E5-4890. Oil Country Tubular Goods, Other Than Drill Pipe, from Korea: Preliminary Results of Antidumping Duty Administrative Review

AGENCY:

Import Administration, International Trade Administration, U.S. Department of Commerce.

SUMMARY:

In response to a request filed by domestic interested parties, the U.S. Department of Commerce (“the Department”) is conducting an administrative review under the antidumping duty order on oil country tubular goods, other than drill pipe (“OCTG”), from Korea. This review covers the following producers: Husteel Co., Ltd. (“Husteel”) and SeAH Steel Corporation (“SeAH”). The period of review (“POR”) is August 1, 2003, through July 31, 2004. The preliminary results are listed below in the section entitled “Preliminary Results of Review.” We preliminarily determine that both Husteel and SeAH made sales below normal value (“NV”). If these preliminary results are adopted in our final results, we will instruct U.S. Customs and Border Protection (“CBP”) to assess antidumping duties based on the difference between the constructed export price (“CEP”) and the NV.

EFFECTIVE DATE:

September 8, 2005.

FOR FURTHER INFORMATION CONTACT:

Scott Lindsay or Nicholas Czajkowski, AD/CVD Operations, Office 6, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 20230, telephone: [phone] or [phone], respectively.

SUPPLEMENTARY INFORMATION:

BACKGROUND

On August 11, 1995, the Department published in the Federal Register an antidumping duty order on OCTG from Korea (60 FR 41058). On August 3, 2004, the Department published a notice of an opportunity to request an administrative review of the antidumping order on OCTG from Korea. See Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation; Opportunity To Request Administrative Review, 69 FR 46496. On August 31, 2004, the Department received a properly filed, timely request for an administrative review from domestic producers, IPSCO Tubulars, Inc., Lone Star Steel Company, and Maverick Tube Corporations (“petitioners”). On September 22, 2004, the Department published a notice of initiation for this antidumping duty administrative review. See Notice of Initiation of Antidumping and Countervailing Duty Administrative Reviews and Request for Revocation in Part, 69 FR 56745.

On November 12, 2004, the Department issued questionnaires to Husteel and SeAH. Husteel and SeAH submitted Section A¹ responses on January 5, 2005 and Section B-D responses on January 18, 2005. SeAH also submitted a Section E response on January 18, 2005. The Department issued supplemental questionnaires on February 29, 2005, March 24, 2005, and June 6, 2005. Husteel and SeAH submitted responses on March 7, 2005, April 22, 2005, and June 24, 2005.

On March 7, 2005, the Department published a notice extending the deadline for the preliminary results of this administrative review from May 3, 2005, until August 31, 2005. See Oil Country Tubular Goods from Korea: Extension of Time Limit for Preliminary Results of Administrative Review, 70 FR 10962.

On November 30, 2004, and December 14, 2004, Husteel and SeAH, respectively submitted a request to the Department for a one-month adjustment to the cost reporting period in this review. Husteel and SeAH requested to report costs from July 1, 2003, through June 30, 2004, rather than for the established period of review (“POR”), August 1, 2003, through July 31, 2004. Husteel and SeAH claimed that the one-month shift in the reporting period would allow them to use their semi-annual financial information, which would ease their reporting burden and simplify accuracy and completeness tests for the Department. Both companies stated that the shift in cost period would not distort their reported costs. In Husteel's and SeAH's December 22, 2004, submissions, each company provided further information regarding their request for the shift in cost period. In their December 2, 2004, and December 28, 2004, submissions, petitioners argued that a shift in the cost period would materially impact the antidumping analysis in this review.

On January 5, 2005, the Department determined that a shift in cost reporting period would be inappropriate. See Letter to Husteel and SeAH regarding adjustment the cost reporting period dated January 5, 2005. The Department found that the difference in costs of primary inputs and in the cost of manufacturing between the two periods would have a significant effect on the results in this review. Therefore, the Department instructed Husteel and SeAH to provide cost information for the POR.

