[Federal Register Volume 59, Number 191 (Tuesday, October 4, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-24540]
[[Page Unknown]]
[Federal Register: October 4, 1994]
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DEPARTMENT OF COMMERCE
[A-412-816]
Notice of Preliminary Determination of Sales at Less Than Fair
Value: Certain Carbon Steel Butt-weld Pipe Fittings From the United
Kingdom
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: October 4, 1994.
FOR FURTHER INFORMATION CONTACT:
Vincent Kane, or Julie Anne Osgood, Office of Countervailing
Investigations, Import Administration, International Trade
Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, NW, Washington, D.C. 20230; telephone (202) 482-
2815 or 482-0167, respectively.
Preliminary Determination: We have preliminarily determined that
certain carbon steel butt-weld pipe fittings from the United Kingdom
(``U.K.'') are being sold in the United States at less than fair value,
as provided in section 733 of the Tariff Act of 1930, as amended (the
``Act''). The estimated margins of sales at less than fair value are
shown in the ``Suspension of Liquidation'' section of this notice.
Case History
Since the initiation of this investigation on March 21, 1994 (59 FR
14148, March 25, 1994), the following events have occurred:
On April 11, 1994, the United State International Trade Commission
(``ITC'') issued an affirmative preliminary injury determination (see
ITC Investigation No. 731-TA-694).
In accordance with 19 CFR 353.42(b), the Department of Commerce
(``the Department'') issued its antidumping duty questionnaire to
B.K.L. Fittings Limited (``BKL''), on April 29, 1994. BKL is the only
U.K. producer and exporter named in the petition.
Petitioner requested a 50-day postponement of the preliminary
determination on June 30, 1994. The request was granted by the
Department of Commerce on July 19, 1994 (59 FR 37961, July 26, 1994).
On June 16, 1994, petitioner alleged that BKL was selling the
subject merchandise in the U.K. at less than its cost of production.
After analyzing petitioner's allegation we found reasonable grounds to
believe or suspect that sales in the home market were being made at
less than the cost of production. On August 15, 1994, we issued a cost
of production/constructed value questionnaire to BKL.
On August 4, 1994, petitioner alleged critical circumstances with
regard to imports of certain carbon steel butt-weld pipe fittings from
the U.K.
Scope of Investigation
The products covered by this investigation are certain carbon steel
butt-weld pipe fittings (``pipe fittings'') having an inside diameter
of less than fourteen inches (355 millimeters), imported in either
finished or unfinished condition. Pipe fittings are formed or forged
steel products used to join pipe sections in piping systems where
conditions require permanent welded connections, as distinguished from
fittings based on other methods of fastening (e.g., threaded, grooved,
or bolted fittings). Butt-weld fittings come in a variety of shapes
which include ``elbows,'' ``tees,'' ``caps,,'' and ``reducers.'' The
edges of finished pipe fittings are beveled, so that when a fitting is
placed against the end of a pipe (the ends of which have also been
beveled), a shallow channel is created to accommodate the ``bead'' of
the weld which joins the fitting to the pipe. These pipe fittings are
currently classifiable under subheading 7307.93.3000 of the Harmonized
Tariff Schedule of the United States (``HTSUS'').
Although the HTSUS subheading is provided for convenience and
customs purposes, our written description of the scope of this
proceeding is dispositive.
Period of Investigation
The period of investigation (``POI'') is September 1, 1993, through
February 28, 1994.
Product Comparisons
In making our fair value comparisons, in accordance with the
Department's standard methodology, we first compared sales of
merchandise identical in all respects. If no identical merchandise was
sold, we compared sales of the most similar merchandise, as determined
by the model-matching criteria contained in Appendix V of the
questionnaire (``Appendix V'') (on file in Room B-099 of the main
building of the Department of Commerce (``Public File'')).
We were unable to compare United States sales to home market sales
at the same level of trade in accordance with 19 CFR 353.58 (1994),
because the computer tape submitted by respondent did not identify the
level of trade for each sale. For purposes of our preliminary
determination we compared sales without regard to level of trade.
However, we will request that respondent submit the necessary data on
level of trade to the Department within the regulatory deadlines (see
19 CFR 353.31) and we will take it into consideration in accordance
with 19 CFR 353.58 in our final determination.
