[Federal Register Volume 64, Number 55 (Tuesday, March 23, 1999)]
[Notices]
[Pages 13962-13970]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-7100]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-201-817]


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

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

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

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SUMMARY: On September 11, 1998, the Department of Commerce (the 
Department) published the preliminary results of its administrative 
review of the antidumping duty order on oil country tubular goods 
(``OCTG'') from Mexico covering exports of this merchandise to the 
United States by certain manufacturers (Oil Country Tubular Goods from 
Mexico; Preliminary Results of Administrative Review (``Mexican 
OCTG''), 63 FR 48599). Based on our preliminary review of these exports 
during the period August 1, 1996 through July 31, 1997, we found no 
margins for either reviewed company. We invited interested parties to 
comment on the preliminary results. We received comments and rebuttals 
from petitioners and from respondent with respect to Tubos de Acero de 
Mexico, S.A. (``TAMSA''). No comments were received from either party 
with respect to the other reviewed manufacturer, Hylsa S.A. de C.V. 
(``Hylsa'') . We have now completed our final results of review and 
determine that the results have not changed for either respondent.

EFFECTIVE DATE: March 23, 1999.

FOR FURTHER INFORMATION CONTACT: John Drury, or Linda Ludwig, 
Enforcement Group III--Office 8, Import Administration, International 
Trade Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW Room 7866, Washington, DC. 20230; telephone 
(202) 482-0195 (Drury), or (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

[[Page 13963]]

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 and TAMSA, we published a notice of initiation of the 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 limit for the 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). 
On January 11, 1999, the Department extended the time limit for the 
final results until March 10, 1999. See Oil Country Tubular Goods from 
Mexico; Extension of Time Limits for Antidumping Duty Administrative 
Review (64 FR 3065, January 20, 1999).

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 
have made a duty absorption determination in this segment of the 
proceeding.
    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 determine that there is no dumping margin for 
either TAMSA's sales or Hylsa's sales during the POR. Since we have 
determined that there are no dumping margins for the respondents with 
respect to their U.S. sales, we also determine that there is no duty 
absorption with respect to those sales.

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.

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.

Analysis of Comments Received

    We invited interested parties to comment on our preliminary results 
of the reviews. We received both comments and rebuttals from 
petitioners and TAMSA. Because there were no comments concerning our 
preliminary results with respect to Hylsa, all comments below pertain 
to TAMSA. The following is a summary of comments.

Comment 1

    Petitioners argue that TAMSA should not be granted a constructed 
export price (``CEP'') offset, as TAMSA neither requested such an 
adjustment nor provided information to the Department necessary to 
analyze whether a CEP offset was warranted. Indeed, since TAMSA claimed 
that its sales were at similar levels of trade, and that the sale to 
the United States was an export price (``EP'') sale, TAMSA never 
claimed a CEP offset. The lack of a CEP offset claim by TAMSA, and 
inadequate information concerning levels of trade, according to 
petitioners, precludes the Department from granting a CEP offset.
    Petitioners begin by pointing out that TAMSA maintained that its 
sale to the United States was an EP sale, not a CEP sale. Because of 
TAMSA's steadfast insistence that its sale was not a CEP sale, and its 
alleged refusal to provide any information which might be used in 
conjunction with a CEP offset, petitioners maintain that TAMSA is not 
entitled to the offset.
    Even if TAMSA is not required to request a CEP offset, petitioners 
argue, TAMSA has the burden to establish an entitlement to an offset by 
providing sufficient information to demonstrate that sales to the 
United States and home market were at different levels of trade, that 
it is not possible to make a level of trade adjustment, and that the 
level of trade in the home market is more advanced than that of the 
sale to the United States. Citing Small Diameter Circular Seamless 
Carbon and Alloy Steel Standard, Line, and Pressure Pipe from Germany 
(``German Pipe'') (63 FR 13217, March 18, 1998), petitioners assert 
that TAMSA alone was responsible for providing this information and 
failed to do so. Petitioners note that, in its initial response, TAMSA 
did not provide any information about different selling functions in 
the home market and the United States market which the Department could 
use in making a level of trade determination. Despite repeated requests 
by the Department in supplemental questionnaires, petitioners contend, 
TAMSA provided

[[Page 13964]]

