[Federal Register Volume 82, Number 164 (Friday, August 25, 2017)]
[Notices]
[Pages 40556-40560]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-18046]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-570-814]


Carbon Steel Butt-Weld Pipe Fittings From the People's Republic 
of China: Initiation of Anti-Circumvention Inquiry on the Antidumping 
Duty Order

AGENCY: Enforcement and Compliance, International Trade Administration, 
Department of Commerce.
SUMMARY: In response to requests from Tube Forgings of America, Inc. 
(TFA), Mills Iron Works, Inc. (Mills), and Hackney Ladish, Inc. 
(Hackney), (collectively, the petitioners), the U.S. Department of 
Commerce (the Department) is initiating an anti-circumvention inquiry. 
In this inquiry, the Department will determine whether certain imports 
of carbon steel butt-weld pipe fittings (butt-weld pipe fittings) into 
the United States, exported from Malaysia, which were completed in 
Malaysia using finished or unfinished butt-weld pipe fittings sourced 
from the People's Republic of China (PRC), are circumventing the 
antidumping duty order on butt-weld pipe fittings from the PRC.

DATES: Applicable August 25, 2017.

FOR FURTHER INFORMATION CONTACT: Julia Hancock at (202) 482-1394, AD/
CVD Operations, Enforcement and Compliance, U.S. Department of 
Commerce, 1401 Constitution Avenue NW., Washington, DC 20230.

SUPPLEMENTARY INFORMATION: On July 6, 1992, the Department issued the 
Order on imports of butt-weld pipe fittings from the PRC.\1\ 
Additionally, on March 31, 1994, the Department issued the affirmative 
final determination finding that imports into the United States of pipe 
fittings that were finished in Thailand from unfinished pipe fittings 
produced in the PRC constituted circumvention of the Order within the 
meaning of section 781(b) of the Tariff Act of 1930, as amended (the 
Act).\2\ The Department applied this finding of circumvention to all 
imports of butt-weld pipe fittings from Thailand, regardless of 
manufacturer/producer, unless accompanied by a certification stating 
that such pipe fittings have not been produced from unfinished PRC pipe 
fittings.\3\
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    \1\ See Antidumping Duty Order and Amendment to the Final 
Determination of Sales at Less Than Fair Value; Certain Carbon Steel 
Butt-Weld Pipe Fittings from the People's Republic of China, 57 FR 
29702 (July 6, 1992) (Order).
    \2\ See Certain Carbon Steel Butt-Weld Pipe Fittings from the 
People's Republic of China; Affirmative Final Determination of 
Circumvention of Antidumping Duty Order, 59 FR 15155 (March 31, 
1994) (Final Determination of Circumvention 1994).
    \3\ Id., at 15158, 15159.
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    On May 22, 2017, the petitioners, pursuant to section 781(b) of the 
Act and 19 CFR 351.225(h), submitted a properly filed request for the 
Department to initiate an anti-circumvention inquiry to determine 
whether certain imports of butt-weld pipe fittings which were completed 
in Malaysia using finished or unfinished butt-weld pipe fittings 
sourced from the PRC are circumventing the Order.\4\ Specifically, the 
petitioners allege that certain imports of butt-weld pipe fittings 
sourced from unfinished or finished butt-weld pipe fittings from the 
PRC have undergone minor finishing processes, or were simply marked 
with ``Malaysia'' as the country of origin, in Malaysia, before export 
to the United States. The petitioners request that the Department treat 
all butt-weld pipe fittings imported from Malaysia, regardless of 
producer or exporter, as subject merchandise under the scope of the 
Order and impose cash deposit requirements for estimated antidumping 
duties on all imports of butt-weld pipe fittings from Malaysia.\5\ In 
the alternative to an anti-circumvention inquiry, the petitioners 
requested that we initiate and issue a preliminary scope ruling that 
certain imports of butt-weld pipe fittings which were completed in 
Malaysia using finished or unfinished butt-weld pipe fittings sourced 
from the PRC are covered by the scope of the Order, pursuant to 19 CFR 
351.225(k).\6\
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    \4\ See Letter from the petitioners to the Secretary of 
Commerce, ``Carbon Steel Butt-Weld Pipe Fittings from the People's 
Republic of China; Request for Circumvention Ruling to Section 
781(b) of the Tariff Act of 1930,'' dated May 22, 2017 (the 
petitioners' Request).
    \5\ See the petitioners' Request at 26-30.
    \6\ Id., at 28-9.
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    On May 26, 2017, we received comments objecting to the allegations 
made by the petitioners from Pantech Steel Industries SDN Ph.D. 
(Pantech).\7\ Also, on June 14, 2017, we received comments objecting to 
the allegations made by the petitioners from Solidbend Fittings & 
Flanges Sdn. Bhd. (Solidbend).\8\ On June 22, 2017, we received 
rebuttal comments from the petitioners regarding Solidbend's 
comments.\9\ Additionally, on July 21, 2017, we received comments 
objecting to the allegations made by the petitioners from Arah Dagang 
Sdn Bhd (Arah Dagang).\10\
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    \7\ See Letter from Pantech to the Secretary of Commerce, 
``Carbon Steel Butt-Weld Pipe Fittings from the People's Republic of 
China: Response to Request for Anti-Circumvention Inquiry,'' dated 
May 26, 2017).
    \8\ See Letter from Solidbend, ``Carbon Steel Butt-Weld Pipe 
Fittings from the People's Republic of China Anti-Circumvention 
Inquiry (Third-Country Assembly Malaysia),'' dated June 14, 2017.
    \9\ See Letter from the petitioners to the Secretary of 
Commerce, ``Carbon Steel Butt-Weld Pipe Fittings from the People's 
Republic of China; Anti-Circumvention Inquiry (Third Country 
Assembly, Malaysia); Petitioners' Response to Objections of 
Solidbend Fittings & Flanges,'' dated June 22, 2017 (the 
petitioners'' Objection Comments).
    \10\ See Letter from Arah Dagang to the Secretary of Commerce, 
``Carbon Steel Butt-Weld Pipe Fittings from China: Response to 
Request for Anti-Circumvention Inquiry,'' dated July 21, 2017.
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    On August 8, 2017, we requested a list of all known producers and 
exporters of butt-weld pipe fittings in Malaysia from the petitioners, 
and on August 10, 2017, the petitioners submitted their response.\11\ 
Additionally, on August 14,

