[Federal Register Volume 64, Number 223 (Friday, November 19, 1999)]
[Notices]
[Pages 63285-63288]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-30282]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-588-853]


Initiation of Antidumping Duty Investigation: Circular Seamless 
Stainless Steel Hollow Products From Japan

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.
EFFECTIVE DATE: November 19, 1999.

FOR FURTHER INFORMATION CONTACT: Charles Riggle or Constance Handley at 
(202) 482-0650 and (202) 482-0631, respectively; Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, NW, Washington, D.C. 20230.

Initiation of Investigation

The Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute are 
references to the provisions effective January 1, 1995, the effective 
date of the amendments made to the Tariff Act of 1930 (``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 (1998).

The Petition

    On October 26, 1999, the Department of Commerce (``the 
Department'') received a petition on circular seamless stainless steel 
hollow products from Japan filed in proper form by Altx, Inc., American 
Extruded Products, PMAC Ltd, DMV Stainless USA, Inc., Salem Tube Inc., 
Sandvik Steel Co. International Extruded Products LLC and the United 
Steel Workers of America, AFL-CIO/CLC. On November 9, 1999, 
Pennsylvania Extruded Company (Pexco) joined as a co-petitioner in the 
case. The Department received supplements to the petition on November 
9, 10, and 12, 1999.
    In accordance with section 732(b) of the Act, the petitioners 
allege that imports of circular seamless stainless steel hollow 
products from Japan are being, or are likely to be, sold in the United 
States at less than fair value within the meaning of section 731 of the 
Act, and that such imports are materially injuring an industry in the 
United States.
    The Department finds that the petitioners filed this petition on 
behalf of the domestic industry because they are interested parties as 
defined in sections 771(9)(C) and (D) of the Act and they have 
demonstrated sufficient industry support with respect to the 
antidumping investigation they are requesting the Department to 
initiate (see Determination of Industry Support for the Petition 
below).

Scope of Investigation

    The scope of this investigation covers seamless stainless hollow 
products, including pipes, tubes, redraw hollows, and hollow bars, of 
circular cross section, containing 10.5 percent or more by weight 
chromium, regardless of production process, outside diameter, wall 
thickness, length, industry specification (domestic, foreign or 
proprietary), grade or intended use. Common specifications for the 
subject seamless stainless steel hollow products include, but are not 
limited to, ASTM-A-213, ASTM-A-268, ASTM-A-269, ASTM-A-270, ASTM-A-271, 
ASTM-A-312, ASTM-A-376, ASTM-A-498, ASTM-A-511, ASTM-A-632, ASTM-A-731 
ASTM-A-771, ASTM-A-789, ASTM-A-790, ASTM-A-826 and their proprietary or 
foreign equivalents.
    The merchandise covered by this petition is found in the Harmonized

[[Page 63286]]

Tariff Schedule of the United States (HTSUS) subheadings 7304.10.50.20, 
7304.10.50.50, 7304.10.50.80, 7304.41.30.05, 7304.41.30.15, 
7304.41.30.45, 7304.41.60.05, 7304.41.60.15, 7304.41.60.45, 
7304.49.00.05, 7304.49.00.15, 7304.49.00.45, 7304.49.00.60. Although 
HTSUS subheadings are provided for convenience and customs purposes, 
the written description of the merchandise is dispositive. Excluded 
from the scope of the investigation are finished oil country tubular 
goods certified to American Petroleum Institute (``API'') standard 5CT 
or 5D. Also excluded are hollow drill bars and rods, classifiable under 
7228.80 of the HTSUS.
    During our review of the petition, we discussed the scope with the 
petitioners to ensure that the scope in the petition accurately 
reflects the product for which the domestic industry is seeking relief. 
Moreover, as discussed in the preamble to the Department's regulations 
(62 FR 27323), we are setting aside a period for parties to raise 
issues regarding product coverage. The Department encourages all 
parties to submit such comments by December 13, 1999. Comments should 
be addressed to Import Administration's Central Records Unit at Room 
1870, U.S. Department of Commerce, 14th Street and Constitution Avenue, 
NW, Washington, D.C. 20230. The period of scope consultations is 
intended to provide the Department with ample opportunity to consider 
all comments and consult with parties prior to the issuance of the 
preliminary determination.

