65 FR 25907, May 4, 2000
                                                 A-588-850
                                                 A-588-851
                                                 A-791-808
                                                 Investigations
                                                 Public Document
                                                 GRP II Off. 5: CH

MEMORANDUM TO: Troy H. Cribb
               Acting Assistant Secretary
                 for Import Administration

FROM:          Holly A. Kuga
               Acting Deputy Assistant Secretary
                 for Group II, Import Administration


SUBJECT: Issues and Decision Memorandum for the Final Determinations
in the Antidumping Duty Investigations of Certain Large Diameter
Carbon and Alloy Seamless Standard, Line and Pressure Pipe from Japan
and Certain Small Diameter Carbon and Alloy Seamless Standard, Line
and Pressure Pipe from Japan and the Republic of South Africa

Summary

We have analyzed the comments and rebuttal of interested parties in
the antidumping duty investigations covering certain large diameter
carbon and alloy seamless standard, line and pressure pipe from Japan
and certain small diameter carbon and alloy seamless standard, line
and pressure pipe from Japan. No comments were received in the case
involving small diameter carbon and alloy seamless standard, line and
pressure pipe from the Republic of South Africa.(1) We recommend that
you approve the position we have developed in the Discussion of the
Issue section of this memorandum.

Background

On December 14, 1999, the Department of Commerce (the Department)
published the preliminary determinations in the antidumping duty
investigations of certain large diameter carbon and alloy seamless
standard, line and pressure pipe from Japan and certain small
diameter carbon and alloy seamless standard, line and pressure pipe
from Japan and the Republic of South Africa. The merchandise covered
by these investigations consists of standard, line and pressure
seamless pipes greater than 4.5 inches (114.3 mm) up to and including
16 inches (406.4 mm) in outside diameter (large diameter) or less
than or equal to 4.5 inches (114.3 mm) in outside diameter (small
diameter), regardless of wall-thickness, manufacturing process (hot
finished or cold-drawn), end finish (plain end, beveled end, upset
end, threaded, or threaded and coupled), or surface finish. The
period of investigation (POI) is April 1, 1998, through March 31,
1999. We invited parties to comment of the preliminary determination.
At the request of Sumitomo Metal Industries (SMI), we held a public
hearing for the two Japan investigations on March 14, 2000. There was
no request for a hearing in the South Africa case.

Scope of Investigations (2)

Large Diameter Carbon and Alloy Seamless Standard, Line and Pressure
Pipe

For purposes of the large diameter seamless pipe investigation, the
products covered are large diameter seamless carbon and alloy (other
than stainless) steel standard, line, and pressure pipes produced, or
equivalent, to the American Society for Testing and Materials (ASTM)
A-53, ASTM A-106, ASTM A-333, ASTM A-334, ASTM A-589, ASTM A-795, and
the American Petroleum Institute (API) 5L specifications and meeting
the physical parameters described below, regardless of application.
The scope of these investigations also includes all other products
used in standard, line, or pressure pipe applications and meeting the
physical parameters described below, regardless of specification,
with the exception of the exclusions discussed below. Specifically
included within the scope of these investigations are seamless pipes
greater than 4.5 inches (114.3 mm) up to and including 16 inches
(406.4 mm) in outside diameter, regardless of wall-thickness,
manufacturing process (hot finished or cold-drawn), end finish (plain
end, beveled end, upset end, threaded, or threaded and coupled), or
surface finish.

The seamless pipes subject to these investigations are currently
classifiable under the subheadings 7304.10.10.30, 7304.10.10.45,
7304.10.10.60, 7304.10.50.50, 7304.31.60.50, 7304.39.00.36,
7304.39.00.40, 7304.39.00.44, 7304.39.00.48, 7304.39.00.52,
7304.39.00.56, 7304.39.00.62, 7304.39.00.68, 7304.39.00.72,
7304.51.50.60, 7304.59.60.00, 7304.59.80.30, 7304.59.80.35,
7304.59.80.40, 7304.59.80.45, 7304.59.80.50, 7304.59.80.55,
7304.59.80.60, 7304.59.80.65, and 7304.59.80.70 of the Harmonized
Tariff Schedule of the United States (HTSUS).

