[Federal Register Volume 59, Number 1 (Monday, January 3, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 93-32066]
[[Page Unknown]]
[Federal Register: January 3, 1994]
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DEPARTMENT OF COMMERCE
[A-570-814]
Certain Carbon Steel Butt-Weld Pipe Fittings From the People's
Republic of China; Affirmative Preliminary Determination of
Circumvention of Antidumping Duty Order
AGENCY: International Trade Administration/Import Administration,
Department of Commerce.
ACTION: Notice of affirmative preliminary determination of
circumvention of antidumping duty order.
SUMMARY: On July 21, 1993, the Department of Commerce received an
application for a circumvention inquiry of the antidumping duty order
on certain carbon steel butt-weld pipe fittings from the People's
Republic of China. Pursuant to that application, the Department of
Commerce initiated a circumvention inquiry on September 2, 1993, which
was published in the Federal Register on September 13, 1993 (58 FR
47859).
We preliminarily determine that imports into the United States of
pipe fittings that were finished in Thailand from unfinished pipe
fittings produced in the People's Republic of China constitute
circumvention of the antidumping duty order on certain carbon steel
butt-weld pipe fittings from the People's Republic of China, within the
meaning of section 781(b) of the Tariff Act of 1930, as amended.
Interested parties are invited to comment on this preliminary
determination.
EFFECTIVE DATE: January 3, 1994.
FOR FURTHER INFORMATION CONTACT: Karin Price, Donald Little, or Maureen
Flannery, Office of Antidumping Compliance, International Trade
Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-
4733.
SUPPLEMENTARY INFORMATION:
Background
On July 6, 1992, the Department of Commerce (the Department)
published in the Federal Register (57 FR 29702) the antidumping duty
order on certain carbon steel butt-weld pipe fittings (pipe fittings)
from the People's Republic of China (PRC). On July 21, 1993, the
petitioner, the U.S. Fittings Group, alleged that the antidumping duty
order on pipe fittings from the PRC was being circumvented, and
requested that the Department investigate the matter. The U.S. Fittings
Group is an ad hoc trade association of domestic producers of pipe
fittings; its members currently consist of Hackney, Inc.; Ladish
Company, Inc.; L.A. Boiler Works, Inc.; Mills Iron Works, Inc.; Steel
Forgings, Inc.; and Tube Forgings of America, Inc.
The petitioner alleged that the antidumping duty order on pipe
fittings from the PRC is being circumvented through the shipment of
unfinished pipe fittings produced in the PRC to Awaji Sangyo (Thailand)
Company, Ltd. (AST), located in Thailand, which then finishes the pipe
fittings and exports them to the United States free of antidumping
duties. AST was excluded from the antidumping duty order on pipe
fittings from Thailand (57 FR 29702, July 6, 1992) due to the finding
of a de minimis margin for AST in the less-than-fair-value (LTFV)
investigation of that case.
The petitioner requested, in accordance with section 781(b) of the
Tariff Act of 1930, as amended, (the Tariff Act), that the Department
conduct a circumvention inquiry. On September 2, 1993, pursuant to the
petitioner's application, the Department initiated a circumvention
inquiry in this matter. The notice of initiation of circumvention
inquiry of the antidumping duty order on pipe fittings from the PRC was
published in the Federal Register on September 13, 1993 (58 FR 47859).
On September 24, 1993 and September 28, 1993, respectively, the
Department issued circumvention questionnaires to AST, and to the
Ministry of Foreign Trade and Economic Cooperation (MFTEC) in the PRC
on behalf of all manufacturers and sellers of pipe fittings in the PRC.
AST responded to Part 1 of the questionnaire on October 4, 1993 and to
Part 2 of the questionnaire on November 8, 1993. Mitsui & Company
(Mitsui), on behalf of Shenzhen Fittings Manufacturing Factory
(Shenzhen Factory), the Chinese supplier of unfinished pipe fittings to
AST, responded to Part 1 of the questionnaire on October 15, 1993 and
to Part 2 of the questionnaire on November 8, 1993. Shenzhen Factory is
a limited partnership, in which Mitsui is the general partner. Neither
MFTEC nor other Chinese manufacturers or sellers of the subject
merchandise responded to the Department's questionnaire. The Department
issued supplemental questionnaires to AST and to Mitsui on November 12,
1993 and November 16, 1993, respectively. The Department received AST's
response to its supplemental questionnaire on November 23, 1993, and
Mitsui's response to its supplemental questionnaire on November 29,
1993. The Department issued additional supplemental questionnaires to
AST and Mitsui on December 3, 1993; responses were received on December
10, 1993.