Determination of Industry Support for the Petition

    Section 732(b)(1) of the Act requires that a petition be filed on 
behalf of the domestic industry. Section 732(c)(4)(A) of the Act 
provides that a petition meets this requirement if the domestic 
producers or workers who support the petition account for: (1) At least 
25 percent of the total production of the domestic like product; and 
(2) more than 50 percent of the production of the domestic like product 
produced by that portion of the industry expressing support for, or 
opposition to, the petition.
    Section 771(4)(A) of the Act defines the ``industry'' as the 
producers of a domestic like product. Thus, to determine whether the 
petition has the requisite industry support, the statute directs the 
Department to look to producers and workers who produce the domestic 
like product. The International Trade Commission (``ITC''), which is 
responsible for determining whether ``the domestic industry'' has been 
injured, must also determine what constitutes a domestic like product 
in order to define the industry. While both the Department and the ITC 
must apply the same statutory definition regarding the domestic like 
product (section 771(10) of the Act), they do so for different purposes 
and pursuant to separate and distinct authority. In addition, the 
Department's determination is subject to limitations of time and 
information. Although this may result in different definitions of the 
like product, such differences do not render the decision of either 
agency contrary to the law.1
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    \1\ See Algoma Steel Corp., Ltd. v. United States, 688 F. Supp. 
639, 642-44 (CIT 1988); High Information Content Flat Panel Displays 
and Display Glass from Japan: Final Determination; Rescission of 
Investigation and Partial Dismissal of Petition, 56 FR 32376, 32380-
81 (July 16, 1991).
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    Section 771(10) of the Act defines the domestic like product as ``a 
product that is like, or in the absence of like, most similar in 
characteristics and uses with, the article subject to an investigation 
under this title.'' Thus, the reference point from which the domestic 
like product analysis begins is ``the article subject to an 
investigation,'' i.e., the class or kind of merchandise to be 
investigated, which normally will be the scope as defined in the 
petition.
    After the filing of the petition, we received comments from U.S. 
redrawers and from Sumitomo Metal Industries, Ltd. (Sumitomo), a 
Japanese producer of the subject merchandise, requesting that for the 
purposes of determining industry support, the Department define hot-
finished pipe and cold-drawn pipe as separate like products. These 
parties contend that hot-finished and cold-drawn pipe are made by 
different companies with different equipment and sold for different 
uses.
    In addition, Sumitomo argues that while the ordinary uses for pipe 
and tubing can be met by the hot-rolling process, there are uses such 
as heat exchange, hydraulics, instrumentation, and subsea control and 
service, which demand greater accuracy, higher physical properties, 
better surfaces, thinner walls and smaller diameters that require cold-
drawing methods. Therefore, both the U.S. redrawers and Sumitomo 
requested that the Department poll producers of hot-finished and cold-
drawn pipe and tube separately to determine if the petitioners have 
adequate industry support for both types of products.
    On November 12, 1999, the petitioners submitted rebuttal comments, 
stating that with the addition of Pexco, the largest U.S. domestic 
producer of the subject merchandise, as a petitioner, the petition has 
clearly been filed on behalf of the U.S. domestic industry whether 
circular seamless stainless steel hollow products are treated as a 
single like product, or as two distinct like products.
    For purposes of this initiation, we are adopting the domestic like 
product definition set forth in the petition. Seamless stainless steel 
hollow products are made along a continuum of sizes and grades, with a 
degree of substitution of one type of product for another along the 
continuum. While we recognize that certain differences exist between 
the products in the proposed like product groupings, we find that the 
similarities are more significant. For example, all products in the 
proposed like product groupings share characteristics, such as chemical 
composition, that make them suitable for uses in pressurized, 
corrosive, high-temperature environments. Moreover, Sumitomo 
acknowledged in its November 10, 1999, submission (at 11) that no 
particular general application is always the exclusive domain of either 
hot-finished or cold-finished products.
    With regard to the assertion that hot-finished and cold-drawn 
hollow products are manufactured by different companies and with 
different equipment, given the time constraints placed on the 
Department, our industry support analysis focuses on the factors 
specified in section 771(10) of the Act, i.e., physical characteristics 
and uses of the domestic like product. Moreover, as stated above, based 
on the evidence available, we find that the similarities outweigh the 
differences between these products.
    Further, several steel cases support our conclusion that hot-
finished and cold-drawn products are treated appropriately as a single 
like product by the Department. See e.g. Initiation of Antidumping Duty 
Investigations: Certain Large Diameter Carbon and Alloy Seamless 
Standard, Line and Pressure Pipe from Japan and Mexico; and Certain 
Small Diameter Carbon and Alloy Seamless Standard, Line and Pressure 
Pipe From the Czech Republic, Japan, the Republic of South Africa and 
Romania, 64 FR 40825 (July 28, 1999); Final Determination of Sales at 
Less Than Fair Value; Stainless Steel Hollow Products from Sweden, 52 
FR 37810 (October 9, 1987); Small Diameter Circular Seamless Carbon and 
Alloy Steel Standard, Line and Pressure Pipe From Germany: Final 
Results of Antidumping Duty Administrative Review, 63 FR 13217 (March 
18, 1998) and Stainless Steel Bar From Japan: Final Results of 
Antidumping

