[Federal Register Volume 63, Number 116 (Wednesday, June 17, 1998)]
[Notices]
[Pages 33041-33051]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-16108]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-201-805]
Circular Welded Non-Alloy Steel Pipe and Tube From Mexico: Final
Results of Antidumping Duty Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of final results of antidumping duty administrative
review.
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SUMMARY: On December 8, 1997, the Department of Commerce (the
Department) published the preliminary results of its administrative
review of the antidumping duty order on circular welded non-alloy steel
pipe from Mexico covering exports of this merchandise to the United
States by one manufacturer/exporter, Hylsa S.A. de C.V. (``Hylsa'')
during the period November 1, 1995 through October 31, 1996. See
Circular Welded Non-Alloy Steel Pipe and Tube from Mexico: Preliminary
Results of Antidumping Duty Administrative Review and Partial
Termination of Review, 62 FR 64564 (Preliminary Results). We invited
interested parties to comment on the preliminary results. We received
comments and rebuttals from petitioners and Hylsa. Based on our
analysis of the comments received, we have changed the results from
those presented in the preliminary results of review.
EFFECTIVE DATE: June 17, 1998.
FOR FURTHER INFORMATION CONTACT: Ilissa Kabak at (202) 482-0145 or John
Kugelman at (202) 482-0649, Enforcement Group III--Office 8, Import
Administration, International Trade Administration, U.S. Department of
Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C.
20230.
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 references to the Department's regulations are
to 19 C.F.R. Part 353 (April 1, 1997). Where appropriate, we have cited
the Department's new regulations, codified at 19 C.F.R. 351 (62 FR
27296, May 19, 1997). While not binding on this review, the new
regulations serve as a restatement of the Department's policies.
Background
The Department published an antidumping duty order on circular
welded non-alloy steel pipe and tube from Mexico on November 2, 1992
(57 FR 49453). The Department published a notice of ``Opportunity to
Request an Administrative Review'' of the antidumping duty order for
the 1995/96 review period on November 4, 1996 (61 FR 56663). On
November 27, 1996, respondents Hylsa and Tuberia Nacional S.A. de C.V.
(``TUNA'') requested that the Department conduct an administrative
review of the antidumping duty order on circular welded non-alloy steel
pipe and tube from Mexico. We initiated this review on December 16,
1996. See 61 FR 66017. On February 4, 1997, TUNA requested a withdrawal
from the proceeding. Pursuant to 19 C.F.R. 353.22(a)(5) of the
Department's regulations, the Department may allow a party that
requests an administrative review to withdraw such request not later
than 90 days after the date of publication of the notice of initiation
of the administrative review. TUNA's request for withdrawal was timely
and there were no requests for review of TUNA from other
[[Page 33042]]
interested parties. Therefore, the Department terminated this review
with respect to TUNA in the December 8, 1997 preliminary results of
this administrative review in accordance with Sec. 353.22(a)(5) of the
Department's regulations (19 CFR 353.22(a)(5)).
Under Sec. 751(a)(3)(A) of the Act, the Department may extend the
deadline for issuing the preliminary results of an administrative
review if it determines that it is not practicable to complete the
review within the statutory time limit of 245 days. The Department
determined that timely completion was not practicable. Accordingly, on
July 8, 1997, the Department published a notice of extension of the
time limit for the preliminary results in this case to December 2,
1997. See Extension of Time Limit for Antidumping Duty Administrative
Review, 62 FR 36488. We held a public hearing on February 20, 1998.
The Department has now completed this review in accordance with
Sec. 751(a) of the Act.
Scope of the Review
The products covered by this order are circular welded non-alloy
steel pipes and tubes, of circular cross-section, not more than 406.4
millimeters (16 inches) in outside diameter, regardless of wall
thickness, surface finish (black, galvanized, or painted), or end
finish (plain end, beveled end, threaded, or threaded and coupled).
These pipes and tubes are generally known as standard pipes and tubes
and are intended for the low pressure conveyance of water, steam,
natural gas, and other liquids and gases in plumbing and heating
systems, air conditioning units, automatic sprinkler systems, and other
related uses, and generally meet ASTM A-53 specifications. Standard
pipe may also be used for light load-bearing applications, such as for
fence tubing, and as structural pipe tubing used for framing and
support members for reconstruction or load-bearing purposes in the
construction, shipbuilding, trucking, farm equipment, and related
industries. Unfinished conduit pipe is also included in these orders.
All carbon steel pipes and tubes within the physical description
outlined above are included within the scope of this order, except line
pipe, oil country tubular goods, boiler tubing, mechanical tubing, pipe
and tube hollows for redraws, finished scaffolding, and finished
conduit. Standard pipe that is dual or triple certified/stenciled that
enters the U.S. as line pipe of a kind used for oil or gas pipelines is
also not included in this order.
Imports of the products covered by this order are currently
classifiable under the following Harmonized Tariff Schedule (HTS)
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, and 7306.30.50.90.
Although the HTS subheadings are provided for convenience and
customs purposes, our written description of the scope of these
proceedings is dispositive.
The period of review (POR) is November 1, 1995 through October 31,
1996. This review covers sales of circular welded non-alloy steel pipe
and tube by Hylsa.
Fair Value Comparisons
To determine whether sales of subject merchandise from Mexico to
the United States were made at less than fair value, we compared the
export price (EP) to the normal value (NV), as described in the
``Export Price'' and ``Normal Value'' sections of the preliminary
results of review notice (see Preliminary Results at 64565-64566). On
January 8, 1998, the Court of Appeals for the Federal Circuit issued a
decision in CEMEX v. United States, 133 F.3d 897 (Fed. Cir. 1998). In
that case, which involved a determination by the Department under pre-
URAA law, the Court discussed the appropriateness of using constructed
value (CV) as the basis for foreign market value when the Department
finds home market sales to be outside the ``ordinary course of trade.''
However, the URAA amended the definition of sales outside the
``ordinary course of trade'' to include sales below cost. See
Sec. 771(15) of the Act. Consequently, the Department has reconsidered
its practice in light of this court decision and has determined that it
would be inappropriate to resort directly to CV, in lieu of foreign
market sales, as the basis for NV if 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 sales of similar merchandise, 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. Therefore, in this proceeding, when making comparisons in
accordance with Sec. 771(16) of the Act, we considered all products
sold in the home market as described in the ``Scope of Review'' section
of this notice, above, 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. We have
implemented the Court's decision in this case, to the extent that the
data on the record permitted.
Analysis of Comments Received
We invited interested parties to comment on our preliminary results
of review. We received both comments and rebuttals from petitioners and
Hylsa. The following analysis addresses the issues raised by the
parties in these comments and rebuttals.
Comment 1: Reimbursement
During the POR, Hylsa was the producer, exporter, and importer of
record for all U.S. sales of subject merchandise. Hylsa's U.S. customs
broker claims Hylsa as the importer of record on the customs entry
document completed upon importation of subject merchandise. The broker
then invoices Hylsa to reclaim the customs duties and service fees it
incurred. Hylsa International Corporation (Hylsa International) is a
U.S. company wholly-owned by Hylsa; it has no employees, nor does it
perform any sales activities. Hylsa International is used by Hylsa as a
conduit through which Hylsa passes sales invoices to, and collects
payments from, its U.S. customers. To this end, Hylsa issues two
invoices for its U.S. sales; one invoice is from Hylsa to Hylsa
International while the other is from Hylsa International to the U.S.
customer. The latter invoice is issued to the U.S. customer for
purchase and payment records. The U.S. customer remits payment to Hylsa
International's bank account, and Hylsa applies these payments to the
customer account it maintains for Hylsa International. For a more
detailed explanation of Hylsa International, see Sales Verification
Report at 8.
