[Federal Register Volume 69, Number 172 (Tuesday, September 7, 2004)]
[Notices]
[Pages 54125-54130]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-2084]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-351-826]


Small Diameter Circular Seamless Carbon and Alloy Steel Standard, 
Line and Pressure Pipe from Brazil; Preliminary Results of Antidumping 
Duty Administrative Review

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

ACTION: Notice of Preliminary Results of Antidumping Duty 
Administrative Review.

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SUMMARY:  In response to a request from V&M do Brasil, S.A., the 
Department of

[[Page 54126]]

Commerce (the Department) is conducting an administrative review of the 
antidumping duty order on small diameter circular seamless carbon and 
alloy steel standard, line and pressure pipe from Brazil (A-351-826). 
This administrative review covers imports of subject merchandise from 
V&M do Brasil, S.A. (VMB). The period of review (POR) is August 1, 
2002, through July 31, 2003.
    We preliminarily determine that sales of subject merchandise by VMB 
have been made at less than normal value (NV). If these preliminary 
results are adopted in our final results, we will instruct U.S. Customs 
and Border Protection (CBP) to assess antidumping duties on appropriate 
entries based on the difference between the constructed export price 
(CEP) and the NV. Interested parties are invited to comment on these 
preliminary results. Parties who submit argument in this proceeding are 
requested to submit with the argument: 1) a statement of the issues, 2) 
a brief summary of the argument, and 3) a table of authorities.

EFFECTIVE DATE: September 7, 2004.

FOR FURTHER INFORMATION CONTACT: Helen Kramer or Patrick Edwards, 
Antidumping and Countervailing Duty Enforcement, Office 7, Import 
Administration, International Trade Administration, U.S. Department of 
Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 
20230, telephone: (202) 482-0405 or (202) 482-8029, respectively.

SUPPLEMENTARY INFORMATION:

Background

    On August 3, 1995, the Department published the antidumping duty 
order on small diameter circular seamless carbon and alloy steel 
standard, line and pressure pipe from Brazil. See Notice of Antidumping 
Duty Order: Small Diameter Circular Seamless Carbon and Alloy Steel 
Standard, Line and Pressure Pipe from Brazil, 60 FR 39707 (August 3, 
1995). On August 1, 2003, the Department published the opportunity to 
request administrative review of, inter alia, seamless line and 
pressure pipe from Brazil for the period August 1, 2003, through July 
31, 2003. See Antidumping or Countervailing Duty Order, Finding, or 
Suspended Investigation; Opportunity to Request Administrative Review, 
68 FR 45218 (August 1, 2003).
    In accordance with 19 CFR 351.213(b)(1), on August 12, 2003, VMB 
requested that we conduct an administrative review of its sales of the 
subject merchandise. On September 30, 2003, the Department published in 
the Federal Register a notice of initiation of this antidumping duty 
administrative review covering the period August 1, 2002, through July 
31, 2003. See Initiation of Antidumping and Countervailing Duty 
Administrative Reviews, 68 FR 56262 (September 30, 2003).
    On October 30, 2003, the Department issued its antidumping duty 
questionnaire to VMB. VMB submitted its response to Section A of the 
questionnaire on December 8, 2003, and the responses to Sections B and 
C on January 6, 2004. The Department issued a supplemental 
questionnaire for all three responses on January 16, 2004. On February 
9, 2004, the Department received VMB's supplemental response. VMB 
submitted its response to Section D of the questionnaire on March 3, 
2004. On March 22, 2004, the Department issued a successorship 
questionnaire to VMB, which also covered issues regarding home market 
and U.S. sales in the information reported in VMB's first supplemental 
questionnaire response on Sections B and C. On April 6, 2004, the 
Department issued a third supplemental questionnaire to VMB, pertaining 
to the model match characteristics the company had reported in its 
Sections B and C responses. Import Administration's Office of 
Accounting issued a supplemental questionnaire regarding VMB's Section 
D response on April 15, 2004. The Department received VMB's response to 
the model match supplemental questionnaire on April 16, 2004. On April 
20, 2004, the Department issued its outline and agenda for the sales 
verification during the week of April 26, 2004, and also received the 
sales reconciliation package from VMB on the same date.
    Because it was not practicable to complete the preliminary results 
of this review within the normal time frame, we extended the time limit 
for this review until August 30, 2004. See Small Diameter Circular 
Seamless Carbon and Alloy Steel Standard, Line and Pressure Pipe from 
Brazil: Extension of Time Limit to Complete Preliminary Results of 
Antidumping Administrative Review, 69 FR 22005 (April 23, 2004). Also 
on April 23, 2004, U.S. Steel Corporation, petitioner, submitted its 
pre-verification comments to the Department. We verified VMB's 
submitted data as discussed below.