Specifications, Characteristics, and Uses: Large diameter seamless
pipe is used primarily for line applications such as oil, gas, or
water pipeline, or utility distribution systems. Seamless pressure
pipes are intended for the conveyance of water, steam, petrochemicals,
chemicals, oil products, natural gas and other liquids and gasses in
industrial piping systems. They may carry these substances at elevated
pressures and temperatures and may be subject to the application of
external heat. Seamless carbon steel pressure pipe meeting the ASTM
A-106 standard may be used in temperatures of up to 1000 degrees
Fahrenheit, at various American Society of Mechanical Engineers
(ASME) code stress levels. Alloy pipes made to ASTM A-335 standard
must be used if temperatures and stress levels exceed those allowed
for ASTM A-106. Seamless pressure pipes sold in the United States are
commonly produced to the ASTM A-106 standard.

Seamless standard pipes are most commonly produced to the ASTM A-53
specification and generally are not intended for high temperature
service. They are intended for the low temperature and pressure
conveyance of water, steam, natural gas, air and other liquids and
gasses in plumbing and heating systems, air conditioning units,
automatic sprinkler systems, and other related uses. Standard pipes
(depending on type and code) may carry liquids at elevated
temperatures but must not exceed relevant ASME code requirements. If
exceptionally low temperature uses or conditions are anticipated,
standard pipe may be manufactured to ASTM A-333 or ASTM A-334
specifications.

Seamless line pipes are intended for the conveyance of oil and
natural gas or other fluids in pipe lines. Seamless line pipes are
produced to the API 5L specification.

Seamless water well pipe (ASTM A-589) and seamless galvanized pipe
for fire protection uses (ASTM A-795) are used for the conveyance of
water.

Seamless pipes are commonly produced and certified to meet ASTM A-
106, ASTM A-53, API 5L-B, and API 5L-X42 specifications. To avoid
maintaining separate production runs and separate inventories,
manufacturers typically triple or quadruple certify the pipes by
meeting the metallurgical requirements and performing the required
tests pursuant to the respective specifications. Since distributors
sell the vast majority of this product, they can thereby maintain a
single inventory to service all customers.

The primary application of ASTM A-106 pressure pipes and triple or
quadruple certified pipes in large diameters is for use as oil and
gas distribution lines for commercial applications. A more minor
application for large diameter seamless pipes is for use in pressure
piping systems by refineries, petrochemical plants, and chemical
plants, as well as in power generation plants and in some oil field
uses (on shore and off shore) such as for separator lines, gathering
lines and metering runs. These applications constitute the majority
of the market for the subject seamless pipes. However, ASTM A-106
pipes may be used in some boiler applications.

The scope of these investigations includes all seamless pipe meeting
the physical parameters described above and produced to one of the
specifications listed above, regardless of application, with the
exception of the exclusions discussed below, whether or not also
certified to a non-covered specification. Standard, line, and
pressure applications and the above-listed specifications are
defining characteristics of the scope of these investigations.
Therefore, seamless pipes meeting the physical description above, but
not produced to the ASTM A-53, ASTM A-106, ASTM A-333, ASTM A-334,
ASTM A-589, ASTM A-795, and API 5L specifications shall be covered if
used in a standard, line, or pressure application, with the exception
of the specific exclusions discussed below.

For example, there are certain other ASTM specifications of pipe
which, because of overlapping characteristics, could potentially be
used in ASTM A-106 applications. These specifications generally
include ASTM A-161, ASTM A-192, ASTM A-210, ASTM A-252, ASTM A-501,
ASTM A-523, ASTM A-524, and ASTM A-618. When such pipes are used in a
standard, line, or pressure pipe application, such products are
covered by the scope of these investigations.

Specifically excluded from the scope of these investigations are:

A. Boiler tubing and mechanical tubing, if such products are not
produced to ASTM A-53, ASTM A-106, ASTM A-333, ASTM A-334, ASTM A-
589, ASTM A-795, and API 5L specifications and are not used in
standard, line, or pressure pipe applications.

Finished and unfinished oil country tubular goods (OCTG), if covered
by the scope of another antidumping duty order from the same country.
If not covered by such an OCTG order, finished and unfinished OCTG
are included in this scope when used in standard, line or pressure
applications.

Products produced to the A-335 specification unless they are used in
an application that would normally utilize ASTM A-53, ASTM A-106,
ASTM A-333, ASTM A-334, ASTM A-589, ASTM A-795, and API 5L
specifications.

