[Federal Register Volume 64, Number 55 (Tuesday, March 23, 1999)]
[Notices]
[Pages 13962-13970]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-7100]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-201-817]
Oil Country Tubular Goods From Mexico: Final Results of
Antidumping Duty Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of final results of antidumping duty administrative
review.
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SUMMARY: On September 11, 1998, the Department of Commerce (the
Department) published the preliminary results of its administrative
review of the antidumping duty order on oil country tubular goods
(``OCTG'') from Mexico covering exports of this merchandise to the
United States by certain manufacturers (Oil Country Tubular Goods from
Mexico; Preliminary Results of Administrative Review (``Mexican
OCTG''), 63 FR 48599). Based on our preliminary review of these exports
during the period August 1, 1996 through July 31, 1997, we found no
margins for either reviewed company. We invited interested parties to
comment on the preliminary results. We received comments and rebuttals
from petitioners and from respondent with respect to Tubos de Acero de
Mexico, S.A. (``TAMSA''). No comments were received from either party
with respect to the other reviewed manufacturer, Hylsa S.A. de C.V.
(``Hylsa'') . We have now completed our final results of review and
determine that the results have not changed for either respondent.
EFFECTIVE DATE: March 23, 1999.
FOR FURTHER INFORMATION CONTACT: John Drury, or Linda Ludwig,
Enforcement Group III--Office 8, Import Administration, International
Trade Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, NW Room 7866, Washington, DC. 20230; telephone
(202) 482-0195 (Drury), or (202) 482-3833 (Ludwig).
SUPPLEMENTARY INFORMATION:
Applicable Statute
Unless otherwise indicated, all citations to the Tariff Act of
1930, as amended (the Act) are references to the provisions effective
January 1, 1995, the effective date of the amendments made to the Act
by the Uruguay Round Agreements Act (URAA). In addition, unless
otherwise indicated, all citations to the Department's regulations are
references to the provisions codified at
[[Page 13963]]
19 CFR part 351 (62 FR 27296, May 19, 1997).
Background
The Department of Commerce published a final determination of sales
at less than fair value for OCTG from Mexico on June 28, 1995 (60 FR
33567), and subsequently published the antidumping duty order on August
11, 1995 (60 FR 41056). The Department of Commerce published a notice
of ``Opportunity To Request Administrative Review'' of the antidumping
order for the 1996/1997 review period on August 4, 1997 (62 FR 41925).
Upon receiving requests for administrative review from two respondents,
Hylsa and TAMSA, we published a notice of initiation of the review on
September 25, 1997 (62 FR 50292).
Under section 751(a)(3)(A) of the Act, the Department may extend
the deadline for completion of an administrative review if it
determines that it is not practicable to complete the review within the
statutory time limit of 365 days. On March 19, 1998, the Department
extended the time limit for the preliminary results to August 31, 1998.
See Oil Country Tubular Goods from Mexico; Extension of Time Limits for
Antidumping Duty Administrative Review (63 FR 14422, March 25, 1998).
On January 11, 1999, the Department extended the time limit for the
final results until March 10, 1999. See Oil Country Tubular Goods from
Mexico; Extension of Time Limits for Antidumping Duty Administrative
Review (64 FR 3065, January 20, 1999).
Duty Absorption
On October 2, 1997, Maverick Tube Corporation, Lone Star Steel
Company, and IPSCO Tubulars, Inc. requested that the Department
determine, with respect to Hylsa, whether antidumping duties had been
absorbed during the POR. On October 23, 1997, North Star Steel Ohio
requested that the Department determine, with respect to TAMSA, whether
antidumping duties had been absorbed during the POR. Section 751(a)(4)
of the Act provides for the Department, if requested, to determine
during an administrative review initiated two or four years after the
publication of the order whether antidumping duties have been absorbed
by a foreign producer or exporter, if the subject merchandise is sold
in the United States through an affiliated importer. Because this
review was initiated two years after the publication of the order, we
have made a duty absorption determination in this segment of the
proceeding.
In this case, both TAMSA and Hylsa sold to the United States
through importers that are affiliated within the meaning of section
751(a)(4) of the Act. We determine that there is no dumping margin for
either TAMSA's sales or Hylsa's sales during the POR. Since we have
determined that there are no dumping margins for the respondents with
respect to their U.S. sales, we also determine that there is no duty
absorption with respect to those sales.
Scope of the Review
Imports covered by this review are oil country tubular goods,
hollow steel products of circular cross-section, including oil well
casing, tubing, and drill pipe, of iron (other than cast iron) or steel
(both carbon and alloy), whether seamless or welded, whether or not
conforming to American Petroleum Institute (API) or non-API
specifications, whether finished or unfinished (including green tubes
and limited service OCTG products). This scope does not cover casing,
tubing, or drill pipe containing 10.5 percent or more of chromium. The
OCTG subject to this order are currently classified in the Harmonized
Tariff Schedule of the United States (HTSUS) under item numbers:
7304.20.10.10, 7304.20.10.20, 7304.20.10.30, 7304.20.10.40,
7304.20.10.50, 7304.20.10.60, 7304.20.10.80, 7304.20.20.10,
7304.20.20.20, 7304.20.20.30, 7304.20.20.40, 7304.20.20.50,
7304.20.20.60, 7304.20.20.80, 7304.20.30.10, 7304.20.30.20,
7304.20.30.30, 7304.20.30.40, 7304.20.30.50, 7304.20.30.60,
7304.20.30.80, 7304.20.40.10, 7304.20.40.20, 7304.20.40.30,
7304.20.40.40, 7304.20.40.50, 7304.20.40.60, 7304.20.40.80,
7304.20.50.15, 7304.20.50.30, 7304.20.50.45, 7304.20.50.60,
7304.20.50.75, 7304.20.60.15, 7304.20.60.30, 7304.20.60.45,
7304.20.60.60, 7304.20.60.75, 7304.20.70.00, 7304.20.80.30,
7304.20.80.45, 7304.20.80.60, 7305.20.20.00, 7305.20.40.00,
7305.20.60.00, 7305.20.80.00, 7306.20.10.30, 7306.20.10.90,
7306.20.20.00, 7306.20.30.00, 7306.20.40.00, 7306.20.60.10,
7306.20.60.50, 7306.20.80.10, and 7306.20.80.50.
