[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]


-----------------------------------------------------------------------

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.

-----------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \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