[Federal Register Volume 64, Number 174 (Thursday, September 9, 1999)]
[Notices]
[Pages 48983-48986]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-23433]



[[Page 48983]]

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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 and Partial Recission of 
Administrative Review

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

ACTION: Notice of preliminary results of antidumping duty 
administrative review and partial rescission of 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 one manufacturer/exporter of the subject 
merchandise to the United States and the period August 1, 1997 through 
July 31, 1998. We preliminarily determine that sales of subject 
merchandise 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 9, 1999.

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, NW, 
Washington, DC 20230; telephone (202) 482-0195 (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 (April 1998).

Background

    The Department 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 published a notice of ``Opportunity 
To Request Administrative Review'' of the antidumping order for the 
1997/1998 review period on August 11, 1998 (63 FR 42821). 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 23, 1998 (63 FR 51893, 
September 29, 1998).
    On November 2, 1998, Hylsa timely withdrew its request for review. 
Therefore, this review has now been terminated as to Hylsa as a result 
of the withdrawal of Hylsa's request for review.
    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 April 14, 1999, the Department 
extended the time limits for these preliminary results to August 31, 
1999. See Oil Country Tubular Goods from Mexico; Extension of Time 
Limits for Antidumping Duty Administrative Review (64 FR 24370, May 6, 
1999).

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.

Period of Review

    The review covers the period August 1, 1997 through July 31, 1998. 
The Department is conducting this review in accordance with section 751 
of the Act, as amended.

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 
October 16, 1998 questionnaire, or to constructed value (``CV'').

Normal Value Comparisons

    To determine whether sales of the subject merchandise by TAMSA were 
made at less than NV, we compared the CEP to the NV, as described in 
the CEP and NV sections of this notice, below. In accordance with 
section 777A(d)(1)(A)(i) of the Act, we compared CEPs to weight-
averaged NVs.

United States Price

    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

[[Page 48984]]

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, an EP sale is a sale 
of merchandise for export to the United States made by a foreign 
producer or exporter outside the United States prior to importation. A 
CEP sale is a sale made in the United States before or after 
importation by or for the account of the exporter/producer or by a 
party affiliated with the exporter or producer. In determining whether 
the sales activity of a U.S. affiliate rises to such a level that CEP 
methodology is warranted, 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.
    Our examination of the record with respect to this administrative 
review indicates that the fact pattern for sales to the United States 
is substantially identical to the pattern for sales in the previous 
administrative review. In Oil Country Tubular Goods From Mexico: Final 
Results of Antidumping Duty Administrative Review, 64 FR 13962 (March 
23, 1999), the Department stated in part:

    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.
    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, * * * 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. 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.

Based on our examination of the record, the selling agreement between 
TAMSA and its U.S. affiliate (Siderca Corp.) has not changed. 
Furthermore, Siderca Corp. has longstanding ties to the United States 
customer and is in frequent contact with that customer concerning sales 
of TAMSA products worldwide. Conversely, TAMSA does not communicate 
directly with the customer and, under the agreement, appears to be 
precluded from contacting United States customers. 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 unaffiliated 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 other selling expenses 
that were associated with economic activity in the United States, in 
accordance with section 772(d) of the Act. Finally, we made an 
adjustment for CEP profit in accordance with section 772(d)(3) of the 
Act.

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's aggregate volume of HM sales of the foreign like product 
was greater than five percent of its 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.

Cost of Production Analysis

    Because the Department disregarded 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 in 
accordance with section 773(b) of the Act. 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.

[[Page 48985]]

B. Test of Home Market Prices
    We used respondent's weighted-average COP for the period August 1, 
1997 to July 31, 1998. 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. Because we compared prices to POR-average costs, 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, 
including interest expenses, and U.S. packing costs, 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.

