[Federal Register Volume 68, Number 46 (Monday, March 10, 2003)]
[Notices]
[Pages 11361-11368]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-5634]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-533-809]


Certain Forged Stainless Steel Flanges from India: Preliminary 
Results of Antidumping Duty Administrative Review

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

ACTION: Notice of preliminary results and partial rescission of 
antidumping duty administrative review.

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EFFECTIVE DATE: March 10, 2003.

FOR FURTHER INFORMATION CONTACT: Helen Kramer at (202) 482-0405 
(Snowdrop Trading, Pvt. Ltd.), Shireen Pasha at (202) 482-0193 (Echjay 
Forgings Ltd./Pushpaman Exports), or Dena Aliadinov at (202) 482-3362 
(Viraj Forgings, Ltd.), Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Ave, NW., Washington, DC 20230.
SUMMARY: The Department of Commerce (the Department) is conducting an 
administrative review of the antidumping duty order on certain forged 
stainless steel flanges from India (``SS flanges'') manufactured/
exported by Echjay Forgings Pvt. Ltd. (``Echjay'') and Viraj Forgings 
Ltd. (``Viraj''), and exported by Snowdrop Trading Pvt. Ltd. 
(``Snowdrop''). The period of review (POR) covers the period February 
1, 2001, through January 31, 2002. We have preliminarily determined, 
based in part on adverse facts available, that Echjay sold subject 
merchandise at less than normal value (``NV'') and that Viraj had a de 
minimis margin. Lastly, we have preliminarily determined to apply a 
facts available (``FA'') rate to Snowdrop's sale. If these preliminary 
results are adopted in our final results of administrative review, we 
will instruct the U.S. Customs Service to assess antidumping duties on 
entries of the subject merchandise for which the importer-specific 
assessment rates are above de minimis. We invite interested parties to 
comment on these preliminary results. We request parties who submit 
argument in these proceedings to submit with the argument: (1) a 
statement of the issues and (2) a brief summary of the argument.

SUPPLEMENTARY INFORMATION:

Background

    On February 9, 1994, the Department published the antidumping duty 
order on SS flanges (59 FR 5994). On February 1, 2002, the Department 
published a notice of opportunity to request an administrative review 
for this order covering the period February 1, 2001, through January 
31, 2002 (67 FR 4945). On February 28, 2002, Snowdrop and Metal 
Forgings Rings & Bearings Pvt. Ltd. (``MF'') requested review in 
accordance with 19 CFR 351.213(b)(2), and the petitioners requested 
review of Bhansali Ferromet Pvt. Ltd. (``Bhansali''), Echjay, Isibars 
Ltd., Panchmahal Steel Ltd. (``Panchmahal''), Patheja Forgings and Auto 
Parts, Ltd. (``Patheja''), and Viraj under 19 CFR 351.213(b)(1). The 
petitioners are the Coalition Against Indian Flanges (Ideal Forging 
Corporation and Maass Flange Corporation). They have not participated 
further in this review. The Department initiated these reviews on March 
27, 2002 (see Initiation of Antidumping and Countervailing Duty 
Administrative Reviews and Requests for Revocations in Part, 67 FR 
14696). The Department rescinded the review of Isibars on December 6, 
2002, after

[[Page 11362]]

determining that Isibars did not produce or sell subject merchandise to 
the United States during the period of review (POR) (67 FR 72644). On 
October 25, 2002, we extended the time limit for the preliminary 
results of this administrative review to February 28, 2003 (67 FR 
65538).

Partial Rescission

    On May 8, 2002, Bhansali submitted a statement that it had no sales 
to the United States during the POR. On May 21, 2002, Panchmahal 
submitted a similar statement. On May 29, 2002, MF withdrew its request 
for review because it did not have any U.S. sales. Patheja did not 
respond to the questionnaire and the Department ascertained that this 
company is defunct. The Department conducted a query of U.S. Customs 
Service data on entries of SS flanges from India made during the POR, 
and confirmed that these companies made no entries during this period. 
Therefore, we preliminarily determine to rescind the review with 
respect to Bhansali, Panchmahal, MF and Patheja.

Scope of the Review

    The products under review are certain forged stainless steel 
flanges, both finished and not finished, generally manufactured to 
specification ASTM A-182, and made in alloys such as 304, 304L, 316, 
and 316L. The scope includes five general types of flanges. They are 
weld-neck, used for butt-weld line connection; threaded, used for 
threaded line connections; slip-on and lap joint, used with stub-ends/
butt-weld line connections; socket weld, used to fit pipe into a 
machined recession; and blind, used to seal off a line. The sizes of 
the flanges within the scope range generally from one to six inches; 
however, all sizes of the above-described merchandise are included in 
the scope. Specifically excluded from the scope of this order are cast 
stainless steel flanges. Cast stainless steel flanges generally are 
manufactured to specification ASTM A-351. The flanges subject to this 
order are currently classifiable under subheadings 7307.21.1000 and 
7307.21.5000 of the Harmonized Tariff Schedule (HTS). Although the HTS 
subheadings are provided for convenience and customs purposes, the 
written description of the merchandise under review is dispositive of 
whether or not the merchandise is covered by the review.

Period of Review

    The POR is February 1, 2001, through January 31, 2002.

