[Federal Register Volume 65, Number 7 (Tuesday, January 11, 2000)]
[Notices]
[Pages 1593-1596]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-633]


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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 9, 1999, the Department of Commerce (``the 
Department'') published the preliminary results of its administrative 
review of the antidumping order on oil country tubular goods (``OCTG'') 
from Mexico covering exports of this merchandise to the United States 
by one manufacturer, Tubos de Acero de Mexico, S.A. (``TAMSA''). Oil 
Country Tubular Goods from Mexico; Preliminary Results of 
Administrative Review (``Preliminary Results''), 64 FR 48983. We 
invited interested parties to comment on the Preliminary Results. We 
received comments from TAMSA and rebuttal comments from petitioners. We 
have now completed our final results of review and determine that the 
results have not changed.

EFFECTIVE DATE: January 11, 2000.

FOR FURTHER INFORMATION CONTACT: Dena Aliadinov, 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) 482-2667 (Aliadinov), (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 19 CFR Part 351 (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 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 a 
request for an administrative review from TAMSA, we published a notice 
of initiation of the review on September 29, 1998 (63 FR 51893).

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 period of review (``POR'') is August 1, 1997 through July 31, 
1998. The Department is conducting this review in accordance within 
section 751 of the Act, as amended.

Analysis of Comments Received

    We invited parties to comment on the preliminary results of the 
review. We received comments from TAMSA and rebuttal comments from the 
petitioners. The following is a summary of these comments.

Comment 1: EP/CEP

    TAMSA argues that the Department incorrectly treated its sole U.S. 
sale as a constructed export price (``CEP'') transaction in the 
preliminary results of this review. See Preliminary Results, 64 FR at 
48984. Regarding whether sales should be classified as EP sales despite 
some involvement by a U.S. affiliate, the Department uses the following 
criteria: (1) Whether the merchandise was shipped directly to the 
unaffiliated buyer, without being introduced into the affiliated 
selling agent's inventory; (2) whether this is the customary sales 
channel between the parties; and (3) whether the affiliated selling 
agent located in the United States acts only as a processor of 
documentation and a communications link between the foreign producer 
and the unaffiliated buyer. See, e.g., Notice of Final Determination of 
Sales at Less Than Fair Value: Newspaper Printing Presses From Germany, 
61 FR 38175 (July 23, 1996).
    TAMSA argues that the Department relied solely on the third 
criterion for its CEP determination, and did not properly address the 
first two criteria. TAMSA claims that its sale meets the first two 
criteria for indirect EP sales because the merchandise in question is 
not introduced into the physical inventory of the affiliated selling 
agent, and direct shipment to the customer is the customary commercial 
channel for sales of this merchandise. TAMSA also claims that it, in 
fact, meets the third criterion because its affiliated selling agent in 
the United States, Siderca Corp., had an ``ancillary'' role.

[[Page 1594]]