The Department also issued a circumvention questionnaire to Thai
Benkan Company, Ltd. (Thai Benkan), a Thai importer of unfinished tees
manufactured by Shenzhen Factory, on November 8, 1993. The Department
received a response from Thai Benkan on November 30, 1993, which was
revised on December 2, 1993. Thai Benkan stated in its response that it
has made no shipments of pipe fittings to the United States after
November 1991.
The Department also issued a questionnaire to Silbo Industries,
Inc. (Silbo), a U.S. importer of subject merchandise from Thailand and
the PRC, on November 16, 1993. Silbo responded to part of the
questionnaire on December 8, 1993. The remaining portion of its
response is due to the Department on January 4, 1994. Additionally, the
Department sent a questionnaire to another company whose name is
proprietary. However, the response was untimely and was returned and
not considered for our determination.
Scope of the Antidumping Duty Order
Imports covered by the antidumping duty order are shipments of
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). Carbon steel butt-weld pipe
fittings are currently classified under subheading 7307.93.30 of the
Harmonized Tariff Schedule (HTS). Although the HTS subheading is
provided for convenience and Customs purposes, our written description
of the scope of this order remains dispositive.
Scope of the Anti-Circumvention Inquiry
The products subject to this circumvention inquiry are pipe
fittings, as described above in the ``Scope of the Antidumping Duty
Order'' section, which are exported in unfinished form from the PRC to
Thailand, where some finishing is performed. We requested data for the
period January 1, 1991 through August 31, 1993, except for pattern of
trade data, which were requested for the period January 1, 1988 through
August 31, 1993.
Nature of the Anti-Circumvention Inquiry
Section 781(b)(1) of the Tariff Act provides that if:
(A) 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 duty order,
(B) Before importation into the United States, such imported
merchandise is completed or assembled in another foreign country from
merchandise which (i) is subject to such order, or (ii) is produced in
the foreign country with respect to which such order applies,
(C) The difference between the value of such imported merchandise
and the value of the merchandise completed or assembled in another
foreign country is small, and
(D) The administering authority determines that action is
appropriate under this paragraph to prevent evasion of such order,
the Department, after taking into account any advice provided by the
U.S. International Trade Commission (ITC) under section 781(e), may
include such imported merchandise within the scope of such order.
In determining whether to include merchandise assembled or
completed in a foreign country within an order, section 781(b)(2) of
the Tariff Act directs the Department to consider such other factors as
(1) the pattern of trade, (2) whether the manufacturer or exporter of
the merchandise produced in the country to which the order applies is
related to the entity who uses such merchandise to assemble or complete
in the foreign country the merchandise that is subsequently imported
into the United States, and (3) whether imports into the foreign
country of the merchandise produced in the country to which the order
applies have increased after issuance of that order.
I. Statutory Criteria
(1) Class or Kind of Merchandise
In this inquiry, the merchandise completed in Thailand and exported
to the United States is pipe fittings having an inside diameter of less
than 14 inches. Thus, the product exported to the United States is of
the same class or kind of merchandise as the product subject to the
antidumping duty order.
(2) Merchandise Imported Into the United States Completed From
Merchandise Subject to an Order
The pipe fittings finished in Thailand and exported to the United
States were completed from unfinished ``as-formed'' pipe fittings
manufactured in the PRC. Therefore, the merchandise exported to the
United States is completed from merchandise subject to the antidumping
duty order and produced in the country with respect to which the
antidumping duty order applies.
(3) Difference in Value
In this anti-circumvention inquiry, we based our analysis of the
difference in value on both a quantitative analysis of the value of the
finishing process in Thailand, and a qualitative analysis of the nature
of the processing performed in Thailand and the level of investment in
Thailand. Such an analysis is consistent with our analysis in previous
anti-circumvention inquiries. See, e.g., Granular
Polytetrafluoroethylene Resin from Italy; Final Affirmative
Determination of Circumvention of Antidumping Duty Order (58 FR 26100,
April 30, 1993).