[[Page 63287]]

Administrative Review, 64 FR 36333 (July 6, 1999). The facts of this 
case do not justify departure from our large body of established 
precedent.
    Because the petitioners did not account for more than 50 percent of 
the domestic production at the time the petition was filed, we polled 
the industry as directed in 732(c)(4)(D) of the Act. While certain 
domestic producers 2 expressed opposition to the petition, 
the entry of Pexco on November 9, 1999, as a petitioner now means that 
the petitioners account for more than 50 per cent of total production 
of the domestic like product. As such, they have established the 
requisite level of industry support. See Attachment to the Initiation 
Checklist, Re: Industry Support, November 15, 1999.
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    \2\ These producers are principally redrawers who import, 
directly or indirectly, at least some of their inputs from Japan.
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    Sumitomo argued further that the Department should have gathered 
U.S. production data for the period July 1, 1998, through June 30, 
1999, rather than calendar year 1998 data, for purposes of its industry 
support analysis because this period would reflect the most recent 
state of the industry. With regard to Sumitomo's argument as to the use 
of 1998 production data, we note that, pursuant to 19 CFR 
351.203(e)(1), the Department has discretion in defining the 12-month 
period for which production will be measured. In this case, we believe 
that the calender year 1998, which was used in the petition for the 
purposes of demonstrating industry support, is representative and 
consistent with Department practice. See e.g., Initiation Checklist for 
the Petitions Covering Certain Cold-Rolled Carbon Steel Flat Products 
from Argentina, Brazil, South Africa, Slovakia, Indonesia, Japan, 
Thailand, Taiwan, Venezuela, the People's Republic of China, Turkey, 
and Russia, dated June 14, 1999, and Initiation Checklist for the 
Petition Covering Solid Agricultural Grade Ammonium Nitrate from The 
Russian Federation, dated June 21, 1999.
    Finally, Sumitomo stated that 1998 production by Al Tech, whose 
seamless pipe production facility was later purchased by the petitioner 
Altx, should not be considered for purposes of determining industry 
support. The petitioners claimed that the inclusion of Al Tech's 1998 
production is appropriate because the equipment employed in 1998 to 
produce the like product is now operated by Altx. We note that this is 
a moot point because, with the entry of Pexco as a petitioner, the 
inclusion of Al Tech's production is not necessary for the petitioners 
to demonstrate adequate industry support.