little or no new information regarding the various selling functions in 
both markets. Instead, petitioners state, TAMSA continued to maintain 
that sales in both the home market and United States markets were at 
the same level of trade, and at no point requested a level of trade 
adjustment. Despite the fact that TAMSA provided just-in-time (``JIT'') 
services to PEMEX, its largest customer, and did not provide them to 
its United States customers, petitioners note that TAMSA never took the 
position that JIT services were sufficient to create a difference in 
levels of trade.
    Petitioners state that the respondent has the burden of proof to 
demonstrate that a level of trade adjustment based on price differences 
is not possible. Petitioners state that TAMSA provided no information 
to answer this question, and thus the Department's decision in the 
preliminary results to grant a CEP offset is incorrect. Petitioners 
believe that the Department did not explain its basis for finding that 
non-PEMEX sales in the home market were at a different level of trade 
from the sale to the United States, and that a level of trade 
adjustment based on price differences is not possible. For all of these 
reasons, petitioners believe that the Department should not grant a CEP 
offset to TAMSA.
    TAMSA counters that the Department's decision to grant a CEP offset 
was proper if the Department maintains that the sale by TAMSA to the 
United States was a CEP sale. TAMSA asserts that it did fully cooperate 
with the Department and provided the necessary information. 
Furthermore, TAMSA states that it did, in fact, advise the Department 
that it had provided sufficient information for a CEP offset, in 
comments which were provided prior to verification. This information, 
according to TAMSA, includes a detailed explanation of the various 
selling functions for each channel of distribution in the home market, 
as well as for the sale to the United States. TAMSA states that if it 
meets its burden to provide sufficient information for the Department 
to determine if there is a more advanced level of trade in the home 
market, yet provides insufficient information for a level of trade 
adjustment, then it has nevertheless met the conditions for a CEP 
offset.
    TAMSA states that it has, in fact, met this burden. Concerning the 
level of trade question, TAMSA states that the information provided to 
the Department shows that it sold at different levels of trade in the 
home market and the United States, and that the home market level of 
trade was more advanced. TAMSA states that, although it initially 
classified all customers as ``end users,'' it subsequently provided 
detailed information regarding channels of distribution, selling 
functions, and other information which clearly establishes different 
channels of distribution and different selling functions with respect 
to the two markets. TAMSA further notes that the Department verified 
the services provided by TAMSA to its customers, including the 
provision of JIT services in the home market and services provided by 
Siderca Corp. in the United States. According to TAMSA, this 
information, which was also verified, is sufficient to establish that 
the U.S. sale was made at a different level of trade than TAMSA's home 
market sales.
    Regarding the question of whether there is enough information to 
make a level of trade adjustment, and whether TAMSA cooperated 
sufficiently in providing such information, TAMSA asserts that the 
Department found no home market level of trade equal to the level of 
trade of the United States sale. Consequently, a level of trade 
adjustment was not feasible.

Department's Position

    The question of whether a respondent is entitled to a CEP offset is 
predicated on a certain pattern of facts. First, there must be a 
decision that sales to the United States are CEP sales. Second, there 
must be a determination that there are different levels of trade 
between the home market and United States, that the home market level 
of trade is more advanced, and that it is not possible to quantify the 
price differences related to those sales and different levels of trade 
to make a level of trade adjustment. Only after these conditions are 
met can a CEP offset be made.
    The Department presented a detailed explanation of the process for 
determining levels of trade and their proper treatment in the 
preliminary results of this review. See Mexican OCTG, 63 FR 48699. To 
summarize, the Department examines and compares the distribution 
systems, including the selling functions, classes of customers, and 
selling expenses, in the two markets. Further, unless the Department 
finds that there are substantial differences in selling functions, it 
will not determine that there are different levels of trade.
    The Department's use of this test is well documented. In Certain 
Cold-Rolled Carbon Steel Flat Products from the Netherlands (62 FR 
18476, April 15, 1997), the Department stated that:

[t]he existence of different classes of customers, as well as 
different functions performed by such customers, is not sufficient 
to establish a difference in the levels of trade. Accordingly, we 
consider the class of customer as one factor, along with the 
producer/exporter's selling functions and the selling expenses 
associated with these functions, in determining the stage of 
marketing, i.e., the level of trade associated with the sales in 
question.''

    As noted in the preliminary results, we compared sales to 
unaffiliated customers in the home market to the constructed sales to 
the importer in the United States. This is consistent with the 
Department's previous practice. See Id. At 18480. In this instance, 
TAMSA's home market sales to unaffiliated parties are compared to the 
sale to Siderca Corp., TAMSA's U.S. affiliate. All sales in the home 
market are to end users, i.e. manufacturers which consume the final 
product. The sale to Siderca Corp., by contrast, is similar to a sale 
to a distributor. Siderca Corp. does not consume the product, but 
rather acts as a reseller. Therefore, the sales in the home market and 
the U.S. sale appear to be made at different points in the chain of 
distribution.
    With respect to the selling functions, TAMSA provided sufficient 
information for the Department to compare selling functions in the two 
markets. Information provided by TAMSA, and verified by the Department, 
demonstrates that TAMSA's selling functions for home market sales are 
different than those associated with TAMSA's sale to Siderca Corp.
    First, TAMSA provides JIT services to the vast majority of its home 
market customers. The Department verified the extent and the nature of 
the expenses associated with JIT services. Also, as TAMSA stated in 
submitting its chart of selling functions, TAMSA provides customer 
visits in the home market. Neither of these services was provided in 
connection with the U.S. sale to Siderca Corp. Services provided by 
Siderca Corp. to end users in the United States are not relevant to 
this analysis, because the appropriate comparison for LOT purposes is 
between the ``starting price'' sale to the first unaffiliated customer 
in the home market, and the constructed export price sale (i.e. the 
sale to Siderca Corp.) in the United States. See Sec. 351.412(c) of the 
Department's regulations. Based on information provided by TAMSA and on 
the Department's verification, the Department's analysis of the selling 
functions provided by TAMSA in both the home and U.S. markets indicates 
that there are selling functions provided in sales to the home market 
which are not provided in the U.S. market and that