[[Page 40557]]

2017, and August 18, 2017, we received additional comments from 
Solidbend and Pantech, respectively, opposing the initiation of an 
anti-circumvention inquiry based on the petitioners' circumvention 
allegation.12 13
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    \11\ See Letter from Paul Walker, Program Manager, to Tube 
Forgings of America, Mills Iron Works, Inc., and Hackney Ladish, 
Inc, ``Request for Producers and Exporters from Malaysia: Carbon 
Steel Butt-Weld Pipe Fittings from the People's Republic of China,'' 
dated August 8, 2017; and Letter from the petitioners to Secretary 
of Commerce, ``Carbon Steel Butt-Weld Pipe Fittings from The 
People's Republic of China; A-570-814; Anticircumvention Inquiry 
(Third Country Assembly, Malaysia); Petitioners' Response to the 
Department's August 8, 2017 Letter,'' dated August 10, 2017.
    \12\ See Letter from Solidbend, ``Carbon Steel Butt-Weld Pipe 
Fittings from the People's Republic of China Anti-Circumvention 
Inquiry (Third-Country Assembly Malaysia),'' dated August 14, 2017; 
and Letter from Pantech to the Secretary of Commerce, ``Carbon Steel 
Butt-Weld Pipe Fittings from the People's Republic of China: 
Response to Petitioners' August 10, 2017, Letter Identify,'' dated 
August 16, 2017.
    \13\ After consideration of the comments filed by interested 
parties in opposition to the initiation of the petitioners' 
circumvention allegation, the Department will address the arguments 
and factual information presented in the comments during the course 
of this anti-circumvention inquiry.
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Scope of the Order