Although the HTSUS subheadings are provided for convenience and
customs purposes, our written description of the scope of this
proceeding is dispositive.
The Department has determined that couplings, and coupling stock,
are not within the scope of the antidumping duty order on OCTG from
Mexico. See Letter to Interested Parties; Final Affirmative Scope
Decision, August 27, 1998.
Period of Review
The review covers the period August 1, 1996 through July 31, 1997.
The Department is conducting this review in accordance within section
751 of the Act, as amended.
Analysis of Comments Received
We invited interested parties to comment on our preliminary results
of the reviews. We received both comments and rebuttals from
petitioners and TAMSA. Because there were no comments concerning our
preliminary results with respect to Hylsa, all comments below pertain
to TAMSA. The following is a summary of comments.
Comment 1
Petitioners argue that TAMSA should not be granted a constructed
export price (``CEP'') offset, as TAMSA neither requested such an
adjustment nor provided information to the Department necessary to
analyze whether a CEP offset was warranted. Indeed, since TAMSA claimed
that its sales were at similar levels of trade, and that the sale to
the United States was an export price (``EP'') sale, TAMSA never
claimed a CEP offset. The lack of a CEP offset claim by TAMSA, and
inadequate information concerning levels of trade, according to
petitioners, precludes the Department from granting a CEP offset.
Petitioners begin by pointing out that TAMSA maintained that its
sale to the United States was an EP sale, not a CEP sale. Because of
TAMSA's steadfast insistence that its sale was not a CEP sale, and its
alleged refusal to provide any information which might be used in
conjunction with a CEP offset, petitioners maintain that TAMSA is not
entitled to the offset.
Even if TAMSA is not required to request a CEP offset, petitioners
argue, TAMSA has the burden to establish an entitlement to an offset by
providing sufficient information to demonstrate that sales to the
United States and home market were at different levels of trade, that
it is not possible to make a level of trade adjustment, and that the
level of trade in the home market is more advanced than that of the
sale to the United States. Citing Small Diameter Circular Seamless
Carbon and Alloy Steel Standard, Line, and Pressure Pipe from Germany
(``German Pipe'') (63 FR 13217, March 18, 1998), petitioners assert
that TAMSA alone was responsible for providing this information and
failed to do so. Petitioners note that, in its initial response, TAMSA
did not provide any information about different selling functions in
the home market and the United States market which the Department could
use in making a level of trade determination. Despite repeated requests
by the Department in supplemental questionnaires, petitioners contend,
TAMSA provided
[[Page 13964]]
little or no new information regarding the various selling functions in
both markets. Instead, petitioners state, TAMSA continued to maintain
that sales in both the home market and United States markets were at
the same level of trade, and at no point requested a level of trade
adjustment. Despite the fact that TAMSA provided just-in-time (``JIT'')
services to PEMEX, its largest customer, and did not provide them to
its United States customers, petitioners note that TAMSA never took the
position that JIT services were sufficient to create a difference in
levels of trade.
Petitioners state that the respondent has the burden of proof to
demonstrate that a level of trade adjustment based on price differences
is not possible. Petitioners state that TAMSA provided no information
to answer this question, and thus the Department's decision in the
preliminary results to grant a CEP offset is incorrect. Petitioners
believe that the Department did not explain its basis for finding that
non-PEMEX sales in the home market were at a different level of trade
from the sale to the United States, and that a level of trade
adjustment based on price differences is not possible. For all of these
reasons, petitioners believe that the Department should not grant a CEP
offset to TAMSA.
TAMSA counters that the Department's decision to grant a CEP offset
was proper if the Department maintains that the sale by TAMSA to the
United States was a CEP sale. TAMSA asserts that it did fully cooperate
with the Department and provided the necessary information.
Furthermore, TAMSA states that it did, in fact, advise the Department
that it had provided sufficient information for a CEP offset, in
comments which were provided prior to verification. This information,
according to TAMSA, includes a detailed explanation of the various
selling functions for each channel of distribution in the home market,
as well as for the sale to the United States. TAMSA states that if it
meets its burden to provide sufficient information for the Department
to determine if there is a more advanced level of trade in the home
market, yet provides insufficient information for a level of trade
adjustment, then it has nevertheless met the conditions for a CEP
offset.
TAMSA states that it has, in fact, met this burden. Concerning the
level of trade question, TAMSA states that the information provided to
the Department shows that it sold at different levels of trade in the
home market and the United States, and that the home market level of
trade was more advanced. TAMSA states that, although it initially
classified all customers as ``end users,'' it subsequently provided
detailed information regarding channels of distribution, selling
functions, and other information which clearly establishes different
channels of distribution and different selling functions with respect
to the two markets. TAMSA further notes that the Department verified
the services provided by TAMSA to its customers, including the
provision of JIT services in the home market and services provided by
Siderca Corp. in the United States. According to TAMSA, this
information, which was also verified, is sufficient to establish that
the U.S. sale was made at a different level of trade than TAMSA's home
market sales.
Regarding the question of whether there is enough information to
make a level of trade adjustment, and whether TAMSA cooperated
sufficiently in providing such information, TAMSA asserts that the
Department found no home market level of trade equal to the level of
trade of the United States sale. Consequently, a level of trade
adjustment was not feasible.
Department's Position
The question of whether a respondent is entitled to a CEP offset is
predicated on a certain pattern of facts. First, there must be a
decision that sales to the United States are CEP sales. Second, there
must be a determination that there are different levels of trade
between the home market and United States, that the home market level
of trade is more advanced, and that it is not possible to quantify the
price differences related to those sales and different levels of trade
to make a level of trade adjustment. Only after these conditions are
met can a CEP offset be made.