Verification

    As provided in section 782(i) of the Tariff Act (the Act), we 
verified the sales and cost information provided by VMB for use in our 
preliminary results using standard verification procedures, including 
on-site inspection of the manufacturer's facilities and the examination 
of relevant sales and financial records. We verified VMB's sales 
responses from April 26, 2004, through April 30, 2004, and cost 
responses from July 12, 2004, through July 16, 2004, at VMB's Barreiro 
plant near Belo Horizonte, Brazil. The results of these verifications 
are found in the sales verification report dated May 26, 2004, and the 
cost verification report dated August 30, 2004, on file in the Central 
Records Unit (CRU) of the Department in room B-099 of the main 
Department of Commerce Building, 14th Street and Constitution Avenue, 
NW, Washington, DC. See Memorandum to the File from Helen Kramer and 
Patrick Edwards, Case Analysts, through Abdelali Elouaradia, Program 
Manager: Verification of Home Market and U.S. Sales Information 
Submitted by V&M do Brasil, S.A. in the Administrative Review of Small 
Diameter Circular Seamless Carbon and Alloy Steel Standard, Line and 
Pressure Pipe from Brazil, dated May 26, 2004, (Sales Verification 
Report); and Memorandum to Neal Halper, Office of Accounting Director 
from Ji Young Oh, Accountant, through Theresa Caherty, Program Manager: 
Verification Report on the Cost of Production and Constructed Value 
Data Submitted by V&M do Brasil, S.A., dated August 30, 2004, (Cost 
Verification Report).

Period of Review

    The period of review (POR) is August 1, 2002, through July 31, 
2003.

Scope of the Review

    For purposes of this review, the products covered are seamless 
pipes produced to the ASTM A-335, ASTM A-106, ASTM A-53 and API 5L 
specifications and meeting the physical parameters described below, 
regardless of application. The scope of this review also includes all 
products used in standard, line, or pressure pipe applications and 
meeting the physical parameters below, regardless of specification.
    For purposes of this review, seamless pipes are seamless carbon and 
alloy (other than stainless) steel pipes, of circular cross-section, 
not more than 114.3 mm (4.5 inches) in outside diameter, regardless of 
wall thickness, manufacturing process (hot-finished or cold-drawn), end 
finish (plain end, beveled end, upset end, threaded, or threaded and 
coupled), or surface finish. These pipes are commonly known as standard 
pipe, line pipe or pressure pipe, depending upon the application. They 
may also be used in structural

[[Page 54127]]

applications. Pipes produced in non-standard wall thickness are 
commonly referred to as tubes.
    The seamless pipes subject to this administrative review are 
currently classifiable under subheadings 7304.10.10.20, 7304.10.50.20, 
7304.31.60.50, 7304.39.00.16, 7304.39.00.20, 7304.39.00.24, 
7304.39.00.28, 7304.39.00.32, 7304.51.50.05, 7304.51.50.60, 
7304.59.60.00, 7304.59.80.10, 7304.59.80.15, 7304.59.80.20, and 
7304.59.80.25 of the Harmonized Tariff Schedule of the United States 
(HTSUS). Although the HTS subheadings are provided for convenience and 
U.S. Customs purposes, the written description of the scope of this 
review is dispositive.