    The merchandise covered by the order consists of certain carbon 
steel butt-weld pipe fittings, having an inside diameter of less than 
14 inches, imported in either finished or unfinished form. These formed 
or forged pipe fittings are used to join sections in piping systems 
where conditions require permanent, welded connections, as 
distinguished from fittings based on other fastening methods (e.g., 
threaded, grooved, or bolted fittings).\14\ Carbon steel butt-weld pipe 
fittings are currently classified under subheading 7307.93.30 of the 
HTSUS. The HTSUS subheading is provided for convenience and customs 
purposes. The written product description remains dispositive.
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    \14\ See Order.
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Determination To Not Initiate a Scope Proceeding

    As noted above, the petitioners have requested the Department 
initiate either a scope proceeding to clarify whether the scope of the 
Order on butt-weld pipe fittings includes the merchandise in question 
pursuant to 19 CFR 351.225(k) or an anti-circumvention proceeding 
pursuant to section 781(b) of the Act and 19 CFR 351.225(h). In the 
instant case, although the petitioners have provided substantial record 
evidence which may support the initiation of either type of inquiry, 
the Department has concluded that the issues raised by the parties are 
better addressed in the context of an anti-circumvention proceeding 
pursuant to section 781(b) of the Act and 19 CFR 351.225(h).\15\ As a 
result of this determination, the Department will not initiate a scope 
proceeding pursuant to 19 CFR 351.225(k) at this time.
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    \15\ As such, the remainder of this notice will focus on the 
statutory criteria for the initiation of an anti-circumvention 
inquiry, as defined in section 781(b) of the Act. See also the 
Analysis section of this notice, below, for the full discussion of 
the Department's determination to initiate an anti-circumvention 
inquiry pursuant to section 781(b) of the Act and 19 CFR 351.225(h).
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Merchandise Subject to the Anti-Circumvention Inquiry

    This anti-circumvention inquiry covers imports of butt-weld pipe 
fittings sourced from unfinished or finished butt-weld pipe fittings 
from the PRC that have undergone minor finishing processes, or were 
simply marked with ``Malaysia'' as the country of origin, in Malaysia, 
before export to the United States.

Initiation of Anti-Circumvention Inquiry

    Section 781(b)(1) of the Act provides that the Department may find 
circumvention of an antidumping or countervailing duty order when 
merchandise of the same class or kind subject to the order is completed 
or assembled in a foreign country other than the country to which the 
order applies. In conducting an anti-circumvention inquiry, under 
section 781(b)(1) of the Act, the Department will rely on the following 
criteria: (A) The merchandise imported into the United States is of the 
same class or kind as any merchandise produced in a foreign country 
that is the subject of an antidumping or countervailing duty order or 
finding; (B) before importation into the United States, such imported 
merchandise is completed or assembled in another foreign country from 
merchandise which is subject to the order or merchandise which is 
produced in the foreign country that is subject to the order; (C) the 
process of assembly or completion in the foreign country referred to in 
section (B) is minor or insignificant; (D) the value of the merchandise 
produced in the foreign country to which the antidumping or 
countervailing duty order applies is a significant portion of the total 
value of the merchandise exported to the United States; and (E) the 
administering authority determines that action is appropriate to 
prevent evasion of such order or finding. As discussed below, the 
petitioners provided evidence with respect to these criteria.

