[Federal Register Volume 63, Number 176 (Friday, September 11, 1998)]
[Notices]
[Pages 48699-48705]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-24488]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-201-817]


Oil Country Tubular Goods From Mexico: Preliminary Results of 
Antidumping Duty Administrative Review

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.


[[Page 48700]]


ACTION: Notice of preliminary results of antidumping duty 
administrative review.

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SUMMARY: In response to a request from respondents, the Department of 
Commerce (the Department) is conducting an administrative review of the 
antidumping duty order on oil country tubular goods (``OCTG'') from 
Mexico. The review covers two manufacturers/exporters of the subject 
merchandise to the United States and the period August 1, 1996 through 
July 31, 1997. We preliminarily determine that sales have not been made 
below normal value (``NV''). If these preliminary results are adopted 
in our final results of administrative review, we will instruct U.S. 
Customs to assess antidumping duties based on the difference between 
export price (``EP'') or constructed export price (``CEP'') and NV.
    Interested parties are invited to comment on these preliminary 
results. Parties who submit argument in this proceeding are requested 
to submit with the argument (1) a statement of the issue and (2) a 
brief summary of the argument (no longer than five pages, including 
footnotes).

EFFECTIVE DATE: September 11, 1998.

FOR FURTHER INFORMATION CONTACT: John Drury, Nancy Decker or Linda 
Ludwig, Import Administration, International Trade Administration, U.S. 
Department of Commerce, 14th Street and Constitution Avenue, N.W., 
Washington, D.C. 20230; telephone (202) 482-3208 (Drury), (202) 482-
0196 (Decker), (202) 482-3833 (Ludwig).

SUPPLEMENTARY INFORMATION:

Applicable Statute

    Unless otherwise indicated, all citations to the Tariff Act of 
1930, as amended (the Act) are references to the provisions effective 
January 1, 1995, the effective date of the amendments made to the Act 
by the Uruguay Round Agreements Act (URAA). In addition, unless 
otherwise indicated, all citations to the Department's regulations are 
references to the provisions codified at 19 CFR Part 351 (62 FR 27296, 
May 19, 1997).

Background

    The Department of Commerce published a final determination of sales 
at less than fair value for OCTG from Mexico on June 28, 1995 (60 FR 
33567), and subsequently published the antidumping duty order on August 
11, 1995 (60 FR 41056). The Department of Commerce published a notice 
of ``Opportunity To Request Administrative Review'' of the antidumping 
order for the 1996/1997 review period on August 4, 1997 (62 FR 41925). 
Upon receiving requests for administrative review from two respondents, 
Hylsa S.A. de C.V. (``Hylsa'') and Tubos de Acero de Mexico, S.A. 
(``TAMSA''), we initiated a review on September 25, 1997 (62 FR 50292).
    Under Section 751(a)(3)(A) of the Act, the Department may extend 
the deadline for completion of an administrative review if it 
determines that it is not practicable to complete the review within the 
statutory time limit of 365 days. On March 19, 1998, the Department 
extended the time limits for these preliminary results to August 31, 
1998. See Oil Country Tubular Goods from Mexico; Extension of Time 
Limits for Antidumping Duty Administrative Review (63 FR 14422, March 
25, 1998).

Duty Absorption

    On October 2, 1997, Maverick Tube Corporation, Lone Star Steel 
Company, and IPSCO Tubulars, Inc. requested that the Department 
determine, with respect to Hylsa, whether antidumping duties had been 
absorbed during the POR. On October 23, 1997, North Star Steel Ohio 
requested that the Department determine, with respect to TAMSA, whether 
antidumping duties had been absorbed during the POR. Section 751(a)(4) 
of the Act provides for the Department, if requested, to determine 
during an administrative review initiated two or four years after the 
publication of the order, whether antidumping duties have been absorbed 
by a foreign producer or exporter, if the subject merchandise is sold 
in the United States through an affiliated importer. Because this 
review was initiated two years after the publication of the order, we 
will make a duty absorption determination in this segment of the 
proceeding.
    Since we have preliminarily determined that there are no dumping 
margins for the respondents with respect to its U.S. sales, we also 
preliminarily determine that there is no duty absorption. As our 
analysis of the dumping margin may be modified in our final results, if 
interested parties wish to submit evidence that the unaffiliated 
purchasers in the United States will pay any ultimately assessed duty 
charged to affiliated importers, they must do so no later than 15 days 
after publication of these preliminary results. This information would 
be considered by the Department if we determine in our final results 
that there are dumping margins on certain U.S. sales.
    In this case, both TAMSA and Hylsa sold to the United States 
through importers that are affiliated within the meaning of section 
751(a)(4) of the Act. We preliminarily determine that there is a no 
dumping margin for either TAMSA's sales or Hylsa's sales during the 
POR.