PERIOD OF REVIEW

The POR for this administrative review is August 1, 2003, through July 31, 2004.

SCOPE OF THE ORDER

The products covered by this order are OCTG, hollow steel products of circular cross-section, including only oil well casing and tubing, 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 or tubing pipe containing 10.5 percent or more of chromium, or drill pipe. The products subject to this order are currently classified in the Harmonized Tariff Schedule of the United States (“HTSUS”) under sub-headings: 7304.29.10.10, 7304.29.10.20, 7304.29.10.30, 7304.29.10.40, 7304.29.10.50, 7304.29.10.60, 7304.29.10.80, 7304.29.20.10, 7304.29.20.20, 7304.29.20.30, 7304.29.20.40, 7304.29.20.50, 7304.29.20.60, 7304.29.20.80, 7304.29.30.10, 7304.29.30.20, 7304.29.30.30, 7304.29.30.40, 7304.29.30.50, 7304.29.30.60, 7304.29.30.80, 7304.29.40.10, 7304.29.40.20, 7304.29.40.30, 7304.29.40.40, 7304.29.40.50, 7304.29.40.60, 7304.29.40.80, 7304.29.50.15, 7304.29.50.30, 7304.29.50.45, 7304.29.50.60, 7304.29.50.75, 7304.29.60.15, 7304.29.60.30, 7304.29.60.45, 7304.29.60.60, 7304.29.60.75, 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. The HTSUS sub-headings are provided for convenience and customs purposes. The written description remains dispositive of the scope of the order.

ANALYSIS

Product Comparisons

In accordance with section 771(16) of the Tariff Act of 1930, as amended (“the Act”), we considered all products manufactured by the respondents that are covered by the description contained in the “Scope of the Order” section above and were sold in the comparison market during the POR, to be the foreign like product for purposes of determining the appropriate product comparisons to U.S. sales. Where there were no sales of identical merchandise in the comparison market to compare to U.S. sales, we compared U.S. sales to the most similar foreign like product on the basis of the characteristics listed in Appendix V of the Department's November 12, 2004, antidumping questionnaire.

Date of Sale

It is the Department's practice to use the invoice date as the date of sale. We may, however, use a date other than the invoice date if we are satisfied that a different date better reflects the date on which the exporter or producer first establishes the material terms of sale. See 19 CFR section 351.401(i); see also Antidumping Duties; Countervailing Duties; Final Rule, 62 FR 27296, 27348-50 (May 19, 1997).

Husteel

U.S. Sales: For its U.S. sales, Husteel's customers contact Husteel USA, Husteel's U.S. affiliate, by phone and negotiate quantity and price. After production is complete, the merchandise is shipped from Korea and Husteel USA issues its invoice to the U.S. customer. As such, Husteel reported the date of sale to be the shipment date from Korea since that date always precedes Husteel USA's invoice date. The Department has found no information that indicates that another date better reflects the date on which the material terms of sale were established. Therefore, the Department is preliminarily using shipment date as date of sale, as reported by Husteel.

SeAH

U.S. Sales: For its U.S. sales, SeAH reported two channels of distribution: 1 - Inventory sales that were warehoused and, in most cases, further manufactured in the United States by Pusan Pipe America (“PPA”), SeAH's U.S. affiliate (U.S. Channel 1); and 2 - Constructed Export Price (CEP) sales made by PPA and shipped directly to the customer from Korea (U.S. Channel 2). In its submission, SeAH reported a different date of sale for each of its two channels of distribution. For sales in U.S. channel 1, SeAH reported the date of sale to be the date of the commercial invoice issued by PPA to the unaffiliated customer. For sales in U.S. channel 2, SeAH reported the date of sale to be the shipment date from Korea since this date precedes the date of PPA's commercial invoice to its unaffiliated U.S. customer. The Department has found no information that indicates that another date better reflects the date on which the material terms of sale were established. Therefore, the Department is preliminarily using the commercial invoice date as date of sale for U.S. channel 1 and the shipment date as date of sale for U.S. channel 2, as reported by SeAH.