Petitioners request that the Department apply the reimbursement
regulation, 19 CFR Sec. 353.26, in this administrative review by
deducting the amount of antidumping duties paid by Hylsa on behalf of
the importer, or reimbursed to the importer, from the export price.
Petitioners object to the Department's interpretation of Sec. 353.26
set forth in the preliminary results of this administrative review. The
Department stated in the preliminary results that separate corporate
entities must exist as producer/reseller and importer in order to
invoke the
[[Page 33043]]
reimbursement regulation. Petitioners argue that, contrary to the
Department's position, the regulation does not require that the
producer/exporter and importer be separate entities. According to
petitioners, the only case in which this situation was addressed was in
the previously completed administrative review of this order. See
Circular Welded Non-Alloy Steel Pipe and Tube from Mexico (Final
Results of Pipe and Tube from Mexico), 62 FR 37014 at 37017 (July 10,
1997) (Comment 4). There, petitioners aver, the Department did not
decide this issue.
Petitioners state that cases in which the Department has discussed
the application of the reimbursement regulation all involved the
payment of duties by a foreign affiliate. In such cases, petitioners
contend, the Department has not inferred that reimbursement has
occurred from the mere fact of affiliation. To this end, petitioners
cite Certain Cut-to-Length Carbon Steel Plate from Germany, 62 FR 18390
at 18394 (April 15, 1997) (Comment 6). On the other hand, petitioners
argue, the Department has not hesitated in applying the reimbursement
regulation in cases where there is evidence of the producer's direct
payment of, or reimbursement for, antidumping duties incurred by an
affiliated importer. See Furfuryl Alcohol from the Republic of South
Africa (Furfuryl Alcohol), 62 FR 36488, 36490 (July 8, 1997)
(preliminary results) and Certain Cold-Rolled Carbon Steel Flat
Products from the Netherlands (Preliminary Results of Steel Products
from the Netherlands), 61 FR 51888, 51891 (October 4, 1996). According
to petitioners, the Department has rejected the argument that since two
affiliated parties are collapsed to calculate a dumping margin, the
parties should also be collapsed under the reimbursement regulation
(citing Circular Welded Non-Alloy Steel Pipe from the Republic of Korea
(Pipe from Korea), 62 FR 55574, 55580 (October 27, 1997) and Color
Television Receivers from the Republic of Korea (Color Television
Receivers), 61 FR 4408, 4411 (February 6, 1996)). Petitioners argue
that, because the Department has not collapsed entities to apply the
reimbursement regulation, we have not concluded whether the regulation
can apply to a single entity. Additionally, because Sec. 353.26 applies
regardless of the affiliation between the producer/exporter and the
importer, it would be inconsistent to apply the regulation in a case
where the producer and importer are affiliated but not apply it when
the producer and importer are a single entity. Petitioners state that
the Department recognized this principle with regards to duty
absorption in Certain Hot-Rolled Lead and Bismuth Carbon Steel Products
from the United Kingdom, 61 FR 65022 at 65023 (December 10, 1996)
(preliminary results).
Petitioners note that in the few cases in which the Department has
addressed the issue of reimbursement, it has demonstrated that the
producers' direct payment of antidumping duties triggers Sec. 353.26.
Petitioners cite to Brass Sheet and Strip from the Netherlands (Brass
from the Netherlands), 57 FR 9534 (March 19, 1992) (Comment 6) and
Color Television Receivers at 4410-4411 in support of their position.
Petitioners maintain that while the Department has previously stated
that the reimbursement regulation cannot apply in cases where, as here,
the importer is the exporter, the Department has, nevertheless, applied
the reimbursement provision in cases with CEP sales without addressing
concerns over the possibility of one party reimbursing itself.
Petitioners refer to Certain Cold-Rolled Carbon Steel Flat Products
from the Netherlands (Final Results of Steel Products from the
Netherlands), 61 FR 48465 at 48470 (September 13, 1996) (Comment 17)
and Furfuryl Alcohol at 36490.
However, petitioners state that if the Department continues to
interpret the regulation as requiring two separate entities, we should
find reimbursement in this case because two entities are, in fact,
involved. Petitioners note that in the regulations the Department
defines ``importer'' as ``the person by whom, or for whose account, the
merchandise is imported.'' 19 CFR Sec. 353.2(i). Petitioners argue that
this definition may refer to more than one entity. In this case, they
assert that while Hylsa may be the ``importer'' because it is ``the
person by whom * * * the merchandise is imported,'' Hylsa International
may also be considered an ``importer'' if it is the party ``for whose
account * * * the merchandise is imported.'' Because Hylsa
International is a separate legal entity that acts as a reseller for
Hylsa's sales to U.S. customers, we may consider it to be the
``importer'' in this case. Therefore, petitioners argue that if Hylsa
International is the ``importer,'' then the Department should find that
Hylsa is paying U.S. antidumping duties on behalf of the ``importer''
within the framework of Sec. 353.26.
Petitioners also assert that the reimbursement regulation applies
even though assessment of antidumping duties has not occurred and cites
Final Results of Steel Products from the Netherlands at 48470-71.
According to petitioners, the Department has taken several approaches
to implementing the reimbursement provisions. Petitioners note that in
past cases, including the above referenced administrative review, we
have ordered the U.S. Customs Service to double the duty assessment
rates published in the final results instead of deducting the amount of
antidumping duties from the export price when applying the
reimbursement regulation. However, in the Preliminary Results of Steel
Products from the Netherlands, the Department deducted the amount of
antidumping duties to be paid from the export price. Petitioners urge
the Department to adhere to the plain language of the regulation and
deduct any antidumping duties paid by Hylsa from EP.
Hylsa counters that the reimbursement regulation is inapplicable in
this case. Arguing that Hylsa is the ``importer,'' Hylsa notes that
Sec. 353.26 mandates the ``importer'' to file a pre-liquidation
certificate with the appropriate District Director of Customs stating
that the ``importer'' has not entered into any duty reimbursement
agreement with the manufacturer, producer, seller, or exporter. Hylsa
argues that since the importer of record is the only party required to
provide this certification, the ``importer'' under the reimbursement
regulation is defined as the ``importer of record.'' Since Hylsa
International has not entered into any reimbursement agreement with
Hylsa, respondent concludes, the reimbursement provision of Sec. 353.26
does not apply.
Hylsa argues that the Department's interpretation of the regulation
was correct in the preliminary results of this administrative review.
The Department stated in the preliminary results that separate entities
must exist as producer and/or seller and importer in order to apply the
reimbursement regulation. Hylsa agrees that Sec. 353.26 requires the
participation of two separate corporate entities and that the
regulation applies only when antidumping duty payments are made on
behalf of the importer. Hylsa also agrees with the petitioners that the
Department has never applied the reimbursement regulation in a case in
which the producer/reseller and importer are the same corporate entity,
but asserts, contrary to petitioners, that this is not a case of first
impression. Hylsa argues that international sales made on a duty-paid
basis are a normal part of international commerce. Therefore, the fact
that the Department has not addressed the issue of reimbursement in
these situations does
[[Page 33044]]
not mean that it has not previously been considered by the Department
or that the Department does not have an established practice with
regard to this issue. Rather, Hylsa argues that this indicates that
parties involved in previous cases agreed that reimbursement is
impossible where the producer and importer are the same entity.
Lastly, Hylsa asserts that if the Department is inclined to
reconsider its interpretation of Sec. 353.26, it would not be proper to
do so for the final results of this administrative review. Hylsa
believes that applying the reimbursement regulation in cases where the
producer/reseller and importer are the same entity would be a
fundamental change in Departmental policy that should be completed
through our normal rule-making procedures, including publication in the
Federal Register, and provision for comment by all interested parties.
The application of the reimbursement regulation to Hylsa's sales in
this review would penalize Hylsa for failing to predict what Hylsa
characterizes as a fundamental policy change.