Line and riser pipe for deepwater application, i.e., line and riser
pipe that is (1) used in a deepwater application, which means for use
in water depths of 1,500 feet or more; (2) intended for use in and is
actually used for a specific deepwater project; (3) rated for a
specified minimum yield strength of not less than 60,000 psi; and (4)
not identified or certified through the use of a monogram, stencil,
or otherwise marked with an API specification (e.g., "API 5L").
With regard to the excluded products listed above, the Department
will not instruct Customs to require end-use certification until such
time as petitioner or other interested parties provide to the
Department a reasonable basis to believe or suspect that the products
are being utilized in a covered application. If such information is
provided, we will require end-use certification only for the
product(s) (or specification(s)) for which evidence is provided that
such products are being used in a covered application as described
above. For example, if, based on evidence provided by petitioner, the
Department finds a reasonable basis to believe or suspect that
seamless pipe produced to the A-335 specification is being used in an
A-106 application, we will require end-use certifications for imports
of that specification. Normally we will require only the importer of
record to certify to the end use of the imported merchandise. If it
later proves necessary for adequate implementation, we may also
require producers who export such products to the United States to
provide such certification on invoices accompanying shipments to the
United States.

Although the HTSUS subheadings are provided for convenience and
customs purposes, our written description of the merchandise subject
to this scope is dispositive.

Small Diameter Carbon and Alloy Seamless Standard, Line and Pressure
Pipe

For purposes of the small diameter seamless pipe investigations, the
products covered are seamless carbon and alloy (other than stainless)
steel standard, line, and pressure pipes and redraw hollows produced,
or equivalent, to the ASTM A-53, ASTM A-106, ASTM A-333, ASTM A-334,
ASTM A-335, ASTM A-589, ASTM A-795, and the American Petroleum
Institute (API) 5L specifications and meeting the physical parameters
described below, regardless of application. The scope of these
investigations also includes all products used in standard, line, or
pressure pipe applications and meeting the physical parameters
described below, regardless of specification. Specifically included
within the scope of these investigations are seamless pipes and
redraw hollows, less than or equal to 4.5 inches (114.3 mm) in
outside diameter, regardless of wall-thickness, manufacturing process
(hot finished or cold-drawn), end finish (plain end, beveled end,
upset end, threaded, or threaded and coupled), or surface finish.

The seamless pipes subject to these investigations are currently
classifiable under the subheadings 7304.10.10.20, 7304.10.50.20,
7304.31.30.00, 7304.31.60.50, 7304.39.00.16, 7304.39.00.20,
7304.39.00.24, 7304.39.00.28, 7304.39.00.32, 7304.51.50.05,
7304.51.50.60, 7304.59.60.00, 7304.59.80.10, 7304.59.80.15,
7304.59.80.20, and 7304.59.80.25 of the HTSUS.

Specifications, Characteristics, and Uses: Seamless pressure pipes
are intended for the conveyance of water, steam, petrochemicals,
chemicals, oil products, natural gas and other liquids and gasses
in industrial piping systems. They may carry these substances at
elevated pressures and temperatures and may be subject to the
application of external heat. Seamless carbon steel pressure pipe
meeting the ASTM A-106 standard may be used in temperatures of up
to 1000 degrees Fahrenheit, at various ASME code stress levels.
Alloy pipes made to ASTM A-335 standard must be used if temperatures
and stress levels exceed those allowed for ASTM A-106. Seamless
pressure pipes sold in the United States are commonly produced to
the ASTM A-106 standard.

Seamless standard pipes are most commonly produced to the ASTM A-53
specification and generally are not intended for high temperature
service. They are intended for the low temperature and pressure
conveyance of water, steam, natural gas, air and other liquids and
gasses in plumbing and heating systems, air conditioning units,
automatic sprinkler systems, and other related uses. Standard pipes
(depending on type and code) may carry liquids at elevated
temperatures but must not exceed relevant ASME code requirements. If
exceptionally low temperature uses or conditions are anticipated,
standard pipe may be manufactured to ASTM A-333 or ASTM A-334
specifications.

Seamless line pipes are intended for the conveyance of oil and
natural gas or other fluids in pipe lines. Seamless line pipes are
produced to the API 5L specification.

Seamless water well pipe (ASTM A-589) and seamless galvanized pipe
for fire protection uses (ASTM A-795) are used for the conveyance of
water.

Seamless pipes are commonly produced and certified to meet ASTM A-
106, ASTM A-53, API 5L-B, and API 5L-X42 specifications. To avoid
maintaining separate production runs and separate inventories,
manufacturers typically triple or quadruple certify the pipes by
meeting the metallurgical requirements and performing the required
tests pursuant to the respective specifications. Since distributors
sell the vast majority of this product, they can thereby maintain a
single inventory to service all customers.