(a) Value of the Completed Merchandise. We used the selling price
of the finished tees sold by AST to the United States on a model-
specific, per kilogram basis to represent the value of the finished
pipe fittings sold to the United States, as reported in AST's
questionnaire response. The terms of sale for these sales were CIF U.S.
port duty unpaid.
(b) Value of Thai Completion. In order to determine the value of
the Thai completion, we used the cost of manufacturing at AST's factory
which finished the tees from unfinished Chinese tees for each month
during the period January 1, 1991 through August 31, 1993 in which the
finishing occurred, as provided by AST. We allocated selling, general,
and administrative expenses and profit from AST's financial statements,
as well as an amount of Awaji Sangyo K.K. of Japan's export selling
expenses as provided in AST's November 23, 1993 response, to AST's cost
of manufacturing.
We used the value of the Thai completion, as provided by AST,
because it was the most complete, verifiable information available.
Complete factors data were unavailable for constructing the cost of the
unfinished Chinese tees. For example, Shenzhen Factory was not able to
provide the consumption rates of raw material inputs, other than steel
pipe, used in manufacturing the unfinished tees or the number of labor
hours used in the production process. Public data on electricity
consumption for producing unfinished tees were also not available.
We calculated the difference in value percentage by dividing the
value added in Thailand by the value of the completed merchandise. We
preliminarily determine that the difference in value is 15 percent of
the value of the completed merchandise. (Since the precise figure is
business proprietary, the stated percentage is within a range of plus
or minus 10 percent.) See December 22, 1993 proprietary analysis
memorandum from case analyst to the File. In order to determine whether
15 percent is ``small'' within the meaning of the Tariff Act, we
examined the nature of the processing performed in Thailand and the
level of investment in Thailand.
Nature of Processing
According to the description of the manufacturing process provided
by the ITC in its final affirmative determination of injury concerning
imports of pipe fittings from the PRC and Thailand (see Certain Carbon
Steel Butt-Weld Pipe Fittings from China and Thailand; Determinations
of the Commission in Investigations Nos. 731-TA-520 and 521 (Final)
Under the Tariff Act of 1930, Together With the Information Obtained in
the Investigations, USITC Publication 2528, June 1992 at I-7 through I-
10), the cold process is the most efficient process for forming tees
which are less than 12 inches in diameter. In the cold process, the raw
material pipe is first cut to length, and the section is enclosed in a
die that matches the shape and size of the finished tee within a press.
The die is then closed, plugs are used to seal the ends, and a fluid,
such as water or a light oil, forces under pressure the metal into the
shape of the die. This process produces the unfinished tee. Finishing
steps re-round, resize, and anneal the unfinished tee.
The finishing steps involved in the production of pipe fittings
include one or more of the following: shot blasting, machine beveling,
boring and tapering, grinding, die stamping, inspection, and painting.
According to the ITC, beveling, boring, and tapering add an estimated
11-20 percent of value, and the remaining finishing operations add an
estimated 3-9 percent of value.
Mitsui's response indicates that Shenzhen Factory produces
unfinished tees using a cold-forming method. After Shenzhen Factory
cuts the raw material carbon steel pipe to a pre-determined length and
lubricates the pipe on the exterior surface, it cold forms the pipe
using the ``Bulge Method,'' a process in which a hydraulic press is
used.
AST receives the unfinished tees in this as-formed condition, with
the bulging head closed. AST then cuts the bulging head off the tee,
heat treats the ``decapped'' as-formed tee in order to prevent the
steel material from becoming brittle from the stress of cold-forming,
shot blasts the tees to remove heat scales from the surface, and bevels
and precision machines the ends of the tees. These processes are then
followed by cleaning, coating with an oxidizing agent or paint, and
marking. AST does not provide any additional materials to the
unfinished pipe fitting.
Based on the above description of the manufacturing process for
tees and other pipe fittings, we preliminarily determine that the
finishing operations performed by AST, or by any other Thai company, to
finish pipe fittings are of minor value when compared to the production
of the unfinished pipe fittings.
Level of Investment
AST has stated that it began in 1991 its tees conversion operation,
i.e., the conversion of unfinished tees into finished tees, pursuant to
a formal corporate decision made in the prior year. This was an interim
step with the goal of producing tees in an integrated process, from the
raw material pipe, by the end of 1993. The level of investment
undertaken by AST, or which will be undertaken by AST, toward this goal
indicates that the plant and equipment required to produce the as-
formed tee from the raw material pipe is substantial as compared to
that required for the finishing operations. See December 22, 1993
proprietary analysis memorandum from case analyst to the File.