[[Page 13965]]

all home market sales are made at a single level of trade.
    Based on the facts of the case, the Department finds that sales by 
TAMSA in the home market are at a different level of trade than the 
sale to the United States. Sales in the home market are to end-users, 
while the sale to Siderca Corp. is a sale to a distributor. 
Furthermore, the provision of JIT services to the vast majority of home 
market customers, as well as visits to customers, demonstrates that 
TAMSA's sales in the home market and its sale to Siderca Corp. are 
characterized by different selling functions. Therefore, the facts on 
the record indicate that TAMSA's sales were made at different levels of 
trade.
    Next, the Department must determine if the home market level of 
trade is more advanced than the U.S. level of trade. The Department's 
analysis of the different selling functions indicates that the home 
market sales are indeed made at a more advanced level of trade. The 
home market sales to end users, who are further down the chain of 
distribution than distributors such as Siderca Corp., and the selling 
functions provided in the home market, especially JIT services, 
constitute a far greater level of service and expense for TAMSA than 
the services provided to Siderca Corp. in connection with the sale to 
the United States.
    Finally, the information on the record indicates that it is not 
possible for the Department to make a level of trade adjustment. 
Specifically, because there are no home market sales at the same level 
of trade as the U.S. sale, it is not possible to quantify the extent to 
which price differences are due to the level of trade differences.
    Given that the home market sales are at a more advanced level of 
trade, and that it is not possible to make a level of trade adjustment, 
section 773(a)(7)(B) of the Act directs the Department to make a CEP 
offset.
    The statutory provision is not limited to situations in which a 
respondent requests such an offset. The record indicates that TAMSA 
provided sufficient information for the Department to conduct a level 
of trade analysis and to determine that a CEP offset was appropriate. 
Thus, petitioners' reliance on the German Pipe case is off point. In 
that case, the respondent did not provide sufficient information either 
before or during verification for the Department to conduct a level of 
trade analysis. In the instant case, in contrast, TAMSA provided 
information prior to verification, and Department officials were able 
to verify the accuracy of the information during verification.
    Thus, based on the facts in the case, we agree with respondent that 
a CEP offset is warranted if the Department continues to classify the 
sale to the United States as a CEP sale.
    The question of whether the sale is classified properly as a CEP 
sale is addressed in the next comment.

Comment 2

    TAMSA contends that the Department erred in classifying TAMSA's 
sale to the United States as a CEP sale. Instead, TAMSA maintains that 
the Department should classify TAMSA's United States sale as an EP 
sale.
    In support of its argument, TAMSA begins by restating the three-
prong test that the Department undertakes to determine if sales made 
through a U.S. affiliate should be classified as CEP sales or 
``indirect'' EP sales. The test examines three criteria: (1) Whether 
merchandise sold to the United States entered into the physical 
inventory of the affiliate or was shipped directly to the United States 
customer; (2) whether a direct shipment to the unaffiliated customer 
was the customary channel of trade, and; (3) whether the affiliate 
acted only as a processor of documentation and as a communications link 
between the unaffiliated customer and the producer or exporter. Where 
one or more of these conditions is not met, the Department treats sales 
through a U.S. affiliate as CEP sales. Noting that the Department 
relied on the third prong of the test in rejecting its claim that the 
sale was an EP sale, TAMSA lists the reasons cited by the Department 
for its determination that the role of its affiliate, Siderca Corp., 
was more than ancillary, and argues that Siderca Corp. in fact served 
only as a document processor and a communications link.
    TAMSA denies any suggestion that Siderca Corp. solicited the sale, 
or in any way negotiated the price of the sale. TAMSA states that the 
record shows clearly that TAMSA, and not Siderca Corp., set the terms 
and price for the sale in question. TAMSA cites a number of instances 
in which it contends that the Department has treated sales as EP sales 
when the United States affiliate has no authority to set prices or is 
not in a position to negotiate prices, and states that the fact pattern 
in this case is consistent with those cases. See Notice of Final 
Determination of Sales at Less Than Fair Value: Beryllium Metal and 
High Beryllium Alloys from the Republic of Kazakhstan (``Beryllium from 
Kazakhstan''), 62 FR 2648 (January 17, 1997); 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 FR 12725 (March 16, 
1998), Notice of Final Determination of Sales at Less Than Fair Value: 
Stainless Steel Wire Rod from Korea (``Wire Rod from Korea''), 63 FR 
40404 (July 29, 1998); and U.S. Steel Group v. United States, 15 F. 
Supp. 2d 892 (CIT 1998). Regarding the sales agreement between TAMSA 
and Siderca Corp., which confers exclusive marketing and sales agency 
powers on Siderca Corp. with respect to TAMSA products, TAMSA argues 
that the antidumping duty order rendered this agreement moot with 
respect to any sales to the United States of subject merchandise.
    Furthermore, TAMSA states that Siderca Corp. merely received a 
request from the U.S. customer, and passed it on to TAMSA in Mexico. 
TAMSA depicts the role of Siderca Corp. in finalizing the sale as the 
passive role of a mere conduit for information passing between the U.S. 
customer and TAMSA during the initial sales process. TAMSA states that 
Siderca Corp. did not match the order to TAMSA's inventory, did not 
find a buyer for the merchandise, and did not finalize the sale.
    Once the sale terms were finalized, TAMSA asserts, the functions 
performed by Siderca Corp. were all ``ancillary'' and therefore should 
not weigh in the decision to treat this sale as a CEP sale. These 
included paying for certain charges, such as brokerage and insurance, 
serving as the importer of record, accepting payment, and other such 
services.
    TAMSA concludes by stating that the Department must go beyond a 
listing of activities and must analyze the various activities involved 
with the sale. TAMSA contends that the record, properly analyzed, shows 
that this sale should be treated as an EP sale.
    Petitioners respond by stating that the Department's normal 
practice is to consider a sale made through a U.S. affiliate to be a 
CEP sale unless the record indicates that all three prongs are met. 
Petitioners state that Siderca Corp. had more than ancillary or 
incidental involvement in the U.S. sale and that these activities were 
sufficient to warrant the Department's treatment of the sale as a CEP 
sale. Petitioners rely upon Certain Cold-Rolled and Corrosion-Resistant 
Carbon Steel Flat Products from Korea, Final Results of Antidumping 
Duty Administrative Review, (``Korean Steel''), 63 FR 13170 (March 18, 
1998) and Stainless Steel Wire Rod from Spain, Final Determination of 
Sales at Less Than Fair Value, (``Wire Rod from Spain''), 63