The primary application of ASTM A-106 pressure pipes and triple or
quadruple certified pipes is in pressure piping systems by
refineries, petrochemical plants, and chemical plants. Other
applications are in power generation plants (electrical-fossil fuel
or nuclear), and in some oil field uses (on shore and off shore) such
as for separator lines, gathering lines and metering runs. A minor
application of this product is for use as oil and gas distribution
lines for commercial applications. These applications constitute the
majority of the market for the subject seamless pipes. However, ASTM
A-106 pipes may be used in some boiler applications.

Redraw hollows are any unfinished pipe or "hollow profiles" of
carbon or alloy steel transformed by hot rolling or cold
drawing/hydrostatic testing or other methods to enable the material
to be sold under ASTM A-53, ASTM A-106, ASTM A-333, ASTM A-334, ASTM
A-335, ASTM A-589, ASTM A-795, and API 5L specifications.

The scope of these investigations includes all seamless pipe meeting
the physical parameters described above and produced to one of the
specifications listed above, regardless of application, with the
exception of the specific exclusions discussed below, and whether or
not also certified to a non-covered specification. Standard, line,
and pressure applications and the above-listed specifications are
defining characteristics of the scope of these investigations.
Therefore, seamless pipes meeting the physical description above, but
not produced to the ASTM A-53, ASTM A-106, ASTM A-333, ASTM A-334,
ASTM A-335, ASTM A-589, ASTM A-795, and API 5L specifications shall
be covered if used in a standard, line, or pressure application, with
the exception of the specific exclusions discussed below.

For example, there are certain other ASTM specifications of pipe
which, because of overlapping characteristics, could potentially be
used in ASTM A-106 applications. These specifications generally
include ASTM A-161, ASTM A-192, ASTM A-210, ASTM A-252, ASTM A-501,
ASTM A-523, ASTM A-524, and ASTM A-618. When such pipes are used in a
standard, line, or pressure pipe application, with the exception of
the specific exclusions discussed below, such products are covered by
the scope of these investigations.

Specifically excluded from the scope of these investigations are
boiler tubing and mechanical tubing, if such products are not
produced to ASTM A-53, ASTM A-106, ASTM A-333, ASTM A-334, ASTM A-
335, ASTM A-589, ASTM A-795, and API 5L specifications and are not
used in standard, line, or pressure pipe applications. In addition,
finished and unfinished OCTG are excluded from the scope of these
investigations, if covered by the scope of another antidumping duty
order from the same country. If not covered by such an OCTG order,
finished and unfinished OCTG are included in this scope when used in
standard, line or pressure applications.

With regard to the excluded products listed above, the Department
will not instruct Customs to require end-use certification until such
time as petitioner or other interested parties provide to the
Department a reasonable basis to believe or suspect that the products
are being used in a covered application. If such information is
provided, we will require end-use certification only for the
product(s) (or specification(s)) for which evidence is provided that
such products are being used in covered applications as described
above. For example, if, based on evidence provided by petitioner, the
Department finds a reasonable basis to believe or suspect that
seamless pipe produced to the A-161 specification is being used in a
standard, line or pressure application, we will require end-use
certifications for imports of that specification. Normally we will
require only the importer of record to certify to the end use of the
imported merchandise. If it later proves necessary for adequate
implementation, we may also require producers who export such
products to the United States to provide such certification on
invoices accompanying shipments to the United States.

Although the HTSUS subheadings are provided for convenience and
customs purposes, our written description of the merchandise subject
to this scope is dispositive.

Discussion of the Issue

1. Class or Kind

Respondent SMI, the American Boiler Manufacturers Association (ABMA)
and MC Tubular Products, Inc. (MCTP) contend that on the basis of
information on the record of these investigations the Department
should treat seamless alloy pressure pipe differently from seamless
triple-stenciled commodity carbon pipe. SMI adds that high-strength
carbon line pipe should also be treated as a separate class of
merchandise from triple-stenciled commodity carbon pipe.

SMI argues that, in making a class or kind determination, the
Department is not limited to the five Diversified Products (3)
criteria outlined in the Memorandum from Case Analysts to Holly Kuga
Re: Class or Kind Determination (Class or Kind Memo). SMI claims that
the CIT, in Diversified Products, did not enunciate five criteria
that it considered appropriate for clarifying the scope of an order,
but rather described the five criteria used by the Department
(physical characteristics, expectations, channels, use and cost) in a
class or kind decision involving an investigation on bicycle
speedometers. SMI added that the CIT also cited two decisions that
listed various factors for making a class or kind determination in
the context of customs classifications, which together list more than
just the five criteria stated above.