Successorship

    Since the publication of the original antidumping duty order in 
1995, there have been eight administrative review periods, during which 
time only two reviews were requested, including the instant review. The 
original investigation conducted by the Department involved Mannesmann, 
S.A. (Mannesmann), a Brazilian subsidiary of Mannesmannr[ouml]hren-
Werke AG of Germany. In 1997, Mannesmannr[ouml]hren-Werke AG merged 
with the French steel company Vallourec to create Vallourec & 
Mannesmann Tubes, headquartered in France. Mannesmann came under the 
Vallourec Group management structure and was renamed as Vallourec & 
Mannesmann Tubes V&M do Brasil, S.A., eventually being simplified to 
V&M do Brasil, S.A in 2000. We have conducted a successorship review 
during this POR because entries for the new entity will be made under 
that name during the next POR.
    The Department is making this successorship determination in order 
to apply the appropriate company-specific cash deposit rates. In 
determining whether VMB is the successor to Mannesmann for purposes of 
applying the antidumping law, the Department examined a number of 
factors including, but not limited to, changes in: (1) management, (2) 
production facilities, (3) suppliers, and (4) customer base. See, e.g., 
Brass Sheet and Strip from Canada: Final Results of Antidumping Duty 
Administrative Review, 57 FR 20460 (May 13, 1992) (Brass from Canada); 
Industrial Phosphoric Acid from Israel: Final Results of Antidumping 
Duty Changed Circumstances Review, 59 FR 6944 (February 14, 1994); 
Notice of Final Results of Antidumping Duty Changed Circumstances 
Review: Pressure Sensitive Pipe from Italy, 69 FR 15279 (March 25, 
2004); and Notice of Final Results of Changed Circumstances Antidumping 
Duty Administrative Review: Polychloroprene Rubber from Japan, 67 FR 58 
(January 2, 2004). While examining these factors alone will not 
necessarily provide a conclusive indication of succession, the 
Department will generally consider one company to have succeeded 
another if that company's operations are essentially inclusive of the 
predecessor's operations. See Brass from Canada. Thus, if the evidence 
with respect to the production and sale of the subject merchandise 
demonstrates that the new company is essentially the same business 
operation as the former company, the Department will assign the new 
company the cash deposit rate of its predecessor.
    The evidence on the record,\1\ including organizational charts, 
company brochures, customer lists, and financial documentation, 
demonstrates that with respect to the production and sale of subject 
merchandise, VMB is the successor to Mannesmann. Specifically, the 
evidence shows that VMB has the same production facilities, with the 
exception of facility expansions and improvements, and most of the same 
customers, suppliers and management, as Mannesmann had. At 
verification, we confirmed that VMB's facilities, customers, and 
suppliers had not changed more than is to be expected in the normal 
course of business. See Sales Verification Report. We reviewed VMB's 
organizational and investment structure before and after the merger of 
Vallourec and Mannesmann's parent company, Mannesmannr[ouml]hren-Werke 
AG. We confirmed that there were only minimal changes made to the 
organizational and investment structure of VMB, i.e., the Advisory 
Council became a Board of Directors after the merger, a consequence of 
a changed management orientation structure. Furthermore, we reviewed 
documentation at verification to support the name change from 
Mannesmann to VMB. See id, at page 5 and at Exhibit 5. Therefore, we 
preliminarily find that VMB is the successor to Mannesmann for purposes 
of this proceeding, and for the application of the antidumping duty 
law.
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    \1\ See Sales Verification Report (May 26, 2004) at pages 3-6, 
Exhibits 2, 5, 9 and 10 and VMB's Supplemental Questionnaire 
Response, April 6, 2004.
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Sales Below Cost Investigation