    According to TAMSA, setting price is the only U.S. selling activity 
the existence of which would justify CEP treatment. Referring to 
Certain Corrosion-Resistant Carbon Steel Flat Products & Certain Cut-
to-Length Carbon Steel Plate from Canada: Final Results of Antidumping 
Duty Administrative Reviews (``Canadian Steel''), 63 FR 12738 (March 
16, 1998); Certain Welded Stainless Steel Pipe from Taiwan: Final 
Results of Administrative Reviews (``Taiwan Pipe''), 63 FR 38382, 38385 
(July 16, 1998); Stainless Steel Wire Rod From Korea: Final 
Determination of Sales at Less Than Fair Value (``Korean Wire Rod''), 
63 FR 40418 (July 29, 1998); and Notice of Final Determination of Sales 
at Less Than Fair Value: Beryllium Metal and High Beryllium Alloys From 
the Republic of Kazakhstan (``Beryllium Metal''), 62 FR 2648, 2649 
(January 17, 1997), TAMSA points out that the Department categorized 
sales as EP sales when the affiliates in these cases had limited or no 
pricing authority. Additionally, TAMSA claims that U.S. Steel Group v. 
United States, 15 F. Supp. 2d 892 (CIT 1998) (``U.S. Steel Group'') 
strengthens its argument, because the Court's ruling in that case 
looked to the existence of sale or contract negotiations. TAMSA also 
relies upon AK Steel v. United States (``AK Steel''), 34 F. Supp. 2d 
756, 762 (CIT 1998), in which the affiliate negotiated the initial 
price, but within certain limitations set by the exporter. TAMSA states 
that the Court in AK Steel upheld the Department's decision to treat 
the sales at issue as EP sales, even though the U.S. affiliate found 
customers, negotiated price based upon predetermined factors, and 
maintained contact with the customer. TAMSA concludes that the 
Department must therefore reconsider the nature of Siderca Corp.'s 
activities in the light of AK Steel.
    TAMSA claims that information in its Section A questionnaire 
response supports its claim that it, and not Siderca Corp., has the 
authority to set price and sales terms and therefore that its U.S. sale 
meets the third criterion. See TAMSA November 4, 1998 Section A 
Response, at A-20-21. According to TAMSA, the Department does not have 
any facts to support its conclusion that Siderca Corp. brought the 
customer to TAMSA. On the contrary, TAMSA argues that Siderca Corp. 
acted merely as a communications link and processor of documentation.
    TAMSA also disputes that the existence of a commercial agreement 
constitutes sufficient grounds for concluding that a transaction is a 
CEP sale. Citing Certain Cold-Rolled Carbon Steel Flat Products from 
the Netherlands: Final Results of Antidumping Duty Administrative 
Review (``Dutch Steel''), 64 FR 11825 (March 10, 1999), TAMSA argues 
that Siderca Corp.'s selling functions are not sufficient for Commerce 
to classify its POR sale as a CEP sale. TAMSA supports its argument by 
stating that Siderca Corp. stopped its OCTG selling and marketing 
activities in the United States at or around the time of the 
antidumping order in this case, making the sales agency agreement 
``meaningless.'' See TAMSA Supplemental Response, February 2, 1999, at 
9-10.
    The petitioners counter that TAMSA has not provided sufficient 
evidence for the Department to change its position, and that the 
respondent bears the burden of proving that all three EP criteria have 
been met. The petitioners state that Siderca Corp. may not have total 
autonomy in setting final sales terms, but its role in the sales 
process is not ``ancillary.''
    With regard to U.S. Steel Group and AK Steel, the petitioners argue 
that the former supports CEP classification for TAMSA because Siderca 
had the freedom to negotiate prices, and the latter has limited 
relevance because the Department sought a remand to reconsider EP 
classification. Furthermore, the petitioners assert that, as was the 
case in U.S. Steel, Siderca Corp.'s additional selling functions--i.e., 
taking title to the merchandise, using its insurance policy to cover 
shipment, etc.--add weight to the other factors in this case, 
supporting CEP classification.
    The petitioners argue that TAMSA has not proven that Siderca Corp. 
did not play any role in determining price; therefore, even greater 
weight must be accorded to the sales agency agreement between TAMSA and 
Siderca Corp. TAMSA may have set the minimum price, according to the 
petitioners' analysis of the sales agency agreement, but Siderca played 
a substantial role in negotiating the price with the customer. The 
petitioners further assert that a U.S. affiliate does not need to make 
independent pricing decisions for its role to be more than ``incidental 
or ancillary.'' See Industrial Nitrocellulose from the United Kingdom: 
Final Results of Antidumping Duty Administrative Review (``Industrial 
Nitrocellulose''), 64 FR 6609, 6611 (February 10, 1999).
    The petitioners maintain that signed contracts among parties are 
more important than internal communications, such as the e-mails relied 
upon by TAMSA. See Section A Response at Attachment A-10 (APO Version). 
The petitioners contend that the e-mails do not provide evidence that 
TAMSA authorized this sale or that this sale would have been made 
without Siderca Corp.'s contacts with the U.S. customer. Furthermore, 
the petitioners disagree with TAMSA's assertion that its sales and 
marketing agreement is not dispositive with respect to this case. In 
fact, according to the petitioners, Siderca Corp. has exclusive rights 
to market and sell TAMSA's product in the United States, demonstrating 
Siderca's pivotal, primary role.
    Referring to Dutch Steel, the petitioners disagree with TAMSA's 
allegation that failure to solicit new customers invalidates the agency 
agreement. The petitioners state that TAMSA has not proven that its 
sale in the instant review was to the same customer as the sale in the 
previous review. Additionally, the petitioners disagree with TAMSA's 
claim that the agreement became ``meaningless'' because TAMSA 
discontinued OCTG exports to the United States after the antidumping 
order, and Siderca Corp. did not take part in OCTG selling or marketing 
activities for nearly two years. The petitioners argue that the sales 
and marketing agreement never ceased to exist and, in fact, was renewed 
after the antidumping order was issued. According to the petitioners, 
this proves that TAMSA continued to sell to the United States. 
Furthermore, Siderca Corp. received payment and compensation for its 
U.S. sale and maintained a sales staff for OCTG, according to the terms 
of the agreement.
    The petitioners also claim that TAMSA does not meet criterion two 
because TAMSA only had one U.S. sale, making it difficult to determine 
the customary commercial channel. Moreover, the merchandise associated 
with the U.S. sale in this review was picked up by the customer at the 
port, and petitioners argue that this was not the customary commercial 
channel established in the sales agency agreement.