Further, SMI contends that an analysis based on the five criteria in
section 351.225(k)(2) of the Department's regulations is not relevant
for establishing the necessary criteria for defining class or kind
during an investigation. Instead, SMI claims, the regulation only
addresses rulings regarding the scope of a previously issued
antidumping or countervailing duty order. Nevertheless, SMI (as well
as the ABMA and MCTP) addressed the five criteria listed under
section 351.225(k)(2) of the Department's regulations in making its
case for separate classes or kinds of merchandise in the instant
investigation.

Alloy pipe

SMI objects to the Department's position that a continuum exists
with regard to the carbon/alloy distinction while allowing large
diameter and small diameter pipe to be split into separate classes or
kinds. SMI argues that large/small diameter pipe are part of a
continuum of sizes. It further argues that, using the Department's
logic that a continuum exists, cast iron, carbon steel, alloy steel
and stainless steel should all be part of the same continuum.
However, SMI points out that in most instances the Department
separates those four categories of ferrous metal, and notes that a
number of antidumping cases have been limited to either carbon steel
or alloy steel, (see e.g. 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; Final
Determination of Sales at Less than Fair Value: Circular Welded Non-
Alloy Steel Pipe from South Africa, 61 FR 24271, May 14, 1996).
Further, SMI states that each of the four categories listed above is
recognized by the industry as a unique product, as evidenced by
textbooks on the subject and by the HTSUS.

SMI states that alloying elements are added in carefully measured
quantities to achieve specific, unique characteristics unattainable
by carbon steel. These unique physical characteristics include
improved yield strength, tensile strength, creep strength, and
elongation. Although SMI concedes that a continuum does exist within
steel products, it contends that it is possible to draw a clear
dividing line between carbon pipe and alloy pipe based on industry
standards. For instance, SMI states that the standard for alloy steel
is that it contains a minimum of 2.07 percent alloying elements.
Therefore, SMI argues, an industry-recognized clear dividing line
exists between ASTM standard A-106 carbon pipe and ASTM standard A-
335 alloy pipe.

With regard to the use of the products, SMI argues that 1) alloying
elements are added to achieve specific goals related to ultimate use;
2) there is danger in choosing overly broad descriptions of end use;
and 3) the correct divisional descriptions of end use would be that
carbon steel involves moving liquids and gases at mild temperatures
whereas alloy steel involves moving liquids and gases at high
temperatures or high pressures. SMI argues further that, contrary to
what the Department stated in its preliminary determination, there is
no degree of substitution of one type of product for another along
the continuum, and that the lack of interchangeability clearly
indicates that the products have different uses. It states that
carbon can never be substituted for alloy; that anyone doing so runs
the risk of having the pipe explode. In addition, SMI maintains that
alloy pipe, because of its cost, is never substituted for carbon
pipe, and there is no evidence on the record suggesting that such
substitution ever occurs. The clear dividing line between carbon pipe
and alloy pipe, according to SMI, can be drawn using the ASME Boiler
and Pressure Vessel Code (ASME Code), which requires the use of alloy
pipe at temperatures above 800 degrees Fahrenheit. SMI further states
that end-use, in this case, also determines the expectations of the
user. Therefore, SMI states that all arguments relevant to end-use
are relevant to the expectations of the ultimate user as well.

The ABMA states that the physical difference between alloy pressure
pipe and carbon pressure pipe is the presence or absence of alloying
elements, and that the separation between carbon pipe and alloy pipe
is made clear by the ASME Code, which defines 800 degrees Fahrenheit
as the point at which carbon steel may be converted to graphite. The
ABMA states that A-335 alloy steels are used in applications where
temperatures exceed 800 degrees, and that A-335 grade P-2 is usable
in applications facing temperatures of up to 1000 degrees,
appreciably more than the 800 degree-maximum under which A-106 carbon
steel can be used. The ABMA maintains that A-335 grade P-1 is an
"aberrational grade"(4) and states that all grades other than P-1
form the "real" category of A-335 material.