[[Page 13966]]

FR 40391 (July 29, 1998) in which the Department treated the sales at 
issue as CEP sales.
    Petitioners note in particular that the sales agency agreement 
between TAMSA and Siderca Corp. names Siderca Corp. as TAMSA's 
exclusive selling agent in the United States market, and further points 
out that the terms of the sale and the selling activities performed by 
Siderca Corp. appear to follow the terms of this agreement. 
Furthermore, petitioners note that the agreement was extended, without 
amendment, after the antidumping duty order went into effect.
    Petitioners further assert that the contacts between Siderca Corp. 
and the U.S. customer were consistent with the functions described in 
the agreement. For example, according to petitioners, the U.S. customer 
contacted Siderca Corp., not TAMSA, regarding this sale, and Siderca 
Corp. had exclusive contact with the customer throughout the sales 
process. Additionally, Siderca Corp. had longstanding and frequent 
contacts with the customer and worked regularly with it to meet its 
needs as they arose for a variety of products and services. These 
contacts and activities, petitioners believe, indicate that Siderca 
Corp.'s efforts brought about the sale of TAMSA merchandise in the 
United States.
    While not disputing that TAMSA may have set the price for the sale, 
petitioners reiterate that the selling agreement between TAMSA and 
Siderca Corp. grants Siderca Corp. certain rights in negotiating and 
setting prices as part of its work in marketing TAMSA products. 
Petitioners state that the Department should discount other assertions 
on the record regarding TAMSA's role in setting the price, and instead 
should concentrate on the selling agreement.
    As for the other functions carried out with respect to this sale, 
petitioners believe that these activities, taken as a whole, indicate 
more than ancillary involvement by Siderca Corp. Petitioners urge the 
Department to consider the range of services and activities in the 
aggregate, rather than line by line, in making its determination. 
Petitioners also advise the Department to examine the differences in 
indirect selling expenses incurred by Siderca Corp. and TAMSA when 
making its determination on this question.
    Finally, petitioners state that it is also doubtful that TAMSA 
passed the second prong of the CEP test. Petitoners note that, in the 
original investigation, the merchandise sold to the U.S. was produced 
to order and the U.S. sales were made through a different U.S. 
affiliate. Comparing the fact pattern in this review to the one from 
the original investigation, petitioners find the two to be different 
and conclude that the current United States sale does not represent the 
customary commercial channel between the parties involved in the sale. 
According to petitioners, this sale therefore failed two of the three 
prongs of the ``indirect EP sale'' test, and the Department should 
therefore treat this sale as a CEP sale.

Department's Position

    Section 772(b) of the Act defines CEP as ``the price at which the 
subject merchandise is first sold (or agreed to be sold) in the United 
States before or after the date of importation by or for the account of 
the producer or exporter of such merchandise or by a seller affiliated 
with the producer or exporter, to a purchaser not affiliated with the 
producer or exporter, as adjusted.'' Section 772(a) of the Act defines 
EP as ``the price at which the subject merchandise is first sold (or 
agreed to be sold) before the date of importation by the producer or 
exporter of the subject merchandise outside of the United States to an 
unaffiliated purchaser in the United States, or to an unaffiliated 
purchaser for exportation to the United States, as adjusted.'' When 
sales are made prior to importation through an affiliated U.S. sales 
agent to an unaffiliated customer in the United States, our practice is 
to examine several criteria in order to determine whether or not the 
sales are ``indirect'' EP sales. Those criteria are: (1) Whether the 
merchandise was shipped directly from the manufacturer to the 
unaffiliated U.S. customer; (2) whether this was the customary 
commercial channel between the parties involved; and (3) whether the 
function of the U.S. selling agent was limited to that of a ``processor 
of sales-related documentation'' and a ``communications link'' between 
the exporter and the unaffiliated U.S. buyer. See Canadian Steel 63 FR 
at 12738. Where all three criteria are met, the Department has regarded 
the routine selling functions of the exporter as merely having been 
relocated geographically from the country of exportation to the United 
States where the sales agent performs them, and has determined the 
sales to be EP sales. Where one or more of these conditions is not met, 
the Department has classified the sales in question as CEP sales.
    In attempting to determine whether a sale should be treated as EP 
or CEP, the Department looks at the overall role of an affiliate in the 
sales process. Essentially, the Department wishes to determine whether 
the affiliate is substantially involved in the sales process. While 
each of the three prongs addresses this question to some extent, the 
third prong of the test is the most important with respect to resolving 
the question. After carefully examining the evidence, the Department 
believes that the fact pattern indicates clearly that the affiliate, 
Siderca Corp., played the leading role in the U.S. sale made during 
this administrative review and was substantially involved in the sales 
process.
    As an initial matter, the selling agreement between TAMSA and 
Siderca Corp. is quite clear with respect to the services that Siderca 
Corp. performs. Siderca Corp. is the exclusive selling agent for TAMSA 
products in the United States and other parts of the world, and has 
certain rights affecting the price for any sales under the agreement. 
In exchange for providing marketing and selling functions, and for 
providing other services, such as paying for brokerage and importer 
duties, Siderca Corp. is entitled to receive compensation under the 
agreement. The record indicates that Siderca Corp. did receive, in 
connection with this sale, the compensation provided for under the 
agreement, and performed functions for which it is responsible under 
the agreement.
    In addition, Siderca Corp. played the primary role in generating 
this sale by bringing the customer to TAMSA. The record shows that 
Siderca Corp. has a longstanding working relationship with the United 
States customer, is in frequent contact with that customer, and that 
sales of other TAMSA products to this and other customers occur because 
of these contacts. Conversely, TAMSA itself appears to have little, if 
any, contact outside of Mexico with regard to the sale of its products 
in the United States. Indeed, under the terms of the agreement, TAMSA 
is precluded from soliciting or negotiating sales directly in the 
United States. The agreement places the rights and responsibilities of 
selling and marketing TAMSA products in the United States squarely on 
Siderca Corp.
    Based on this fact pattern, it appears that, contrary to TAMSA's 
claims, the sale to the United States of subject merchandise was within 
the framework of the agreement between TAMSA and Siderca Corp. Evidence 
on the record indicates that, consistent with its rights and 
responsibilities under the selling agreement, Siderca Corp. maintained 
contacts with the United States customer and, through these contacts, 
was able to match that customer's requirements with subject merchandise 
available from TAMSA. Siderca Corp.