Verification

    As provided in section 782(i) of the Act, we verified sales 
information provided by Echjay from December 11 through December 13, 
2002, and sales and cost information provided by Viraj from December 16 
through December 18, 2002, using standard verification procedures, 
including an examination of relevant sales, cost, financial records, 
and selection of original documentation containing relevant 
information. Our verification results are outlined in the public 
versions of the verification reports and are on file in the 
Department's Central Records Unit located in Room B-099 of the main 
Department of Commerce Building, 14th Street and Constitution Avenue, 
NW., Washington, DC 20230.

Use of Facts Available

A. Echjay

    Echjay's initial Sections B and C response of July 23, 2002, was 
deficient and/or unresponsive to many of the questions asked in the 
Department's questionnaire. There were no sales of subject merchandise 
in the home market during the POR, and Echjay reported sales to its 
three largest third country markets, Belgium, Germany and the United 
Kingdom (``U.K.''). Echjay claimed it had no direct or indirect selling 
expenses, and omitted the information requested for variable and total 
costs of manufacturing, stating that there are identical sales in the 
U.S. and U.K. markets. However, the Department found that there were 
identical matches for only one-fourth of the products sold in the 
United States. On August 12, 2002, we transmitted the Section D 
questionnaire to Echjay, with a deadline of August 26, 2002, for their 
response. On August 22, 2002, we received Echjay's request for a three-
week extension of time. We granted a two-week extension until September 
9, 2002. On September 5, 2002, we received a letter from Echjay in 
which it acknowledged that the merchandise sold in the U.K. market did 
not have identical matches for the entire range of the merchandise sold 
in the United States, but asked that the Department consider the prices 
in which the merchandise was sold in the U.K. as NV. Echjay asked for 
another extension of time until October 31, 2002, to respond to Section 
D. Echjay also explained that it would be computing the weighted 
average cost of production (``COP'') based on total tonnage produced 
during the year (instead of the product-specific production quantity, 
per the Section D instructions). On September 6, 2002, we granted an 
extension of time until September 18, 2002. We stated that inasmuch as 
certain U.S. sales will not have identical or similar matches, Echjay 
must report cost data for all reported products by control numbers 
(``CONNUMs''). We explained that when comparing similar products, the 
Department considers differences in variable costs associated with the 
physical characteristics of the products in its margin calculation. 
Further, we noted that the Department's preference is to use the third 
country market with the highest volume to determine NV, which in this 
case was Belgium. We explained that we need Echjay's response to 
Section D so that we can match products that are not identical by 
greatest similarity or CV. We warned that if Echjay did not respond to 
Section D, or if due to statutory time limits we have insufficient time 
to analyze a new submission, it might be necessary to resort to facts 
available. Finally, we instructed Echjay to prepare its response 
strictly in accordance with the instructions, i.e., ``Calculate COP and 
CV figures on weighted-average basis using the CONNUM specific 
production quantity, regardless of market sold, as the weighing 
factor.''
    We sent Echjay a supplemental Section B and C questionnaire on 
September 10, 2002, with a due date of September 24, 2002. We received 
Echjay's Section D response by the extended due date, September 18, 
2002. Question II.A.6 asks respondents to: ``Identify those inputs, and 
other items * * * that your company receives from affiliated parties. 
For each item received from an affiliated party, provide the name of 
the affiliated party and state the nature of the affiliation. Finally, 
state whether the transfer price of the good or service reflects the 
market price of the item. * * * '' Footnote 2 instructs respondents to 
report the ``cost'' of affiliated purchases in accordance with the 
amounts as recorded in their normal accounting system. Question 7 on 
the same page asks respondents to list the major inputs purchased from 
affiliated parties that are used to produce the merchandise under 
consideration, and to complete a chart comparing purchases from 
affiliated and unaffiliated suppliers. In response, Echjay stated ``We 
do not receive any input or any other item from any affiliated parties. 
* * * Hence, we are leaving the chart below and the subpoints blank.'' 
Section D response, page 8 (September 18, 2002).
    On November 1, 2002, the Department sent Echjay a second 
supplemental questionnaire with a due date of November 12, 2002, in 
which we asked

[[Page 11363]]

the company to list the exact functions performed by its wholly owned 
affiliate, Pushpaman Exports (``PE'') in the exporting of SS flanges 
and to report all costs incurred by PE during the POR. We stated: 
``Failure to provide this information as requested will result in the 
use of facts available, which will be adverse to you.'' Further, we 
informed Echjay that we would be using its reported sales to Belgium, 
its largest third country market, to determine NV, in accordance with 
the Department's practice.
    We received Echjay's response on November 21, 2002, in which it 
stated that it diverts some of its orders to PE, which then either 
purchases finished products, including SS flanges, or supplies Echjay 
with stainless steel billets procured from unaffiliated suppliers, 
which then produces the merchandise on a ``labor charge basis.'' Echjay 
explained that in its previous responses, it had already included sales 
made by PE, declaring:

    In our previous responses, we have already included expenses 
made by Pushpaman Exports as far as Ocean Freight, Marine Insurance, 
Packing are concerned. As per the instructions of this questionnaire 
we are now providing the other costs incurred by Pushpaman Exports, 
in the appropriate fields.