Department's Position
We disagree with petitioners that 19 CFR Sec. 353.26 is applicable
in this case. Petitioners claim that because the Department has not
collapsed entities to apply the reimbursement regulation in past cases,
we have not addressed whether the regulation can apply to a single
entity. Our decision as to reimbursement is based upon our regulatory
interpretation of 19 CFR Sec. 353.26, which is that two separate
corporate entities must exist to invoke the reimbursement regulation.
This interpretation was the basis for the decision not to apply the
reimbursement regulation in the preliminary results of this
administrative review. Petitioners cited to Brass Sheet and Strip from
the Netherlands and Final Results of Steel Products from the
Netherlands, in which the Department invoked the reimbursement
regulation, and claimed that the regulation should likewise be applied
here, where the exporter is the importer. However, because two separate
entities were present in both of those cases, those decisions do not
apply to the instant case in which one corporate entity is the
producer, exporter and importer of record.
We also disagree with petitioners' claim that Hylsa International
could be considered the ``importer'' to satisfy the separate corporate
entity requirement. Hylsa International is a paper company with no
employees or sales activities. In addition, the customs broker bills
Hylsa, not Hylsa International, for fees it incurred. The customs
broker also claims Hylsa, not Hylsa International, as the importer of
record on the customs entry document completed upon importation of
subject merchandise. Therefore, we do not agree that the subject
merchandise imported into the United States by Hylsa is for Hylsa
International's account. Accordingly, we conclude that, for purposes of
the reimbursement provision, Hylsa is the importer as defined in 19
C.F.R. Sec. 353.2(i) because it is ``the person by whom . . . the
merchandise is imported.''
As indicated above, petitioners assert that Sec. 353.26 applies
even when the producer and importer are the same entity. Petitioners
claim that the Department has applied the reimbursement regulation to
cases with CEP sales without addressing concerns regarding an entity
reimbursing itself and cites two antidumping cases to support this
argument. As indicated above, petitioners assertions are incorrect. In
Color Television Receivers, our premise was precisely the notion that
the reimbursement regulation does not apply when the producer, exporter
and importer are one and the same entity. In that case, the issue was
whether companies which had been collapsed and treated as a single
entity for purposes of calculating duties should also be considered a
single entity for purposes of applying the reimbursement regulation.
See Id. at 4411. In that case, we determined that these are distinct
issues, requiring different analyses. As we stated, ``[h]ow antidumping
duties are calculated and who, under the law, is responsible for paying
those duties are separate and distinct issues.'' Id. at 4411. Unlike
the case now before us, Color Television Receivers did not involve a
single entity involved in the production, export and import of subject
merchandise. In the cases cited by petitioners, two entities were
involved in the production, export, and import of the subject
merchandise. Because the Department has determined that a single entity
is involved in the production, export, and import of subject
merchandise in this administrative review, the two cited cases are
inapplicable in this instance.
While we recognize that petitioners' position may be a permissible
interpretation of the regulation, the Department continues to believe
that our interpretation is more appropriate given the circumstances of
this case.
Comment 2: Co-export Sales
Hylsa grants co-export rebates on sales to home market customers
that use pipe as input material to manufacture non-subject merchandise
for export. Hylsa explained that it provides the rebate to account for
the differential between home market and export prices for subject pipe
charged to these customers. Hylsa requires the majority of its co-
export customers to submit export documentation as proof that they are
eligible for the rebate. See Sales Verification Report at 9.
Petitioners assert that the Department should exclude these co-
export sales for comparison purposes because the price at which the
merchandise is sold is not ``the price at which the foreign like
product is first sold . . . for consumption in the exporting country''
under 19 U.S.C. Sec. 1677b(a)(1)(B)(i). Petitioners argue that the
Department is entitled to agency deference in defining home market
consumption on a case-by-case basis, citing Chevron U.S.A. Inc. v.
Natural Resources Defense Council, 467 U.S. 837, 842-843 (1984).
Because co-export rebates are granted only for sales which are
subsequently exported after further processing, petitioners insist that
such sales are not ``for consumption'' in Mexico, and believe that
including co-export sales in the normal value calculation would
encourage price discrimination of subject merchandise between Mexican
and U.S. markets. Use of these sales for comparison purposes,
petitioners conclude, will not provide an accurate measurement of any
price differences between the two markets.
Alternatively, petitioners argue that the Department may consider
co-export sales to be outside of the ordinary course of trade as
defined at 19 U.S.C. Sec. 1677(15). Petitioners list a number of
factors that the Department should consider when deciding whether sales
of subject merchandise are made outside of the ordinary course of
trade, citing the Court of International Trade's (CIT) decision in
Laclede Steel Co. v. United States, Slip Op. 95-144, 1995 Court of
International Trade LEXIS 191 (Ct. Intl. Trade 1995). These factors
are: 1) the price of the merchandise as compared to other home market
sales, 2) the profit margin of the merchandise as compared to other
home market sales, 3) the number of customers purchasing the product,
4) quality assurances extended for the merchandise, 5) differences in
how the product is sold, 6) the end use of the merchandise, 7) the
average size of the sale compared to other home market sales, and 8)
distinguishable characteristics of the product by the seller.
Petitioners state that the Department should also note other particular
characteristics of Hylsa's co-export sales, including (i) only home
market customers that export to the U.S.
[[Page 33045]]
market receive the rebate, and (ii) co-export sales are made at prices
not representative of ``conditions and practices within Mexico for
sales of standard pipe.'' Petitioners maintain that Hylsa's co-export
sales prices are below ``normal'' home market prices, which proves that
profitability is below that of normal domestic sales. Sales terms for
co-export sales differ from normal home market sales in that separate
export documentation and dual invoicing are required. Petitioners note
that these sales are also made by Hylsa's export sales department
instead of the domestic sales department, which handles all other home
market sales.
Petitioners assert that even if the Department does consider these
sales to be within the ordinary course of trade, in the past it has
reserved the inherent authority under 19 C.F.R. Sec. 353.44(b) to
exclude home market sales from its calculation, if the Department
believes that their inclusion would not serve the purpose of the
antidumping law. This provision states that if 80 percent of home
market sales are made at the same price, the Department will calculate
normal value based on that sales price alone, excluding the remaining
transactions. Petitioners also cite 19 C.F.R. Sec. 353.44(c), which
provides that, if the Department decides that Sec. 353.44(b) does not
apply and that using weighted-average price or prices (as provided for
in Sec. 353.44(a)) is inappropriate, the Department will use any other
reasonable method for calculating normal value that it deems
appropriate. Therefore, petitioners believe that we should disregard
co-export sales in the calculation of normal value.
Petitioners assert that if the Department includes the co-export
sales, it should not allow any adjustment for ``co-export rebates''
granted to home market customers. According to petitioners, the
Department could not verify the basic operation of these rebates as a
result of inconsistent and contradictory explanations made by Hylsa at
verification. Therefore, petitioners assert that the Department should
add the rebate amounts back into the invoiced home market price using a
circumstance-of-sale (COS) adjustment to increase normal value by the
amount equal to the co-export rebates, as provided under 19 U.S.C.
Sec. 1677b(a)(6). Petitioners cite Zenith Electronics Corp. v. United
States, 77 F.3d 426 (Fed. Cir. 1996), Mantex, Inc. v. United States,
841 F. Supp. 1290 (Ct. Intl. Trade 1993), and Sawhill Tubular Division
Cyclops Corp. v. United States, 666 F. Supp. 1550 (Ct. Intl. Trade
1987) to support the discretion the courts have allowed the Department
regarding COS adjustments. Petitioners state that we made a COS
adjustment in Oil Country Tubular Goods from Argentina, 60 FR 33539
(June 28, 1995) (Comment 6) to account for rebates granted on third-
country comparison market sales. Petitioners note further that the CIT
upheld our adjustment and finding of a ``causal link'' between the
rebates and any difference ``or lack thereof'' between U.S. market
prices and comparison market prices in U.S. Steel Group v. United
States, 973 F. Supp. 1076 (Ct. Intl. Trade 1997). Petitioners argue
that a ``causal link'' exists between Hylsa's co-export rebates and the
difference in prices between the U.S. and comparison prices in the
instant review.