The Department presented a detailed explanation of the process for
determining levels of trade and their proper treatment in the
preliminary results of this review. See Mexican OCTG, 63 FR 48699. To
summarize, the Department examines and compares the distribution
systems, including the selling functions, classes of customers, and
selling expenses, in the two markets. Further, unless the Department
finds that there are substantial differences in selling functions, it
will not determine that there are different levels of trade.
The Department's use of this test is well documented. In Certain
Cold-Rolled Carbon Steel Flat Products from the Netherlands (62 FR
18476, April 15, 1997), the Department stated that:
[t]he existence of different classes of customers, as well as
different functions performed by such customers, is not sufficient
to establish a difference in the levels of trade. Accordingly, we
consider the class of customer as one factor, along with the
producer/exporter's selling functions and the selling expenses
associated with these functions, in determining the stage of
marketing, i.e., the level of trade associated with the sales in
question.''
As noted in the preliminary results, we compared sales to
unaffiliated customers in the home market to the constructed sales to
the importer in the United States. This is consistent with the
Department's previous practice. See Id. At 18480. In this instance,
TAMSA's home market sales to unaffiliated parties are compared to the
sale to Siderca Corp., TAMSA's U.S. affiliate. All sales in the home
market are to end users, i.e. manufacturers which consume the final
product. The sale to Siderca Corp., by contrast, is similar to a sale
to a distributor. Siderca Corp. does not consume the product, but
rather acts as a reseller. Therefore, the sales in the home market and
the U.S. sale appear to be made at different points in the chain of
distribution.
With respect to the selling functions, TAMSA provided sufficient
information for the Department to compare selling functions in the two
markets. Information provided by TAMSA, and verified by the Department,
demonstrates that TAMSA's selling functions for home market sales are
different than those associated with TAMSA's sale to Siderca Corp.
First, TAMSA provides JIT services to the vast majority of its home
market customers. The Department verified the extent and the nature of
the expenses associated with JIT services. Also, as TAMSA stated in
submitting its chart of selling functions, TAMSA provides customer
visits in the home market. Neither of these services was provided in
connection with the U.S. sale to Siderca Corp. Services provided by
Siderca Corp. to end users in the United States are not relevant to
this analysis, because the appropriate comparison for LOT purposes is
between the ``starting price'' sale to the first unaffiliated customer
in the home market, and the constructed export price sale (i.e. the
sale to Siderca Corp.) in the United States. See Sec. 351.412(c) of the
Department's regulations. Based on information provided by TAMSA and on
the Department's verification, the Department's analysis of the selling
functions provided by TAMSA in both the home and U.S. markets indicates
that there are selling functions provided in sales to the home market
which are not provided in the U.S. market and that
[[Page 13965]]
all home market sales are made at a single level of trade.
Based on the facts of the case, the Department finds that sales by
TAMSA in the home market are at a different level of trade than the
sale to the United States. Sales in the home market are to end-users,
while the sale to Siderca Corp. is a sale to a distributor.
Furthermore, the provision of JIT services to the vast majority of home
market customers, as well as visits to customers, demonstrates that
TAMSA's sales in the home market and its sale to Siderca Corp. are
characterized by different selling functions. Therefore, the facts on
the record indicate that TAMSA's sales were made at different levels of
trade.
Next, the Department must determine if the home market level of
trade is more advanced than the U.S. level of trade. The Department's
analysis of the different selling functions indicates that the home
market sales are indeed made at a more advanced level of trade. The
home market sales to end users, who are further down the chain of
distribution than distributors such as Siderca Corp., and the selling
functions provided in the home market, especially JIT services,
constitute a far greater level of service and expense for TAMSA than
the services provided to Siderca Corp. in connection with the sale to
the United States.
Finally, the information on the record indicates that it is not
possible for the Department to make a level of trade adjustment.
Specifically, because there are no home market sales at the same level
of trade as the U.S. sale, it is not possible to quantify the extent to
which price differences are due to the level of trade differences.
Given that the home market sales are at a more advanced level of
trade, and that it is not possible to make a level of trade adjustment,
section 773(a)(7)(B) of the Act directs the Department to make a CEP
offset.
The statutory provision is not limited to situations in which a
respondent requests such an offset. The record indicates that TAMSA
provided sufficient information for the Department to conduct a level
of trade analysis and to determine that a CEP offset was appropriate.
Thus, petitioners' reliance on the German Pipe case is off point. In
that case, the respondent did not provide sufficient information either
before or during verification for the Department to conduct a level of
trade analysis. In the instant case, in contrast, TAMSA provided
information prior to verification, and Department officials were able
to verify the accuracy of the information during verification.
Thus, based on the facts in the case, we agree with respondent that
a CEP offset is warranted if the Department continues to classify the
sale to the United States as a CEP sale.
The question of whether the sale is classified properly as a CEP
sale is addressed in the next comment.
Comment 2
TAMSA contends that the Department erred in classifying TAMSA's
sale to the United States as a CEP sale. Instead, TAMSA maintains that
the Department should classify TAMSA's United States sale as an EP
sale.
In support of its argument, TAMSA begins by restating the three-
prong test that the Department undertakes to determine if sales made
through a U.S. affiliate should be classified as CEP sales or
``indirect'' EP sales. The test examines three criteria: (1) Whether
merchandise sold to the United States entered into the physical
inventory of the affiliate or was shipped directly to the United States
customer; (2) whether a direct shipment to the unaffiliated customer
was the customary channel of trade, and; (3) whether the affiliate
acted only as a processor of documentation and as a communications link
between the unaffiliated customer and the producer or exporter. Where
one or more of these conditions is not met, the Department treats sales
through a U.S. affiliate as CEP sales. Noting that the Department
relied on the third prong of the test in rejecting its claim that the
sale was an EP sale, TAMSA lists the reasons cited by the Department
for its determination that the role of its affiliate, Siderca Corp.,
was more than ancillary, and argues that Siderca Corp. in fact served
only as a document processor and a communications link.