Fair Value Comparisons
To determine whether BKL's sales for export to the United States
were made at less than fair value, we compared the United States price
(``USP'') to the foreign market value (``FMV''), as specified in the
``United States Price'' and ``Foreign Market Value'' sections of this
notice. BKL's sales for export to the Untied States and in its home
market involved both identical and similar merchandise. For those U.S.
sales compared to a sale of similar merchandise in the home market, we
made an adjustment, pursuant to 19 CFR 353.57, for physical differences
in merchandise. For certain products, respondent did not provide the
information necessary to make a comparison with the most similar
merchandise based on the model-matching criteria contained in Appendix
V. As those sales accounted for a very small percentage of total sales
of subject merchandise, they have been disregarded in calculating our
preliminary margin.
United States Price
We based USP on purchase price, in accordance with section 772(b)
of the Act, where the subject merchandise was sold to an unrelated
purchaser in the United States before importation and where the use of
exporter's sales price (``ESP'') methodology was not otherwise
indicated.
We calculated purchase price based on packed, c.i.f. import prices
to an unrelated customer in the United States. We made deductions to
the U.S. price, where appropriate, for foreign brokerage, foreign
inland freight, ocean freight and marine insurance, U.S. duty and
brokerage.
Where sales to the first unrelated purchaser took place after
importation of the subject merchandise into the United States, we based
USP on ESP, in accordance with section 772(c) of the Act. Almost all of
the ESP sales of subject merchandise were reported as further
manufactured in the United States.
For ESP sales we made deductions, where appropriate, for discounts,
foreign brokerage, foreign inland freight, ocean freight, marine
insurance, U.S. duty, U.S. inland freight, and U.S. brokerage and
handling. In addition, for ESP sales only, we deducted credit expense,
indirect selling expense, inventory carrying costs, and commissions to
an unrelated agent. For certain ESP sales where respondent did not
provide paydates, we used the average number of credit days in
calculating credit expense.
We made an adjustment to U.S. price for value-added tax (``VAT'')
assessed on comparison sales in the U.K. in accordance with our
practice, pursuant to the Court of International Trade (``CIT'')
decision in Federal-Mogul, et al. v. United States, 834 F. Supp. 1391.
See Preliminary Antidumping Duty Determination: Color Negative
Photographic Paper and Chemical Components from Japan (59 FR 16177,
16179, April 6, 1994), for an explanation of this methodology.
For pipe fittings that were further manufactured in the United
States, we deducted all value added in the United States, pursuant to
section 772(e)(3) of the Act. The value added consists of the cost of
fabrication and general expenses associated with the further
manufacturing operations, as well as a proportional amount of profit or
loss attributable to the further manufacture. We calculated profit or
loss by deducting from the sales price of the further manufactured
merchandise the related production costs and selling expense incurred
by the company in both the U.K. and the United States. We then
allocated total profit or loss proportionately to all components of
cost. We included only the profit or loss allocated to the further
manufacturing portion of total cost in our calculation of value added.
Additionally, we adjusted general and administrative (G&A) expenses
from an allocation based on weight to an allocation based on cost of
sales.
Where respondent did not provide further manufacturing costs for
certain products, we disregarded sales of those products in our
preliminary margin calculation.
Foreign Market Value
In order to determine whether BKL had a sufficient volume of sales
in the home market to serve as the basis for calculating FMV, we
compared the volume of home market sales of subject merchandise to the
volume of third country sales of subject merchandise, in accordance
with section 773(a)(1)(B) of the Act. On this basis, we determined that
the home market was viable.
We calculated FMV based on both f.o.b. plant and delivered prices
inclusive of packing, to customers in the U.K. In light of the decision
of the Court of Appeals for the Federal Circuit in Ad Hoc Committee of
AZ-NM-TX-FL Producers of Gray Portland Cement v. United States, 13 F.
3d 398 (Fed. Cir., January 5, 1994), we deducted post-sale home market
movement charges from the FMV under the circumstance-of-sale provision
of 19 CFR 353.56(a). This adjustment included home market inland
freight.
We deducted rebates, where appropriate, on home market sales. We
deducted home market packing costs and added U.S. packing costs in
accordance with section 773(a)(1) of the Act. In addition, we made
circumstance-of-sale adjustments for differences in credit charges
between the two markets, pursuant to CFR 353.56(a)(2). In calculating
home market credit expense, we used the weighted-average interest rate
paid by respondent on short-term borrowings denominated in British
pounds. In calculating U.S. credit expense, we used the weighted-
average interest rate paid by respondent on short-term dollar
borrowings. For a further discussion of the Department's treatment of
credit in this investigation, please see Memorandum from Barbara R.