Canadian Sales: For sales to Canada, the comparison market in this review (see “Normal Value Comparisons” below), PPA receives an inquiry from the customer by fax or telephone. Once SeAH and PPA agree on the price, the customer then sends a written purchase order to PPA. The merchandise is shipped and SeAH invoices PPA. PPA then invoices the Canadian customer, pays SeAH, and then receives payment from the customer. As such, SeAH reported the shipment date from Korea since this date precedes the date of PPA's commercial invoice to its unaffiliated Canadian customer. The Department has found no information that indicates that another date better reflects the date on which the material terms of sale were established. Therefore, the Department is preliminarily using shipment date as date of sale, as reported by SeAH.

Normal Value Comparisons

To determine whether Husteel's or SeAH's sales of subject merchandise to the United States were made at less than NV, we compared each company's CEP to the NV, as described in the “Constructed Export Price” and “Normal Value” sections of this notice, in accordance with section 777A(d)(2) of the Act.

Selection of Comparison Market

The Department determines the viability of a comparison market by comparing the aggregate quantity of comparison-market sales to U.S. sales. A home market is not considered a viable comparison market if the aggregate quantity of sales of the foreign like product in that market amounts to less than five percent of the quantity of sales of subject merchandise into the United States during the POR. See section 773(a)(1)(B) of the Act; see also 19 CFR 351.404. Husteel and SeAH each reported that the aggregate quantity of sales of the foreign like product in Korea during the POR amounted to less than five percent of the quantity of each company's sales of subject merchandise to the United States during the POR.

In Husteel's and SeAH's January 18, 2005, questionnaire responses, each company reported that the aggregate quantity of their sales of the foreign like product to the People's Republic of China (PRC) amounted to more than five percent of the total quantity of each company's sales of subject merchandise to the United States during the POR. However, pursuant to section 771(18) of Act, the Department has determined that the PRC is a non-market economy country (NME). Consequently, the Department finds that the prices of Husteel's and SeAH's OCTG sales to the PRC are unrepresentative. As such, pursuant to section 773(a)(1)(B)(ii)(I) of the Act, the Department finds that such prices are inappropriate for use as a basis to establish normal value.

In its January 5, 2005, questionnaire response, Husteel reported having no sales of OCTG to any other countries besides the United States and the PRC during the POR. Therefore, the Department has used constructed value (CV) for Husteel as the basis for NV for this review based on the cost of production (COP) (Section D) questionnaire responses submitted on January 18, 2005.

In its January 5, 2005, questionnaire response, SeAH reported sales of OCTG to Canada and Myanmar during the POR. Since the quantity of foreign like product sold by SeAH into Myanmar was less than five percent of the quantity of subject merchandise sold in the United States, the Department determined that only Canada qualified as a viable comparison market based on the criterion established in section 773(a)(1) of the Act. The Department calculated NV based on the information on sales to Canada provided in SeAH's April 22, 2005, questionnaire response. For U.S. sales for which a match with Canadian sales could not be found, the Department used CV as the basis for comparison based on the information provided by SeAH in Section D of its January 18, 2005, submission.

Normal Value

Price-to-Price Comparisons

SeAH: Where appropriate, we made adjustments to NV in accordance with section 773(a)(6) of the Act. We added duty drawback and deducted movement expenses, third country packing expenses and third country direct selling expenses from the NV. We also made adjustments for CEP-offset (see “Level of Trade/CEP-offset” section below), based on the sum of inventory carrying costs and other indirect selling expenses. We made further adjustments for differences in costs attributable to differences in physical characteristics of merchandise. Finally, the Department added U.S. packing expenses to derive the foreign unit price in dollars (“FUPDOL”) to use as the NV.