TAMSA denies any suggestion that Siderca Corp. solicited the sale,
or in any way negotiated the price of the sale. TAMSA states that the
record shows clearly that TAMSA, and not Siderca Corp., set the terms
and price for the sale in question. TAMSA cites a number of instances
in which it contends that the Department has treated sales as EP sales
when the United States affiliate has no authority to set prices or is
not in a position to negotiate prices, and states that the fact pattern
in this case is consistent with those cases. See Notice of Final
Determination of Sales at Less Than Fair Value: Beryllium Metal and
High Beryllium Alloys from the Republic of Kazakhstan (``Beryllium from
Kazakhstan''), 62 FR 2648 (January 17, 1997); Certain Corrosion
Resistant Carbon Steel Flat Products and Certain Cut-to-Length Carbon
Steel Plate from Canada: Final Results of Antidumping Duty
Administrative Review (``Canadian Steel''), 63 FR 12725 (March 16,
1998), Notice of Final Determination of Sales at Less Than Fair Value:
Stainless Steel Wire Rod from Korea (``Wire Rod from Korea''), 63 FR
40404 (July 29, 1998); and U.S. Steel Group v. United States, 15 F.
Supp. 2d 892 (CIT 1998). Regarding the sales agreement between TAMSA
and Siderca Corp., which confers exclusive marketing and sales agency
powers on Siderca Corp. with respect to TAMSA products, TAMSA argues
that the antidumping duty order rendered this agreement moot with
respect to any sales to the United States of subject merchandise.
Furthermore, TAMSA states that Siderca Corp. merely received a
request from the U.S. customer, and passed it on to TAMSA in Mexico.
TAMSA depicts the role of Siderca Corp. in finalizing the sale as the
passive role of a mere conduit for information passing between the U.S.
customer and TAMSA during the initial sales process. TAMSA states that
Siderca Corp. did not match the order to TAMSA's inventory, did not
find a buyer for the merchandise, and did not finalize the sale.
Once the sale terms were finalized, TAMSA asserts, the functions
performed by Siderca Corp. were all ``ancillary'' and therefore should
not weigh in the decision to treat this sale as a CEP sale. These
included paying for certain charges, such as brokerage and insurance,
serving as the importer of record, accepting payment, and other such
services.
TAMSA concludes by stating that the Department must go beyond a
listing of activities and must analyze the various activities involved
with the sale. TAMSA contends that the record, properly analyzed, shows
that this sale should be treated as an EP sale.
Petitioners respond by stating that the Department's normal
practice is to consider a sale made through a U.S. affiliate to be a
CEP sale unless the record indicates that all three prongs are met.
Petitioners state that Siderca Corp. had more than ancillary or
incidental involvement in the U.S. sale and that these activities were
sufficient to warrant the Department's treatment of the sale as a CEP
sale. Petitioners rely upon Certain Cold-Rolled and Corrosion-Resistant
Carbon Steel Flat Products from Korea, Final Results of Antidumping
Duty Administrative Review, (``Korean Steel''), 63 FR 13170 (March 18,
1998) and Stainless Steel Wire Rod from Spain, Final Determination of
Sales at Less Than Fair Value, (``Wire Rod from Spain''), 63
[[Page 13966]]
FR 40391 (July 29, 1998) in which the Department treated the sales at
issue as CEP sales.
Petitioners note in particular that the sales agency agreement
between TAMSA and Siderca Corp. names Siderca Corp. as TAMSA's
exclusive selling agent in the United States market, and further points
out that the terms of the sale and the selling activities performed by
Siderca Corp. appear to follow the terms of this agreement.
Furthermore, petitioners note that the agreement was extended, without
amendment, after the antidumping duty order went into effect.
Petitioners further assert that the contacts between Siderca Corp.
and the U.S. customer were consistent with the functions described in
the agreement. For example, according to petitioners, the U.S. customer
contacted Siderca Corp., not TAMSA, regarding this sale, and Siderca
Corp. had exclusive contact with the customer throughout the sales
process. Additionally, Siderca Corp. had longstanding and frequent
contacts with the customer and worked regularly with it to meet its
needs as they arose for a variety of products and services. These
contacts and activities, petitioners believe, indicate that Siderca
Corp.'s efforts brought about the sale of TAMSA merchandise in the
United States.
While not disputing that TAMSA may have set the price for the sale,
petitioners reiterate that the selling agreement between TAMSA and
Siderca Corp. grants Siderca Corp. certain rights in negotiating and
setting prices as part of its work in marketing TAMSA products.
Petitioners state that the Department should discount other assertions
on the record regarding TAMSA's role in setting the price, and instead
should concentrate on the selling agreement.
As for the other functions carried out with respect to this sale,
petitioners believe that these activities, taken as a whole, indicate
more than ancillary involvement by Siderca Corp. Petitioners urge the
Department to consider the range of services and activities in the
aggregate, rather than line by line, in making its determination.
Petitioners also advise the Department to examine the differences in
indirect selling expenses incurred by Siderca Corp. and TAMSA when
making its determination on this question.
Finally, petitioners state that it is also doubtful that TAMSA
passed the second prong of the CEP test. Petitoners note that, in the
original investigation, the merchandise sold to the U.S. was produced
to order and the U.S. sales were made through a different U.S.
affiliate. Comparing the fact pattern in this review to the one from
the original investigation, petitioners find the two to be different
and conclude that the current United States sale does not represent the
customary commercial channel between the parties involved in the sale.
According to petitioners, this sale therefore failed two of the three
prongs of the ``indirect EP sale'' test, and the Department should
therefore treat this sale as a CEP sale.