We have determined that the finishing operations performed to
finish unfinished tees provide limited value to the finished tee
relative to the production process used to manufacture the unfinished
tee. Moreover, the level of investment required to produce unfinished
tees is significant when compared to that required to finish the
unfinished tee. Accordingly, based on the qualitative factors discussed
above, we preliminarily determine that the calculated difference in
value percentage is ``small'' within the meaning of section 781(b) of
the Tariff Act.
(4) Action is Appropriate to Prevent Evasion of the Order We
preliminarily determine that action is appropriate to prevent the
circumvention of the antidumping duty order on pipe fittings from the
PRC. The Department has no other means to ensure that entries of
Chinese pipe fittings finished by AST are suspended and any appropriate
duties ultimately collected thereon, or to ensure that proper cash
deposits are collected on entries of Chinese pipe fittings finished by
other companies in Thailand.
II. Factors
(1) Pattern of Trade
To evaluate the pattern of trade factors in this case, we examined
the timing and quantities of exports of pipe fittings from AST to the
United States during the period January 1, 1988 through August 1, 1993.
AST began exporting finished tees to the United States in 1991. Data on
AST's exports of finished tees to the United States show a significant
increase in the volume of these exports subsequent to the issuance of
the antidumping duty order on pipe fittings from the PRC. We also
examined data on Shenzhen Factory's exports to the United States for
the period January 1, 1991 through August 31, 1993. These data indicate
that the volume of Shenzhen Factory's exports to the United States
decreased significantly subsequent to the issuance of the antidumping
duty order on pipe fittings from the PRC.
Therefore, this factor indicates that circumvention may have been
occurring during the period. See December 22, 1993 analysis memorandum
from case analyst to the File.
Because an antidumping duty order on pipe fittings from Thailand
was issued by the Department at the same time as the order on pipe
fittings from the PRC, any comparison of the quantity of exports from
Thailand to the United States with the quantity of exports from the PRC
to the United States prior to and subsequent to the issuance of the
orders would be meaningless. Therefore, we have not included such a
comparison in our analysis.
(2) Relationship
Generally, we consider circumvention to be more likely when the
manufacturer of the covered merchandise is related to the third country
assembler. Our inquiry indicates that the relationship between AST, the
third country assembler and exporter of the finished pipe fittings to
the United States, and Mitsui and Shenzhen Factory, the entity which
produced the unfinished pipe fittings sold to AST, was limited to the
purchase/sale of the unfinished pipe fittings. Therefore, in this
inquiry, no purchases of Chinese unfinished pipe fittings occurred
between related parties within the meaning of section 773(e)(4) of the
Tariff Act.
(3) Increase in Imports
Data on imports of unfinished pipe fittings into Thailand from
Chinese manufacturers/sellers other than Shenzhen Factory were not
available, and public data on imports of pipe fittings from the PRC
into Thailand were not available for the period after June 1992.
Therefore, to measure the increase in imports, we examined export data
supplied by Shenzhen Factory for the period January 1, 1991 through
August 31, 1993. It is clear that an increase in exports of unfinished
tees from Shenzhen Factory to Thailand occurred after the issuance of
the antidumping duty order on pipe fittings from the PRC. This increase
corresponds to the increase of AST's exports of finished tees to the
United States during the same period. See December 22, 1993 analysis
memorandum from the case analyst to the File. Accordingly, this factor
indicates that circumvention activities may have occurred.
Affirmative Preliminary Determination of Circumvention
After consideration of the factors discussed above, we
preliminarily determine that circumvention of the antidumping duty
order on pipe fittings from the PRC has occurred within the meaning of
section 781(b) of the Tariff Act. We base this determination on the
following. First, the items completed in Thailand and sold to the
United States are of the same class or kind of merchandise as that
covered by the order, and are completed from merchandise produced in
the PRC and covered by the order. Second, the difference in value
between the unfinished pipe fittings sold to Thailand and the value of
the finished pipe fittings exported to the United States is small. We
note that our determination of ``small'' in this case is not
necessarily synonymous with the determination of ``small'' that the
Department has used in the past or that the Department will use in
future anti-circumvention inquiries, because Congress has directed us
to make such determinations on a case-by-case basis. Further, we find
the pattern of trade and level of imports into Thailand indicate a
finding of circumvention of the antidumping duty order. Finally, we
find that action is appropriate to prevent evasion of the antidumping
duty order. To this end, and in accordance with the purposes of section
781, we are applying this finding to all Thai manufacturers/exporters
of the class or kind of merchandise, i.e., pipe fittings, subject to
the certification requirements described below.