Although Echjay stated that sample worksheets showing the cost 
allocations for the CONNUMs with the highest sales volume in Belgium 
and the United States were attached in Annexures D and E, in fact they 
were missing from the submission, which was received uncollated and 
therefore not in proper condition for placement on the record of this 
proceeding.
    On December 2, 2002, we sent Echjay the third supplemental 
questionnaire for sections B-D via email, facsimile and courier, asking 
Echjay to identify any other manufacturers of SS flanges sold by PE, 
and setting a deadline of December 5, 2002. As of the close of business 
on December 6, 2002, the last workday before the verification team's 
departure for India, the Department had not received Echjay's response. 
See Memorandum to the File from Shireen Pasha, Case Analyst, Third 
Supplemental Questionnaire for Sections B-D, December 6, 2002.
    During verification, between December 11 and 13, 2002, we 
discovered that Echjay had failed to report the costs, transfer prices 
and market prices for billets supplied by PE, which are major inputs 
that constituted a substantial part of Echjay's direct material costs. 
Furthermore, Echjay's packing expenses could not be verified. In 
addition, worksheets Echjay prepared for verification to demonstrate 
how it calculated the product-specific variable and total costs 
revealed that it had again ignored the explicit instructions in the 
Section D questionnaire and supplemental requests for information, 
instead adopting a methodology of its own devising without consultation 
with the Department.
    At verification, we found that Echjay had failed to provide 
product-specific costs by control number (``CONNUM'') to account for 
the cost differences associated with the physical characteristics of 
the products under review. A respondent's product-specific sales and 
cost data are the most basic and significant data needed in order for 
the Department to perform a dumping analysis and margin calculation. 
The specific physical characteristics identified at the beginning of 
each case, which make up a control number, are those physical 
characteristics determined to be the most significant in 
differentiating between products. These are the physical 
characteristics that define a unique product for sales comparison 
purposes. The level of detail within each physical characteristic 
reflects the importance the Department places on comparing the most 
similar products in a price-to-price comparison. In this review, the 
Department identified five characteristics for matching purposes: grade 
of stainless steel, type of flange, size, pressure rating, and finish. 
Echjay assigned the same costs to all products within a stainless steel 
grade, accounting only for cost differences due to the price and weight 
of the direct material input of stainless steel billets. Absent 
product-specific cost information, the Department lacks the necessary 
information to calculate a difference-in-merchandise (``DIFMER'') 
adjustment to account for differences in physical characteristics when 
comparing sales of similar merchandise. In addition, without this 
information, we cannot determine matches between U.S. and comparison 
market sales for price-to-price comparisons, nor can we determine 
accurate constructed values for use as normal value, as required.
    When a respondent's normal accounting system does not differentiate 
among products nor provide product-specific costs to the level of 
detail required by the Department, our consistent practice is to have 
the respondent start with the costs established in their normal 
accounting system and then further allocate the costs to specific 
products based upon a reasonable method available to them. See section 
773(f)(1)(A) of the Act. If there is little or no cost difference 
associated with a particular physical characteristic, then the 
respondent may provide an analysis as to why there is virtually no cost 
difference relating to the characteristic in question. If there is a 
significant difference then the respondent is required to develop a 
reasonable method to quantify such a difference.
    Echjay's methodology allocated expenses in proportion to the weight 
of billets used to produce SS flanges instead of using the CONNUM-
specific production quantity, as instructed, thereby failing to account 
for yield losses. Moreover, as the billet weight used to allocate costs 
did not include the billets supplied by PE, the costs of the products 
sold by PE in the Belgian market are understated, thereby distorting 
DIFMER calculations. Further, Echjay included in CV various expenses 
the Department normally treats as sale-specific circumstances of sale 
(``COS'') adjustments and movement expenses. Therefore, we cannot rely 
on the product-specific variable and total costs Echjay reported in its 
sales listings for U.S. and comparison market sales to calculate 
DIFMERs for the purpose of comparing similar products sold in the 
respective markets.
    The Department uses its model matching methodology to determine 
which comparison market sales should be used to calculate NV for sales 
for which there are no identical matches. We reject comparisons if the 
difference in the variable costs of manufacture between the product 
sold in the comparison market and the product sold in the United States 
exceeds 20 percent of the total cost of the U.S. product. Without 
accurate costs, we cannot reliably determine which sales should be 
compared in the respective markets. Moreover, if some U.S. sales cannot 
be matched with comparison market sales, either because of insufficient 
similarity or because of lack of contemporaneousness, we must be able 
to calculate the CV of the products sold in the United States. 
Therefore, without accurate costs we cannot reliably calculate whether 
dumping margins exist.
    Section 776(a)(2) of the Act provides that ``if an interested party 
or any other person--(A) withholds information that has been requested 
by the administering authority; (B) fails to provide such information 
by the deadlines for the submission of the information or in the form 
and manner requested, subject to subsections (c)(1) and (e) of section 
782; (C) significantly impedes a proceeding under this title; or (D) 
provides such information but the information cannot