Department's Position
Section 772(b) of the Act defines CEP as ``the price at which the
subject merchandise is first sold (or agreed to be sold) in the United
States before or after the date of importation by or for the account of
the producer or exporter of such merchandise or by a seller affiliated
with the producer or exporter, to a purchaser not affiliated with the
producer or exporter, as adjusted.'' Section 772(a) of the Act defines
EP as ``the price at which the subject merchandise is first sold (or
agreed to be sold) before the date of importation by the producer or
exporter of the subject merchandise outside of the United States to an
unaffiliated purchaser in the United States, or to an unaffiliated
purchaser for exportation to the United States, as adjusted.'' When
sales are made prior to importation through an affiliated U.S. sales
agent to an unaffiliated customer in the United States, our practice is
to examine several criteria in order to determine whether or not the
sales are ``indirect'' EP sales. Those criteria are: (1) Whether the
merchandise was shipped directly from the manufacturer to the
unaffiliated U.S. customer; (2) whether this was the customary
commercial channel between the parties involved; and (3) whether the
function of the U.S. selling agent was limited to that of a ``processor
of sales-related documentation'' and a ``communications link'' between
the exporter and the unaffiliated U.S. buyer. See Canadian Steel 63 FR
at 12738. Where all three criteria are met, the Department has regarded
the routine selling functions of the exporter as merely having been
relocated geographically from the country of exportation to the United
States where the sales agent performs them, and has determined the
sales to be EP sales. Where one or more of these conditions is not met,
the Department has classified the sales in question as CEP sales.
In attempting to determine whether a sale should be treated as EP
or CEP, the Department looks at the overall role of an affiliate in the
sales process. Essentially, the Department wishes to determine whether
the affiliate is substantially involved in the sales process. While
each of the three prongs addresses this question to some extent, the
third prong of the test is the most important with respect to resolving
the question. After carefully examining the evidence, the Department
believes that the fact pattern indicates clearly that the affiliate,
Siderca Corp., played the leading role in the U.S. sale made during
this administrative review and was substantially involved in the sales
process.
As an initial matter, the selling agreement between TAMSA and
Siderca Corp. is quite clear with respect to the services that Siderca
Corp. performs. Siderca Corp. is the exclusive selling agent for TAMSA
products in the United States and other parts of the world, and has
certain rights affecting the price for any sales under the agreement.
In exchange for providing marketing and selling functions, and for
providing other services, such as paying for brokerage and importer
duties, Siderca Corp. is entitled to receive compensation under the
agreement. The record indicates that Siderca Corp. did receive, in
connection with this sale, the compensation provided for under the
agreement, and performed functions for which it is responsible under
the agreement.
In addition, Siderca Corp. played the primary role in generating
this sale by bringing the customer to TAMSA. The record shows that
Siderca Corp. has a longstanding working relationship with the United
States customer, is in frequent contact with that customer, and that
sales of other TAMSA products to this and other customers occur because
of these contacts. Conversely, TAMSA itself appears to have little, if
any, contact outside of Mexico with regard to the sale of its products
in the United States. Indeed, under the terms of the agreement, TAMSA
is precluded from soliciting or negotiating sales directly in the
United States. The agreement places the rights and responsibilities of
selling and marketing TAMSA products in the United States squarely on
Siderca Corp.
Based on this fact pattern, it appears that, contrary to TAMSA's
claims, the sale to the United States of subject merchandise was within
the framework of the agreement between TAMSA and Siderca Corp. Evidence
on the record indicates that, consistent with its rights and
responsibilities under the selling agreement, Siderca Corp. maintained
contacts with the United States customer and, through these contacts,
was able to match that customer's requirements with subject merchandise
available from TAMSA. Siderca Corp.
[[Page 13967]]
was aware of the existence of the merchandise from a canceled sale that
it had previously arranged, and upon receiving the inquiry forwarded it
to TAMSA for approval. The fact that Siderca Corp. may not have fully
exercised its rights with regards to price negotiation, deferring to
TAMSA with respect to the final approval, neither negates the substance
and importance of the agreement nor diminishes the importance of
Siderca Corp.'s role in arranging this sale. Simply put, under the
current agreement, it appears that TAMSA would be precluded from
seeking sales in the United States directly. Sales of TAMSA products in
the United States must, as a condition of the agreement, begin with
Siderca Corp. The fact that Siderca Corp. performed other functions as
specified in the agreement, even if these were ancillary services, and
received compensation according to the terms of the agreement,
reinforces the conclusion that Siderca Corp.'s activities under the
agreement were the primary factors in creating the sale to the United
States.
The cases cited by both TAMSA and petitioners, when compared with
the fact pattern of the case, reinforce the conclusion that this sale
should be classified as a CEP sale. In Wire Rod from Korea, the
Department treated the sales as EP sales because the Department
``(c)onfirmed Changwon's assertions that POSAM (the U.S. affiliate) is
not in a position to negotiate, confirm, or reject prices without
approval from Changwon'' and ``POSAM * * * did not solicit business on
behalf of Changwon'' and ``Changwon itself contacted its potential U.S.
customers'' (63 FR at 40418-19). In this instance, in contrast, Siderca
Corp. had the authority to negotiate, confirm, or reject prices through
its selling agreement. Additionally, the Department determined at the
Siderca Corp. verification that Siderca Corp. maintains a sales staff
which is in active contact with U.S. customers, whereas TAMSA had no
contact with the potential U.S. customers.
In Beryllium from Kazakhstan, the Department treated the sales as
EP because ``verification findings confirmed the limits on BMI's (the
U.S. affiliate) authority to finalize the sales and that BMI is acting
solely as a processor of documentation and communications link'' (62 FR
at 2649). In the instant case, in contrast, the verification findings
indicate that Siderca Corp.'s authority is not limited, because of the
existence of the selling agreement.