Stafford to Susan G. Esserman (September 26, 1994) on file in room B-
099 of the U.S. Department of Commerce.
In accordance with 19 CFR 353.56(b)(1), we deducted home market
indirect selling expenses as an offset to the U.S. commissions, but
capped this deduction by the amount of the ESP commissions and indirect
selling expenses. We adjusted for VAT in accordance with our practice
(see ``United States Price'' section of this notice.)
Cost of Production
Petitioner alleged that BKL made home market sales during the POI
at prices below its cost of production (``COP''). Based on petitioner's
allegations and after examining the evidence on the record, we
concluded that we had reasonable grounds to ``believe or suspect'' that
sales were made below COP. Thus, we initiated a COP investigation
pursuant to section 773(b) of the Act.
We performed a product-specific COP test, in which we examined
whether each home market sale was priced below that product's COP. The
Department defines COP as the sum of direct material, direct labor,
variable and fixed factory overhead, general expenses, and packing
expense, in accordance with 19 CFR 353.51(c). (See, e.g., Preliminary
Results of Antidumping Duty Administrative Review: Polyethylene
Terephthalate Film, Sheet, and Strip From the Republic of Korea (59 FR
35098, 35099, July 8, 1994).) We compared the COP for each product to
the home market unit price, net of rebates, movement expenses, and
indirect expenses. We relied on submitted COP information except for
the calculation of financing expense. The submitted calculation was
based on the combination of the financial statements of BKL and its
parent company without taking into account elimination of intercompany
transactions. Therefore, we recalculated financing expense using the
parent company financial statements only.
In accordance with section 773(b) of the Act, we also examined
whether the home market sales of each product were made at prices below
their COP in substantial quantities over an extended period of time,
and whether such sales were made at prices that would permit recovery
of all costs within a reasonable period of time in the normal course of
trade.
To satisfy the requirement of 773(b)(1) that below cost sales be
disregarded only if made in substantial quantities, the following
methodology was used. For each product where less than ten percent, by
quantity, of the home market sales during the POI were made at prices
below the COP, we included all sales of that model for the computation
of FMV. For each product where ten percent or more, but less than 90
percent, of the home market sales during the POI were priced below the
COP, we excluded from the calculation of FMV those home market sales
which were priced below the COP, provided that the below-cost sales of
that product were made over an extended period of time. Where we found
that more than 90 percent of respondent's sales were at prices below
the COP, and such sales were over an extended period of time, we
disregarded all sales of that product and calculated FMV based on CV.
In order to determine whether below-cost sales had been made over
an extended period of time, we compared the number of months in which
below-cost sales occurred for each product to the number of months in
the POI in which that product was sold. If a product was sold in fewer
than three months during the POI, we did not exclude sales unless there
were below cost sales in each month of sale. If a product was sold in
three or more months, we did not exclude the below-cost sales unless
there were below-cost sales in at least three months during the POI.
(See Preliminary Results and Partial Termination of Antidumping Duty
Administrative Reviews: Tapered Roller Bearings, Four Inches or Less in
Outside Diameter, and Components Thereof, From Japan (58 FR 69336,
69338, December 30, 1993).)
Constructed Value
For those products without an adequate number of sales at prices
equal to or greater than the COP, we based FMV on constructed value
(``CV''), pursuant to section 773(b)(2) of the Act. We calculated CV
based on the sum of the cost of materials, fabrication, general
expenses, U.S. packing costs and profit, in accordance with section
773(e)(1)(B) (i) and (ii) of the Act. We relied on submitted CV
information except for the calculation of financing expense, which we
recalculated as described in the ``Cost of Production'' section of this
notice. We included in our calculation of CV: (1) the greater of BKL's
general expenses or the statutory minimum of ten percent of the cost of
manufacture (``COM''), as appropriate, and; (2) for profit, the greater
of BKL's profit or the statutory minimum of eight percent of the sum of
COM and general expenses.
Currency Conversion
We made currency conversions based on the official exchange rates
in effect on the dates of the U.S. sales as certified by the Federal
Reserve Bank of New York.
Critical Circumstances
Petitioner alleges that critical circumstances exist with respect
to imports of the subject merchandise from the U.K. Section 733(e)(1)
of the Act provides that the Department will determine that there is a
reasonable basis to believe or suspect that critical circumstances
exist if:
(A)(i) There is a history of dumping in the United States or
elsewhere of the class or kind of merchandise which is the subject of
this investigation, or
(ii) The person by whom, or for whose account, the merchandise was
imported knew or should have known that the exporter was selling the
merchandise which is the subject of the investigation at less than its
fair value, and
(B) There have been massive imports of the class or kind of
merchandise which is the subject of the investigation over a relatively
short period.