[[Page 13967]]

was aware of the existence of the merchandise from a canceled sale that 
it had previously arranged, and upon receiving the inquiry forwarded it 
to TAMSA for approval. The fact that Siderca Corp. may not have fully 
exercised its rights with regards to price negotiation, deferring to 
TAMSA with respect to the final approval, neither negates the substance 
and importance of the agreement nor diminishes the importance of 
Siderca Corp.'s role in arranging this sale. Simply put, under the 
current agreement, it appears that TAMSA would be precluded from 
seeking sales in the United States directly. Sales of TAMSA products in 
the United States must, as a condition of the agreement, begin with 
Siderca Corp. The fact that Siderca Corp. performed other functions as 
specified in the agreement, even if these were ancillary services, and 
received compensation according to the terms of the agreement, 
reinforces the conclusion that Siderca Corp.'s activities under the 
agreement were the primary factors in creating the sale to the United 
States.
    The cases cited by both TAMSA and petitioners, when compared with 
the fact pattern of the case, reinforce the conclusion that this sale 
should be classified as a CEP sale. In Wire Rod from Korea, the 
Department treated the sales as EP sales because the Department 
``(c)onfirmed Changwon's assertions that POSAM (the U.S. affiliate) is 
not in a position to negotiate, confirm, or reject prices without 
approval from Changwon'' and ``POSAM * * * did not solicit business on 
behalf of Changwon'' and ``Changwon itself contacted its potential U.S. 
customers'' (63 FR at 40418-19). In this instance, in contrast, Siderca 
Corp. had the authority to negotiate, confirm, or reject prices through 
its selling agreement. Additionally, the Department determined at the 
Siderca Corp. verification that Siderca Corp. maintains a sales staff 
which is in active contact with U.S. customers, whereas TAMSA had no 
contact with the potential U.S. customers.
    In Beryllium from Kazakhstan, the Department treated the sales as 
EP because ``verification findings confirmed the limits on BMI's (the 
U.S. affiliate) authority to finalize the sales and that BMI is acting 
solely as a processor of documentation and communications link'' (62 FR 
at 2649). In the instant case, in contrast, the verification findings 
indicate that Siderca Corp.'s authority is not limited, because of the 
existence of the selling agreement.
    As for the Canadian Steel case relied upon by the respondent, the 
U.S. affiliate whose sales were deemed to be EP sales in that case did 
not solicit sales, negotiate contracts or prices, or provide customer 
support. Siderca Corp., in contrast, regularly did all of the above on 
behalf of TAMSA. Even if it did not expressly solicit this particular 
sale, its function, which included negotiation with respect to this 
sale, clearly exceeded the Canadian Steel definition of ancillary 
functions.
    Although TAMSA relied upon U.S. Steel Group v. United States, that 
case actually involved CEP, not EP, sales. In that case, the Court of 
International Trade (``CIT'') examined the Department's determination 
in Certain Cut-to-Length Carbon Steel Plate from Germany; Final Results 
of Antidumping Duty Administrative Review, 62 FR 18391 (April 15, 
1997). The CIT noted that, during the review, the producer, Dillinger, 
stated that it set the terms of the sale, including the final price. 
The Court further noted that the Department had found that the U.S. 
affiliate, Francosteel, among other things, either solicited or 
responded to the initial U.S. customer contact, received the purchase 
orders, negotiated the final sale with the U.S. customer using the 
pricing and term guidelines provided by Dillinger, took title to the 
merchandise, acted as importer of record, and invoiced the U.S. 
customer. Finally, Francosteel had the flexibility to make decisions on 
its own as to price. All of these factors, ``[c]ombined with all the 
normal selling functions, which have not always led to CEP 
classification, legitimately may be viewed as pushing this sale over 
the edge into CEP rather than the EP category.'' U.S. Steel Group, 15 
F. Supp. 2d at 903. A similar fact pattern exists in this case. Siderca 
Corp. has the authority to make pricing decisions on its own; it made 
the first contact with the customer and performed all of the selling 
functions listed above.
    The case cited by petitioners also support a conclusion that this 
sale is best classified as a CEP sale. In Wire Rod from Spain, 63 FR at 
40394, the Department treated the U.S. sales as CEP sales under a 
similar fact pattern. The Department noted that the U.S. affiliate 
(Acerinox) ``will contact U.S. customers that it has not dealt with for 
some time. Otherwise, U.S. customers contact Acerinox to inquire about 
purchasing'' Roldan's SSWR, the product made by the parent company. The 
Department further stated that Acerinox ``(m)ay accept the customer's 
order, if it is a small order. * * * For inquiries regarding 
significant purchases, Acerinox will contact (the parent company) to 
determine the sales terms' that are acceptable. After taking an order, 
Acerinox transmits it to the parent company. Acerinox then coordinates 
freight in the United States and collects and transfers payment to the 
parent company. Based upon this fact pattern, the Department stated 
that ``[t]he record shows that Acerinox was involved in every aspect of 
the sales process except for arranging for shipment [of the product] to 
the United States and invoicing the U.S. customers. Moreover, 
Acerinox's involvement in the sales process was extensive * * *'' when 
compared to that of the parent company. The Department further stated 
that ``[t]he preponderance of selling functions incurred to sell 
Roland's (wire rod) to the U.S. customers occurred in the United 
States. Furthermore, Acerinox's role in negotiating the terms of 
certain U.S. sales is not indicative of the ancillary role normally 
played by a ``processor of sales-related documentation'' and a 
``communication link.'' Specifically, Acerinox's authority to negotiate 
and accept sales terms * * * as well as its authority to initiate 
contact with U.S. customers * * * contradicts' the parent company's 
claim that the U.S. affiliate's activities were ancillary. Thus, the 
Department classified these sales as CEP sales.
    Again, the fact pattern in Wire Rod from Spain is consistent with 
that found in this review. TAMSA had no direct contact with the U.S. 
customer, whereas Siderca Corp., through its selling agreement, had the 
authority to set the price and terms. While TAMSA had a role in setting 
the price, as did the parent of Acerinox, Siderca Corp.''s contacts 
with customers, its flexibility in negotiating terms of sale, and its 
other sales-related activities, indicate that the sale is appropriately 
classified as CEP.
    Finally, in Korean Steel, 63 FR at 13177, the Department again 
found that a fact pattern similar to that in this case warranted CEP 
treatment of the U.S. sales. In the Korean Steel case, the Department 
stated that ``(a)ll of Dongbu's U.S. sales are made through DBLA [the 
U.S. affiliate], and that Dongbu's U.S. customers seldom have contact 
with Dongbu. Furthermore, it is DBSA (and not Dongbu) that writes and 
signs the sales contract. * * * Furthermore, we find that, in addition 
to playing a key role in the sales negotiation process, DBLA played a 
central role in all sales activities after the merchandise arrived in 
the United States.''
    Based on the facts of the case, and their similarity to previous 
cases concerning the issue of whether a sale should be classified as 
CEP or EP, we believe that TAMSA's sale to the United