[[Page 11364]]

be verified as provided in section 782(i), the administering authority 
* * * shall, subject to section 782(d), use the facts otherwise 
available in reaching the applicable determination under this title.''
    Pursuant to section 776(a)(2), we find that in failing to report a 
substantial percentage of its direct material costs supplied by an 
affiliated party, Echjay withheld information requested by the 
Department. Further, Echjay failed to provide its cost of production 
data in the form and manner requested and failed to meet the deadlines 
for submission of information. Moreover, Echjay did not notify the 
Department prior to verification of any inability to report the cost 
data in the form and manner requested, nor did it propose an 
alternative acceptable methodology that would account for yield losses. 
Finally, the packing cost information Echjay provided could not be 
verified. Therefore, pursuant to section 776(a)(2)(A), (B), and (D), we 
preliminarily determine that the use of facts otherwise available 
(``FA'') is warranted in order to calculate a margin for Echjay.
    Section 782(e) of the Act provides that the Department ``shall not 
decline to consider information that is submitted by an interested 
party and is necessary to the determination but does not meet all the 
applicable requirements established by (the Department)'' if the 
information is timely, can be verified, and is not so incomplete that 
it cannot be used, and if the interested party acted to the best of its 
ability in providing the information. Where all of these conditions are 
met, and if the Department can use the information without undue 
difficulties, the statute requires it to do so.
    For these preliminary results, we have revised Echjay's reported CV 
data to conform to the Department's standard methodology, to the extent 
that information already on the record permits. Using cost data from 
Echjay's most recent fiscal year financial statements, we calculated 
direct labor costs, overhead costs, general and administrative 
expenses, and revised interest expenses per kilogram by dividing by the 
total weight of production of all products, subject and non-subject. 
However, despite repeated requests to do so, Echjay failed to report 
all of its direct material costs pursuant to the major input rule (19 
CFR 351.407(b)). As a result, the Department was unable to verify the 
material costs which account for most of the total costs of production. 
In addition, although the Department asked Echjay several times to 
report its labor cost for packing, we found at verification that 
Echjay's explanations of the method it used to calculate packing costs 
were unsubstantiated and that neither the material cost nor the labor 
cost for packing could be verified. Therefore, pursuant to section 
776(b) of the Act, we preliminarily determine that Echjay has failed to 
cooperate to the best of its ability.
    Section 776(b) provides that, if the Department finds that an 
interested party ``has failed to cooperate by not acting to the best of 
its ability to comply with a request for information,'' the Department 
may use information that is adverse to the interests of the party as 
the facts otherwise available. Adverse inferences are appropriate ``to 
ensure that the party does not obtain a more favorable result by 
failing to cooperate than if it had cooperated fully.'' See Statement 
of Administrative Action (SAA) accompanying the URAA, H.R. Doc. No. 
103-316 (1994), at 870. Furthermore, ``an affirmative finding of bad 
faith on the part of the respondent is not required before the 
Department may make an adverse inference.'' See Antidumping Duties, 
Countervailing Duties; Final Rule, 62 FR 27340 (May 17, 1997).
    Accordingly, we have preliminarily determined to make an adverse 
inference and apply the highest cost per kilogram Echjay reported in 
its Section D response for stainless steel material used to produce 
flanges to all of Echjay's direct material costs. In addition, we have 
preliminarily determined to add the highest reported packing expense 
for Belgian sales to CV for U.S. packing.

B. Snowdrop

    Snowdrop made one sale of rough flanges to the United States during 
the POR. As there were no sales in the home market, Snowdrop reported 
its sales to its three largest third country markets. The Department 
found no identical matches to the merchandise sold to the United 
States. It therefore determined that it would be necessary to use CV to 
calculate a margin. On October 21, 2002, the Department sent Section D 
questionnaires to the two producers of the flanges Snowdrop exported to 
the United States, Panchmahal and Paramount Forge (``Paramount''), with 
a request that they report CV for the merchandise they sold to Snowdrop 
and respond by November 7, 2002. Panchmahal notified the Department via 
email that it would not complete the questionnaire, as it had made the 
sale to Snowdrop in the belief that it was for the Indian market. On 
November 14, 2002, the Department sent a letter to Paramount asking 
them to inform us of their intentions. On November 18, 2002, Paramount 
asked the Department for an extension of time of unspecified duration. 
On the same day, we replied that we could extend the deadline only to 
November 22, 2002, which is a total of 32 days from our original 
request for information. Subsequent to this date, we received no 
further communication from Paramount. Panchmahal and Paramount, by not 
providing the Department with the necessary CV information to conduct a 
margin analysis, as described above, repeatedly failed to respond to 
the Department's request for information within the meaning of section 
782(d)(1) of the Act.
    Although Snowdrop provided the Department with some information, 
that information was too incomplete for the Department to conduct a 
margin analysis. Pursuant to sections 776(a)(1) and 776(a)(2)(A) of the 
Act, we have preliminarily determined to use the facts otherwise 
available in reaching the applicable determination. Further, because 
Panchmahal and Paramount, which, as producers of subject merchandise, 
are interested parties in this proceeding, did not act to the best of 
their abilities in withholding information and significantly impeded 
this review, we preliminarily find that it is appropriate to make 
adverse inferences pursuant to section 776(b) of the Act. See Coumarin 
From the People's Republic of China; Final Results of Antidumping Duty 
Administrative Review, 66 FR 34614 (June 29, 2001); Freshwater Crawfish 
Tail Meat From the People's Republic of China; Notice of Final Results 
of Antidumping Duty Administrative Review and New Shipper Reviews, and 
Final Partial Rescission of Antidumping Duty Administrative Review, 66 
FR 20634 (April 24, 2001); Freshwater Crawfish Tail Meat From the 
People's Republic of China; Notice of Final Results of Antidumping Duty 
Administrative Review, and Final Partial Rescission of Antidumping Duty 
Administrative Review, 67 FR 19546 (April 22, 2002); and Freshwater 
Crawfish Tail Meat From the People's Republic of China; Notice of 
Preliminary Results of Antidumping Duty Administrative Review, 67 FR 
63877 (October 16, 2002). When making adverse inferences, the SAA 
authorizes the Department to consider the extent to which a party may 
benefit from its own lack of cooperation (SAA at 870). Because 
Panchmahal currently has a cash deposit rate of 210.00 percent based on 
the highest rate in the original petition and antidumping duty order,