A. Merchandise of the Same Class or Kind

    The petitioners state that the butt-weld pipe fittings exported to 
the United States from Malaysia are the same class or kind as the butt-
weld pipe fittings covered by the Order.\16\ The petitioners assert 
that merchandise subject to the Order is comprised of butt-weld pipe 
fittings ``{i{time} mported in either finished or unfinished form.'' 
\17\ According to the petitioners, the language of the scope 
establishes that, once the fitting has been formed, either in finished 
or unfinished form, regardless of any finishing process occurring in 
Malaysia, such merchandise is subject to the Order.\18\ Additionally, 
the petitioners also provided affidavits, as well as an email from a 
Malaysian manufacturer, Globefit Manufacturing (Globefit), indicating 
that Malaysian exporters and producers are exporting merchandise 
identical to that which is subject to the Order.\19\ Since the 
merchandise being imported into the United States from Malaysia is 
physically identical to the subject merchandise from the PRC, pursuant 
to section 781(b)(1)(A) of the Act, the petitioners state that the 
butt-weld pipe fittings are of the same class or kind of merchandise as 
the butt-weld pipe fittings subject to the Order.
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    \16\ See the petitioners' Request at 9-10.
    \17\ Id., at 9.
    \18\ Id., at 10; Order.
    \19\ Id., at 10 and Attachments 1 and 2.
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B. Completion of Merchandise in a Foreign Country

    Section 781(b)(1)(B)(ii) of the Act requires the Department to 
determine whether, ``before importation into the United States, such 
imported merchandise is completed or assembled in another foreign 
country from merchandise which is produced in the foreign country with 
respect to which such order or finding applies.'' The petitioners 
presented evidence demonstrating how butt-weld pipe fittings are 
completed in Malaysia through finishing or simply marking with 
``Malaysia'' as the country-of-origin, from finished or unfinished 
butt-weld pipe fittings manufactured and imported from the PRC.\20\ 
Additionally, the petitioners provided evidence that there is very 
little production of butt-weld pipe fittings in Malaysia and that most 
Malaysian producers have converted their manufacturing operations to 
trading warehouses focusing on exports to the United States by sourcing 
butt-weld pipe fittings from the PRC, Taiwan, and South Korea.\21\ The 
petitioners submitted evidence that the capacity to produce butt-weld 
pipe fittings significantly decreased and, thus, the few remaining 
Malaysian manufacturers must use imported finished or unfinished butt-
weld pipe

[[Page 40558]]

fittings from the PRC, which then undergo only minor finishing or are 
simply stamped with ``Malaysia'' as the country-of-origin.\22\ As 
support, the petitioners provided an affidavit and email documenting 
that a Malaysian manufacturer, Globefit, had arrangements to purchase 
unfinished fittings with a PRC butt-weld pipe fitting manufacturer and 
finish the fittings, which would be stamped with ``Malaysia'' as the 
country-of-origin along with a certificate, for export to the United 
States with the purpose of evading the Order.\23\
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    \20\ Id., at 11, 12, and 15 and Attachments 1 and 2.
    \21\ Id.
    \22\ Id.
    \23\ Id.
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C. Minor or Insignificant Process