As for the Canadian Steel case relied upon by the respondent, the
U.S. affiliate whose sales were deemed to be EP sales in that case did
not solicit sales, negotiate contracts or prices, or provide customer
support. Siderca Corp., in contrast, regularly did all of the above on
behalf of TAMSA. Even if it did not expressly solicit this particular
sale, its function, which included negotiation with respect to this
sale, clearly exceeded the Canadian Steel definition of ancillary
functions.
Although TAMSA relied upon U.S. Steel Group v. United States, that
case actually involved CEP, not EP, sales. In that case, the Court of
International Trade (``CIT'') examined the Department's determination
in Certain Cut-to-Length Carbon Steel Plate from Germany; Final Results
of Antidumping Duty Administrative Review, 62 FR 18391 (April 15,
1997). The CIT noted that, during the review, the producer, Dillinger,
stated that it set the terms of the sale, including the final price.
The Court further noted that the Department had found that the U.S.
affiliate, Francosteel, among other things, either solicited or
responded to the initial U.S. customer contact, received the purchase
orders, negotiated the final sale with the U.S. customer using the
pricing and term guidelines provided by Dillinger, took title to the
merchandise, acted as importer of record, and invoiced the U.S.
customer. Finally, Francosteel had the flexibility to make decisions on
its own as to price. All of these factors, ``[c]ombined with all the
normal selling functions, which have not always led to CEP
classification, legitimately may be viewed as pushing this sale over
the edge into CEP rather than the EP category.'' U.S. Steel Group, 15
F. Supp. 2d at 903. A similar fact pattern exists in this case. Siderca
Corp. has the authority to make pricing decisions on its own; it made
the first contact with the customer and performed all of the selling
functions listed above.
The case cited by petitioners also support a conclusion that this
sale is best classified as a CEP sale. In Wire Rod from Spain, 63 FR at
40394, the Department treated the U.S. sales as CEP sales under a
similar fact pattern. The Department noted that the U.S. affiliate
(Acerinox) ``will contact U.S. customers that it has not dealt with for
some time. Otherwise, U.S. customers contact Acerinox to inquire about
purchasing'' Roldan's SSWR, the product made by the parent company. The
Department further stated that Acerinox ``(m)ay accept the customer's
order, if it is a small order. * * * For inquiries regarding
significant purchases, Acerinox will contact (the parent company) to
determine the sales terms' that are acceptable. After taking an order,
Acerinox transmits it to the parent company. Acerinox then coordinates
freight in the United States and collects and transfers payment to the
parent company. Based upon this fact pattern, the Department stated
that ``[t]he record shows that Acerinox was involved in every aspect of
the sales process except for arranging for shipment [of the product] to
the United States and invoicing the U.S. customers. Moreover,
Acerinox's involvement in the sales process was extensive * * *'' when
compared to that of the parent company. The Department further stated
that ``[t]he preponderance of selling functions incurred to sell
Roland's (wire rod) to the U.S. customers occurred in the United
States. Furthermore, Acerinox's role in negotiating the terms of
certain U.S. sales is not indicative of the ancillary role normally
played by a ``processor of sales-related documentation'' and a
``communication link.'' Specifically, Acerinox's authority to negotiate
and accept sales terms * * * as well as its authority to initiate
contact with U.S. customers * * * contradicts' the parent company's
claim that the U.S. affiliate's activities were ancillary. Thus, the
Department classified these sales as CEP sales.
Again, the fact pattern in Wire Rod from Spain is consistent with
that found in this review. TAMSA had no direct contact with the U.S.
customer, whereas Siderca Corp., through its selling agreement, had the
authority to set the price and terms. While TAMSA had a role in setting
the price, as did the parent of Acerinox, Siderca Corp.''s contacts
with customers, its flexibility in negotiating terms of sale, and its
other sales-related activities, indicate that the sale is appropriately
classified as CEP.
Finally, in Korean Steel, 63 FR at 13177, the Department again
found that a fact pattern similar to that in this case warranted CEP
treatment of the U.S. sales. In the Korean Steel case, the Department
stated that ``(a)ll of Dongbu's U.S. sales are made through DBLA [the
U.S. affiliate], and that Dongbu's U.S. customers seldom have contact
with Dongbu. Furthermore, it is DBSA (and not Dongbu) that writes and
signs the sales contract. * * * Furthermore, we find that, in addition
to playing a key role in the sales negotiation process, DBLA played a
central role in all sales activities after the merchandise arrived in
the United States.''
Based on the facts of the case, and their similarity to previous
cases concerning the issue of whether a sale should be classified as
CEP or EP, we believe that TAMSA's sale to the United
[[Page 13968]]
States is properly classified as a CEP sale.
Comment 3
Petitioners argue that the Department should apply partial facts
available for certain selling expenses incurred in the United States.
Petitioners believe that TAMSA did not cooperate fully, or to the best
of its ability, in providing proper figures and supporting
documentation for various expenses such as brokerage.
Petitioners present a sequence of events which purport to show that
TAMSA did not cooperate to the best of its ability. Petitioners point
to the first price build-up submitted by TAMSA and assert that it
contained numerous errors and omissions. Petitioners state that,
despite requests for clarification of the expenses in the price build-
up, TAMSA did not present all of the expenses or a satisfactory
explanation until verification. During the verification in Veracruz,
petitioners state that the Department discovered previously unknown and
unreported expenses. Similarly, according to petitioners, at the
verification of Siderca Corp. in Houston, the Department discovered new
supporting documentation for the various expenses. Because neither all
expenses nor all supporting documents were provided before the two
verifications, petitioners urge the Department to use partial facts
available with regard to these expenses.