[[Page 13968]]

States is properly classified as a CEP sale.

Comment 3

    Petitioners argue that the Department should apply partial facts 
available for certain selling expenses incurred in the United States. 
Petitioners believe that TAMSA did not cooperate fully, or to the best 
of its ability, in providing proper figures and supporting 
documentation for various expenses such as brokerage.
    Petitioners present a sequence of events which purport to show that 
TAMSA did not cooperate to the best of its ability. Petitioners point 
to the first price build-up submitted by TAMSA and assert that it 
contained numerous errors and omissions. Petitioners state that, 
despite requests for clarification of the expenses in the price build-
up, TAMSA did not present all of the expenses or a satisfactory 
explanation until verification. During the verification in Veracruz, 
petitioners state that the Department discovered previously unknown and 
unreported expenses. Similarly, according to petitioners, at the 
verification of Siderca Corp. in Houston, the Department discovered new 
supporting documentation for the various expenses. Because neither all 
expenses nor all supporting documents were provided before the two 
verifications, petitioners urge the Department to use partial facts 
available with regard to these expenses.
    TAMSA retorts that it did, in fact, cooperate fully and to the best 
of its ability. TAMSA states that, contrary to petitioners' claims, all 
expenses related to the sale into the United States were reported 
before verification in Veracruz. Of the three charges mentioned by 
petitioners (brokerage charges, stevedoring, and wharfage), TAMSA 
points out that each was reported before verification. While 
acknowledging that two of the three charges were reported late or were 
initially mis-reported, TAMSA attributes this delay to clerical errors 
or omissions that TAMSA itself discovered and corrected prior to the 
Department's first verification in Veracruz. Because the errors were 
minor, and were corrected either before or at verification, TAMSA 
contends that it is the Department's practice to accept such 
corrections. See Notice of Final Determination of Sales at Less Than 
Fair Value: Stainless Steel Wire Rod from Sweden, 63 FR 40449 (July 29, 
1998); Notice of Final Determination of Sales at Less Than Fair Value: 
Static Random Access Memory Semiconductors from Taiwan, 63 FR 8909 
(February 23, 1998); Final Determination of Sales at Less Than Fair 
Value: Certain Cut-to-Length Carbon Steel Plate from the People's 
Republic of China, 62 FR 61964 (November 20, 1997).