Export Price and Normal Value

    The petitioners, in determining normal value (``NV'') for Japan, 
relied upon price data contained in a confidential market research 
report filed with the Department. At our request, the petitioners 
arranged for the Department to contact the authors of the report to 
verify the accuracy of the data, the methodology used to collect the 
data, and the credentials of those gathering the market research. The 
Department's discussion with the authors of the market research reports 
is summarized in Memorandum to the File: Re: Foreign Market Research 
Reports, dated November 2, 1999.
    The petitioners based EP on affidavits of U.S. price offerings for 
seamless stainless steel hollow products manufactured by Sumitomo, 
Nippon, and Sanyo during January through April 1999. The petitioners 
selected seamless stainless hollow products with specifications 
commonly exported to the United States. In the absence of more 
definitive information, the petitioners refer to the date of the offer 
as the date of sale. The affidavits with the sales price offers reflect 
the prices offered to an unaffiliated customer.
    The petitioners calculated a net U.S. price by subtracting 
estimated costs for shipment from the factory in Japan to the port of 
export, and Japanese trading company commissions, from the sales price. 
For a more detailed discussion of the deductions and adjustments 
relating to home market price, U.S. price, factors of production and 
sources of data, see Initiation Checklist, dated November 15, 1999. 
Should the need arise to use as facts available under section 776 of 
the Act any of this information in our preliminary or final 
determinations, we may re-examine the information and revise the margin 
calculations, if appropriate.
    As further explained below in the ``Initiation of Cost 
Investigation'' section, the petitioners provided information 
demonstrating reasonable grounds to believe or suspect that sales of 
seamless stainless steel hollow products sold in the home market were 
made at prices below the fully absorbed cost of production (``COP''), 
within the meaning of section 773(b) of the Act. Pursuant to section 
773(b)(3) of the Act, COP consists of the cost of manufacturing 
(``COM''), selling, general, and administrative expenses (``SG&A'') and 
packing. To calculate COP, the petitioners based COM on their own 
production experience, adjusted for known differences between costs 
incurred to produce seamless stainless steel hollow products in the 
United States and in Japan using market research and publicly available 
data.
    To calculate SG&A and financial expenses, petitioners relied upon 
the fiscal year 1998 audited financial statements of a Japanese steel 
producer. Based upon the comparison of the adjusted prices of the 
foreign like product in the home market to the calculated COP of the 
product, we find reasonable grounds to believe or suspect that sales of 
the foreign like product were made below the COP within the meaning of 
section 773(b)(2)(A)(i) of the Act. Accordingly, the Department is 
initiating a country-wide cost investigation.
    When we find that sales in the home market are made at prices below 
cost, we compare EP to constructed value 3 (``CV''). The 
margin calculations based on price to CV comparisons, indicate dumping 
margins ranging from 30.86-156.81 percent. The estimated dumping 
margins, based on price-to-price comparisons, range from 11.72-49.17 
percent.
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    \3\ Pursuant to section 773(e) of the Act, the constructed value 
is the sum of (1) the cost of materials and fabrication of the 
subject merchandise, (2) selling, general, and administrative 
expenses and profit in the foreign market, and (3) the cost of 
packing for exportation to the United States.
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    Based on the data provided by the petitioners, there is reason to 
believe that imports of circular stainless steel hollow products from 
Japan are being, or are likely to be, sold at less than normal value.