Scope of the Review

    Imports covered by this review are oil country tubular goods, 
hollow steel products of circular cross-section, including oil well 
casing, tubing, and drill pipe, of iron (other than cast iron) or steel 
(both carbon and alloy), whether seamless or welded, whether or not 
conforming to American Petroleum Institute (API) or non-API 
specifications, whether finished or unfinished (including green tubes 
and limited service OCTG products). This scope does not cover casing, 
tubing, or drill pipe containing 10.5 percent or more of chromium. The 
OCTG subject to this order are currently classified in the Harmonized 
Tariff Schedule of the United States (HTSUS) under item numbers: 
7304.20.10.10, 7304.20.10.20, 7304.20.10.30, 7304.20.10.40, 
7304.20.10.50, 7304.20.10.60, 7304.20.10.80, 7304.20.20.10, 
7304.20.20.20, 7304.20.20.30, 7304.20.20.40, 7304.20.20.50, 
7304.20.20.60, 7304.20.20.80, 7304.20.30.10, 7304.20.30.20, 
7304.20.30.30, 7304.20.30.40, 7304.20.30.50, 7304.20.30.60, 
7304.20.30.80, 7304.20.40.10, 7304.20.40.20, 7304.20.40.30, 
7304.20.40.40, 7304.20.40.50, 7304.20.40.60, 7304.20.40.80, 
7304.20.50.15, 7304.20.50.30, 7304.20.50.45, 7304.20.50.60, 
7304.20.50.75, 7304.20.60.15, 7304.20.60.30, 7304.20.60.45, 
7304.20.60.60, 7304.20.60.75, 7304.20.70.00, 7304.20.80.30, 
7304.20.80.45, 7304.20.80.60, 7305.20.20.00, 7305.20.40.00, 
7305.20.60.00, 7305.20.80.00, 7306.20.10.30, 7306.20.10.90, 
7306.20.20.00, 7306.20.30.00, 7306.20.40.00, 7306.20.60.10, 
7306.20.60.50, 7306.20.80.10, and 7306.20.80.50.
    Although the HTSUS subheadings are provided for convenience and 
customs purposes, our written description of the scope of this 
proceeding is dispositive.
    The Department has determined that couplings, and coupling stock, 
are not within the scope of the antidumping duty order on OCTG from 
Mexico. See Letter to Interested Parties; Final Affirmative Scope 
Decision, August 27, 1998.

[[Page 48701]]

Period of Review

    The review covers the period August 1, 1996 through July 31, 1997. 
The Department is conducting this review in accordance within section 
751 of the Act, as amended.

Verification

    As provided in section 782(i) of the Act, we verified information 
provided by both Hylsa and TAMSA (sales and cost) using standard 
verification procedures, including on-site inspection of the 
manufacturer's facilities and the examination of the relevant sales and 
financial records.
    Our verification results are outlined in the public versions of the 
verification reports.

Product Comparisons

    In accordance with section 771(16) of the Act, we considered all 
products produced by the respondents, covered by the description in the 
Scope of the Review section, above, and sold in the home market during 
the period of review (POR), to be foreign like products for purposes of 
determining appropriate product comparisons to U.S. sales. Where there 
were no sales of identical merchandise in the home market to compare to 
U.S. sales, we compared U.S. sales to the most similar foreign like 
product on the basis of the characteristics listed in the Department's 
September 16, 1997 questionnaires or to constructed value (``CV'').