Hylsa avers that the Department should continue to include co-
export sales for comparison with U.S. sales. Hylsa maintains that the
operations of the co-export rebate program were fully explained to the
Department and that the confusion petitioners cite arose from one sales
trace analyzed at verification. Hylsa argues that the payment process
for this sale was not characteristic of co-export sales payments, and
that normal invoicing procedures were followed by Hylsa. Therefore,
Hylsa believes that the co-export rebate program was described
correctly to the Department.
Hylsa further argues that co-export sales are made for consumption
in the home market, demonstrated by the fact that the co-export
customers transform the foreign like product into merchandise outside
the scope of the antidumping duty order before exportation. Hylsa cites
to Dynamic Random Access Memory Semiconductors of One Megabit and Above
from Korea (DRAMS from Korea), 58 FR 15467, 15473 (March 23, 1993) in
support of its position.
Additionally, Hylsa asserts that co-export sales are made within
the ordinary course of trade. Hylsa notes that its co-export rebate
program predates the original antidumping duty investigation and that
the Department included these sales in its home market price
calculations in the original investigation, published in Circular
Welded Non-Alloy Steel Pipe from Mexico (Final Determination of Pipe
from Mexico), 57 FR 42953, 42954 (September 17, 1992). Hylsa maintains
that no differences exist in ``quality assurance, average size of sale,
product markings, or the manner in which the pipe is sold'' between co-
export sales and other home market sales. Hylsa contends that, under
the Department's established practice, price differentials alone are
not sufficient to classify a company's sales, with otherwise-normal
distribution channels, as sales made outside the ordinary course of
trade. See Electrolytic Manganese Dioxide from Japan, 58 FR 28551,
28552 (May 14, 1993).
Hylsa also argues against the petitioners' proposed application of
a COS adjustment to co-export sales to adjust for any price
differential attributable to co-export rebates. Hylsa contends that the
regulation regarding COS adjustments provides for the application of a
COS adjustment to account for differences in direct selling and other
assumed expenses. Hylsa notes that petitioners do not address any
differences in direct selling and/or assumed expenses between Hylsa's
co-export and other home market sales. Hylsa also notes that any price
differential between these sales exists because the co-export customer
commits to using the foreign like product as input for non-subject
merchandise which is subsequently exported. The Department cannot, and
should not, use this commitment to apply an unfavorable COS adjustment,
according to Hylsa.
Department's Position
We disagree with petitioners that co-export sales are not made for
consumption in the home market or that these sales are outside the
ordinary course of trade. Additionally, we disagree with petitioners
that the Department should exclude these sales under 19 CFR Sec. 353.44
(b) and (c) or that we should apply a COS adjustment.
Hylsa's co-export customers purchase the foreign like product to
use as an input for the processing of merchandise outside the scope of
the antidumping duty order. This finished merchandise is then exported
to the United States or South America. We agree with Hylsa that the
transformation of the foreign like product into non-subject merchandise
constitutes consumption by the home market co-export customers and that
such transactions constitute home market sales under section
773(a)(1)(B)(i) of the Act. We followed this practice in the past. See,
e.g., DRAMS from Korea at 15473. Consistent with our findings in DRAMS
from Korea, the merchandise exported by Hylsa's co-export customers is
not within the class or kind of merchandise subject to the order.
Morever, as in DRAMS from Korea, the record in this case indicates that
Hylsa does not know the ultimate export destination to which the
further-processed merchandise is shipped. See Id.
Furthermore, we do not consider Hylsa's co-export sales to be
outside of
[[Page 33046]]
the ordinary course of trade under 19 U.S.C. Sec. 1677(15). This
provision states that ``ordinary course of trade'' means the
``conditions and practices which, for a reasonable time prior to the
exportation of the subject merchandise, have been normal in the trade
under consideration with respect to merchandise of the same class or
kind.'' We note that Hylsa implemented the co-export rebate program
before the antidumping petition was filed. Therefore, co-export sales
have been part of Hylsa's normal business practices for many years.
Additionally, we considered these sales as within the ordinary course
of trade and included them in our home market price calculation in the
original investigation in this case (see Final Determination of Pipe
from Mexico at 42954). Petitioners argued that Laclede Steel Co. v.
United States outlined eight factors which the Department should
consider when determining whether sales were made within the ordinary
course of trade. We agree with petitioners that co-export sales prices
are lower than other home market sales prices and that sales terms are
different for co-export sales. However, no sales differences exist with
regard to quality assurance for the product, distinguishable
characteristics of the pipe, average size of the sale, or the manner in
which the majority of co-export sales are sold (see Proprietary Version
of Hylsa's July 3, 1997 Response at 35). We believe that the above-
cited differences between co-export and other home market sales in and
of themselves are not sufficient to consider co-export sales as outside
the ordinary course of trade.
Petitioners note that we have the inherent authority under 19
C.F.R. Sec. 353.44 (b) and (c) to exclude those sales that would not
serve the purposes of the antidumping statute. We note that
Sec. 353.44(b) concerns home market transactions sold at the ``same
price.'' The majority of Hylsa's home market sales are made at varying
price levels, thus rendering this provision inapplicable. Additionally,
Sec. 353.44(c) states that if the Department determines that
Sec. 353.44 (a) and (b) do not apply, we have the authority to ``use
any other method for calculating foreign market value.'' Subparagraph
(a), which states that the Department will calculate normal value by
using the weighted-average price when home market sales vary in price,
applies in the review. Because we consider the co-export sales to be
made within the ordinary course of trade and consider such sales as
home market sales, we do not need to invoke our authority to exclude
these sales when calculating normal value.
Finally, we disagree with petitioners that a COS adjustment is
warranted for the co-export sales. Under 19 C.F.R. Sec. 353.56(a)(2),
factors that would warrant the use of a COS adjustment involve
differences in selling expenses, such as ``commissions, credit terms,
guarantees, warranties, technical assistance, and servicing * * * [and]
also * * * differences in selling costs.'' We did not find that Hylsa's
co-export sales had any demonstrable differences in selling expenses,
as referenced above. Therefore, a COS adjustment is not warranted for
Hylsa's co-export sales.
Comment 3: Additional Foreign Inland Freight, Additional Inland
Freight, Additional Foreign Brokerage Fees, and Additional U.S.
Brokerage Fees
Hylsa argues that the Department improperly rejected Hylsa's
reported additional foreign inland freight, additional inland freight,
additional foreign brokerage fees, and additional U.S. brokerage fees
and improperly applied adverse partial facts available. Hylsa explains
that in its normal course of business it incurs freight and brokerage
expenses which exceed the amounts billed to, and collected from, its
customers. Hylsa asserts that it used a reasonable allocation basis for
reporting these additional expenses, given that it does not maintain
actual freight and brokerage costs on a sales-specific basis, and that
transaction-specific reporting would have been too burdensome. Hylsa
argues that the calculation methodology it used in this administrative
review was identical to that which was verified and accepted by the
Department in the original investigation of this case. Hylsa also cites
to the following cases as examples where the Department allowed the
allocation of movement expenses when the calculation of transaction-
specific costs was deemed too burdensome: Industrial Belts from Japan,
58 FR 30018, 30022; Steel Wire Rope from India, 56 FR 46285, 46287
(September 11, 1991).