Initiation of Cost Investigation

    As noted above, pursuant to section 773(b) of the Act, the 
petitioners provided specific factual information demonstrating 
reasonable grounds to believe or suspect that sales in the Japanese 
home market were made at prices below the fully absorbed COP and, 
accordingly, requested that the Department conduct a country-wide 
sales-below-COP investigation in connection with the requested 
antidumping investigation for Japan. The Statement of Administrative 
Action accompanying the URAA, H.R. Doc. 103-412 (``SAA''), states that 
an allegation of sales below COP need not be specific to individual 
exporters or producers. SAA at 833. The SAA at 833 states that 
``Commerce will consider allegations of below-cost sales in the 
aggregate for a foreign country, just as Commerce currently considers 
allegations of sales at less than fair value on a country-wide basis 
for purposes of

[[Page 63288]]

initiating an antidumping investigation.''
    Further, the SAA provides that ``new section 773(b)(2)(A) retains 
the current requirement that Commerce have `reasonable grounds to 
believe or suspect' that below cost sales have occurred before 
initiating such an investigation. `Reasonable grounds' * * * exist when 
an interested party provides specific factual information on costs and 
prices, observed or constructed, indicating that sales in the foreign 
market in question are at below-cost prices.'' Id. Based upon the 
comparison of the adjusted prices from the petition for the 
representative foreign like products to their costs of production, we 
find the existence of ``reasonable grounds to believe or suspect'' that 
sales of these foreign like products in Japan were made below the COP 
within the meaning of section 773(b)(2)(A)(i) of the Act. Accordingly, 
the Department is initiating the requested country-wide cost 
investigation.

Allegations and Evidence of Material Injury and Causation

    The petition alleges that the U.S. industry producing the domestic 
like products is being materially injured, and is threatened with 
material injury, by reason of the individual and cumulated imports of 
the subject merchandise sold at less than NV. The petitioners explained 
that the industry's injured condition is evident in the declining 
trends in (1) U.S. market share, (2) average unit sales values, (3) 
share of domestic consumption, (4) operating income, (5) employment, 
(6) output, (7) sales, (8) return on investment, (9) capacity 
utilization, (10) ability to raise capital and (11) cash flow.
    The allegations of injury and causation are supported by relevant 
evidence including U.S. Customs import data, lost sales, and pricing 
information. The Department assessed the allegations and supporting 
evidence regarding material injury and causation and determined that 
these allegations are supported by accurate and adequate evidence and 
meet the statutory requirements for initiation (see Attachments to 
Initiation Checklist, Re: Material Injury, November 15, 1999).

Initiation of Antidumping Investigation

    Based upon our examination of the petition on circular seamless 
stainless steel hollow products from Japan, we find that the petition 
meets the requirements of section 732 of the Act. Therefore, we are 
initiating an antidumping duty investigation to determine whether 
imports of circular seamless stainless steel hollow products from Japan 
are being, or are likely to be, sold in the United States at less than 
fair value. Unless this deadline is extended, we will make our 
preliminary determinations no later than 140 days after the date of 
this initiation.

Distribution of Copies of the Petition

    In accordance with section 732(b)(3)(A) of the Act, a copy of the 
public version of the petition has been provided to the representatives 
of Japan. We will attempt to provide a copy of the public versions of 
each petition to each exporter named in the petition, as appropriate.

International Trade Commission Notification

    We have notified the ITC of our initiations, as required by section 
732(d) of the Act.

Preliminary Determinations by the ITC

    The ITC will determine, by no later than December 10, 1999, whether 
there is a reasonable indication that imports of circular seamless 
stainless steel hollow products from Japan are causing material injury, 
or threatening to cause material injury, to a U.S. industry. A negative 
ITC determination will result in the investigation being terminated; 
otherwise, this investigation will proceed according to statutory and 
regulatory time limits.
    This notice is published pursuant to section 777(i) of the Act.

    Dated: November 15, 1999.
Joseph A. Spetrini,
Acting Assistant Secretary for Import Administration.
[FR Doc. 99-30282 Filed 11-18-99; 8:45 am]
BILLING CODE 3510-DS-P