Fair Value Comparisons

    To determine whether sales of the subject merchandise by TAMSA and 
Hylsa were made at less than fair value (``LTFV''), we compared the EP 
or CEP to the NV, as described in the EP, CEP, and NV sections of this 
notice, below. In accordance with section 777A(d)(1)(A)(i) of the Act, 
we compared EPs or CEPs to weight-averaged NVs.
    Hylsa reported that it had no viable home market or third country 
sales during the POR. Therefore, for Hylsa we used CV for NV. See the 
NV section of this notice, below, for further discussion.

United States Price (USP)

TAMSA

    In its response to the Department, TAMSA claimed that its sales to 
the United States were EP sales. After careful examination of the 
record, and based upon our analysis using the three-pronged test 
defined below, the Department has preliminarily determined to treat 
TAMSA's U.S. sales as CEP sales, as defined in section 772(b) of the 
Act. See Analysis Memorandum for TAMSA for a further discussion.
    Pursuant to section 772(a) and (b) of the Act (19 U.S.C. 
Sec. 1677a(a) and (b)), an EP sale is a sale of merchandise for export 
to the United States made prior to importation, and a CEP sale is a 
sale made in the United States before or after importation. In 
determining whether the sales activity of a U.S. subsidiary rises to 
such a level that a sale also involving the producer or exporter 
outside the United States will be considered a CEP sale, the Department 
has examined the following criteria: (1) Whether the merchandise was 
shipped directly from the manufacturer to the unaffiliated U.S. 
customer (rather than being introduced into the inventory of the U.S. 
affiliate), (2) whether this was a customary commercial channel between 
the parties involved; and (3) whether the function of the U.S. 
affiliate is limited to that of a ``processor of sales-related 
documentation'' and a ``communication link'' with the unaffiliated U.S. 
buyer. See, e.g., Certain Corrosion-Resistant Carbon Steel Flat 
Products and Certain Cut-to-Length Carbon Steel Plate From Canada: 
Final Results of Antidumping Duty Administrative Review (``Canadian 
Steel''), 63 Fed. Reg. 12725, 12738 (March 16, 1998).
    In the Canadian Steel case, the Department clarified its 
interpretation of the third prong of this test, as follows. ``Where the 
factors indicate that the activities of the U.S. affiliate are 
ancillary to the sale (e.g., arranging transportation or customs 
clearance, invoicing), we treat the transactions as EP sales. Where the 
U.S. affiliate has more than an incidental involvement in making sales 
(e.g., solicits sales, negotiates contracts or prices) or providing 
customer support, we treat the transactions as CEP sales.'' Id. 
    Based on our examination of the record, TAMSA's U.S. affiliate 
(Siderca Corp.) has more than an incidental involvement in making sales 
or providing customer support. Siderca Corp. has an exclusive export 
agent agreement to distribute TAMSA merchandise in the U.S., Siderca 
Corp. solicits sales, and matches customer orders to TAMSA's production 
or inventory. Siderca Corp. invoices the U.S. customer, and receives 
payment. Siderca Corp pays for import charges as well as insurance for 
the merchandise. Conversely, TAMSA does not communicate directly with 
the customer. Only Siderca Corp. communicates with the customer. Based 
on these facts, it is clear that the U.S. affiliate has more than an 
incidental involvement in making these sales. Since the sales in 
question do not meet the third prong of the test for indirect EP sales 
described above, we need not consider the other two prongs. Based on 
our analysis, we are treating TAMSA's U.S. transactions as CEP sales.
    We based CEP on the delivered price to affiliated customers in the 
United States. We made adjustments, where applicable, for movement 
expenses (U.S. inland freight, U.S. brokerage and handling expenses, 
and U.S. customs duties), credit expenses, and indirect selling 
expenses that were associated with economic activity in the United 
States. Finally, we made an adjustment for CEP profit in accordance 
with section 772(d)(3) of the Act.