TAMSA retorts that it did, in fact, cooperate fully and to the best
of its ability. TAMSA states that, contrary to petitioners' claims, all
expenses related to the sale into the United States were reported
before verification in Veracruz. Of the three charges mentioned by
petitioners (brokerage charges, stevedoring, and wharfage), TAMSA
points out that each was reported before verification. While
acknowledging that two of the three charges were reported late or were
initially mis-reported, TAMSA attributes this delay to clerical errors
or omissions that TAMSA itself discovered and corrected prior to the
Department's first verification in Veracruz. Because the errors were
minor, and were corrected either before or at verification, TAMSA
contends that it is the Department's practice to accept such
corrections. See Notice of Final Determination of Sales at Less Than
Fair Value: Stainless Steel Wire Rod from Sweden, 63 FR 40449 (July 29,
1998); Notice of Final Determination of Sales at Less Than Fair Value:
Static Random Access Memory Semiconductors from Taiwan, 63 FR 8909
(February 23, 1998); Final Determination of Sales at Less Than Fair
Value: Certain Cut-to-Length Carbon Steel Plate from the People's
Republic of China, 62 FR 61964 (November 20, 1997).
Department's Position
We agree with respondent. While the Department generally requires
respondents to report all expenses and provide any requested supporting
documentation in accordance with established deadlines, the fact is
that TAMSA provided data on nearly all expenses in a timely manner.
TAMSA reported only one minor expense prior to the Department's
verification in Veracruz. Furthermore, the Department verified the
accuracy of the reported expenses. The additional support documentation
added to the record at the verification in Houston did not reflect a
change in the expenses reported. Although they demonstrated that
Siderca Corp. did have greater control in the price build-up than
originally claimed by TAMSA, the additional support documentation added
to the record at the verification in Houston did not reflect a change
in the expenses reported.
Finally, although TAMSA did not provide all of the supporting
documentation for all of the expenses incurred prior to the
verifications, the Department was able to supplement and verify all
relevant information during the two verifications. Therefore, we will
not make any changes with regard to these expenses.
Comment 4
Petitioners assert that the Department should deduct commissions
paid to Siderca Corp. from the United States price. Assuming that
TAMSA's United States sale is classified properly as a CEP sale,
petitioners argue that the statute calls for commissions to be deducted
from the United States Price.
Petitioners note that Siderca Corp. is entitled, under its selling
agreement with TAMSA, to receive a ``commission'' equal to a percentage
of the actual price charged to customers. If this figure is intended to
offset expenses incurred by Siderca Corp., petitioners argue, the
amount of the commission which exceeds the expenses should be deducted.
TAMSA counters that these are related party commissions and are
thus intra-company transfers. TAMSA states that the general practice of
the Department is to treat related party mark-ups in price not as
commissions, but as intra-company transfers rather than as expenses.
Since these are not sales expenses, they should not be deducted from
United States price. TAMSA cites various cases in which the Department
did not deduct commissions between affiliated parties. See Antifriction
Bearings (Other Than Tapered Roller Bearings) and Parts Thereof from
France, Germany, Italy, Japan, Romania, Singapore, Sweden, and the
United Kingdom, 63 FR 33320 (June 18, 1998); Korean Steel, 63 FR 13170.
Department's Position
We agree with respondent. The Department does not generally treat
price mark-ups between affiliates such as the ones in this case as
commissions. See U.S. Steel Group, 15 F. Supp. 2d at 903, and Floral
Trade Council v. United States, Slip-Op. 99-10 (CIT January 27, 1999).
Instead, these are intra-company transfers which the Department treats
as part of the general operating expenses of the company. Thus we
generally do not deduct them from U.S. price. Instead, in accordance
with 19 CFR 351.402(e), we deduct the actual expenses of the affiliated
importer. ``Although the statute appears to require the expense
represented by commissions to be deducted from CEP whether or not the
producer/exporter and U.S. [affiliate] are related, the statute does
not define `commissions.' '' Floral Trade Council, Slip Op. 99-10 at
10. Therefore, the Court has sustained the Department's practice of
treating commissions paid by the producer/exporter to an affiliate as
an intra-company transfer, rather than as a true commission. Id.
Petitioners cite section 771(d) of the Act (19 U.S.C. 1677a(d)) in
support of their contention that commissions should be deducted.
However, the opinion in U.S. Steel Group makes clear that, ``[i]f
expenses represented by the commissions are already accounted for by
means of a deduction for selling expenses nominally made under another
provision of 19 U.S.C.A. 1677a(d), or the expense does not truly exist,
no additional commission deduction need be made.'' 15 F. Supp. 2d at
903. Because the Department has already made adjustments for all of
TAMSA's selling expenses under 19 U.S.C. 1677a(d) related to the sale
in question, an additional adjustment for ``commission'' would
constitute double-counting. Consequently, the Department has made no
further adjustments in this regard.
Petitioners' claim that the amount of the ``commission'' that
exceeds the expenses incurred by Siderca Corp. is also already
addressed by another provision of section 772(d) of the Act (19 U.S.C.
1677a(d)), specifically the CEP profit provision, section 772(d)(3) of
the Act (19 U.S.C. 1677a(d)(3)). The
[[Page 13969]]
Court has also affirmed the Department's position that the amount by
which ``commissions'' paid to affiliates represents profit for the
affiliate receiving them. A profit amount has already been accounted
for under the CEP profit provision. Floral Trade Council, Slip Op. 99-
10 at 13.
Comment 5
Petitioners urge the Department to correct TAMSA's reported
warehousing expenses in connection with the provision of Just In Time
services to certain domestic customers. Petitioners assert that TAMSA's
methodology, which reports expenses on a monthly basis by regional
warehouse, is distortive. Petitioners cite changes in the actual
expenses per month, and state that there appears to be no correlation
between these expenses and the tonnage shipped or warehoused in that
month. In particular, there appear to be instances where costs go up
even though tonnages go down for a month. Petitioners urge the
Department to recalculate warehousing expenses for each region on a
per-ton amount for the entire period of review.