Constructed Value

Husteel: We used CV as the basis for NV for all sales because Husteel had no viable comparison market in accordance with section 773(a)(4) of the Act. We calculated CV in accordance with section 773(e) of the Act. Materials, labor, and factory overhead were totaled to derive the cost of manufacturing. Interest, general and administrative (G&A) expenses, selling expenses, profit and U.S. packing expenses were then added to derive the CV. In accordance with section 773(e)(2)(B)(iii) of the Act, we based profit and selling expenses on amounts derived from SeAH's financial statements. Finally, we deducted direct selling expenses from the CV price to derive the FUPDOL to use as the NV.

SeAH: We used CV as the basis for NV for one sale because there were no usable contemporaneous sales of the foreign like product in the comparison market, in accordance with section 773(a)(4) of the Act. We calculated CV in accordance with section 773(e) of the Act. Materials, labor, and factory overhead were totaled to derive the cost of manufacturing. Interest, G&A expenses, selling expenses, profit, and U.S. packing expenses were then added to derive the CV. Profit was calculated based on the total value of sales and total cost of production provided by SeAH in its questionnaire response. Finally, we deducted credit expenses and U.S. direct selling expenses from CV to derive the FUPDOL to use as the NV.

Constructed Export Price

In accordance with section 772(b) of the Act, CEP is 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 under sections 772(c) and (d) of the Act. In Husteel's and SeAH's questionnaire responses, each company classified all of its export sales of OCTG to the United States as CEP sales.

All of Husteel's sales are properly classified as CEP sales because they were made for the account of Husteel by Husteel USA. Husteel reported one channel of distribution in the U.S. market: “produced to order” sales, shipped directly from Korea to the unaffiliated U.S. customers. All of SeAH's sales are properly classified as CEP sales because they were made for the account of SeAH by PPA. SeAH reported two channels of distribution for its U.S. sales: (1) CEP sales of further manufactured merchandise from PPA's inventory and (2) CEP sales shipped directly to the U.S. customer from Korea.

The Department recalculated SeAH's starting price taking into account, where necessary, billing adjustments and early payment discounts. Where applicable, the Department made deductions from the starting price for movement expenses, including foreign inland freight, foreign and U.S. brokerage and handling, international freight, marine insurance and U.S. customs duties in accordance with section 772(c)(2) of the Act. See Memorandum from Nicholas Czajkowski, Case Analyst, to the File: Analysis of Husteel Corporation (“Husteel”) for the Preliminary Results of the Administrative Review of Oil Country Tubular Goods, Other Than Drill Pipe from Korea, and Memorandum from Nicholas Czajkowski, Case Analyst, to the File: Analysis of SeaH Steel Corporation (“SeAH”) for the Preliminary Results of the Administrative Review of Oil Country Tubular Goods, Other Than Drill Pipe from Korea, dated August 31, 2005, on file in the CRU. In accordance with section 772(d)(1) of the Act, the Department also deducted U.S. direct selling expenses, including credit expense, packing expense, inventory carrying costs, profit and indirect selling expense. We also deducted the cost of further manufacturing, where applicable, for SeAH. Finally, we added duty drawback to the starting price to derive a net U.S. price to use as the CEP.

Level of Trade/CEP-offset

In accordance with section 773(a)(1) of the Act, to the extent practicable, we determined NV based on sales made in the comparison market at the same level of trade (“LOT”) as the U.S. sales. The NV LOT is that of the starting-price sales in the comparison market. The Court of Appeals for the Federal Circuit has held that the statute unambiguously requires Commerce to deduct the selling expenses set forth in section 772(d) of the Act from the CEP starting price prior to performing its LOT analysis. See Micron Technology, Inc. v. United States, 243 F.3rd 1301, 1315 (Fed. Cir. 2001). Consequently, the Department will continue to adjust the CEP, pursuant to section 772(d) of the Act, prior to performing the LOT analysis, as articulated by the Department's regulations at 19 CFR 351.412. When NV is based on CV, the NV LOT is that of the sales from which we derive SG&A expenses and profit.