Hylsa

    We used EP in accordance with section 772(a) of the Act because the 
subject merchandise was sold to unaffiliated customers before 
importation and the CEP methodology was not indicated by the facts on 
the record. While Hylsa did sell the subject merchandise through a U.S. 
affiliate, we found the following fact pattern when applying the three-
prong test. First, the merchandise was shipped directly from the 
manufacturer to the unaffiliated U.S. customer and was not introduced 
into the inventory of the U.S. affiliate. Concerning the second prong 
of the test, the Court of International Trade has recognized that if a 
majority of a company's sales are not warehoused by the U.S. affiliate, 
this indicates that the direct shipments of merchandise were a 
customary commercial channel of trade. E.I. Du Pont de Nemours & Co., 
Inc. v. United States, 841 F. Sup. 1237, 1248-50 (1993). The majority 
of Hylsa's sales are not warehoused by the United States affiliate. 
Finally, as to the third prong of the test, we found that the functions 
of Hylsa's U.S. affiliate are limited to that of ``processor of sales-
related documentation'' in connection with the unaffiliated U.S. buyer. 
We found that Hylsa communicates directly with the unaffiliated 
customer, sets the price, and pays for all related expenses. The 
affiliate's role is confined to issuing an invoice and collecting 
payment. Therefore, we preliminarily conclude that Hylsa's sales of 
subject merchandise to the U.S. are EP sales.
    We calculated EP based on packed, prepaid or delivered prices to 
customers in the United States. We made adjustments, where applicable, 
for movement expenses (U.S. inland freight, U.S. brokerage and handling 
expenses, and U.S. Customs duties).
    Based on findings at verification, we have adjusted Hylsa's 
reported credit

[[Page 48702]]

expense. We found that the rate used to calculate the credit expense 
had been understated due to the exclusion of a tax expense. We instead 
have used the weighted average of Hylsa's short-term borrowings for the 
POR plus an amount equal to the tax expense. See Analysis Memorandum 
for Hylsa for further details.

Normal Value

    In order to determine whether there were sufficient sales of OCTG 
in the home market (``HM'') to serve as a viable basis for calculating 
NV, we compared the volume of home market sales of subject merchandise 
to the volume of subject merchandise sold in the United States, in 
accordance with section 773(a)(1)(C) of the Act.

TAMSA

    TAMSA's aggregate volume of HM sales of the foreign like product 
was greater than five percent of its respective aggregate volume of 
U.S. sales of the subject merchandise. Therefore, for TAMSA, we have 
based NV on HM sales. We made adjustments to NV for HM inland freight, 
discounts, credit expenses, warehousing expenses, packing, and warranty 
expenses.
    Based on our findings at verification, we made adjustments to the 
reported values for direct selling expenses. See Analysis Memorandum 
for further discussion.