Hylsa argues that the Department verified the accuracy of the
reported additional freight and brokerage expenses by reconciling the
amounts reported in Hylsa's section B and C sales listings to Hylsa's
cost accounting system. Additionally, Hylsa asserts that the Department
verified the unreasonable burden Hylsa would have faced in attempting
to report these expenses on a transaction-specific basis. Hylsa
reiterated that it does not have computer capabilities to match the
additional freight expenses to specific invoices.
Hylsa asserts that the Department has no reasonable basis for
rejecting the reported additional freight and brokerage expenses. Hylsa
notes that the Department claimed in the preliminary results of this
administrative review that the information was unverifiable based on
transaction-specific freight and brokerage expenses the Department
calculated from individual sales traces reviewed at verification. Hylsa
maintains that the allocation of these additional expenses was
reasonable given that, ``on average[,] Hylsa's customers paid Hylsa
less for shipping and brokerage expenses than Hylsa paid its suppliers.
Due to the inherent nature of averages, however, a given customer may
have paid more or less than Hylsa paid on any specific transaction.''
Hylsa's February 6 brief at 13. Hylsa contends that this fluctuation
does not render the information unverifiable.
Hylsa further argues that the Department was not warranted in its
use of partial adverse facts available for the additional freight and
brokerage expenses in the preliminary results. Hylsa asserts that it
provided verifiable information and cooperated to the best of its
ability to comply with our requests for information. In addition, Hylsa
maintains that the Department did not advise Hylsa in its supplemental
questionnaires that its reporting methodology was incorrect. In sum,
Hylsa argues that the reporting of additional freight and brokerage
expenses, in addition to those charged to customers, to compensate for
the difference between the actual and invoiced freight and brokerage
expenses, is proper and should be used.
Petitioners assert that the Department should continue to disallow
the additional inland freight and foreign inland freight expenses
reported by Hylsa for the final results of this review. Petitioners
argue that the methodology Hylsa employed to calculate the additional
freight expenses for both home market and U.S. sales is unacceptable
because it encompasses fees incurred on both subject and nonsubject
merchandise allocated only to sales of subject merchandise that
incurred freight expenses. Additionally, petitioners argue that
additional freight charges result from partial truck load shipments,
noting that ``[t]he shipping company charges by the truckload, but
Hylsa invoices its customers for shipping charges based on a flat per-
ton rate that assumes the truck is full.'' Petitioners' February 13
rebuttal brief at 3. Petitioners contend that Hylsa's methodology
implies that it pays the
[[Page 33047]]
same proportion of additional freight fees for subject and non-subject
merchandise sales delivered by partial truck loads. However,
petitioners note that there is no evidence on the record supporting
this assumption. Petitioners assert that the verification report shows
that an overall calculated percentage does not reasonably represent
additional freight charges for individual transactions.
Petitioners cite to the final results of the previous
administrative review of this case in which the Department disallowed
Hylsa's claimed adjustment for additional freight expenses. See
Circular Welded Non-Alloy Steel Pipe and Tube from Mexico (Final
Results of Pipe from Mexico), 62 FR 37014, 37017 (July 10, 1997)
(Comment 5). Petitioners note that although the methodology Hylsa used
to report the additional expenses in the above-cited review was
different than in this review, it was flawed for similar reasons that
are apparent in the present review; specifically, it resulted in the
improper allocation of freight and brokerage expenses incurred on sales
of non-subject merchandise to sales of subject merchandise.
Additionally, the Department found in the previous review that Hylsa
maintained records that would have allowed it to tie freight expenses
to specific sales but that Hylsa destroyed these records after a short
period of time. In response, the Department stated in the final results
that it intended to investigate this situation in future reviews.
Petitioners argue that Hylsa should have been prepared in this present
review to substantiate its freight claim by maintaining the appropriate
records.
Petitioners argue that the Department should also continue to deny
any adjustment for the additional foreign and U.S. brokerage expenses.
Petitioners contend that because the calculations represent brokerage
expenses incurred on subject and nonsubject merchandise exported to
both U.S. and third-country markets, it is not a reasonable
representation of additional brokerage fees incurred on U.S. sales of
subject merchandise. Petitioners cite to the Memorandum to the File
from Ilissa Kabak, December 4, 1997 (Analysis Memo) at 2 and the Sales
Verification Report, November 20, 1997, at 33.
Department's Position
We disagree with Hylsa's claim that we improperly rejected the
reported additional foreign inland freight, additional inland freight,
additional foreign brokerage fees, and additional U.S. brokerage fees.
We also disagree with Hylsa's claim that we improperly applied adverse
partial facts available.
Hylsa's methodology for allocating additional freight and brokerage
expenses to reported home market and U.S. sales is unacceptable. In its
original and supplemental questionnaire responses, Hylsa never
explicitly indicated that its additional freight calculations included
expenses incurred on non-subject as well as subject merchandise.
Hylsa's February 21, 1997 Section B response at 27 and July 3, 1997
response at 70. Thus, Hylsa's complaint that we did not alert Hylsa
that the reporting methodology was incorrect in supplemental
questionnaires is not compelling. Because Hylsa inadequately explained
its calculation methodology before verification, it was not possible
for us to advise Hylsa that its methodology was incorrect. We agree
with petitioners that, because these additional expenses for sales of
subject and non-subject merchandise are allocated only to sales of
subject merchandise that incurred freight expenses, the calculation
methodology for this expense is unacceptable. As for the additional
foreign and U.S. brokerage expenses, Hylsa again did not explicitly
state in its responses prior to verification that its calculations for
these expenses included fees incurred for both subject and non-subject
merchandise sales to both U.S. and third-country markets. Hylsa's July
3, 1997 Section C response at 88. Therefore, we agree with petitioners
that because these additional expenses for subject and non-subject
merchandise, and for export markets other than the United States, are
allocated only to subject merchandise sales to the U.S. market, the
calculation methodology is distortive and, therefore, unacceptable.
We also disagree with Hylsa that the information regarding the
additional freight and brokerage expenses was verified and should not
be rejected. When comparing the total reported freight and brokerage
expenses with actual costs incurred for the sales traces we analyzed at
verification, we determined that the total freight and brokerage fees,
including the additional expenses reported, did not reasonably
represent the actual costs incurred by Hylsa and, therefore, could not
be considered verified. Accordingly, we adjusted the expenses in our
margin calculation as explained in the Analysis Memo at 2-3.
It is the respondent's burden to provide the Department with
verifiable information in antidumping proceedings. See 19 CFR 353.37
and 353.54. As we noted in the final results of the previous
administrative review, Hylsa maintains computerized records that would
allow it to tie total freight expenses to specific transactions but
destroys these records after a short period of time in the normal
course of business. Therefore, if these records exist in Hylsa's
accounting system, we expect Hylsa's full cooperation in providing us
with verifiable information, which would include these records, to tie
freight charges to specific transactions. Therefore, we believe that
Hylsa did not cooperate to the best of its ability and that the use of
partial adverse facts available is justified. As we explained in our
preliminary results, we have applied partial facts available in
accordance with section 776 of the Act. See Preliminary Results, 62 FR
64564 at 64565.
In sum, the use of partial adverse facts available for additional
freight and foreign and U.S. brokerage charges on U.S. sales and the
denial of additional freight deductions on home market sales is
justified and we continue to follow this approach in these final
results of review.
Comment 4: U.S. Credit Expenses
Petitioners argue that the Department should base U.S. credit
expenses on facts available. Petitioners note that in its questionnaire
response, Hylsa explained that credit expenses were calculated on a
sale-by-sale basis using the actual number of days between the shipment
and payment dates, citing Hylsa's February 21, 1997 Section C
questionnaire response at 31-32. Subsequently, petitioners note that at
verification the Department found that actual payment dates were not
used for Hylsa's credit calculation, noting the findings presented in
the Sales Verification Report at 18-20. Therefore, petitioners argue
that the Department should use the longest reported shipment-to-payment
date interval to calculate U.S. credit expenses.
