(f)(2)(B) of the Act, and U.S.
selling expenses, as defined in sections 772(d)(1) and (2). As we
discussed in AFBs at 2126, sections 772(f) (1) and 772(f)(2)(D) of the
Act state, the per-unit profit amount shall be an amount determined by
multiplying the total actual profit by the applicable percentage (ratio
of total U.S. expenses to total expenses). Specifically, the Act
defines ``total actual profit'' as the total profit earned by the
foreign producer, exporter, and affiliated parties described in
subparagraph (C) with respect to the sale of the merchandise for which
total expenses are determined under such subparagraph. In accordance
with the statute, we base the calculation of the total actual profit
used in calculating the per-unit profit amount for CEP sales on actual
revenues and expenses recognized by the company. In calculating the
per-unit cost of the U.S. sales, we have included net interest expense.
Therefore, we do not need to include imputed interest expenses in the
``total actual profit'' calculation since we have already accounted for
actual interest in computing this amount under section 772(f)(1) of the
Act.
When we allocated a portion of the actual profit to each CEP sale,
we have included imputed credit and inventory carrying costs as part of
the total U.S. expense allocation factor. This methodology is
consistent with section 772(f)(1) of the Act, which defines ``total
United States Expense'' as the total expenses described under sections
772(d)(1) and (2). Such expenses include both imputed credit and
inventory carrying costs. See Certain Stainless Wire Rods from France,
61 FR 47874, 47882 (September 11, 1996).
Comment 11: Rajinder contends that, in the Department's
recalculation of HM imputed credit expenses, excise taxes should not be
deducted because the amount of credit extended to the customer is
inclusive of excise tax.
The petitioners contend that the Department should continue to
exclude Rajinder's excise taxes in the calculation of Rajinder's HM
imputed credit expense calculation because, to do otherwise, is
inconsistent with and contrary to both Department policy and practice.
The petitioners contend further that, because the taxes are ultimately
rescinded to the government as revenue, it does not serve the purpose
of the adjustment to price for imputed credit expenses.
Department's Position: We have not deducted excise taxes in the
recalculation of HM imputed credit expense. This tax is included in the
price Rajinder charged to the customer and is paid to the government
when the goods are removed from the factory. Therefore, the amount of
the tax is an imputed credit expense brought on by the sale of the pipe
and, as such, is appropriate to include in the interest expense
calculation.
Comment 12: Rajinder contends that the Department matched certain
U.S. sales transactions to the incorrect HM sales transactions.
Specifically, Rajinder argues that the Department inadvertently defined
a certain computer variable, which it used for matching purposes, by
the date of payment. Rajinder argues that, for the final results of
review, the Department should define the variable as the sale date.
Department's Position: We agree with Rajinder and have corrected
this clerical error.
Comment 13: Rajinder contends that, despite the Department's
inclusion of language in the program to change the sale dates of
certain U.S. sales transactions, the computer output demonstrates that
such changes were not implemented. Rajinder requests that the
Department make such changes for the final results of review.
The petitioners agree with Rajinder that changes to the sale dates
are appropriate and provide suggestions for those changes.
Department's Position: We agree and have corrected this error for
the final results (see analysis memorandum, dated May 20, 1998).
Comment 14: Rajinder contends that the Department inadvertently
failed to make corrections to its reported HM shipment dates as
presented at the outset of verification. Rajinder requests that the
Department make these changes for the final results of review because
corrections to the shipment date ultimately affect HM prices.
Department's Position: We agree with respondent and have made the
necessary changes for the final results of review.
Final Results of Review
As a result of our analysis of the comments received and the
correction of certain inadvertent clerical errors, we find that the
following margins exist for the period May 1, 1996, through April 30,
1997:
------------------------------------------------------------------------
Percentage
Manufacturer/Exporter margin
------------------------------------------------------------------------
RSL........................................................ 31.13
Lloyd's Metals & Engineers*................................ 0.00
------------------------------------------------------------------------
*This firm made no shipments of subject merchandise to the United States
during the instant POR. Rate is from the last segment of the
proceeding in which the firm had shipments/sales.
Assessment Rates
The Department shall determine, and the Customs Service shall
assess, antidumping duties on all appropriate entries. For CEP sales,
we divided the total dumping margins for the reviewed sales by the
total entered value of those
[[Page 32833]]
reviewed sales for each importer/customer. We will direct Customs to
assess the resulting percentage margin against the entered Customs
values for the subject merchandise on each of the importer's/customer's
entries during the review period. While the Department is aware that
the entered value of sales during the POR is not necessarily equal to
the entered value of entries during the POR, use of entered value of
sales as the basis of the assessment rate permits the Department to
collect a reasonable approximation of the antidumping duties which
would have been determined if the Department had reviewed those sales
of merchandise actually entered during the POR.
To calculate the cash deposit rate for each exporter, we divided
the total dumping margins for each exporter by the total net value (EP
or CEP) for that exporter's sales of subject merchandise in the United
States during the review period. The following deposit requirements
will be effective for shipments of subject merchandise entered, or
withdrawn from warehouse, for consumption on or after the publication
date of these final results of administrative review, as provided by
section 751(a)(1) of the Tariff Act: (1) the cash deposit rate for the
reviewed companies will be the rates outlined 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, a prior 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) the cash deposit rate for all other
manufacturers or exporters will continue to be 7.08 percent, the ``All
Others'' rate made effective by the final determination of sales at
LTFV, as explained in the 1995/96 New Shippers Review of this order.
See Certain Welded Carbon Steel Pipes and Tubes from India; Final
Results of New Shippers Antidumping Duty Administrative Review, 62 FR
47632, 47644 (September 10, 1997).
These deposit requirements shall remain in effect until publication
of the final results of the next administrative review.
This notice also serves as a final reminder to importers of their
responsibility under 19 CFR 353.26 to file a certificate regarding the
reimbursement of antidumping duties prior to liquidation of the
relevant entries during this review period. Failure to comply with this
requirement could result in the Secretary's presumption that
reimbursement of antidumping duties occurred and the subsequent
assessment of double antidumping duties.
This notice also serves as the only reminder to parties subject to
administrative protective orders (APO) of their responsibility
concerning the return or destruction of proprietary information
disclosed under APO in accordance with 19 CFR 353.34(d)(1). Timely
written notification of the 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 determination is issued and published in accordance with
sections 751(a)(1) and 777(i)(1) of the Act.
Dated: June 8, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-15873 Filed 6-15-98; 8:45 am]
BILLING CODE 3510-DS-P