Department's Position

    After careful examination of the record, and based upon our 
analysis using the three-pronged test discussed below, the Department 
has determined to treat TAMSA's U.S. sale as a CEP sale, as defined in 
section 772(b) of the Act. 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

[[Page 1595]]

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 the 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., Canadian Steel, 63 
FR at 12738. Unless all three criteria are met, a sale made by the U.S. 
affiliate will not be attributed to the exporting affiliated party and, 
therefore, considered an indirect EP sale.
    Because the third criterion is not met in this case, we need not 
address the first two criteria. Our examination of the record with 
respect to this administrative review indicates that the fact pattern 
for sales to the United States is substantially similar to the pattern 
for sales in the previous administrative review, in which we found that 
sales involving Siderca Corp. were CEP sales.
    Under the selling agreement between TAMSA and Siderca Corp., 
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 price for any sales under the agreement. In exchange for 
providing marketing and selling functions, and for providing other 
services, 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 working relationship with the United States 
customer. 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 agreement, TAMSA is precluded from 
soliciting or negotiating sales directly in the United States.
    The judicial cases TAMSA relies upon do not support its position. 
Contrary to TAMSA's claim, the opinion in U.S. Steel does not suggest 
that the Department should classify the sale in this case as an EP 
sale. The Court's decision to uphold Commerce's CEP classification in 
that case was not based solely on the evidence that the U.S. affiliate 
negotiated the final sale price consistent with a floor price set by 
the exporter. Instead, the Court also considered the fact that the U.S. 
affiliate had ``flexibility'' to make decisions as to price. In this 
case, as well, the binding sales agreement indicates that Siderca Corp. 
had the exclusive right and flexibility to negotiate the price. Thus, 
by analogy to U.S. Steel Corp., CEP classification is also appropriate 
in this OCTG case.
    The Court's opinion in AK Steel also does not compel the Department 
to adopt an EP classification for the sale in this OCTG review. 
Although the Court in that case denied the Department's request for a 
remand to reconsider its classification of certain sales as EP sales, 
the Court did not find that the facts of that case demanded an EP 
classification. Instead, the AK Steel Court held that, prior to making 
its determination, ``Commerce may have been free to assess the evidence 
differently than it did.'' 34 F. Supp. 2d at 761. The principle of 
finality of administrative decisions requires that once a final agency 
decision is made, it cannot be changed unless the decision was 
erroneous when made. Noting that nothing in the record showed that the 
U.S. sales agents were free to negotiate prices, the Court held only 
that (although Commerce might have reached a different conclusion), 
``it was not an error'' to classify the sales as EP sales. Id. 
Furthermore, the facts of this OCTG case weigh more heavily in favor of 
a CEP classification than did those in the case underlying AK Steel, 
because in this case the administrative record does contain evidence 
that the U.S. subsidiary was authorized to negotiate prices.
    The administrative cases relied upon by TAMSA also do not support 
its claim that the sale in this case should be classified as an EP 
sale. For example, although both this case and the Dutch Steel case 
involve a sales agency agreement, the Dutch producer, Hoogovens, 
maintained direct communication links with its U.S. customers, often 
without its affiliate, HSUSA. Hoogovens' ``U.S. customers communicated 
directly with Hoogovens regarding post-sale price adjustments for 
quality defects.'' See Dutch Steel, 64 FR at 11829. In that case, ``the 
preponderance of selling functions involved in U.S. sales occurred in 
the Netherlands.'' Id. 64 FR at 11828. In this OCTG case, in contrast, 
the preponderance of selling functions were performed in the United 
States by Siderca Corp. While HSUSA had no authority to negotiate 
prices, Siderca Corp. had the authority to negotiate prices through its 
selling agreement. The agreement places the rights and responsibilities 
of selling and marketing TAMSA products in the United States squarely 
on Siderca Corp.
    TAMSA's reliance on Canadian Steel, Taiwan Pipe, Korean Wire Rod, 
and Beryllium Metal is also misplaced. Sales at issue in those cases 
were deemed to be EP sales because the U.S. affiliates were not free to 
solicit sales, negotiate contracts or prices, or provide customer 
support. Siderca Corp., in contrast, was authorized to perform all of 
the above functions on behalf of TAMSA as well as resolving any 
disputes regarding the status of the order, delivery or quality, or any 
other customer issues.
    The Department's position in the Notice of Final Determination of 
Sales at Less Than Fair Value: Stainless Steel Wire Rod from Spain 
(``Wire Rod from Spain''), 63 FR at 40394 (July 29, 1998), also 
supports the conclusion that TAMSA's sale is best classified as a CEP 
sale. In that case, the Department treated the U.S. sales as CEP sales 
under a similar fact pattern. Specifically, Acerinox's authority to 
negotiate and accept sales terms, as well as its authority to initiate 
contact with U.S. customers, contradicted the parent company's claim 
that the U.S. affiliate's activities were ancillary. Thus, the 
Department classified these sales as CEP sales.
    Finally, although TAMSA claims that the contract was meaningless 
during this period of review, and that an e-mail interchange included 
in its submission shows that TAMSA was responsible for setting the 
price of this sale, there is record evidence showing that the contract 
remains in effect. Siderca Corp. retained its obligations under the 
agreement (e.g., maintaining a sales staff) and was substantially 
involved in the sales process for this sale. 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, the Department has 
classified TAMSA's sale to the United States as a CEP sale for these 
final results.