To determine whether the comparison-market sales on which NV is based are at a different LOT than EP or CEP sales, we examine stages in the marketing process and selling functions along the chain of distribution between the producer and the first unaffiliated customer. If the comparison-market sales are at a different level of trade and the difference affects price comparability, as manifested in a pattern of consistent price differences between the sales on which NV is based and comparison-market sales at the level of trade of the export transaction, we make a level-of-trade adjustment under section 773(a)(7) of the Act. Finally, if the data available is not sufficient to provide an appropriate basis to quantify a level-of-trade adjustment, we adjust NV under section 773(a)(7) of the Act (the CEP-offset provision).

In the current review, SeAH reported one LOT in the Canadian market and two LOT in the United States. SeAH claimed that, once adjustments for PPA's activities for U.S. sales, pursuant to section 772(d) of the Act, are made, the LOT in both U.S. channels would be less advanced than the Canadian LOT. SeAH claimed that they cannot quantify a level-of-trade adjustment, but that a CEP offset is warranted in this case. For this review, we obtained information from SeAH regarding the marketing stages involved in its selling activities for its reported U.S. and Canadian sales, including a description of the selling activities performed by the respondent for each channel of distribution it claimed. (See SeAH's January 18, 2005, and April 22, 2005, questionnaire responses).

Level of Trade in the Canadian Market

SeAH reported one channel of distribution and one LOT in the Canadian market. All sales into the Canadian market were CEP sales made between PPA and the customer and shipped directly to the customer from Korea. As such, we preliminarily find that all of SeAH's sales in the Canadian market were made at one LOT.

Level of Trade in the U.S. Market

As previously stated, SeAH reported two channels of distribution for its sales into the U.S. market, U.S. Channel 1 and U.S. Channel 2. SeAH also reported two LOT. We examined the selling functions performed by SeAH and/or PPA for each U.S. channel of distribution and found that there were significant differences with respect to the inventory and further manufacturing activities which PPA performed. In SeAH's U.S. Channel 1 sales, subject merchandise was inventoried and further manufactured by PPA in the United States before being sold to the unaffiliated customer. In SeAH's U.S. Channel 2 sales, subject merchandise was shipped directly from Korea to the unaffiliated customer. Therefore, we preliminarily find that SeAH made its U.S. sales at two different LOT.

Comparison of Levels of Trade Between Markets

SeAH reported that PPA is involved in all aspects of the selling functions for both of channels of distribution in the United States. In accordance with section 772(d) of the Act, we deducted selling expenses from the CEP prior to performing the LOT analysis.

In accordance with section 772(d) of the Act, we deducted inventory costs, further manufacturing costs, freight and movement expenses, and selling and marketing expenses performed by PPA for SeAH's U.S. Channel 1 sales. After deducting these expenses, we compared the Canadian LOT to the U.S. Channel 1 LOT. Based on our analysis, we find that the U.S. Channel 1 sales are at a less advanced LOT than the Canadian sales.

In accordance with section 772(d) of the Act, we deducted freight and movement expenses, and selling and marketing expenses performed by PPA for SeAH's U.S. Channel 2 sales. After deducting these expenses, we compared the Canadian LOT to the U.S. Channel 2 LOT. Based on our analysis, we find that the U.S. Channel 2 sales are at a less advanced LOT than the Canadian sales.

Therefore, since the sales in Canada are being made at a more advanced LOT than the sales to the United States, a LOT adjustment is appropriate for the Canadian sales in this review. However, since the data available is not sufficient to provide an appropriate basis for making a LOT adjustment, we made a CEP offset adjustment in accordance with section 773(a)(7)(B) of the Act and 19 CFR 351.412(f). This offset is equal to the amount of indirect selling expenses incurred in the comparison market not exceeding the amount of indirect selling expenses and commissions deducted from the U.S. price in accordance with section 772(d)(1)(D) of the Act.