    On January 13, 2004, the petitioner, United States Steel 
Corporation, requested that the Department conduct a sales-below-cost 
investigation. On January 14, 2004, the Department received 
notification from VMB that it intended to submit comments on the record 
regarding the petitioner's cost allegations. The Department informed 
VMB that comments must be received no later than, January 21, 2004, and 
VMB submitted its comments on petitioner's cost allegation to the 
Department accordingly. The petitioner responded on January 26, 2004, 
and the Department subsequently initiated a sales-below-cost 
investigation on February 3, 2004.\2\ For more information on the 
Department's analysis of VMB's cost of production and calculation of 
constructed value, see the section on ``COP Analysis'' below.
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    \2\ See Memorandum from Helen Kramer and Patrick Edwards, Case 
Analysts to Richard Weible, Office Director: Petitioner's Allegation 
of Sales Below the Cost of Production by V&M do Brasil, S.A., dated 
February 3, 2004.
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Fair Value Comparisons [FEDREG][VOL]*[/VOL][NO]*[/NO][DATE]*[/
DATE][NOTICES] [NOTICE][PREAMB][AGENCY]*[/AGENCY][SUBJECT]*[/SUBJECT]

    To determine whether VMB made sales of seamless standard, line and 
pressure pipe to the United States at less than fair value, we compared 
the CEP to the NV, as described in the ``Constructed Export Price'' and 
``Normal Value'' sections of this notice, below. In accordance with 
section 777A(d)(2) of the Act, we compared the CEPs of individual U.S. 
transactions to monthly weighted-average NVs.

Product Comparisons

    In accordance with section 771(16) of the Act, we considered all 
products produced by VMB covered by the descriptions in the ``Scope of 
the Review'' section of this notice to be foreign like products for the 
purpose of determining appropriate product comparisons to VMB's U.S. 
sales of the subject merchandise.
    We have relied on the following eight criteria to match U.S. sales 
of the subject merchandise to sales in Brazil of the foreign like 
product: product specification, manufacturing process (cold-finished or 
hot-rolled), grade, wall thickness, outside diameter, schedule, surface 
finish and end finish.
    Where there were no sales of identical merchandise in the home 
market to compare to U.S. sales, we compared U.S. sales to the next 
most similar foreign like product on the basis of the characteristics 
and reporting instructions listed in the Department's October 30, 2003, 
questionnaire.

Constructed Export Price

    Section 772(b) of the Act defines CEP as the price at which the 
subject

[[Page 54128]]

merchandise is first sold (or agreed to be sold) in the United States 
before or after the date of importation by, or for the account of, the 
producer or exporter of such merchandise, or by a seller affiliated 
with the producer or exporter, to a purchaser not affiliated with the 
producer or exporter, as adjusted under sections 772(c) and (d).
    In the instant review, VMB sold subject merchandise through an 
affiliated company, Vallourec & Mannesmann Tubes Corporation (VM Corp.) 
of Houston, Texas. VMB reported all of its U.S. sales of subject 
merchandise as CEP transactions. After reviewing the evidence on the 
record of this review, we have preliminarily determined that VMB's 
transactions are classified properly as CEP sales because these sales 
occurred in the United States and were made through its U.S. affiliate 
to an unaffiliated buyer. Such a determination is consistent with 
section 772(b) of the Act and the U.S. Court of Appeals for the Federal 
Circuit's decision in AK Steel Corp. et al. v. United States, 226 F.3d 
1361, 1374 (Fed. Cir. 2000) (AK Steel). In AK Steel, the Court of 
Appeals examined the definitions of EP and CEP, noting ``the plain 
meaning of the language enacted by Congress in 1994, focuses on where 
the sale takes place and whether the foreign producer or exporter and 
the U.S. importer are affiliated, making these two factors dispositive 
of the choice between the two classifications.'' AK Steel at 1369. The 
court declared, `` the critical differences between EP and CEP sales 
are whether the sale or transaction takes place inside or outside the 
United States and whether it is made by an affiliate,'' and noted the 
phrase ``outside the United States'' had been added to the 1994, 
statutory definition of EP. AK Steel at 1368-70. Thus, the 
classification of a sale as either EP or CEP depends upon where the 
contract for sale was concluded (i.e., in or outside the United States) 
and whether the foreign producer or exporter is affiliated with the 
U.S. importer.
    For these CEP sales transactions, we calculated price in conformity 
with section 772(b) of the Act. We based CEP on the packed, delivered 
duty paid prices to an unaffiliated purchaser in the United States. We 
also made deductions for movement expenses in accordance with section 
772(c)(2)(A) of the Act; these included foreign inland freight, foreign 
inland insurance, foreign brokerage and handling, international 
freight, marine insurance, U.S. brokerage and handling and U.S. customs 
duties. In accordance with section 772(d)(1) of the Act, we deducted 
those selling expenses associated with economic activities occurring in 
the United States, including imputed credit expenses and indirect 
selling expenses. We also made an adjustment for profit in accordance 
with section 772(d)(3) of the Act.