Cost of Production Analysis

    Because the Department found sales below cost for TAMSA in the 
comparison market during the last completed segment of the proceeding, 
we initiated a cost of production (``COP'') analysis. We conducted the 
COP analysis as described below.
A. Calculation of COP
    In accordance with section 773(b)(3) of the Act, we calculated the 
weighted-average COP, by model, based on the sum of the cost of 
materials, fabrication and general expenses, and packing costs. We 
relied on the submitted COPs, except in the following specific 
instances where the submitted costs were not appropriately quantified 
or valued.
    We made the following company-specific adjustments to the submitted 
costs. See Analysis Memorandum for a further discussion.
    1. We revised TAMSA's depreciation expense to allocate the year end 
adjustment evenly throughout 1996. See Cost Verification Report from 
Theresa L. Caherty and Michael P. Harrison to Christian B. Marsh dated 
August 24, 1998.
    2. For products which were not produced during the POR, we used the 
COP for the period in which the products were produced.
    3. We calculated TAMSA's FOH 2 and FOH 3 expense allocation using a 
percentage of standard costs. See Analysis Memorandum for further 
discussion.
    4. We revised TAMSA's general and administrative expense rate to 
include the mandatory employee profit sharing contribution.
    5. We revised TAMSA's net financial expense to include the premium 
paid to retire its debentures and to allocate expenses between short-
term and long-term liabilities.
B. Test of Home Market Prices
    We used respondent's weighted-average COP for the period August 1, 
1996 to July 31, 1997. We compared the weighted-average COP figures to 
home market sales of the foreign like product as required under section 
773(b) of the Act. In determining whether to disregard home-market 
sales made at prices below the COP, we examined whether (1) within an 
extended period of time, such sales were made in substantial 
quantities, and (2) such sales were made at prices which permitted the 
recovery of all costs within a reasonable period of time. On a product-
specific basis, we compared the COP to the home market prices, less any 
applicable movement charges, rebates, and discounts.
C. Results of COP Test
    Pursuant to section 773(b)(2)(C), where less than 20 percent of 
TAMSA's sales of a given product were at prices less than the COP, we 
did not disregard any below-cost sales of that product because we 
determined that the below-cost sales were not made in ``substantial 
quantities.'' Where 20 percent or more of respondent's sales of a given 
product during the POR were at prices less than the COP, we determined 
such sales to have been made in ``substantial quantities'' within an 
extended period of time in accordance with section 773(b)(2)(B) of the 
Act. We also determined that such sales were also not made at prices 
which would permit recovery of all costs within a reasonable period of 
time, in accordance with section 773(b)(2)(D) of the Act; therefore, we 
disregarded the below-cost sales.
D. Calculation of CV
    In accordance with section 773(e) of the Act, we calculated CV 
based on the sum of TAMSA's cost of materials, fabrication, SG&A, U.S. 
packing costs, and interest expenses as reported and a calculated 
profit. In accordance with section 773(e)(2)(A) of the Act, we based 
SG&A and profit on the amounts incurred and realized by the respondent 
in connection with the production and sale of the foreign like product 
in the ordinary course of trade, for consumption in the foreign 
country. For selling expenses, we used the weighted-average home market 
selling expenses.
    Hylsa. Hylsa reported that it had no viable home or third country 
market during the POR. Therefore, in accordance with section 773(a)(4) 
of the Act, we based NV for Hylsa on CV. In accordance with section 
773(e)(1) of the Act, we calculated CV based on the sum of the costs of 
materials, labor, overhead, SG&A, profit, interest expenses, and U.S. 
packing costs. We adjusted SG&A, packing and cost of manufacture 
(``COM'') based on our findings at verification. See analysis 
memorandum for further information.
    Section 773(e)(2)(A) states that SG&A and profit are to be based on 
the actual amounts incurred in connection with sales of a foreign like 
product. In the event such data is not available, section 773(e)(2)(B) 
of the Act sets forth three alternatives for computing profit and SG&A 
without establishing a hierarchy or preference among the alternative 
methods. The alternative methods are: (1) Calculate SG&A and profit 
incurred by the producer based on the sale of merchandise of the same 
general type as the exports in question; (2) average SG&A and profit of 
other producers of the foreign like product for sales in the home 
market; or (3) any other reasonable method, capped by the amount 
normally realized on sales in the foreign country of the general 
category of the products. In addition, the Statement of Administrative 
Action (``SAA'') states that, if the Department does not have the data 
to determine amounts for profit under alternatives one and two, or a 
profit cap under alternative three, it still may apply alternative 
three (without the cap) on the basis of the ``facts available.'' SAA at 
841.
    In this case, since Hylsa did not have a viable home market or 
third country market for this product, we based Hylsa's SG&A and profit 
values on the following methodology. For profit and SG&A expenses, we 
used data from Hylsa's financial statements. We based our profit 
calculations on the income statement of the tubular products division 
of Hylsa, and SG&A on Hylsa's consolidated financial statement. See 
Analysis Memorandum for further discussion.

[[Page 48703]]

    There were no allegations of below-cost sales for Hylsa during this 
POR. Consequently, we did not initiate a COP analysis for Hylsa.

Price to CV Comparisons

    Where we compared CV to EP for Hylsa, we increased CV by U.S. 
credit expenses pursuant to section 773(a)(6)(C)(iii) of the Act and 19 
CFR Sec. 351.410(a)(c).