    Under section 781(b)(2) of the Act, the Department is required to 
consider five factors to determine whether the process of assembly or 
completion is minor or insignificant. The petitioners allege that the 
production of butt-weld pipe fittings in the PRC, which subsequently 
undergoes only minor finishing processes, or are simply marked with 
``Malaysia'' as the country-of-origin, comprises most the value 
associated with the merchandise imported from Malaysia into the United 
States, and that the processing occurring in Malaysia adds relatively 
little to the overall value of the finished butt-weld pipe 
fittings.\24\
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    \24\ Id., at 17.
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(1) Level of Investment
    The petitioners do not have access to the actual level of 
investment for manufacturing butt-weld pipe fittings in Malaysia.\25\ 
Accordingly, the petitioners provided an affidavit indicating that 
Malaysian manufacturers of butt-weld pipe fittings have switched their 
operations from manufacturing to import/export trading and, thus, the 
level of investment to manufacture butt-weld pipe fittings in Malaysia 
declined and is minimal.\26\ In support of their argument that the 
level of investment in Malaysia is minimal, the petitioners provided an 
affidavit from TFA asserting that the cost in equipment to cut, heat, 
and form seamless pipe into rough fittings is substantially higher than 
the cost in equipment necessary to only perform the finishing steps for 
the finished butt-weld pipe fittings, which comprises approximately 
less than twenty percent of the total cost.\27\ Moreover, the 
petitioners submitted evidence that the level of investment to merely 
stamp the butt-weld pipe fittings with ``Malaysia'' as the country-of-
origin accounts for relatively little of the total cost of equipment 
needed to complete the full integrated production of a finished butt-
weld pipe fitting.\28\ While the investment costs of a U.S. producer 
are not identical to those of a PRC or Malaysian producer, the 
petitioners argue, based on their own experience, that the investment 
costs of equipment for each production step would be the same relative 
to the total equipment cost regardless of the location of the 
producer.\29\
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    \25\ Id.
    \26\ Id., at 17 and Attachment 2.
    \27\ Id., at 18 and Attachment 3.
    \28\ Id.
    \29\ Id.
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(2) Level of Research and Development
    The petitioners assert that butt-weld pipe fittings are a 
technologically mature product and that there has been no significant 
advancement in the product or its production for decades.\30\ As such, 
the level of research and development to produce butt-weld pipe 
fittings is minimal to non-existent.\31\
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    \30\ Id., at 19 (citing to Carbon Steel Butt-Weld Pipe Fittings 
from Brazil, China, Japan, Taiwan, and Thailand, Inv. Nos. 731-TA-
308-310 and 520-521, USITC Pub. 4628 (August 2016) (Fourth Sunset 
Review) at I-3).
    \31\ Id.
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(3) Nature of Production Process in Malaysia
    According to the petitioners, the additional processing undertaken 
by Malaysian producers of butt-weld pipe fittings is minimal.\32\ 
Regardless of whether butt-weld pipe fittings exported from the PRC to 
Malaysia are in finished or unfinished forms, the production steps 
performed are minor, according to the petitioners.\33\ Conversely, the 
manufacturing process to produce butt-weld pipe fittings in the PRC 
from the beginning of the production process is much more complex. 
Specifically, the manufacturing process for butt-weld pipe fittings 
consists of three production phases: (1) The seamless carbon steel pipe 
is transformed into a rough shape of an elbow, tee, etc., through a 
cold- or hot-forming process that produces the rough pipe fitting; (2) 
then, the rough pipe fitting goes through a reforming or sizing process 
to ensure that the fitting will match the pipe to which it is to be 
welded; and (3) the final stage that produces the finished butt-weld 
pipe fitting includes shot blasting or cleaning, machine beveling of 
the fitting, boring and tapering its interior, grinding, die stamping, 
and painting.\34\ In contrast, the processing of unfinished forms into 
a finished butt-weld pipe fitting, which is performed in Malaysia, only 
involves the third-step of the production process for butt-weld pipe 
fittings.\35\ As a consequence, because the production process is so 
minimal in Malaysia and unfinished fittings are of the same class or 
kind of merchandise as the finished butt-weld pipe fittings, the 
petitioners maintain that the finished butt-weld pipe fittings produced 
in Malaysia from finished or unfinished butt-weld pipe fittings 
exported from the PRC are subject to the Order.
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    \32\ Id., at 19.
    \33\ Id.
    \34\ Id., at 16 (citing to Fourth Sunset Review at I-3 and I-6).
    \35\ Id., at 19 and Attachment 2.
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(4) Extent of Production in Malaysia
    The petitioners argue that production facilities in Malaysia are 
more limited compared to facilities in the PRC.\36\ This is because 
Malaysian manufacturers primarily have shifted their business model 
from manufacturing to trading and, thus, the production capacity in 
Malaysia is significantly smaller than it may have been in prior years, 
as identified in the petitioners' submitted affidavit.\37\ Moreover, 
the petitioners cite information indicating that the production 
facilities in Malaysia for butt-weld pipe fittings are limited to 
finishing operations, and, in some instances, limited to only stamping 
butt-weld pipe fittings with a ``Malaysia'' country-of-origin mark.\38\
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    \36\ Id. at 20.
    \37\ Id., at 20 and Attachment 2.
    \38\ Id.
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(5) Value of Processing in Malaysia
    The petitioners assert that the production of butt-weld pipe 
fittings in the PRC accounts for a large percentage of the total value 
of the finished butt-weld pipe fittings that are produced in 
Malaysia.\39\ Using information provided in an affidavit from TFA, the 
petitioners posit that the price of unfinished or finished butt-weld 
pipe fittings is between approximately 80 percent to 100 percent of the 
price of finished butt-weld pipe fittings.\40\ Thus, the value-added in 
Malaysia by either just finishing the unfinished butt-weld pipe 
fittings or merely adding the ``Malaysia'' country-of-origin marking 
ranges from an estimated 15 percent to a considerably lesser value 
added. Thus, the petitioners maintain that the completion activities in 
Malaysia add very little to the finished butt-weld pipe fittings 
exported to the United States from butt-weld pipe fittings sourced from 
the PRC.\41\ This conclusion is comparable to the little amount of 
value added by finishing operations