Hylsa disagrees with petitioners' request for the Department to
apply facts available to U.S. credit expenses. Hylsa contends that the
reported sale-specific payment dates were the dates on which the
payments for U.S. sales were posted in Hylsa's accounting system in the
normal course of business. Hylsa supported its position by reiterating
that when a U.S. customer specifies invoices for which it is paying,
Hylsa's accounting system records the actual date of payment. However,
if the U.S. customer does not specify invoices with its payment, Hylsa
makes a ``reasonable assignment'' of the payment to outstanding
invoices in Hylsa International's customer account with Hylsa, retiring
the oldest outstanding
[[Page 33048]]
balance first. Hylsa's February 13 rebuttal brief at 18. Hylsa's
accounting records reflect a longer outstanding balance than is
actually the case for these sales. Therefore, Hylsa asserts, the
reported payment dates tend to over-state U.S. credit expenses due to
the lag time between the receipt of payment and recording of payment
for these sales in the accounting system, thereby rendering the
application of facts available unnecessary.
Department's Position
We agree with Hylsa that applying facts available for U.S. credit
expenses is unreasonable. While it is correct that Hylsa did not use
the actual payment date for certain sales, we noted from the verified
sales traces that Hylsa reported payment date as the date on which the
payment was recorded in its accounting records in the normal course of
business. We agree with Hylsa that the reported payment dates tend to
over-state U.S. credit expenses due to the lag time between the actual
receipt of payment and its subsequent recording in the accounting
system. Because Hylsa's methodology would tend to over-state, rather
than understate, U.S. credit expenses, the application of facts
available is not justified in this instance.
Comment 5: Inland Freight Expenses for 1996 Co-Export Sales
Hylsa asserts that we improperly disallowed deductions for inland
freight expenses incurred on co-export sales made in 1996. Hylsa
claimed that although Department verifiers noted in the verification
report that no freight charges were incurred on co-export sales made
during 1996, this conclusion is incorrect due to a misunderstanding by
the Department. Hylsa argues that no company official claimed during
verification that the co-export sales made in 1996 did not incur
freight expenses. To support this, Hylsa filed with its February 6 case
brief an affidavit from the company official responsible for presenting
freight information during verification. The affidavit states that this
company official explained to Department verifiers that freight
expenses for 1996 co-export sales were recorded in Hylsa's export
freight expense account. Hylsa also argues that in its submissions,
Hylsa claimed freight expenses for these sales and that during
verification the Department confirmed that the sales in question
incurred freight charges. Therefore, Hylsa contends that the Department
should not disallow the freight expenses reported for 1996 co-export
sales.
Petitioners argue that if the Department uses co-export sales for
comparison for the final results of this administrative review (see
Comment 2 above), we should continue to disallow the deduction of
freight expenses for 1996 co-export sales. Petitioners contend that the
discrepancies the Department discovered between the questionnaire
response and information presented at verification justify denying the
adjustment. Additionally, petitioners argue that the affidavit
submitted by Hylsa with its case brief was untimely filed because the
deadline for submitting factual information to the Department was June
16, 1997, 180 days after the publication date of the notice of
initiation, as outlined in Sec. 353.31(a)(1)(ii) of the Department's
regulations. Petitioners believe that this affidavit should not be
considered for the final results of this review nor retained for the
record, as allowed under Sec. 353.31(a)(3). Petitioners note that even
if the Department retains the affidavit, the document should not negate
the statement, noted by the Department in its sales verification
report, that Hylsa did not incur freight expenses on 1996 co-export
sales.
Department's Position
We disagree with Hylsa that we improperly disallowed deductions for
inland freight expenses incurred on co-export sales made in 1996.
During verification, Hylsa presented the Department with worksheets
regarding freight expenses that were incurred throughout the POR. We
noted that the co-export freight accounts had zero recorded for each
month of 1996. Prior to submission of its case brief, Hylsa never
provided the Department with an explanation that freight charges for
its home market co-export sales were expensed in the export freight
account.
Further, the record does not contain evidence concerning i) how
much freight was incurred on co-export sales in 1996, and ii) where,
and how, such charges were expensed in Hylsa's accounting records.
Although Hylsa submitted an affidavit with its February 6 case brief
(at Appendix 1) from the official in charge of presenting freight
expenses to the Department at verification, by the affiant's own
statement, he ``did not include[ ]'' data on 1996 co-export freight
expenses in the worksheets presented specifically for purposes of
verifying domestic inland freight. Therefore, Hylsa itself made any
such expenses unverifiable by withholding the information that would
substantiate the claimed adjustment. Therefore, we are denying Hylsa's
claimed adjustment for freight expenses incurred on 1996 co-export
sales.
Comment 6: Simultaneous Reporting of Early Payment Discounts and
Reported Interest Revenue
Hylsa argues that the Department improperly disallowed early
payment discounts for observations where Hylsa reported both early
payment discounts and interest revenue collected on late payments.
According to Hylsa, the company's accounting records permitted it to
report only a customer-specific allocated amount of early payment
discounts granted and late payment fees/interest revenues collected
during the POR. Hylsa notes that the Department accepted the customer-
specific allocation methodology for these adjustments. Hylsa argues
against the Department's preliminary decision that the allocation of
both an early payment discount and interest revenue fee to the same
transaction is inconsistent. Hylsa maintains that this allocation
reflects that the customer in question remitted payment early for some
purchases and late for others, not that the customer earned early
payment discounts and paid late-payment charges on the same sales
transaction. Hylsa believes that because this approach accurately
reflects the discounts granted and income Hylsa received from these
customers, the Department should not deny deductions of early payment
discounts for those sales that also have a reported interest revenue.
Petitioners maintain that the Department should continue to
disallow any deduction for early payment discounts for those
transactions with simultaneously reported interest revenue. Petitioners
note it is impossible for any given customer, on average, to pay both
early and late. Therefore, argue petitioners, the Department was
correct in denying the adjustment for these transactions.
Department's Position
Prior to verification, Hylsa neglected to explain that early
payment discounts reported for sales made in 1996 were reported on an
allocated, not actual, basis. See Hylsa's February 21, 1997 response at
19 and July 3, 1997 response at 64. Although specifically asked to
explain how the reported per-unit early payment amount was calculated,
Hylsa never suggested that the reported early payment discounts were
calculated, allocated amounts. In its February 21 response Hylsa stated
that ``[t]he amount of the prompt-payment discount granted for each
sale is reported on a per-metric-ton basis. . .''. We note that
[[Page 33049]]
for other adjustments reported on an allocated basis, Hylsa fully
explained in its questionnaire response that the expenses were indeed
allocated amounts, not transaction-specific amounts (e.g., interest
revenue, inventory carrying costs). See id. at 33, 38. Therefore, prior
to verification, Hylsa did not fully and accurately disclose the
methodology it used to report early payment discounts for sales made in
1996 prior to verification.
At verification Hylsa explained that it implemented a new
accounting system in 1996. Hylsa stated that with this new accounting
system, it lost the ability to tie early payment discounts and the
accompanying credit memos to specific invoices issued throughout 1996.
See Sales Verification Report at 23. Hylsa then explained that, for
early payment discounts granted in 1996, it calculated a customer-
specific percentage of early payment discounts granted on sales of
subject and non-subject merchandise for the calendar year 1996. Hylsa
then applied these customer-specific percentages to reported home-
market sales. See Sales Verification Report at 24 and Verification
Exhibit 17.