Currency Conversion

We made currency conversions in accordance with section 773A of the Act based on the exchange rates in effect on the dates of the U.S. sales as certified by the Federal Reserve Bank.

PRELIMINARY RESULTS OF REVIEW

We preliminarily determine that the following dumping margin exists:

Manufacturer/Exporter	Margin
SeAH Steel Corporation	3.91%
Husteel Co., Ltd.	12.30%

Verification

As provided in section 782(i) of the Act, the Department anticipates conducting a verification of Husteel and SeAH following the issuance of the preliminary results.

Duty Assessment and Cash Deposit Requirements

The Department shall determine, and CBP shall assess, antidumping duties on all appropriate entries. Pursuant to 19 CFR 351.212(b), the Department calculates an assessment rate for each importer of the subject merchandise for each respondent. The Department will issue appropriate assessment instructions directly to CBP within 15 days of publication of the final results of this review.

Furthermore, the following cash deposit rates will be effective with respect to all shipments of OCTG from Korea entered, or withdrawn from warehouse, for consumption on or after the publication date of the final results, as provided for by section 751(a)(1) of the Act: (1) for Husteel and SeAH, the cash deposit rate will be the rate established in the final results of this review; (2) for previously reviewed or investigated companies not listed above, the cash deposit rate will be the company-specific rate established for the most recent period; (3) if the exporter is not a firm covered in this review, a prior review, or the 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 subject merchandise; and (4) if neither the exporter nor the manufacturer is a firm covered by this review, a prior review, or the LTFV investigation, the cash deposit rate shall be the all others rate established in the LTFV investigation, which is 12.17 percent. See Final Determination of Sales at Less Than Fair Value: Oil Country Tubular Goods from Korea, 60 FR 33561 (June 28, 1995). These deposit rates, when imposed, shall remain in effect until publication of the final results of the next administrative review.

Public Comment

Pursuant to 19 CFR 351.224(b), the Department will disclose to parties to the proceeding any calculations performed in connection with these preliminary results within five days after the date of publication of this notice. Pursuant to 19 CFR 351.309, interested parties may submit written comments in response to these preliminary results. Unless extended by the Department, case briefs are to be submitted within 30 days after the date of publication of this notice, and rebuttal briefs, limited to arguments raised in case briefs, are to be submitted no later than five days after the time limit for filing case briefs. Parties who submit arguments in this proceeding are requested to submit with the argument: (1) a statement of the issues, and (2) a brief summary of the argument. Case and rebuttal briefs must be served on interested parties in accordance with 19 CFR 351.303(f).

Also, pursuant to 19 CFR 351.310(c), within 30 days of the date of publication of this notice, interested parties may request a public hearing on arguments to be raised in the case and rebuttal briefs. Unless the Secretary specifies otherwise, the hearing, if requested, will be held two days after the date for submission of rebuttal briefs. Parties will be notified of the time and location. The Department will publish the final results of this administrative review, including the results of its analysis of issues raised in any case or rebuttal brief, no later than 120 days after publication of these preliminary results, unless extended. See 19 CFR 351.213(h).

Notification to Importers

This notice serves as a preliminary reminder to importers of their responsibility under 19 CFR 351.402(f) 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. These preliminary results of this administrative review and notice are issued and published in accordance with sections 751(a)(1) and 777(i)(1) of the Act.

Dated: August 31, 2005.

Barbara E. Tillman,

Acting Assistant Secretary for Import Administration.

Footnotes

1.  Section A of the questionnaire requests general information concerning a company's corporate structure and business practices, the merchandise under investigation that it sells, and the manner in which it sells that merchandise in all of its markets. Section B requests a complete listing of all home market sales, or, if the home market is not viable, of sales in the most appropriate third-country market (this section is not applicable to respondents in non-market economy cases). Section C requests a complete listing of U.S. sales. Section D requests information on the cost of production of the foreign like product and the constructed value of the merchandise under investigation. Section E requests information on further manufacturing.