[[Page 11365]]

and both Paramount and Snowdrop have the ``All Others'' rate of 162.14 
percent, the Department determines that assigning a 210.00 percent rate 
will prevent non-responding firms from benefiting from their failure to 
respond to the Department's requests for information. Anything less 
than the current 210 percent cash deposit rate would effectively reward 
non-responding firms for not cooperating by not acting to the best of 
their ability.
    Section 776(c) provides that, when the Department relies on 
secondary information rather than on information obtained in the course 
of an investigation or review, the Department shall, to the extent 
practicable, corroborate that information from independent sources that 
are reasonably at its disposal. The SAA states that the independent 
sources may include published price lists, official import statistics 
and customs data, and information obtained from interested parties 
during the particular investigation or review. See SAA at 870. The SAA 
clarifies that ``corroborate'' means that the Department will satisfy 
itself that the secondary information to be used has probative value. 
Id. To corroborate secondary information, the Department will, to the 
extent practicable, examine the reliability and relevance of the 
information used.
    To assess the reliability of the petition margin, in accordance 
with section 776(c) of the Act, to the extent practicable, we examined 
the key elements of the calculations of export price and normal value 
upon which the petitioners based their margins for the petition. The 
U.S. prices in the petition were based on quotes to U.S. customers, 
most of which were obtained through market research. See Petition for 
the Imposition of Antidumping Duties, December 29, 1993. We were able 
to corroborate the U.S. prices in the petition, which were used as the 
basis of the 210 percent rate, by comparing these prices to publicly 
available information based on IM-145 import statistics from the U.S. 
International Trade Commission's Web site via dataweb for HTS numbers 
7307215000 and 7307211000. We noted that the average reported Customs 
unit value for these products in calendar year 2001, which overlaps 
eleven months of the POR, was lower than those cited in the petition, 
which ranged from $4.77 to $47.32, thus corroborating the petition's 
U.S. price. The NVs in the petition were based on actual price 
quotations obtained through market research. The Department is not 
aware of other independent sources of information that would enable it 
to corroborate the margin calculations in the petition further.
    With respect to the relevance aspect of corroboration, however, the 
Department will consider information reasonably at its disposal as to 
whether there are circumstances that would render a margin not 
relevant. Where circumstances indicate that the selected margin is not 
appropriate as adverse facts available, the Department will disregard 
the margin and determine an appropriate margin. See Fresh Cut Flowers 
from Mexico; Final Results of Antidumping Duty Administrative Review, 
61 FR 6812 (February 22, 1996), where the Department disregarded the 
highest dumping margin as best information available because the margin 
was based on another company's uncharacteristic business expense 
resulting in an unusually high margin. Further, in accordance with F. 
LII De Cecco Di Filippo Fara S. Martino S.p.A. v. United States, 216 F. 
3d 1027 (Fed. Cir. June 16, 2000), we also examine whether information 
on the record would support the selected rates as reasonable facts 
available.
    We find that the 210 percent rate which we are using for these 
preliminary results does have probative value. We know that, during the 
POR, one of Snowdrop's suppliers was Panchmahal Steel Ltd. 
(Panchmahal), which currently has a 210 percent margin rate from the 
prior administrative review of this proceeding. Thus, this rate is 
relevant for Snowdrop because it was recently applied to Panchmahal in 
the prior administrative review, Panchmahal was a supplier to Snowdrop 
during the POR, and we are not aware of any circumstances that would 
render this rate inappropriate. Also, we note that four Indian 
manufacturers currently have a 210 percent margin under this order.
    The implementing regulation for section 776 of the Act, codified at 
19 CFR 351.308(d), states, ``(t)he fact that corroboration may not be 
practicable in a given circumstance will not prevent the Secretary from 
applying an adverse inference as appropriate and using the secondary 
information in question.'' Additionally, the SAA at 870 states 
specifically that, where ``corroboration may not be practicable in a 
given circumstance,'' the Department may nevertheless apply an adverse 
inference. The SAA at 869 emphasizes that the Department need not prove 
that the facts available are the best alternative information. 
Therefore, based on our efforts, described above, to corroborate 
information contained in the petition and in accordance with 776(c) of 
the Act, which discusses facts available and corroboration, we consider 
the margins in the petition to be corroborated to the extent 
practicable for purposes of this preliminary determination (see Certain 
Cut-to-Length Carbon Steel Plate from Mexico: Final Results of 
Antidumping Duty Administrative Review, 64 FR 76, 84 (January 4, 
1999)).

Fair Value Comparisons: Echjay and Viraj

    To determine whether sales of subject merchandise were made in the 
United States at less than fair value, we compared the export price 
(EP) or constructed export price (CEP) to the NV, as described in the 
``Export Price and Constructed Export Price'' and ``Normal Value'' 
sections of this notice. In accordance with section 777A(d)(1)(A)(i) of 
the Act, we calculated EPs and CEPs and compared these prices to 
weighted-average normal values or CVs, as appropriate.