In response to comments submitted in the case and rebuttal briefs,
we further analyzed Hylsa's questionnaire responses and verification
exhibits. We have concluded from information on the record that Hylsa
did indeed have the ability to report transaction-specific early
payment discounts. Included in documentation submitted by Hylsa at
Appendix SA-11 are examples of sales invoices issued in 1996 with
accompanying credit memos for early payment discounts. The credit memo
includes the invoice number for which the early payment discount was
granted. Additionally, page 21 of Verification Exhibit 21 shows the
customer account detail for a home market customer. We found that this
customer account subledger reflects debit and credit movement, by sales
invoice, of the account. Additionally, we found that early payment
discounts are recorded, by invoice, in the same customer account
subledger. Therefore, we conclude that Hylsa had the ability to tie
early payment discounts to specific sales invoices, contrary to its
claims at verification. Furthermore, Hylsa specifically stated that it
was unable to report transaction-specific early payment discount
amounts, not that sales-specific reporting would be too burdensome. We
find that Hylsa did not act to the best of its ability in responding to
our requests for information. Hylsa failed to provide accurate and
verifiable information regarding early payment discounts granted in
1996. Therefore, for the final results, we are denying the deduction of
all early payment discounts granted in 1996; we are continuing to allow
deduction of early payment discounts for sales made in 1995, which were
reported on a transaction-specific basis.
Comment 7: Bare and Varnished Pipe
Hylsa argues that the Department improperly instructed it to treat
bare and varnished pipe as having the same surface finish when
assigning control numbers (CONNUMs). In its original questionnaire
responses, Hylsa reported bare and varnished pipe as products with
separate surface finishes. Prior to verification the Department
instructed Hylsa to consider bare and varnished pipe as the same
products when assigning CONNUMs and subsequently treated these products
as identical merchandise for the preliminary margin calculation. Hylsa
asserts that bare and varnished pipe are not identical products because
of material and production process differences, and that bare and
varnished pipe are recognized in the marketplace as discrete products,
with differing prices and applications.
Hylsa cites Gray Portland Cement and Clinker from Mexico, 55 FR
29244, 29247 (July 18, 1990) in which the Department emphasized that
Sec. 771(16)(A) of the Act states a preference for matching home market
merchandise with identical characteristics to those products sold in
the U.S. market. Hylsa argues that bare and varnished pipe are not
physically identical merchandise and, therefore, the Department should
follow statutory preference and match identical products. Because Hylsa
sold varnished pipe in Mexico identical to merchandise sold in the
United States, Hylsa argues, the Department should not match home
market sales of bare pipe to U.S. sales of varnished pipe.
Hylsa further asserts that market behavior demonstrates that bare
and varnished pipe are different products that are not easily
interchangeable. For example, customers who galvanize pipe themselves
prefer bare pipe so that they will not have to remove the varnish prior
to galvanization. Additionally, Hylsa contends that price differentials
between the two products can be significant and cites a proprietary
example from its database of transactions reported for January 1996.
According to Hylsa, bare and varnished pipe go through different
finishing stages during the production process. While varnished pipe is
coated with a lacquer varnish, bare pipe may be pickled, oiled, or left
untreated. Due to these differences, Hylsa argues, end products incur
different costs of production.
Petitioners respond that the Department has always treated bare and
varnished pipe as the same product for model-matching purposes in its
pipe and tube cases. Because varnishing is viewed by the industry
primarily as a packing treatment to inhibit rust, petitioners aver, its
presence does not transform the merchandise into a different product.
Petitioners claim that Hylsa's example of a price differential is
unreliable. They note it is based on a comparison of one January 1996
sale of bare pipe, which was sold to a customer not even included in
Hylsa's list of standard pipe customers, to three, weighted-average
January 1996 sales of varnished pipe. Furthermore, argue petitioners,
the inclusion of co-export sales and unreliable adjustments reported in
the sales database cause substantial price differences between
identical products sold within the same month. According to
petitioners, these price differences operate independently of the
pipe's surface finish. Lastly, petitioners state that one selective
example of a price differential between bare and varnished pipe does
not rise to the level of a prima facie demonstration of price
differentials attributable to differing surface finish.
Department's Position
We agree with petitioners. Pickling, oiling and varnishing are
packing treatments used to inhibit rust development on finished pipe
products. The application of these treatments does not transform the
finished merchandise into a different product for purposes of
merchandise comparison under Sec. 771(16)(A) and (B) of the Act. We are
unable to determine from the record the significance of Hylsa's example
of the price differential between bare and varnished pipe because one
example of a price differential is not representative of a trend of
price differentials. We have treated bare and varnished pipe as
identical merchandise in previous reviews of this and other pipe cases
and we continue to do so for the final results of this review.
Comment 8: Value-Added Tax Included in the Home Market Credit Expense
Calculation
The Department explained its decision to exclude value-added taxes
(IVA) from the home market credit expense calculation in the previous
review of this case. See Final Results of Pipe from Mexico at 37016. In
this review we determined that because the IVA is revenue for the
government and not for Hylsa, it should not be included
[[Page 33050]]
in the credit calculation. Because of the Department's decision in the
previous review, Hylsa reported home market credit expenses for this
review exclusive of IVA. Hylsa claims, however, that we should include
IVA when calculating home market credit expenses for these final
results, as we accepted this methodology in the less-than-fair-value
(LTFV) investigation of this case.
Hylsa claims that it allows its customers to delay payment of the
entire invoice amount of a sale, which includes the IVA. Therefore, the
opportunity cost to Hylsa of extending credit should be based on the
entire amount of the invoice. Hylsa cites to Certain Fresh Cut Flowers
from Mexico, 56 FR 1794,1798 (January 17, 1991) and Shop Towels from
Bangladesh, 57 FR 3996, 4001 (February 3, 1992) as cases where the
Department's approach to credit expenses supports Hylsa's argument.
Hylsa argues that the fact that IVA is a revenue for the government,
not the company, is irrelevant because the customer carries credit
based on the entire amount of the invoice, and it is based on this
amount that Hylsa incurs the opportunity cost of capital.
Petitioners object to Hylsa's suggestion that the Department
include IVA in the home market credit expense calculation. They note
that Hylsa is presenting the same argument that the Department rejected
in the previous administrative review in Final Results of Pipe from
Mexico at 37016. Petitioners argue that although the opportunity cost
of the money used to pay taxes may be as genuine as other opportunity
costs, they represent an incident of taxation, inclusion of which does
not serve any purpose under the antidumping statute.
Department's Position
We disagree with Hylsa that IVA should be included in the home
market credit expense calculation because the IVA is not a revenue for
Hylsa but for the government. As the Department explained in Certain
Cut-to-Length Steel Plate from Brazil, 62 FR 18486 at 18488 (April 15,
1997), it is not our practice to include VAT payments in credit expense
calculations. In that case we stated that ``[w]hile there may be a
potential opportunity cost associated with the respondents' prepayment
of the VAT, this fact alone is not a sufficient basis for the
Department to make an adjustment in price-to-price comparisons.'' Id.
at 1848. The Department continued to explain that ``to allow the type
of credit adjustment suggested by the respondents would imply that in
the future the Department would be faced with the virtually impossible
task of trying to determine the potential opportunity cost or gain of
every charge and expense reported in the respondents' home market and
U.S. databases.'' Id. at 18488. Furthermore, no statute or regulation
requires us to include IVA in the home market credit expense
calculation. For these final results, we are following our established
practice of excluding the IVA from home market credit expense
calculations in the final results of this review.