Comment 2

    TAMSA states that, in testing the home market sales database for 
below-cost sales, the Department should not compare home market sales 
prices that are unadjusted for inflation with costs of production that 
are adjusted for inflation.
    Petitioners did not comment.

[[Page 1596]]

Department's Position

    We agree with respondent and have changed the program for the final 
results. Circumstances do not warrant using the Department's high 
inflation methodology in this review. Therefore, we have deleted the 
inflation adjustment to costs of production.

Comment 3

    TAMSA asserts that the Department's antidumping duty calculation 
program contained an error in line 1693. According to TAMSA, the 
Department underestimated selling expenses, leading to overestimated 
levels of profit from U.S. sales and underestimated total expenses. 
TAMSA requests that the Department include performance bond costs on 
certain home market sales when calculating home market direct selling 
expenses.
    Petitioners did not comment.

Department's Position

    We agree with respondent and have changed the program for the final 
results. The program now includes BONDH, a variable for performance 
bond costs, in the home market direct selling expenses calculation.

Final Results of the Review

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

             Circular Welded Non-Alloy Steel Pipes and Tubes
------------------------------------------------------------------------
                                                              Weighted-
               Producer/manufacturer/exporter                  average
                                                                margin
------------------------------------------------------------------------
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 requirement 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 covered in this review, the cash deposit 
rate will be 23.79 percent, 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 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 
sections 751(a)(1) and 777(i)(1) of the Act.

    Dated: January 4, 2000.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 00-633 Filed 1-10-00; 8:45 am]
BILLING CODE 3510-DS-P