[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]
-----------------------------------------------------------------------
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.
-----------------------------------------------------------------------
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