Normal Value

A. Home Market Viability

    To determine whether there is a sufficient volume of sales in the 
home market to serve as a viable basis for calculating NV, we compared 
VMB's volume of home market sales of the foreign like product to the 
volume of U.S. sales of the subject merchandise, in accordance with 
section 773(a)(1)(B) of the Act. Because VMB's aggregate volume of home 
market sales of the foreign like product was greater than five percent 
of its aggregate volume of U.S. sales for the subject merchandise, we 
determined the home market was viable. See VMB's Section A 
Questionnaire Response at Attachment A-1, December 8, 2003.

B. Cost of Production Analysis

    Based on a cost allegation submitted by the petitioner pursuant to 
19 CFR 351.301(d)(2)(ii), we found reasonable grounds to believe or 
suspect that VMB made sales of the foreign like product at prices below 
the COP, as provided by section 773(b)(2)(A)(ii) of the Act. Therefore, 
pursuant to section 773(b)(1) of the Act, we initiated a COP 
investigation of sales by VMB. See Memorandum from Helen Kramer and 
Patrick Edwards, Case Analysts, to Richard O. Weible, Office Director, 
regarding Petitioner's Allegation of Sales Below the Cost of Production 
by V&M do Brasil, S.A., February 3, 2004, on file in the CRU.
    In accordance with section 773(b)(3) of the Act, we calculated the 
weighted-average COP for each model based on the sum of VMB's material 
and fabrication costs for the foreign like product, plus amounts for 
selling expenses, general and administrative expenses (G&A), interest 
expenses and packing costs. The Department relied on the COP data 
reported by VMB, except as noted below:
    1. We revised the total cost of manufacturing (TOTCOM) for a 
particular control number, which had a negative TOTCOM because of a 
minor aberration in VMB's accounting system. We assigned a TOTCOM of 
the standard costs for this control number.
    2. We revised VMB's reported TOTCOM to exclude normalization costs 
that were related to non-subject merchandise.
    3. We revised the G&A expense ratio to exclude the reversal of bad 
debt expense.
For further details regarding these adjustments, see the Department's 
``Cost of Production and Constructed Value Calculation Adjustments for 
the Preliminary Results V&M do Brasil, S.A.'' (COP Memorandum), dated 
August 30, 2004.
    We compared the weighted-average COP figures to the home market 
sales prices of the foreign like product as required under section 
773(b) of the Act, to determine whether these sales had been made at 
prices below COP. On a product-specific basis, we compared the COP to 
home market prices net of any applicable billing adjustments, indirect 
taxes (ICMS, IPI, COFINS and PIS), and any applicable movement charges.
    In determining whether to disregard home market sales made at 
prices below the COP, we examined, in accordance with sections 
773(b)(1)(A) and (B) of the Act, whether such sales were made in 
substantial quantities within an extended period of time, and whether 
such sales were made at prices which permitted the recovery of all 
costs within a reasonable period of time in the normal course of trade. 
Pursuant to section 773(b)(2)(C) of the Act, where less than 20 percent 
of VMB's home market sales of a given model were at prices below the 
COP, we did not disregard any below-cost sales of that model because we 
determined that the below-cost sales were not made within an extended 
period of time in ``substantial quantities.'' Where 20 percent or more 
of VMB's home market sales of a given model were at prices less than 
COP, we disregarded the below-cost sales because: (1) they were 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 our comparison of prices to the weighted-average COPs for the POR, 
they 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.
    Our cost test for VMB revealed that for home market sales of 
certain models, less than 20 percent of the sales of those models were 
at prices below the COP. We therefore retained all such sales in our 
analysis and used them as the basis for determining NV. Our cost test 
also indicated that for certain models, more than 20 percent of the 
home market sales of those models were sold at prices below COP within 
an extended period of time and were at prices which would not permit 
the recovery of all costs