Comment 9: General and Administrative Expenses
Hylsa objects to the Department's recalculation of Hylsa's general
and administrative expenses (G&A) in the preliminary results of this
administrative review and believes that the Department should use
Hylsa's reported G&A rates. See Analysis Memo at 9, Appendix 2. Hylsa
argues that in other cases the Department has accepted its methodology
which involves a ``layered calculation'' in which ``corporate-wide G&A
expenses are allocated over corporate-wide cost of goods sold, and
divisional G&A expenses are allocated over divisional costs of goods
sold.'' Hylsa cites Flat Panel Displays from Japan, 56 FR 32376, 32398-
99 (July 16, 1991) as support for its reporting methodology. Hylsa
believes that its reported ``layered'' G&A expenses are consistent with
the methodology the Department has routinely accepted. Further, Hylsa
claims the Department's methodology in the instant review is illogical
because Hylsa's total G&A expenses include costs for divisions that are
not related to the production or sale of subject merchandise. Hylsa
argues in the alternative that if the Department does not accept its
methodology for reporting G&A expenses, the information the Department
would need to recalculate G&A on a company-wide basis is on the record.
Therefore, argues Hylsa, the Department should not apply adverse facts
available as requested by the petitioners.
Petitioners note that the Department decided in the previous
administrative review of this case to use company-wide G&A rates for
the G&A calculation in Final Results of Pipe from Mexico at 37022.
Petitioners assert that although the Department has determined that G&A
must be reported on a company-wide basis, Hylsa has deliberately
refused to comply with the Department's request in this review. In
light of Hylsa's deliberate refusal in this regard, petitioners assert
that the Department should apply adverse facts available using Hylsa's,
or any related entity's, highest G&A rate on the record.
Department's Position
We disagree with both Hylsa and petitioners, in part. In the
original questionnaire issued to Hylsa on December 23, 1996, page D-16
states that ``G&A expenses are those period expenses which relate to
the activities of the company as a whole rather than to the production
process alone * * * [y]ou should also include in your reported G&A
expenses an amount for administrative services performed on your
company's behalf by its parent company or other affiliated party.'' It
is our practice to use company-wide G&A expenses when calculating cost
of production and constructed value. See, e.g., Final Determination of
Sales at Less Than Fair Value: Furfuryl Alcohol From South Africa, 60
FR 22550, 22556 (1995).
However, we disagree with petitioners' contention that we should
use adverse facts available for G&A expenses. We obtained the
information to calculate acceptable G&A rates at verification.
Therefore, it is unnecessary and unreasonable to apply adverse facts
available given the circumstances in this review. For these final
results of review we have continued to use the G&A rates that we used
for the preliminary results.
Comment 10: Additional Depreciation
Petitioners claim that in its margin calculation program, the
Department neglected to include the additional depreciation due to
revaluation of fixed assets for the Flat Products Division. According
to petitioners, this information was discovered at verification and is
on the record.
Hylsa argues that these depreciation costs were already included in
the preliminary results margin calculation program, citing to the
Analysis Memo at 8.
Department's Position
We agree with Hylsa that these costs were included in the
preliminary results margin calculation program. See Analysis Memo at 8
and Appendix 1. Therefore, we have continued to include these
additional depreciation costs for these final results.
Comment 11: Classification of Aluminum, Zinc, and Zinc Chloride
Petitioners assert that the cost verification report implies that
aluminum, zinc, and zinc chloride have been inappropriately classified
as overhead and not direct materials. See Cost Verification Report at
27. Petitioners note that because these are
[[Page 33051]]
material inputs, they should be reclassified as direct materials costs.
Hylsa asserts that the materials in question were correctly
included in the reported direct material costs and cites to the Cost
Verification Report at 22.
Department's Position
We agree with Hylsa. After further analysis we determined that
aluminum, zinc, and zinc chloride were properly classified as direct
materials for the purposes of this review. Therefore, no adjustment to
Hylsa's reported material costs is needed for the final results.
Comment 12: Indirect Selling Expenses in the Arm's-Length Test
Petitioners note that the computer program used to determine
whether Hylsa's home market sales to affiliated parties were at arm's
length for the preliminary results of this administrative review
unintentionally neglected to subtract indirect selling expenses from
the gross unit prices prior to testing the affiliated-party prices.
Department's Position
It is the Department's practice not to adjust for indirect selling
expenses for home market sales in the arm's-length test and margin
calculation programs when the reviewed U.S. transactions are EP sales.
See Notice of Final Results of Antidumping Duty Administrative Review:
Certain Welded Carbon Steel Pipe and Tube from Turkey, 61 FR 69067
(December 31, 1996). Therefore, we are not adjusting our methodology
for the final results of this administrative review.
Comment 13: Reported Customer Codes
Petitioners argue that Hylsa's reported customer codes are reported
in a non-numeric and inconsistent format. Petitioners assert that this
inconsistency may result in one customer being treated as two separate
entities in the arm's-length test if it has two customer codes. Because
the arm's-length program does not include special instructions to
correct for this error, reason petitioners, the Department should
insert the proper language.
Department's Position
We noted the inconsistent format in which Hylsa reported customer
codes for the preliminary results of this review. We inserted special
computer language to correct for the inconsistencies that the
petitioners noted for affiliated-customer codes in the arm's-length
test for the preliminary results. Since the arm's-length test compares
the weighted-average prices of affiliated party sales, by customer code
and CONNUM, to the weight-averaged prices of unaffiliated party sales
by CONNUM only, there is no need to insert code to ``correct'' for the
home market customer codes. Therefore, for these final results, we have
not inserted additional programming language related to this issue.
Final Results of the Review
As a result of this review, we determine that the following
weighted-average dumping margin exists:
Circular Welded Non-Alloy Steel Pipes and Tubes
------------------------------------------------------------------------
Weighted-
Producer/manufacturer/exporter average margin
------------------------------------------------------------------------
Hylsa................................................... 8.31
------------------------------------------------------------------------
The Department will determine, and the U.S. Customs Service shall
assess, antidumping duties on all appropriate entries. Because Hylsa
was the only importer during the POR, we have calculated the importer-
specific per-unit duty assessment rate for the merchandise imported by
Hylsa by dividing the total amount of antidumping duties calculated
during the POR by the total quantity entered during the POR. The
Department will issue appraisement instructions directly to the Customs
Service.
Furthermore, the following deposit requirements will be effective
upon publication of this notice of final results of review for all
shipments of circular welded non-alloy steel pipe from Mexico entered,
or withdrawn from warehouse, for consumption on or after the
publication date, as provided for by Sec. 751(a)(1) of the Act: (1) The
cash deposit rate for the reviewed company will be the rate stated
above; (2) if the exporter is not a firm covered in this review, a
prior 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; (3) 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; (4) the cash deposit rate for all
other manufacturers or exporters will continue to be the ``all others''
rate of 32.62 percent.\1\ See Notice of Antidumping Orders: Certain
Circular Welded Non-Alloy Steel Pipe from Brazil, the Republic of Korea
(Korea), Mexico, and Venezuela, and Amendment to Final Determination of
Sales at Less Than Fair Value: Certain Circular Welded Non-Alloy Steel
Pipe from Korea, 57 FR 49453 (November 2, 1992). These deposit
requirements, when imposed, shall remain in effect until publication of
the final results of the next administrative review.
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\1\ The preliminary results of this administrative review
incorrectly stated that the ``all others'' rate was 36.62 percent.
Preliminary Results at 62 FR 64568.
---------------------------------------------------------------------------
This notice serves as a final reminder to importers of their
responsibility under 19 C.F.R. Sec. 353.26 of the Department's
regulations to file a certificate regarding the reimbursement of
antidumping duties prior to liquidation of the relevant entries during
this review period. Failure to comply with this requirement could
result in the Secretary's presumption that reimbursement of antidumping
duties occurred and the subsequent assessment of double antidumping
duties.
This notice also serves as a reminder to parties subject to
administrative protective order (APO) of their responsibility
concerning the disposition of proprietary information disclosed under
APO in accordance with 19 C.F.R. Sec. 353.34(d)(1) of the Department's
regulations. Timely 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. 98-16108 Filed 6-16-98; 8:45 am]
BILLING CODE 3510-DS-P