Requirement of Certification
Considered within the scope of the antidumping duty order on pipe
fittings from the PRC are all imports from all producers into the
United States of pipe fittings from Thailand, as defined in the ``Scope
of the Inquiry'' section of this notice, unless accompanied by a
certificate stating that such pipe fittings have not been produced from
unfinished Chinese pipe fittings.
Suspension of Liquidation
In accordance with 19 CFR 353.29(j)(2), we are directing the U.S.
Customs Service to suspend liquidation of all entries of pipe fittings
from Thailand. The merchandise subject to suspension of liquidation is
pipe fittings, as defined in the ``Scope of Circumvention Inquiry''
section of this notice, that are entered or withdrawn from warehouse,
for consumption on or after the date of publication of this notice in
the Federal Register. (We note that entries of pipe fittings from
Thailand, with the exception of AST's pipe fittings, are currently
being suspended pursuant to the antidumping duty order on pipe fittings
from Thailand (57 FR 29702, July 6, 1992).) For all such imports which
are accompanied by a certificate stating that such pipe fittings have
not been produced from unfinished Chinese pipe fittings, the U.S.
Customs Service shall require a cash deposit or posting of a bond in
the amount of the company-specific rate for the Thai manufacturer/
exporter, or, if there is no company-specific rate for the Thai
manufacturer or exporter, the ``All Others'' rate for pipe fittings
from Thailand. For all such imports which are accompanied by a
certificate stating that the merchandise was manufactured using Chinese
unfinished pipe fittings and the name of the manufacturer of the
Chinese unfinished pipe fittings, the U.S. Customs Service shall
require a cash deposit or posting of a bond in the amount of the
company-specific rate of the manufacturer of the Chinese unfinished
pipe fittings. For all such imports which are accompanied by a
certificate stating that such pipe fittings have been produced from
unfinished Chinese pipe fittings, but do not provide the specific
Chinese manufacturer, the U.S. Customs Service shall require a cash
deposit or posting of a bond in the amount of the highest rate for pipe
fittings from the PRC. For all other imports of pipe fittings from
Thailand which are accompanied by an inadequate certificate, or no
certificate, the U.S. Customs Service shall require a cash deposit or
posting of a bond in an amount based on the higher of (1) the highest
rate for any manufacturer/exporter of pipe fittings from the PRC, or
(2) the rate for the Thai manufacturer/exporter, or, if there is no
company-specific rate for the Thai manufacturer or exporter, the ``All
Others'' rate for pipe fittings from Thailand.
This suspension of liquidation shall remain in effect until further
notice.
Notification of the International Trade Commission
The Department, consistent with section 781(e)(1)(B) of the Tariff
Act, will notify the ITC of this preliminary determination to include
merchandise subject to this inquiry within the antidumping duty order
on pipe fittings from the PRC. Pursuant to section 781(e)(2) of the
Tariff Act, the ITC may request consultation concerning the
Department's proposed inclusion of the subject merchandise. If, after
consultations, the ITC believes that a significant injury issue is
presented by the proposed inclusion, the ITC will have 60 days from the
date of notification to provide written advice to the Department.
Public Comment
Interested parties may request disclosure within 5 days of the date
of publication of this determination, and may request a hearing within
10 days of publication. Case briefs and/or written comments from
interested parties may be submitted not later than February 16, 1994.
Rebuttal briefs and rebuttals to written comments, limited to issues
raised in those briefs or comments, may be filed not later than
February 22, 1994. Any hearing, if requested, will be held on February
24, 1994. The Department will publish its final determination with
respect to this anti-circumvention inquiry, including the results of
its analysis of any written or oral comments.
This preliminary affirmative circumvention determination is in
accordance with section 781(b) of the Tariff Act (19 U.S.C. 1677j(b))
and 19 CFR 353.29(f).
Dated: December 23, 1993.
Barbara R. Stafford,
Acting Assistant Secretary for Import Administration.
[FR Doc. 93-32066 Filed 12-30-93; 8:45 am]
BILLING CODE 3510-DS-P