[[Page 40559]]

performed in Thailand on butt-weld pipe fittings sourced from the PRC 
in the Final Determination of Circumvention 1994.\42\
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    \39\ Id., at 21 and Attachment 3.
    \40\ Id.
    \41\ Id.
    \42\ Id.
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D. Value of Merchandise Produced in the PRC

    The petitioners argue that the evidence, as noted above, in their 
anti-circumvention request clearly supports their position that the 
value of unfinished and finished butt-weld pipe fittings produced in 
the PRC, and then finished or marked with a Malaysian country-origin 
mark, represents a significant portion of the total value of the 
merchandise exported to the United States, as measured by a percentage 
of the total cost of manufacture.\43\
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    \43\ Id., at 22.
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E. Additional Factors To Consider in Determining Whether Inquiry in 
Warranted

    Section 781(b)(3) of the Act directs the Department to consider 
additional factors in determining whether to include merchandise 
assembled or completed in a foreign country within the scope of the 
Order, such as ``(A) the pattern of trade, including sourcing patterns, 
(B) whether the manufacturer or exporter of the merchandise . . . is 
affiliated with the person who uses the merchandise . . . to assemble 
or complete in the foreign country the merchandise that is subsequently 
imported in the United States, and (C) whether imports into the foreign 
country of the merchandise . . . have increased after initiation of the 
investigation which resulted in the issuance of such order or 
finding.''
(1) Pattern of Trade
    The petitioners state that the record evidence demonstrates that, 
since the imposition of the Order, a pattern of trade illustrates 
circumvention between the levels of imports for butt-weld pipe fittings 
between the PRC, Malaysia, and the United States.\44\ Publicly-
available import data show that PRC-origin imports of butt-weld pipe 
fittings into Malaysia increased significantly in recent years, and a 
steady increase in exports from Malaysia to the United States since the 
imposition of the Order.\45\ Also, between 2010 and 2015, publicly-
available import data show a marked increase of PRC-origin butt-weld 
pipe fittings into Malaysia coincides with a decline in volume of 
exports from the PRC to the United States.\46\ Additionally, the 
petitioners submit that the record evidence shows that, while butt-weld 
pipe fittings exported from the PRC to the United States declined 
between 2010 and 2015, butt-weld pipe fittings exported from Malaysia 
to the United States increased steadily at the same time.\47\ No other 
factual information on the record contradicts this claim.
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    \44\ Id. at 23.
    \45\ Id., at 23 and Attachment 4. The petitioners stated that 
all imports of butt-weld pipe fittings from the PRC into Malaysia, 
the PRC into the United States, and Malaysia into the United States 
declined in 2016, but this was due to the substantial decline in oil 
prices globally and this decline is not an indication that 
circumvention of the Order through Malaysia ceased, which is further 
supported by the Fourth Sunset Review. Id., at 24-25 at footnote 59; 
Carbon Steel Butt-Weld Pipe Fittings from Brazil, China, Japan, 
Taiwan, and Thailand, Inv. Nos. 731-TA-308-310 and 520-21, USITC 
Pub. 4628 (August 2016) (Fourth Sunset Review) at 6 and I-6.
    \46\ See the petitioners' Request at 24-25 and Attachment 4.
    \47\ Id.
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(2) Affiliation
    The petitioners provided no information regarding the affiliation 
between PRC producers of unfinished and finished butt-weld pipe 
fittings, and Malaysian producers of butt-weld pipe fittings that 
undergo only minor finishing processes, or are simply marked with 
``Malaysia'' as the country-of-origin.
(3) Subsequent Import Volume
    The petitioners presented evidence indicating that shipments of 
butt-weld pipe fittings from the PRC to Malaysia steadily increased 
since imposition of the Order, whereas shipments of butt-weld pipe 
fittings from the PRC to the United States steadily declined.\48\ No 
other factual information contradicts this claim.
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    \48\ Id., at 25-6 and Attachment 4.
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Analysis of the Allegation