TAMSA counters that its methodology is reasonable, that it acted to
the best of its ability in providing information, and that its
reporting methodology was not unreasonably distortive. Because of the
nature of Just In Time services (i.e., rapid delivery upon order),
expenses incurred in a month usually correspond closely to tonnages
shipped and sold in that month. To relate expenses from one month to
sales in a different month, as petitioners' methodology would, is more
distortive, according to TAMSA. TAMSA further explains how lower
tonnages in a month might incur higher expenses. For example, TAMSA
could incur more customer support expenses during a month in which it
made many smaller sales than in a month in which it made a single
larger tonnage sale. TAMSA cites Tapered Roller Bearings and Parts
Thereof, Finished and Unfinished, from Japan, and Tapered Roller
Bearings, Four Inches or Less in Outside Diameter, and Components
Thereof, from Japan: Final Results of Antidumping Duty Administrative
Reviews (63 FR 63860, November 17, 1998) in support of its assertion
that the Department should accept this methodology.
Department's Position
We agree with respondent. The methodology which TAMSA used is based
on actual, verified monthly figures. By using this methodology, TAMSA
has provided the Department with a more detailed, and more accurate,
warehousing cost. Adopting the petitioners' methodology would be less
accurate, as it would spread out monthly costs over the entire period
of review. As it is generally the Department's preference to use the
most accurate and reasonable methodology possible, a warehousing
expense methodology which is based on monthly figures is preferable to
one based on annual averages.
Comment 6
Petitioners request that the Department adjust the reported home
market freight charges for inland freight from the plant to the
warehouse. Since TAMSA was unable to report the actual freight charges,
it took the price lists for freight and adjusted these using a
methodology to take into account trucks which did not ship with a full
load. Petitioners argue that this ``constructed'' freight charge is
distortive. As partial facts available, petitioners suggest using the
prices from the price lists as a surrogate for the freight costs.
TAMSA counters that its allocation methodology was reasonable. As
directed by the Department's original questionnaire, TAMSA attempted to
allocate freight costs on the basis of the unit weight of the
individual products shipped. Because it used actual price lists, as
adjusted for instances not involving full truck loads, TAMSA claims
that its methodology more closely reflects the actual prices paid for
freight.
Department's Position
We agree with respondent. While the Department prefers to have
actual freight costs, a reasonable allocation methodology that most
closely reflects the actual costs is acceptable. The Department
verified information regarding price lists and payment for freight.
Based upon this verified information, the Department believes that this
methodology most closely reflects actual costs.
Comment 7
Both petitioners and respondents request that the Department
correct certain clerical errors. Petitioners request that the
Department make an adjustment to its cost calculation methodology by
eliminating the field titled ``SEPTADJ,'' that it correct the direct
selling expenses calculation by adding CREDITU to the expense, and that
it correct the application of exchange rates to packing expenses. TAMSA
requests that the Department calculate normal value based on monthly
averages (instead of on averages for the ``90-60 window'' as it has
done in the current program), that it add BILLADJH to the cost
calculation program, that it correct a conversion error in the CEP
ratio calculation, and that it not deduct CREDITU from U.S. direct
selling expenses.
Department's Position
The Department has examined the error allegations, and has made the
changes requested by both parties. Petitioners' and TAMSA's clerical
error requests regarding direct selling expenses address the same
issue. Both parties proposed programming language to address the issue.
Because we believe that petitioners most closely follow the proper
methodology, we have adopted their suggested programming language for
the final results. Because the details of these clerical error issues
involve proprietary data, see Analysis Memorandum for Final Results,
March 8, 1999.
Final Results of the Review
As a result of this review, we determine that the following
weighted-average dumping margins exist:
Circular Welded Non-Alloy Steel Pipes and Tubes
------------------------------------------------------------------------
Weighted-
Producer/manufacturer/exporter average
margin
------------------------------------------------------------------------
Hylsa...................................................... 0.00
TAMSA...................................................... 0.00
------------------------------------------------------------------------
The Department shall determine, and the Customs Service shall
assess, antidumping duties on all appropriate entries. The Department
will issue appraisement instructions directly to the Customs Service.
Furthermore, the following deposit requirements will be effective upon
publication of this notice of final results of review for all shipments
of oil country tubular goods from Mexico entered, or withdrawn from
warehouse, for consumption on or after the publication date, as
provided for by section 751(a)(1) of the Act: (1) The cash deposit rate
for the reviewed company will be the rate for that firm as stated
above; (2) for previously reviewed or investigated companies not listed
above, the cash deposit rate will continue to be the company-specific
rate published for the most recent period; (3) if the exporter is not a
firm covered in this review, or the original less than fair value
(LTFV) investigation, but the manufacturer is, the cash deposit rate
will be the rate established for the most recent period for the
manufacturer of the merchandise; and (4) if neither the exporter nor
the manufacturer is a firm
[[Page 13970]]
covered in this review, the cash deposit rate will be 23.79 percent.
This is the ``all others'' rate from the LTFV investigation. These
deposit requirements, when imposed, shall remain in effect until
publication of the final results of the next administrative review.
This notice serves as a final reminder to importers of their
responsibility under 19 CFR 351.402(f) of the Department's regulations
to file a certificate regarding the reimbursement of antidumping duties
prior to liquidation of the relevant entries during this review period.
Failure to comply with this requirement could result in the Secretary's
presumption that reimbursement of antidumping duties occurred and the
subsequent assessment of double antidumping duties. This notice also
serves as a reminder to parties subject to administrative protective
order (APO) of their responsibility concerning the disposition of
proprietary information disclosed under APO in accordance with 19 CFR
351.306 of the Department's regulations. Timely written notification of
return/destruction of APO materials or conversion to judicial
protective order is hereby requested. Failure to comply with the
regulations and the terms of an APO is a sanctionable violation.
This administrative review and this notice are in accordance with
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and Sec. 351.221 of
the Department's regulations.
Dated: March 10, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-7100 Filed 3-22-99; 8:45 am]
BILLING CODE 3510-DS-P