Export Price and Constructed Export Price

    In accordance with section 772 of the Act, we calculated either an 
EP or a CEP, depending on the nature of each sale. Section 772(a) of 
the Act defines EP as the price at which the subject merchandise is 
first sold by the foreign exporter or producer before the date of 
importation to an unaffiliated purchaser in the United States, or to an 
unaffiliated purchaser for exportation to the United States. We have 
preliminarily determined that all of Echjay's U.S. sales during the POR 
were EP sales, and that direct sales made by Viraj to unaffiliated U.S. 
customers were EP sales.
    Section 772(b) of the Act defines CEP as the price at which the 
subject merchandise is first sold in the United States before or after 
the date of importation, by or for the account of the producer or 
exporter of the merchandise, or by a seller affiliated with the 
producer or exporter, to an unaffiliated purchaser, as adjusted under 
sections 772(c) and (d) of the Act. We have preliminarily considered 
sales Viraj made through Viraj USA, Inc. (``VUI'') during the POR to be 
CEP sales.
    We calculated EP and CEP, as appropriate, based on prices charged 
to the first unaffiliated customer in the United States. We used the 
date of invoice as the date of sale. We based EP on the packed CIF duty 
paid prices to the first unaffiliated purchasers in the United States. 
We made deductions for movement expenses in accordance with section 
772(c)(2)(A) of the Act, including: foreign inland freight, foreign

[[Page 11366]]

brokerage and handling, ocean freight, and marine insurance.
    For CEP sales, in accordance with section 772(d)(1) of the Act, we 
deducted from the starting price those selling expenses that were 
incurred in selling the subject merchandise in the United States, 
including direct selling expenses (i.e., bank charges, U.S. Customs 
clearance expenses, and interest for discounted U.S. sales 
receivables), and indirect selling expenses. In accordance with section 
772(d)(3) of the Act, we deducted an amount for profit allocated to the 
expenses deducted under sections 772(d)(1) and (2) of the Act. We did 
not deduct imputed credit expenses from the starting price because 
Viraj discounted its U.S. sales receivables, and therefore did not 
incur any opportunity cost of capital.

Duty Drawback

    Section 772(c)(1)(B) of the Act provides that EP or CEP shall be 
increased by ``the amount of any import duties imposed by the country 
of exportation which have been rebated, or which have not been 
collected, by reason of the exportation of the subject merchandise to 
the United States.'' The Department determines that an adjustment to 
U.S. price for claimed duty drawback is appropriate when a company can 
demonstrate that there is (1) a sufficient link between the import duty 
and the rebate, and (2) sufficient imports of the imported material to 
account for the duty drawback received for the export of the 
manufactured product (the ``two pronged test''). See Rajinder Pipes 
Ltd. v. United States, 70 F. Supp. 2d 1350, 1358 (CIT 1999). See, also, 
Certain Welded Carbon Standard SteelPipes and Tubes from India:Final 
Results of New Shippers Antidumping Duty Administrative Review, 62 FR 
47632 (September 10, 1997) and Federal Mogul Corp. v. United States, 
862 F. Supp. 384, 409 (CIT 1994).
    We found at verification of Echjay that it had received Duty 
Entitlement Pass Book (``DEPB'') certificates from the Indian 
government, which it booked as ``export incentives'' in its Profit and 
Loss Statements, although it had imported no raw materials, and had 
sold all of these DEPB certificates on the secondary market. Echjay 
therefore fails both prongs of the duty drawback test, and we are 
preliminarily denying this adjustment.
    At verification the Department found that Viraj used DEPB licenses 
received from the Indian government on the basis of the FOB value of 
its exports to offset the Indian customs duties otherwise payable on 
imported raw materials used in the production of SS flanges. Viraj 
reported these payments received from the Indian government in its 
profit and loss accounts as income under ``Import Duty Drawback Credit 
Under Pass Book/DEPB Schemes.'' Although in the previous segment of 
this proceeding, the Department granted a duty drawback adjustment, we 
note that each segment is independent of any other. In this review, at 
verification Viraj traced the total quantities of raw materials which 
it imported and used in the production of subject merchandise, and 
accounted for all customs duties amounts not paid but offset against 
DEPB Duty Entitlement Certificates. However, Viraj was unable to 
demonstrate the necessary link between the amount of import duties not 
paid on raw materials used to make subject merchandise and the duty 
drawback rebate given by the government of India, thus failing the 
second part of the two-pronged test. Indeed, a company official 
explained at verification that Viraj sold DEPB licenses in excess of 
import duties owed on the secondary market for these licenses. Since 
Viraj did not meet both prongs of the Department's two-pronged test for 
granting a duty drawback adjustment, we have not added duty drawback to 
Viraj's U.S. sales prices for the preliminary results.

Normal Value

A. Viability

    In order to determine whether there is sufficient volume of sales 
in the comparison market to serve as a viable basis for calculating NV 
(i.e., the aggregate volume of comparison market sales of the foreign 
like product during the POR is equal to or greater than five percent of 
the aggregate volume of U.S. sales of subject merchandise during the 
POR), we compared the volume of Echjay's Belgian sales and Viraj's home 
market sales of the foreign like product to the volume of U.S. sales of 
the subject merchandise. Since we found no reason to determine that 
quantity (weight) was not the appropriate basis for these comparisons, 
we did not use value as the measure. See 19 CFR 351.404(b)(2). We 
determined that the comparison markets were viable because comparison 
market sales were greater than five percent of Echjay's and Viraj's 
respective U.S. sales, based on aggregate volume by weight.