    Based on our analysis of the petitioners' anti-circumvention 
inquiry allegation, the Department determines that the petitioners have 
satisfied the criteria under section 781(b)(1) of the Act to warrant 
the initiation of an anti-circumvention inquiry of the Order on butt-
weld pipe fittings from the PRC.
    With regard to whether the merchandise from Malaysia is of the same 
class or kind as the merchandise produced in the PRC, the petitioners 
presented information to the Department indicating that, pursuant to 
section 781(b)(1)(A) of the Act, the merchandise being produced in and/
or exported from Malaysia may be of the same class or kind as butt-weld 
pipe fittings produced in the PRC, which is subject to the Order.\49\ 
Consequently, the Department finds that the petitioners provided 
sufficient information in their request regarding the class or kind of 
merchandise to support the initiation of this anti-circumvention 
inquiry.
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    \49\ Id. at 9-10.
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    With regard to completion or assembly of merchandise in a foreign 
country, pursuant to section 781(b)(1)(B) of the Act, the petitioners 
also presented information to the Department indicating that the butt-
weld pipe fittings exported from Malaysia to the United States are 
produced in Malaysia using butt-weld pipe fittings from the PRC, which 
account for a significant portion of the total costs related to the 
production of butt-weld pipe fittings.\50\ We find that the information 
presented by the petitioners regarding this criterion supports their 
request to initiate this anti-circumvention inquiry.
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    \50\ Id., at 21-2 and Attachment 3.
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    The Department finds that the petitioners sufficiently addressed 
the factors described in section 781(b)(1)(C) and 781(b)(2) of the Act 
regarding whether the assembly or completion of butt-weld pipe fittings 
in Malaysia is minor or insignificant. In particular, the petitioners' 
submission asserts that: (1) The level of investment of butt-weld pipe 
fittings is minimal in Malaysia; (2) research and development is not 
taking place in Malaysia; (3) the production process involves only 
finishing or simply stamping with a Malaysian country-of-origin mark on 
butt-weld pipe fittings from a country subject to the Order; (4) the 
production facilities in Malaysia are more limited compared to 
facilities in the PRC; and (5) the value of the processing performed in 
Malaysia is minimal, as the production of butt-weld pipe fittings in 
the PRC accounts for approximately 80 percent to 100 percent of the 
value of finished butt-weld pipe fittings.\51\
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    \51\ See discussion of these five factors above.
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    With respect to the value of the merchandise produced in the PRC, 
pursuant to section 78l(b)(l)(D) of the Act, the petitioners relied on 
one of their member's information and arguments in the ``minor or 
insignificant process'' portion of their anti-circumvention allegation 
to indicate that the value of the unfinished or finished butt-weld pipe 
fittings, produced in the PRC, may be significant relative to the total 
value of the finished butt-weld pipe fittings exported from Malaysia to 
the United States.\52\ We find that this information adequately meets 
the requirements of this factor, as discussed above, for the purposes 
of