[[Page 54129]]

within a reasonable period of time. Thus, in accordance with section 
773(b)(1) of the Act, we excluded these below-cost sales from our 
analysis and used the remaining above-cost sales as the basis for 
determining NV.

C. Price-to-Price Comparisons

    We matched all U.S. sales to NV. We calculated NV based on prices 
to unaffiliated customers. We adjusted gross unit price for billing 
adjustments, interest revenue and indirect taxes. We made deductions, 
where appropriate, for foreign inland freight, insurance and 
warehousing, pursuant to section 773(a)(6)(B) of the Act. In addition, 
we made adjustments for differences in cost attributable to differences 
in physical characteristics of the merchandise, pursuant to section 
773(a)(6)(C)(ii) of the Act and 19 CFR 351.411, as well as for 
differences in circumstances of sale (COS), in accordance with section 
773(a)(6)(C)(iii) of the Act and 19 CFR 351.410. We made COS 
adjustments for imputed credit expenses, warranty expenses, and 
commissions. Finally, we deducted home market packing costs and added 
U.S. packing costs in accordance with sections 773(a)(6)(A) and (B) of 
the Act.

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 export transaction. The NV LOT is 
that of the starting-price sales in the comparison market. For CEP, it 
is the level of the constructed sale from the exporter to the importer. 
We consider only the selling activities reflected in the U.S. price 
after the deduction of expenses incurred in the United States and CEP 
profit under section 772(d) of the Act. See Micron Technology Inc. v. 
United States, 243 F.3d 1301, 1314-1315 (Fed. Cir. 2001).
    To determine whether NV sales are at a different LOT than CEP 
sales, we examine stages in the marketing process and selling functions 
along the chain of distribution between the producer and the 
unaffiliated customer. We analyze whether different selling activities 
are performed, and whether any price differences (other than those for 
which other allowances are made under the Act) are shown to be wholly 
or partly due to a difference in LOT between the CEP and NV. Under 
section 773(a)(7)(A) of the Act, we make an upward or downward 
adjustment to NV for LOT if the difference in LOT involves the 
performance of different selling activities and is demonstrated to 
affect price comparability, based on a pattern of consistent price 
differences between sales at different LOTs in the country in which NV 
is determined. Finally, if the NV LOT is at a more advanced stage of 
distribution than the LOT of the CEP, but the data available do not 
provide an appropriate basis to determine a LOT adjustment, we reduce 
NV by the amount of indirect selling expenses incurred in the foreign 
comparison market on sales of the foreign like product, but by no more 
than the amount of the indirect selling expenses incurred for CEP 
sales. See section 773(a)(7)(B) of the Act (the CEP offset provision).
    In analyzing differences in selling functions, we determine whether 
the LOTs identified by the respondent are meaningful. See Antidumping 
Duties; Countervailing Duties, Final Rule, 62 FR 27296, 27371 (May 19, 
1997). If the claimed LOTs are the same, we expect that the functions 
and activities of the seller should be similar. Conversely, if a party 
claims that LOTs are different for different groups of sales, the 
functions and activities of the seller should be dissimilar. See 
Porcelain-on-Steel Cookware from Mexico: Final Results of 
Administrative Review, 65 FR 30068 (May 10, 2000). In the present 
review, VMB claimed that there was no LOT in the home market comparable 
to the LOT of the CEP sales, and requested a CEP offset. See VMB's 
Section A Questionnaire Response at page 15, December 8, 2003. 