Level of Trade

    In accordance with section 773(a)(1)(B)(i) of the Act, to the 
extent practicable, we determine NV based on sales in the comparison 
market at the same level of trade (LOT) as the EP or CEP transaction. 
The NV LOT is that of the starting price sales in the comparison market 
or, when NV is based on CV, that of the sales from which we derive 
selling, general and administrative expenses and profit. For EP, the 
U.S. LOT is also the level of the starting price sale, which is usually 
from the exporter to the importer. For CEP, it is the level of the 
constructed sale from the exporter to the importer.
    To determine whether NV sales are at a different LOT than EP or CEP 
sales, we examine stages in the marketing process and selling functions 
along the chain of distribution between the producer and the 
unaffiliated customer. If the comparison market sales are at a 
different LOT, and the difference affects price comparability, as 
manifested in a pattern of consistent price differences between the 
sales on which NV is based and comparison market sales at the LOT of 
the export transaction, we make a LOT adjustment under section 
773(a)(7)(A) of the Act. Finally, for CEP sales, if the NV level is 
more remote from the factory than the CEP level and there is no basis 
for determining whether the differences in the levels between NV and 
CEP affects price comparability, we adjust NV under section 
773(A)(7)(B) of the Act (the CEP offset provision). (See e.g., Notice 
of Final Determination of Sales at Less Than Fair Value: Certain Cut-
to-Length Carbon Steel Plate from South Africa, 62 FR 61731 (November 
19, 1997).)
    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 examined both the chain of 
distribution and the selling functions in both markets. An analysis of 
the chain of distribution and of the selling functions substantiates or 
invalidates the claimed LOTs. Our analysis revealed that while all 
sales in the home market were in the same chain of distribution, there 
were substantial differences in selling functions between certain types 
of customers.
    Some of the home market sales were made on a Just In Time (``JIT'') 
basis. As in the prior review, the Department preliminarily determines 
that the infrastructure required to support the selling functions 
involving JIT sales results in these sales being made at a different 
LOT than non-JIT sales. Some sales in the home market, which would 
match to the U.S. sale, were not made on a JIT basis. The Department 
examined the selling functions provided by TAMSA to these customers to 
determine if these sales were at the same LOT as sales to the United 
States.
    In Stainless Steel Sheet and Strip in Coils from the United 
Kingdom, Preliminary Determination of Sales at Less than Fair Value and 
Postponement of Final Determination, 64 FR 85 (January 4, 1999), the 
Department determined that some of the items listed by respondent were 
not selling functions relevant to the Department's LOT analysis because 
they did not characterize significant services provided to customers. 
Based on this analysis, we conclude that customer solicitation is not a 
selling function. Therefore, we are disregarding this item in our LOT 
analysis.
    Of the remaining 13 selling functions listed by TAMSA, all but one 
were provided in both the home market and the United States to non-JIT 
customers. Only customer visits are listed by TAMSA as a selling 
function provided in the home market, but not in the United States. 
However, TAMSA does not quantify or otherwise describe the nature of 
these visits. Given the absence of evidence, we preliminarily determine 
that the actual differences in selling functions in connection with 
sales to non-JIT customers in the home market, and sales to the United 
States, are relatively minor.
    Based on this determination, we preliminarily determine that sales 
to home market customers which do not receive JIT services are at the 
same level of trade as CEP sales. As a result, we have based our margin 
analysis on the

[[Page 48986]]

comparison of CEP sales to these non-JIT home market sales.
    Because we have preliminarily determined that there are sales in 
the home market at the same level of trade as the sale to the United 
States, and because we have used only these same LOT sales as matching 
in calculating the margin, we are not making an LOT adjustment or a CEP 
offset.

Preliminary Results of Review

    We preliminarily determine that the following margins exist for the 
period August 1, 1997 through July 31, 1998:

TAMSA--0.00%

    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. For duty assessment purposes, we 
calculated an importer-specific assessment rate by taking the dumping 
margin calculated for the U.S. sale to the importer and dividing this 
amount by the total entered value of the sale. This specific rate 
calculated will be used for the assessment of antidumping duties on the 
entry of the subject merchandise during the POR.
    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 19 CFR 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%, the ``all other'' rate from the original 
investigation.
    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 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 
sections 751(a)(1) and 777(i)(1)of the Act.

    Dated: August 31, 1999.
Richard W. Moreland,
Acting Assistant Secretary for Import Administration.
[FR Doc. 99-23433 Filed 9-8-99; 8:45 am]
BILLING CODE 3510-DS-P