B. Arm's Length Sales

    Since no information on the record indicates any comparison market 
sales to affiliates, we did not use an arm's-length test.

C. Cost of Production Analysis

    In the previous review of Viraj's sales, the Department found that 
certain home market sales failed the cost test. Accordingly, pursuant 
to section 773(b)(1) of the Act, we initiated an investigation to 
determine whether Viraj's sales of subject merchandise were made at 
prices below COP during the POR. We determined that only grade, type, 
size, pressure rating, and finish were required to define products for 
purposes of matching U.S. sales to home market sales. We converted 
costs from a per-piece basis to a per-kilogram basis. See the company-
specific analysis memorandum for Viraj, dated February 28, 2003, 
(``Viraj Analysis Memo'') a public version of which is available in the 
Central Records Unit.
    In accordance with section 773(b)(3) of the Act, we calculated COP 
for Viraj based on the sum of the costs of materials and fabrication 
employed in producing the foreign like product, plus selling, general, 
and administrative expenses (``SG&A''), net interest expenses 
(``INTEX'') and packing. See below under Comparison Market Price for a 
discussion of revisions the Department made to Viraj's reported INTEX.
    After calculating COP, we tested whether home market sales of SS 
flanges were made at prices below COP within an extended period of time 
in substantial quantities and whether such prices permitted the 
recovery of all costs within a reasonable period of time. We compared 
model-specific COPs to the reported home market prices less movement 
charges.
    Pursuant to section 773(b)(2)(C) of the Act, where less than 20 
percent of a respondent's home market sales for a model are at prices 
less than the COP, we do not disregard any below-cost sales of that 
model because we determine that the below-cost sales were not made 
within an extended period of time in ``substantial quantities.'' Where 
20 percent or more of a respondent's home market sales of a given model 
are at prices less than COP, we disregard the below-cost sales because 
they are (1) made within an extended period of time in substantial 
quantities in accordance with sections 773(b)(2)(B) and (C) of the Act, 
and (2) based on comparisons of prices to weighted-average COPs for the 
POR, were at prices which would not permit the recovery of all costs 
within a reasonable period of time in accordance with section 
773(b)(2)(D) of the Act.
    The results of our cost test for Viraj indicated that for certain 
comparison market models, less than 20 percent of

[[Page 11367]]

the sales of the model were at prices below COP. We therefore retained 
all sales of these comparison market models in our analysis and used 
them as the basis for determining NV. Our cost test also indicated that 
within an extended period of time (one year, in accordance with section 
773(b)(2)(B) of the Act), for certain comparison market models, more 
than 20 percent of the comparison market sales were sold at prices 
below COP and were at prices which would not permit the recovery of all 
costs within a reasonable period of time. In accordance with section 
773(b)(1) of the Act, we therefore excluded these below-cost sales from 
our analysis and used the remaining above-cost sales as the basis for 
determining NV.

Price-to-Price Comparisons: Viraj

    We compared Viraj's U.S. sales with contemporaneous sales of the 
foreign like product in the comparison market. We considered SS flanges 
identical based on grade, type, size, pressure rating and finish. We 
used a 20 percent DIFMER cost deviation cap as the maximum difference 
in cost allowable for similar merchandise, which we calculated as the 
absolute value of the difference between the U.S. and comparison market 
variable costs of manufacturing divided by the total cost of 
manufacturing of the U.S. product. In accordance with the Department's 
practice, where all contemporaneous matches to a U.S. sale observation 
resulted in DIFMER adjustments exceeding 20 percent of the COM of the 
U.S. product, we based NV on CV.
    For those product comparisons for which there were sales at prices 
above the COP, we based NV on the home market prices to home market 
customers. We made adjustments, where appropriate, for physical 
differences in the merchandise in accordance with section 
773(a)(6)(C)(ii) of the Act. In accordance with section 773(a)(6)(A) 
and (B), we deducted home market packing costs and added U.S. packing 
costs. Based on findings at verification, we corrected Viraj's reported 
packing expenses for finished flanges to include packaging materials. 
In addition, we made adjustments for differences in COS, as 
appropriate. Because we were unable to verify Viraj's interest rate for 
calculating home market credit expenses, we did not make an adjustment 
for this expense. See pages 13 and 14 of the Department's Viraj 
Verification Report, dated January 23, 2003. During verification, we 
reviewed Viraj's U.S. and home market sales with the largest sales 
volume and found that Viraj incurred sale-specific interest expenses as 
a result of discounting its U.S. sales receivables, and that these 
expenses were incorrectly included in INTEX instead of being reported 
as direct selling expenses. Hence, we calculated a weighted average 
percentage rate for these interest expenses based on the five U.S. 
sales we reviewed during verification. We divided this total by the 
sales revenue for these five sales and took the weighted average 
percent ratio and multiplied it by the gross unit price (GRSUPRU) for 
each U.S. sale. We then deducted this interest expense total from INTEX 
and included it as one of the direct selling expenses which were 
deducted from the starting price for CEP sales. See Viraj Analysis 
Memo. For comparison to EP, we made COS adjustments by deducting 
comparison market direct selling expenses and adding U.S. direct 
selling expenses.