[FEDREG][VOL]*[/VOL][NO]*[\NO][DATE]*[/DATE][NOTICES] 
[NOTICE][PREAMB][AGENCY]*[/AGENCY][SUBJECT]*[/SUBJECT]
    VMB claimed two LOTs in the home market based on distinct channels 
of distribution to two categories of customers: distributors and end-
users. We examined the reported selling functions and found that VMB's 
home market selling functions for all customers include sales 
forecasting, planning and promotion, order processing, general selling 
functions performed by VMB sales personnel, and provision for 
warranties. VMB also claimed packing as a selling function performed 
for all customers. However, did not consider this to be a selling 
function relevant to LOT. See VMB's Section A Questionnaire Response at 
page A-12 and Exhibit A-11, December 8, 2003. VMB further reported 
several selling functions unique to each channel of distribution: sales 
and marketing support and research are functions involved only in sales 
to distributors, while advertising in trade magazines and providing 
catalogues and after-sales services are provided solely to end-users. 
VMB also reported the selling function of inventory maintenance with 
regard to sales to one end-user customer. A small percentage of VMB 
sales are transferred to unaffiliated warehouses from which this 
customer regularly extracts merchandise on a just-in-time (JIT) basis, 
resulting in an inventory maintenance expense for VMB. See VMB's Second 
Supplemental Response at page 1, April 6, 2004. VMB also claimed the 
payment of commissions on sales to some end-users as a selling 
function. However, we make a separate COS adjustment for commissions 
and do not consider this as a selling function in our LOT analysis.
    We weighed the relative importance of each of VMB's reported 
selling functions in the home market. Advertising, a function provided 
solely to end-users, accounts for a negligible percentage of the value 
of total sales during the POR. We found no evidence on the record that 
VMB provided any pre- or post-sale technical assistance not covered 
under warranty expenses. At verification, VMB claimed for the first 
time that it provides substantial further processing services to end-
user customers, in effect acting as a service center. However, there is 
no evidence of this on the record. Based upon the above analysis, we 
preliminarily conclude that the selling functions for the reported 
channels of distribution are sufficiently similar to consider them as 
one LOT in the home market.
    Because VMB reported that all of its U.S. sales are CEP sales made 
through one channel of distribution to its U.S. affiliate, we 
preliminarily agree with VMB's claim that there is only one LOT in the 
U.S. market. We examined the claimed selling functions for VMB's CEP 
sales, i.e., the selling functions performed for the sale to VM Corp., 
which include sales forecasting, order processing, packing for shipment 
to the United States, technical assistance, and warranties. See VMB's 
Section A Questionnaire Response at page A-12 and Exhibit A-11, 
December 8, 2003. As stated above, we did not consider packing as a 
selling function, and there is no evidence on the record that VMB 
provided any technical assistance for its U.S. sales. VM Corp. handles 
the remaining selling functions of sales negotiations, planning, and 
customer service involved in the CEP sales to the unaffiliated customer 
in the United States.
    We compared VMB's selling functions in the home market with the 
selling functions for U.S. sales to its affiliate, VM Corp. We 
preliminarily find that VMB's selling functions for sales to the United 
States, namely, sales forecasting, order processing, delivery and 
warranties, are less numerous than VMB's selling functions for its home 
market sales. Further, in the home market, the chain of distribution is