Department's Position

    We agree with respondent. While the Department generally requires 
respondents to report all expenses and provide any requested supporting 
documentation in accordance with established deadlines, the fact is 
that TAMSA provided data on nearly all expenses in a timely manner. 
TAMSA reported only one minor expense prior to the Department's 
verification in Veracruz. Furthermore, the Department verified the 
accuracy of the reported expenses. The additional support documentation 
added to the record at the verification in Houston did not reflect a 
change in the expenses reported. Although they demonstrated that 
Siderca Corp. did have greater control in the price build-up than 
originally claimed by TAMSA, the additional support documentation added 
to the record at the verification in Houston did not reflect a change 
in the expenses reported.
    Finally, although TAMSA did not provide all of the supporting 
documentation for all of the expenses incurred prior to the 
verifications, the Department was able to supplement and verify all 
relevant information during the two verifications. Therefore, we will 
not make any changes with regard to these expenses.

Comment 4

    Petitioners assert that the Department should deduct commissions 
paid to Siderca Corp. from the United States price. Assuming that 
TAMSA's United States sale is classified properly as a CEP sale, 
petitioners argue that the statute calls for commissions to be deducted 
from the United States Price.
    Petitioners note that Siderca Corp. is entitled, under its selling 
agreement with TAMSA, to receive a ``commission'' equal to a percentage 
of the actual price charged to customers. If this figure is intended to 
offset expenses incurred by Siderca Corp., petitioners argue, the 
amount of the commission which exceeds the expenses should be deducted.
    TAMSA counters that these are related party commissions and are 
thus intra-company transfers. TAMSA states that the general practice of 
the Department is to treat related party mark-ups in price not as 
commissions, but as intra-company transfers rather than as expenses. 
Since these are not sales expenses, they should not be deducted from 
United States price. TAMSA cites various cases in which the Department 
did not deduct commissions between affiliated parties. See Antifriction 
Bearings (Other Than Tapered Roller Bearings) and Parts Thereof from 
France, Germany, Italy, Japan, Romania, Singapore, Sweden, and the 
United Kingdom, 63 FR 33320 (June 18, 1998); Korean Steel, 63 FR 13170.

Department's Position

    We agree with respondent. The Department does not generally treat 
price mark-ups between affiliates such as the ones in this case as 
commissions. See U.S. Steel Group, 15 F. Supp. 2d at 903, and Floral 
Trade Council v. United States, Slip-Op. 99-10 (CIT January 27, 1999). 
Instead, these are intra-company transfers which the Department treats 
as part of the general operating expenses of the company. Thus we 
generally do not deduct them from U.S. price. Instead, in accordance 
with 19 CFR 351.402(e), we deduct the actual expenses of the affiliated 
importer. ``Although the statute appears to require the expense 
represented by commissions to be deducted from CEP whether or not the 
producer/exporter and U.S. [affiliate] are related, the statute does 
not define `commissions.' '' Floral Trade Council, Slip Op. 99-10 at 
10. Therefore, the Court has sustained the Department's practice of 
treating commissions paid by the producer/exporter to an affiliate as 
an intra-company transfer, rather than as a true commission. Id.
    Petitioners cite section 771(d) of the Act (19 U.S.C. 1677a(d)) in 
support of their contention that commissions should be deducted. 
However, the opinion in U.S. Steel Group makes clear that, ``[i]f 
expenses represented by the commissions are already accounted for by 
means of a deduction for selling expenses nominally made under another 
provision of 19 U.S.C.A. 1677a(d), or the expense does not truly exist, 
no additional commission deduction need be made.'' 15 F. Supp. 2d at 
903. Because the Department has already made adjustments for all of 
TAMSA's selling expenses under 19 U.S.C. 1677a(d) related to the sale 
in question, an additional adjustment for ``commission'' would 
constitute double-counting. Consequently, the Department has made no 
further adjustments in this regard.
    Petitioners' claim that the amount of the ``commission'' that 
exceeds the expenses incurred by Siderca Corp. is also already 
addressed by another provision of section 772(d) of the Act (19 U.S.C. 
1677a(d)), specifically the CEP profit provision, section 772(d)(3) of 
the Act (19 U.S.C. 1677a(d)(3)). The

[[Page 13969]]

Court has also affirmed the Department's position that the amount by 
which ``commissions'' paid to affiliates represents profit for the 
affiliate receiving them. A profit amount has already been accounted 
for under the CEP profit provision. Floral Trade Council, Slip Op. 99-
10 at 13.

Comment 5

    Petitioners urge the Department to correct TAMSA's reported 
warehousing expenses in connection with the provision of Just In Time 
services to certain domestic customers. Petitioners assert that TAMSA's 
methodology, which reports expenses on a monthly basis by regional 
warehouse, is distortive. Petitioners cite changes in the actual 
expenses per month, and state that there appears to be no correlation 
between these expenses and the tonnage shipped or warehoused in that 
month. In particular, there appear to be instances where costs go up 
even though tonnages go down for a month. Petitioners urge the 
Department to recalculate warehousing expenses for each region on a 
per-ton amount for the entire period of review.
    TAMSA counters that its methodology is reasonable, that it acted to 
the best of its ability in providing information, and that its 
reporting methodology was not unreasonably distortive. Because of the 
nature of Just In Time services (i.e., rapid delivery upon order), 
expenses incurred in a month usually correspond closely to tonnages 
shipped and sold in that month. To relate expenses from one month to 
sales in a different month, as petitioners' methodology would, is more 
distortive, according to TAMSA. TAMSA further explains how lower 
tonnages in a month might incur higher expenses. For example, TAMSA 
could incur more customer support expenses during a month in which it 
made many smaller sales than in a month in which it made a single 
larger tonnage sale. TAMSA cites Tapered Roller Bearings and Parts 
Thereof, Finished and Unfinished, from Japan, and Tapered Roller 
Bearings, Four Inches or Less in Outside Diameter, and Components 
Thereof, from Japan: Final Results of Antidumping Duty Administrative 
Reviews (63 FR 63860, November 17, 1998) in support of its assertion 
that the Department should accept this methodology.