Price-to-CV Comparisons

A. Viraj

    In accordance with section 773(a)(4) of the Act, we based NV on CV 
if we were unable to find a contemporaneous comparison market match for 
the U.S. sale. We calculated CV based on the cost of materials and 
fabrication employed in producing the subject merchandise, SG&A, INTEX 
and profit. In accordance with 773(e)(2)(A) of the Act, we based SG&A 
expenses and profit on the amounts Viraj incurred and realized in 
connection with the production and sale of the foreign like product in 
the ordinary course of trade for consumption in India. For selling 
expenses, we used the weighted-average home market selling expenses. 
Where appropriate, we made COS adjustments to CV in accordance with 
section 773(a)(8) of the Act and 19 CFR 351.410.

B. Echjay

    We based NV on CV for all U.S. sales because as noted above in the 
Facts Available section of this notice, we could not calculate reliable 
DIFMERs based on Echjay's cost data. In accordance with 773(e)(2)(B)(i) 
of the Act, we based SG&A expenses and profit on Echjay's financial 
statements. We made adjustments for differences in COS between the U.S. 
and Belgian markets, as appropriate, in accordance with section 
773(a)(6)(C)(iii) of the Act and 19 CFR 351.410.

Level of Trade

    In accordance with section 773(a)(1)(B) 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 LOT in 
the comparison market is the LOT of the starting-price sales in the 
comparison market or, when NV is based on CV, the LOT of the sales from 
which we derive SG&A expenses and profit. With respect to U.S. price 
for EP transactions, the LOT is also that of the starting-price sale, 
which is usually from the exporter to the importer. For CEP, the LOT is 
that of the constructed sale from the exporter to the importer. To 
determine whether comparison market sales are at a different LOT from 
U.S. sales, we examined stages in the marketing process and selling 
functions along the chain of distribution between the producer and the 
unaffiliated customer. In analyzing Echjay's and Viraj's selling 
activities, we did not note any significant differences in functions 
provided in any of the markets. Based upon the record evidence, we have 
determined that for Viraj there is one LOT for all EP and CEP sales, 
the same LOT as for all comparison market sales. Accordingly, because 
we find the U.S. sales and comparison market sales to be at the same 
LOT for both respondents, no LOT adjustment under section 773(a)(7)(A) 
is warranted, nor did Echjay or Viraj request one.

Preliminary Results of Review

    As a result of our review, we preliminarily determine the weighted-
average dumping margins for the period February 1, 2001, through 
January 31, 2002, to be as follows:

------------------------------------------------------------------------
                                                                Margin
                   Manufacturer/Exporter                      (Percent)
------------------------------------------------------------------------
Echjay Forgings/Pushpaman Exports..........................       125.78
Snowdrop Trading...........................................       210.00
Viraj......................................................            0
------------------------------------------------------------------------

The Department will disclose calculations performed in connection with 
these preliminary results of review within five days of the date of 
publication of this notice in accordance with 19 CFR 351.224(b). An 
interested party may request a hearing within 30 days of publication. 
See CFR 351.310(c). Any hearing, if requested, will be held 37 days 
after the date of publication, or the first business day thereafter, 
unless the Department alters the date per 19 CFR 351.310(d). Interested 
parties may submit case briefs and/or written comments no later than 30 
days after the date of publication of these preliminary results of 
review. Rebuttal briefs and rebuttals to written comments, limited to 
issues raised in the case briefs and comments, may be filed no later 
than 35 days after the date of publication of this notice. Parties who 
submit argument in

[[Page 11368]]

these proceedings are requested to submit with the argument (1) a 
statement of the issue, (2) a brief summary of the argument and (3) a 
table of authorities. The Department will issue the final results of 
this administrative review, including the results of our analysis of 
the issues raised in any such written comments or at a hearing, within 
120 days of publication of these preliminary results.
    The Department shall determine, and the U.S. Customs Service shall 
assess, antidumping duties on all appropriate entries. In accordance 
with 19 CFR 351.212(b)(1), we will calculate assessment rates for the 
merchandise based on the ratio of the total amount of antidumping 
duties calculated for the examined sales made during the POR to the 
total quantity (in kilograms) of the sales used to calculate those 
duties. This rate will be assessed uniformly on all entries of 
merchandise of that manufacturer/exporter made during the POR. The 
Department will issue appropriate appraisement instructions directly to 
the Customs Service upon completion of the review.
    Furthermore, the following deposit requirements will be effective 
upon completion of the final results of this administrative review for 
all shipments of flanges from India entered, or withdrawn from 
warehouse, for consumption on or after the publication date of the 
final results of this administrative review, as provided by section 
751(a)(1) of the Act: (1) The cash deposit rates for the reviewed 
companies will be the rates established in the final results of 
administrative review; (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 this review, or 
the LTFV investigation; and (4) if neither the exporter nor the 
manufacturer is a firm covered in this review or any previous reviews, 
the cash deposit rate will be 162.14 percent, the ``all others'' rate 
established in the LTFV investigation (59 FR 5994, February 9, 1994).
    This notice also serves as a preliminary reminder to importers of 
their responsibility under 19 CFR 351.402(f) 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.
    We are issuing and publishing this notice in accordance with 
sections 751(a)(1) and 777(i)(1) of the Act.

    Dated: February 28, 2003.
Faryar Shirzad,
Assistant Secretary for Import Administration.
[FR Doc. 03-5634 Filed 3-7-03; 8:45 am]
BILLING CODE 3510-DS-P