Level of Trade

    In accordance with section 773(a)(1)(A) of the Act, and the SAA at 
pages 829-831, to the extent practicable, the Department will calculate 
NV based on sales at the same level of trade (LOT) as the U.S. sale 
(either EP or CEP). When there are no sales in the comparison market at 
the same LOT as the U.S. sale(s), the Department may compare sales in 
the U.S. and foreign markets at a different LOT, and adjust NV if 
appropriate. The NV LOT is that of the starting-price sales in the home 
market. When NV is based on CV, the level of trade is that of the sales 
from which we derive selling, general and administrative (``SG&A'') 
expenses and profit.
    As the Department explained in Gray Portland Cement and Clinker 
from Mexico: Final Results of Antidumping Duty Administrative Review 
(Cement from Mexico), 62 FR 17156 (April 9, 1997), for both EP and CEP 
the relevant transaction for the LOT analysis is the sale from the 
exporter to the importer. While the starting price for CEP is that of a 
subsequent resale to an unaffiliated buyer, the construction of the CEP 
results in a price that would have been charged by the exporter to the 
importer if the importer had not been affiliated. We calculate the CEP 
by removing from the first resale to an unaffiliated U.S. customer the 
expenses referenced in section 772(d) of the Act and the profit 
associated with these expenses. These expenses represent activities 
undertaken by the affiliated importer in making the sale to the 
unaffiliated customers. Because the expenses deducted under section 
772(d) of the Act are incurred for selling activities in the United 
States, the deduction of these expenses may yield a different LOT for 
the CEP than for the later resale (which we use for the starting 
price). Movement charges, duties, and taxes deducted under section 
772(c) of the Act do not represent activities of the affiliated 
importer, and we do not remove them to obtain the price on which the 
CEP LOT is based.
    To determine whether some or all home market sales are at a 
different LOT than U.S. sales, we apply a two-prong test. Customer 
categories such as distributors, retailers, or end-users are commonly 
used by respondents to describe LOTs, but, without substantiation, they 
are insufficient to establish that a claimed LOT is valid. An analysis 
of the chain of distribution and of the selling functions substantiates 
or invalidates the claimed LOTs.
    In the first part of the test, we examine whether the home market 
sales are at different stages in the marketing process than the U.S. 
sales. The marketing process in both markets begins with goods being 
sold by the producer and extends to the sale to the final user. The 
chain of distribution between the producer and the final user may have 
many or few links, and each respondent's sales occur somewhere along 
this chain. In the United States the respondent's sales are generally 
to an importer, whether independent or affiliated. We review and 
compare the distribution systems in the home market and the United 
States, including selling functions, class of customer, and the extent 
and level of selling expenses for each claimed LOT. Unless the sales 
being compared are at different stages in the marketing process, the 
Department will not find that a difference in LOT exists, even if 
selling functions are different.
    The second prong of the Department's LOT test concerns selling 
functions. If the claimed LOTs are different, the selling functions 
performed in selling to each level should also be different. Therefore, 
unless we find at a minimum that there are different selling functions 
and different stages in the marketing process for sales to the U.S. and 
HM sales, we will not determine that there are separate LOTs. Different 
LOTs necessarily involve differences in selling functions, but 
differences in selling functions, even substantial ones, are not alone 
sufficient to establish a difference in the LOTs. Differences in LOTs 
are characterized by purchasers at different stages of marketing or 
their equivalent which, in this case, are the different stages in the 
chain of distribution, and by sellers performing qualitatively 
different functions in selling to them.
    When we compare U.S. sales to home market sales made at a different 
LOT, we make a LOT adjustment if the difference in LOTs affect price 
comparability. We determine any effect on price comparability by 
examining sales at different LOTs in a single market (the home market 
or the third-country market used to calculate NV when the aggregate 
volume of sales in the home market is less than five percent of the 
aggregate volume of U.S. sales). Any price effect must be manifested in 
a pattern of consistent price differences between home market (or 
third-country) sales used for comparison and sales at the equivalent 
LOT of the export transaction. See, e.g. Granular 
Polytetrafluorethylene Resin from Italy; Preliminary Results of 
Antidumping Duty Administrative Review, 62 FR 26285 (May 13, 1997), and 
Cement from Mexico, at 17148. To quantify the price differences, we 
calculate the difference in the average of the net prices of the same 
models sold at different LOTs. We use the average percentage difference 
between these net prices to adjust NV when the LOT of NV is different 
from that of the export sale. If there is no pattern of price 
differences, then the difference in LOTs does not have a price effect, 
and, therefore, no adjustment is necessary.
    Section 773 of the Act also provides for an adjustment to NV when 
NV is based on a LOT different from that of the CEP if the NV is more 
remote from the factory than the CEP and, even though the respondent 
has acted to the best of its ability in providing data for this 
purpose, we are unable to determine whether the differences in LOT 
between CEP and NV affect the comparability of their prices. This 
latter situation might occur when there is no home market (or third-
country) LOT equivalent to the U.S. sales level or where there is an 
equivalent home market (or third-country) level but the data are 
insufficient to support a conclusion on price effect. See, e.g., 
Certain Corrosion Resistant Carbon Steel Flat Products and Cut-to-
Length Carbon Steel Plate from Canada, Final Results of Antidumping 
Duty Administrative Reviews, 62 FR 18466 (April 15, 1997). This 
adjustment, the CEP offset, is identified in section 773(a)(7)(B) of 
the Act and is the lesser of the following:
    * The indirect selling expenses of the home market (or third-
country) sale; or
    * The indirect selling expenses deducted from the starting price 
used to calculate CEP.
    The CEP offset is not automatic each time we use CEP. See 
Mechanical Transfer Presses from Japan, Final Results of Antidumping 
Administrative Review (62 FR 17156, October 9, 1996). The CEP offset is 
made only when the home market (or third-country) sale's LOT is more 
advanced than the LOT of the CEP sale and there is not an appropriate 
basis for determining whether there is an effect on price 
comparability. See, e.g., Cement from Mexico at 17156.