[[Page 40560]]

initiating this anticircumvention inquiry.
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    \52\ See the petitioners' Request at 10-23 and Attachments 1, 2, 
and 3.
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    With respect to the additional factors listed under section 
781(b)(3) of the Act, we find that the petitioners presented evidence 
indicating that shipments of butt-weld pipe fittings from Malaysia to 
the United States increased since the imposition of the Order and that 
shipments of butt-weld pipe fittings from the PRC to Malaysia also 
increased since the Order took effect, further supporting initiation of 
this anti-circumvention inquiry.\53\
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    \53\ See the petitioners' Request at 23-5 and Attachment 4.
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    Accordingly, we are initiating a formal anti-circumvention inquiry 
concerning the Order on butt-weld pipe fittings from the PRC, pursuant 
to section 781(b) of the Act.
    In connection with this anti-circumvention inquiry, in order to 
determine: (1) The extent to which PRC-sourced unfinished or finished 
butt-weld pipe fittings is further processed into butt-weld pipe 
fittings in Malaysia before shipment to the United States; (2) the 
extent to which a country-wide finding applicable to all exports might 
be warranted, as alleged by the petitioners; and (3) whether the 
process of turning PRC-sourced unfinished or finished butt-weld pipe 
fittings into finished butt-weld pipe fittings processed in Malaysia is 
minor or insignificant, the Department will issue questionnaires to 
Malaysian producers and exporters of butt-weld pipe fittings to the 
United States. The Department will issue questionnaires to solicit 
information from the Malaysian producers and exporters concerning their 
shipments of butt-weld pipe fittings to the United States and the 
origin of the imported unfinished or finished butt-weld pipe fittings 
being processed into butt-weld pipe fittings. Companies failing to 
respond completely and timely to the Department's questionnaire may be 
deemed uncooperative and an adverse inference may be applied in 
determining whether such companies are circumventing the Order. See 
section 776 of the Act.
    Finally, while we believe sufficient factual information has been 
submitted by the petitioners supporting their request for an inquiry, 
we do not find that the record supports the simultaneous issuance of a 
preliminary ruling. Such inquiries are by their nature complicated and 
require additional information regarding production in both the country 
subject to the order and the third-country completing the product. As 
noted above, the Department intends to request additional information 
regarding the statutory criteria to determine whether shipments of 
butt-weld pipe fittings from Malaysia are circumventing the Order on 
butt-weld pipe fittings from the PRC. Thus, further development of the 
record is required before a preliminary ruling can be issued.

Notification to Interested Parties

    In accordance with 19 CFR 351.225(e), the Department finds that the 
issue of whether a product is included within the scope of any order 
cannot be determined based solely upon the application and the 
descriptions of the merchandise. Accordingly, the Department will 
notify by mail all parties on the Department's scope service list of 
the initiation of anti-circumvention inquiries. Additionally, in 
accordance with 19 CFR 351.225(f)(1)(i) and (ii), in this notice of 
initiation issued under 19 CFR 351.225(e), we included a description of 
the product that is the subject of this anti-circumvention inquiry 
(i.e., butt-weld pipe fittings that contain the characteristics as 
provided in the scope of the Order), and an explanation of the reasons 
for the Department's decision to initiate this anti-circumvention 
inquiry, as provided above.
    In accordance with 19 CFR 351.225(1)(2), if the Department issues 
an affirmative preliminary determination, we will then instruct U.S. 
Customs and Border Protection to suspend liquidation and require cash 
deposits of estimated antidumping duties, at the applicable rates, for 
each unliquidated entry of the merchandise at issue, entered or 
withdrawn from warehouse for consumption on or after the date of 
initiation of the inquiry. The Department will establish a schedule for 
questionnaires and comments for this inquiry. In accordance with 
section 781(f) of the Act and 19 CFR 351.225(f)(5), the Department 
intends to issue its final determination within 300 days of the date of 
publication of this notice.
    This notice is published in accordance with 19 CFR 351.225(f).

    Dated: August 21, 2017.
Gary Taverman,
Deputy Assistant Secretary for Antidumping and Countervailing Duty 
Operations, performing the non-exclusive functions and duties of the 
Assistant Secretary for Enforcement and Compliance.
[FR Doc. 2017-18046 Filed 8-24-17; 8:45 am]
 BILLING CODE 3510-DS-P