Department's Position

    We agree with respondent. The methodology which TAMSA used is based 
on actual, verified monthly figures. By using this methodology, TAMSA 
has provided the Department with a more detailed, and more accurate, 
warehousing cost. Adopting the petitioners' methodology would be less 
accurate, as it would spread out monthly costs over the entire period 
of review. As it is generally the Department's preference to use the 
most accurate and reasonable methodology possible, a warehousing 
expense methodology which is based on monthly figures is preferable to 
one based on annual averages.

Comment 6

    Petitioners request that the Department adjust the reported home 
market freight charges for inland freight from the plant to the 
warehouse. Since TAMSA was unable to report the actual freight charges, 
it took the price lists for freight and adjusted these using a 
methodology to take into account trucks which did not ship with a full 
load. Petitioners argue that this ``constructed'' freight charge is 
distortive. As partial facts available, petitioners suggest using the 
prices from the price lists as a surrogate for the freight costs.
    TAMSA counters that its allocation methodology was reasonable. As 
directed by the Department's original questionnaire, TAMSA attempted to 
allocate freight costs on the basis of the unit weight of the 
individual products shipped. Because it used actual price lists, as 
adjusted for instances not involving full truck loads, TAMSA claims 
that its methodology more closely reflects the actual prices paid for 
freight.

Department's Position

    We agree with respondent. While the Department prefers to have 
actual freight costs, a reasonable allocation methodology that most 
closely reflects the actual costs is acceptable. The Department 
verified information regarding price lists and payment for freight. 
Based upon this verified information, the Department believes that this 
methodology most closely reflects actual costs.

Comment 7

    Both petitioners and respondents request that the Department 
correct certain clerical errors. Petitioners request that the 
Department make an adjustment to its cost calculation methodology by 
eliminating the field titled ``SEPTADJ,'' that it correct the direct 
selling expenses calculation by adding CREDITU to the expense, and that 
it correct the application of exchange rates to packing expenses. TAMSA 
requests that the Department calculate normal value based on monthly 
averages (instead of on averages for the ``90-60 window'' as it has 
done in the current program), that it add BILLADJH to the cost 
calculation program, that it correct a conversion error in the CEP 
ratio calculation, and that it not deduct CREDITU from U.S. direct 
selling expenses.

Department's Position

    The Department has examined the error allegations, and has made the 
changes requested by both parties. Petitioners' and TAMSA's clerical 
error requests regarding direct selling expenses address the same 
issue. Both parties proposed programming language to address the issue. 
Because we believe that petitioners most closely follow the proper 
methodology, we have adopted their suggested programming language for 
the final results. Because the details of these clerical error issues 
involve proprietary data, see Analysis Memorandum for Final Results, 
March 8, 1999.

Final Results of the Review

    As a result of this review, we determine that the following 
weighted-average dumping margins exist:

             Circular Welded Non-Alloy Steel Pipes and Tubes
------------------------------------------------------------------------
                                                              Weighted-
               Producer/manufacturer/exporter                  average
                                                                margin
------------------------------------------------------------------------
Hylsa......................................................         0.00
TAMSA......................................................         0.00
------------------------------------------------------------------------

    The Department shall determine, and the Customs Service shall 
assess, antidumping duties on all appropriate entries. 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 oil country tubular goods from Mexico entered, or withdrawn from 
warehouse, for consumption on or after the publication date, as 
provided for by section 751(a)(1) of the Act: (1) The cash deposit rate 
for the reviewed company will be the rate for that firm as stated 
above; (2) for previously reviewed or investigated companies not listed 
above, the cash deposit rate will continue to be the company-specific 
rate published for the most recent period; (3) if the exporter is not a 
firm covered in this review, or the original less than fair value 
(LTFV) investigation, but the manufacturer is, the cash deposit rate 
will be the rate established for the most recent period for the 
manufacturer of the merchandise; and (4) if neither the exporter nor 
the manufacturer is a firm

[[Page 13970]]

covered in this review, the cash deposit rate will be 23.79 percent. 
This is the ``all others'' rate from the LTFV investigation. These 
deposit requirements, when imposed, shall remain in effect until 
publication of the final results of the next administrative review.
    This notice serves as a final reminder to importers of their 
responsibility under 19 CFR 351.402(f) 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 CFR 
351.306 of the Department's regulations. Timely written notification of 
return/destruction of APO materials or conversion to judicial 
protective order is hereby requested. Failure to comply with the 
regulations and the terms of an APO is a sanctionable violation.
    This administrative review and this notice are in accordance with 
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and Sec. 351.221 of 
the Department's regulations.

    Dated: March 10, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-7100 Filed 3-22-99; 8:45 am]
BILLING CODE 3510-DS-P