[[Page 48704]]

    The Department's analysis of the LOT comparisons for the two 
respondents is as follows:
    TAMSA. It is the Department's policy to match, whenever possible, 
U.S. sales to home market sales of identical merchandise. If there are 
identical matches, the Department then undertakes a LOT analysis as 
previously described. See Import Administration Policy Bulletin 92/1, 
``Matching at Levels of Trade,'' July 29, 1992. Consistent with this 
policy, the Department determined that the U.S. sales made by TAMSA had 
matches in the home market of identical merchandise within the same 
month of the U.S. sale. The U.S. sales matched exclusively to home 
market sales made to PEMEX. We then sought to determine whether sales 
to PEMEX were at the same level of trade as TAMSA's sales to the United 
States. To determine whether TAMSA's CEP and NV sales were at the same 
LOT, we compared the CEP sales to the PEMEX HM sales in accordance with 
the methodology discussed above.
    Our analysis of the stages in the marketing process indicates that 
the sales to the U.S. are made at a different point in the chain of 
distribution than sales to PEMEX. Whereas sales to PEMEX are to an end 
user, its U.S. sales are to a distributor (Siderca). Therefore, the 
Department analyzed the different selling functions and services which 
TAMSA provides to its customers.
    We requested information concerning the selling functions 
associated with sales in each market for TAMSA. In addition to the 
standard selling functions that TAMSA provides to all home market 
customers, such as inventory maintenance, technical advice, and others, 
TAMSA provides other services on a just-in-time basis to PEMEX. 
Provision of these services requires staff dedicated to administering 
the just-in-time agreements, and entails certain expenses for TAMSA. 
Such expenses include provisions and expenditures for breach of 
contract, salaries and overhead for extra personnel to administer the 
just-in-time agreements, and other costs. These expenses and selling 
functions do not exist for TAMSA's sales to the U.S. See Analysis 
Memorandum for further discussion. Based on this analysis, we 
preliminarily determine that TAMSA's home market sales to PEMEX and its 
CEP sales are at different LOTs.
    Section 773(a)(7)(B) of the Act directs us to make an adjustment 
for differences in LOTs where such differences affect price 
comparability. Where such an adjustment is not feasible, and the home 
market LOT is more advanced than the CEP LOT, the Department must make 
a CEP offset. We examined the data for TAMSA and have determined that a 
LOT adjustment is not feasible. Specifically, we note that although 
TAMSA made sales to other customers which involved different sales 
functions, it made no sales in Mexico at the LOT of the U.S. sales 
which could be used to calculate the extent to which price 
comparability can be attributed to LOT. Thus, the Department is 
precluded from making a LOT adjustment.
    Therefore, as indicated above, in accordance with Section 
773(a)(7)(B) of the Act, a CEP offset is warranted where NV is 
established at a LOT which constitutes a more advanced stage of 
distribution (or the equivalent) than the LOT of the CEP sale. Because 
we have determined that TAMSA's home market LOT is different from the 
CEP LOT and is at a more advanced stage of distribution, as well as 
that a LOT adjustment is not feasible, we made a CEP offset pursuant to 
Section 773(a)(7)(B) of the Act.
    Hylsa. Since NV for Hylsa is based on CV, the level of trade is 
that of the sales from which we derive SG&A expenses and profit used in 
the CV calculations. We derived profit and SG&A expenses from Hylsa's 
tubular products division financial sheets and submitted worksheets, 
which we examined at verification. Although Hylsa's U.S. sale involves 
ministerial functions performed by a U.S. affiliate, we consider this 
to be a sale which we categorized as an EP sale made indirectly by 
Hylsa to the unaffiliated end-user customer. We find that there is no 
evidence on the record to suggest that these sales to the U.S., when 
compared to the HM sales made by Hylsa's tubular products division, 
which were used in CV, are at a different level of trade. Therefore, a 
LOT adjustment is not appropriate for Hylsa's sales.