Regarding (A)(ii) above, we normally consider margins of 15 percent
or more for exporter's sales price sales, and margins of 25 percent or
more for purchase price sales sufficient to input knowledge of dumping.
If the U.S. price is based on both PP and ESP, we normally weight-
average the 25 percent and 15 percent benchmarks by the volume of PP
and ESP sales to arrive at a weighted-average benchmark percentage for
imputing the knowledge of dumping (see, e.g., Notice of Final
Determination of Sales at Less Than Fair Value: Certain Cold-Rolled
Carbon Steel Flat Products From Argentina (58 FR 37078, July 9, 1993)).
The calculated preliminary margin in this investigation indicates
that importers of pipe fittings should have known that the merchandise
was being sold at less than fair value.
Pursuant to 19 CFR 353.16 (f), we generally consider the following
factors in determining whether imports have been massive over a short
period of time: (1) The volume and value of the imports; (2) seasonal
trends (if applicable); and (3) the share of domestic consumption
accounted for by imports.
If imports during the period immediately following the filing of
the petition increase by at least 15 percent over imports during a
comparable period immediately proceeding the filing of a petition, we
normally consider them massive pursuant to section 353.16(f)(2) of the
Department's regulations.
In order to determine whether imports have been massive over a
relatively short period of time, we compared BKL's reported shipments
of butt-weld pipe fittings to the United States in the seven months
after the petition was filed to the seven months immediately before
this period. Our analysis showed that the volume of imports of subject
merchandise to the United States by BKL had increased by more than 15
percent. (See 19 CFR 353.16(f)(2).) Based on this analysis, we
determine that imports of butt-weld pipe fittings from the U.K. were
massive over a relatively short period of time. Accordingly, as the
criteria enumerated in section 733(e)(1) of the Act are met, we
preliminarily determine that critical circumstances exist for imports
of butt-weld pipe fittings from the U.K.
Verification
As provided in section 776(b) of the Act, we will verify
information used in making our final determination.
Suspension of Liquidation
In accordance with section 733(d)(1) of the Act, we are directing
the Customs Service to suspend liquidation of all entries of butt-weld
pipe fittings from the U.K., as defined in the ``Scope of
Investigation'' section of this notice, that are entered or withdrawn
from warehouse for consumption on or after the date 90 days prior to
publication of this notice in the Federal Register. The Customs Service
shall require a cash deposit or posting of a bond equal to the
estimated dumping margins shown below. This suspension of liquidation
will remain in effect until further notice. The estimated preliminary
weighted-average dumping margins are as follows:
------------------------------------------------------------------------
Margin
Manufacturer/producer/exporter percentages
------------------------------------------------------------------------
BKL........................................................ 73.38
All others................................................. 75.38
------------------------------------------------------------------------
ITC Notification
In accordance with section 733(f) of the Act, we have notified the
ITC of our determination. If our final determination is affirmative,
the ITC will determine whether these imports are materially injuring,
or threaten material injury to, the U.S. industry within 75 days after
our final determination.
Public Comment
Interested parties who wish to request a hearing must submit a
written request to the Assistant Secretary for Import Administration,
U.S. Department of Commerce, room B-099, within ten days of the
publication of this notice. Requests should contain: (1) The party's
name, address, and telephone number; (2) the number of participants;
and (3) a list of the issues to be discussed.
In accordance with 19 CFR 353.38, case briefs or other written
comments in a least six copies must be submitted to the Assistant
Secretary no later than November 16, 1994, and rebuttal briefs no later
than November 23, 1994. A hearing, if requested, will be held on
November 28, 1994, at the U.S. Department of Commerce in room 1414.
Parties should confirm by telephone the time, date, and place of the
hearing two days prior to the scheduled date. In accordance with 19 CFR
353.38(b), oral presentations will be limited to issues raised in the
briefs.
We will make our final determination not later than 75 days after
the date of this preliminary determination.
This determination is published pursuant to section 733(f) of the
Act and 19 CFR 353.15(a)(4).
Dated: September 26, 1994.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 94-24540 Filed 10-3-94; 8:45 am]
BILLING CODE 3510-DS-M
