93-32066. Certain Carbon Steel Butt-Weld Pipe Fittings From the People's Republic of China; Affirmative Preliminary Determination of Circumvention of Antidumping Duty Order  

  • [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]
    
    
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    [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
    
    
    

Document Information

Published:
01/03/1994
Department:
International Trade Administration
Entry Type:
Notice
Action:
Notice of affirmative preliminary determination of circumvention of antidumping duty order.
Document Number:
93-32066
Dates:
January 3, 1994.
Pages:
62-65 (4 pages)
Docket Numbers:
Federal Register: January 3, 1994, A-570-814