[[Page 54130]]

further from the factory, e.g., many sales are made to distributors and 
may go through unaffiliated warehouses; in contrast, the CEP LOT is 
determined by the selling function performed at the point of sale to 
the affiliated importer and, thus, the CEP LOT is at a less advanced 
stage of distribution. We therefore examined whether a LOT adjustment 
or CEP offset may be appropriate. As we have preliminarily determined 
that VMB sold at only one LOT in the home market, there is no basis for 
determining a pattern of consistent price differences between LOTs. 
Moreover, we preliminarily find that there is no home market LOT 
comparable to the CEP LOT. Further, we do not have record information 
that would allow us to examine pricing patterns based on VMB's sales of 
non-subject merchandise, and there are no other respondents or other 
record information on which such an analysis could be based. 
Accordingly, because the data available do not provide an appropriate 
basis for making a LOT adjustment, but the LOT in the home market is at 
a more advanced stage of distribution than the LOT of the CEP 
transactions, we preliminarily determine that a CEP offset adjustment 
is appropriate, in accordance with section 773(a)(7)(B) of the Act.

Currency Conversion

    We made currency conversions into U.S. dollars, in accordance with 
section 773A(a) of the Act, based on the exchange rates in effect on 
the dates of the U.S. sales, as certified by the Federal Reserve Bank.

Preliminary Results of Review

    As a result of our review, we preliminarily determine the weighted-
average dumping margin for the period August 1, 2002, through July 31, 
2003, to be as follows:

------------------------------------------------------------------------
                                                                Margin
                   Manufacturer / Exporter                     (percent)
------------------------------------------------------------------------
V&M do Brasil, S.A..........................................        0.90
------------------------------------------------------------------------

    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). 
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 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. An interested 
party may request a hearing within 30 days of publication. See section 
351.310(c) of the Department's regulations. 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. The 
Department will issue the final results of these preliminary results, 
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.

Assessment Rates

    Pursuant to section 351.212(b), the Department calculates an 
assessment rate for each importer of the subject merchandise. Upon 
issuance of the final results of this review, if the importer-specific 
assessment rate calculated in the final results is above de minimis 
(i.e., at or above 0.50 percent), the Department will issue 
appraisement instructions directly to CBP to assess antidumping duties 
on appropriate entries by applying the assessment rate to the entered 
value of the merchandise. For assessment purposes, we calculated an 
importer-specific assessment rate for the subject merchandise by 
aggregating the dumping duties due for all U.S. sales to the importer 
and dividing the amount by the entered value. If these preliminary 
results are adopted in our final results of review, we will direct CBP 
to assess the resulting rate against the entered value of the subject 
merchandise on VMB's affiliated importer's entries during the POR.
    Furthermore, the following deposit requirements will be effective 
upon completion of the final results of this administrative review for 
all shipments of the subject merchandise 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 rate for the reviewed 
company will be the rate established in the final results of the 
administrative review (except that no deposit will be required if the 
rate is zero or de minimis); (2) 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 most recent 
period for the manufacturer of the merchandise; and (3) if neither the 
exporter nor the manufacturer is a firm covered in this review, any 
previous reviews, or the LTFV investigation, the cash deposit rate will 
be 124.95 percent, the ``all others'' rate established in the LTFV 
investigation. See Antidumping Duty Order and Amended Final 
Determination: Certain Small Diameter Seamless Carbon and Alloy Steel 
Standard, Line and Pressure Pipe from Brazil, 60 FR 39707 (August 3, 
1995).
    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: August 30, 2004.
James J. Jochum,
Assistant Secretary for Import Administration.
[FR Doc. E4-2084 Filed 9-3-04; 8:45 am]
BILLING CODE 3510-DS-S