Preliminary Results of Review

    We preliminarily determine that the following margins exist for the 
period August 1, 1996 through July 31, 1997:

Hylsa--0%
TAMSA--0%

    Parties to this proceeding may request disclosure within five days 
of publication of this notice and any interested party may request a 
hearing within 30 days of publication. Any hearing, if requested, will 
be held 37 days after the date of publication, or the first working day 
thereafter. Interested parties may submit case briefs and/or written 
comments no later than 30 days after the date of publication. Rebuttal 
briefs and rebuttals to written comments, limited to issues raised in 
such briefs or comments, may be filed no later than 35 days after the 
date of publication. The Department will publish the final results of 
this administrative review, which will include the results of its 
analysis of issues raised in any such written comments or at a hearing, 
within 120 days after the publication of this notice.
    The Department shall determine, and Customs shall assess, 
antidumping duties on all appropriate entries. The Department will 
issue appraisement instructions directly to Customs. The final results 
of this review shall be the basis for the assessment of antidumping 
duties on entries of merchandise covered by the determination and for 
future deposits of estimated duties. We will base the assessment of 
antidumping duties on the entered value of the covered merchandise.
    Furthermore, the following deposit requirements will be effective 
upon completion of the final results of these administrative reviews 
for all shipments of OCTG from Mexico entered, or withdrawn from 
warehouse, for consumption on or after the publication date of the 
final results of these administrative reviews, as provided by section 
751(a)(1) of the Act: (1) The cash deposit rate for reviewed firms will 
be the rate established in the final results of administrative review, 
except if the rate is less than 0.50 percent, and therefore, de minimis 
within the meaning of 351.106(d)(1), in which case the cash deposit 
rate will be zero; (2) for merchandise exported by manufacturers or 
exporters not covered in this review but covered in the original less-
than-fair-value (LTFV) investigation or a previous review, the cash 
deposit will continue to be the most recent rate published in the final 
determination or final results for which the manufacturer or exporter 
received a company-specific rate; (3) if the exporter is not a firm 
covered in this review, or the original investigation, but the 
manufacturer is, the cash deposit rate will be that established for the 
manufacturer of the merchandise in the final results of these reviews, 
or the LTFV investigation; and (4) if neither the exporter nor the 
manufacturer is a firm covered in this or any previous review or the 
original fair value investigation, the cash deposit rate will be 
23.79%.
    This notice also serves as a preliminary reminder to importers of 
their responsibility under 19 CFR 351.402(f)(2) 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

[[Page 48705]]

this requirement could result in the Secretary's presumption that 
reimbursement of antidumping duties occurred and the subsequent 
assessment of double antidumping duties.
    This administrative review and notice are in accordance with 
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 351.201 
and 351.221.

    Dated: August 31, 1998.
Joseph A. Spetrini,
Acting Assistant Secretary for Import Administration.
[FR Doc. 98-24488 Filed 9-10-98; 8:45 am]
BILLING CODE 3510-DS-P