The ABMA emphasizes the danger of using an A-106 carbon pipe in an
application calling for A-335 alloy pipe, stating that doing so could
lead to "extensive and costly damage and injuries and death." It
states that the use of alloy pipes is necessary in modern boilers,
which rely on super-heated steam, and that using carbon pipe would
limit the boiler service temperature to an impractically low 800
degrees. Finally, the ABMA states that the ultimate purchasers expect
merchandise to perform in conformity with its physical
characteristics.

MCTP argues that alloy pipe and carbon pipe have different physical
characteristics by virtue of the fact that adding alloying elements
gives alloy pipe a different chemistry from carbon pipe. MCTP
believes that the continuum reasoning used by the Department in its
preliminary determination creates an overly broad continuum, with
extremely dissimilar products on either end of the spectrum.
Therefore, MCTP argues, the Department should divide the continuum
along the recognized industry division between carbon pipe and A-335
alloy pipe. Further, MCTP states that the physical differences
described above lead to differences in the expectations of the
ultimate user and in ultimate use.

SMI, the ABMA and MCTP all state that the unique physical
characteristics of alloy pipe are a result of the addition of
alloying elements, and further processing in the form of heat
treatment, with both elements requiring the incursion of additional
production costs, arguing that these additional costs are reflected
in higher prices for alloy pipe, estimated by one distributor to be
between 50 and 250 percent higher than for carbon steel (see MCTP
case brief at 12).

In addressing the channels of trade through which these products are
sold, SMI, the ABMA and MCTP all state that there are approximately
only five U.S. distributers who are specialized intermediaries
dealing exclusively or predominately with alloy pipe. These
distributors, according to SMI, form a unique backbone of
distribution distinct from the general distribution system of the
approximately 3,000 commodity pipe dealers, despite that fact that
both groups can nominally be referred to as "distributors." Even with
these differences in distribution channels, MCTP submits, the
channels of trade factor probably never has played a determinative
role in a class or kind ruling, citing Memorandum to Assistant
Secretary for Import Administration from Barbara R. Stafford, Deputy
Assistant Secretary, Antidumping Duty Investigations of Seamless Pipe
from Argentina, Brazil, Germany, and Italy, Class or Kind (June 12,
1995) (at 9). There the Department stated that it divides a single
class or kind in a petition into multiple classes or kinds primarily
based on the physical characteristics of the merchandise, and then on
the fact that the differences in physical characteristics affect the
capabilities of the merchandise, which in turn establishes the
boundaries of the ultimate use and of the customers' expectations of
the products involved.

All three parties agree that some pipe distributors do some
advertising through their catalogues and web sites, but point out
that in those listings the distributors distinguished between carbon
and alloy products. SMI states that it does not advertise or display
its pipe products because its customers are intimately familiar with
the products. The ABMA concurs that its members are intimately
familiar with the merchandise and states that pressure pipe is not
the kind of merchandise which requires advertising or display.
Furthermore, MCTP asserts it does not believe that advertising and
display has ever been a determining factor in a class or kind
argument.

The petitioners believe that the issue was adequately analyzed in
the preliminary determination and contended that no new information
has been presented that should lead the Department to revisit the
issue. The petitioners point out that A-335 grade P-1, like the A-106
grades, contains carbon, and that the permissible carbon levels
decrease and the alloying elements increase incrementally in the
subsequent A-335 grades. Further, they note that there is an
incremental change in permissible temperature ranges, as well. Both
of these factors, according to the petitioners, point to the fact
that A-106 and A-335 are part of a continuum with no clear dividing
line between A-106 carbon pipe and A-335 alloy pipe based on physical
characteristics. In addition, the petitioners note that A-106 and A-
335 pipe are used in the same types of industrial applications,
including the conveyance of water, steam petrochemicals and chemicals
at high temperatures under pressure, with A-335 being used at the
high end of the spectrum.

With regard to channels of trade and advertising, the petitioners
state that several major pipe distributors carry both A-335 and A-106
seamless pipe. They state further that A-335 and A-106 are advertised
in the same manner, and have provided the product guide of Vision
Metals as an example of this (see Exhibit 10 to the petitioners'
rebuttal brief), as well as the web sites of several distributors.

High Strength Line Pipe

SMI argues that there is a clear dividing line between all grades of
API 5L line pipe through X-60 and the three grades above X-60, which
have specifications set by agreement between the purchaser and the
manufacturer. According to SMI, customers for these grades insist on
their individual stringent metallurgy requirements and require a
heavy wall thickness.

With regard to the end use of the merchandise, SMI contends that the
Department's definition of a line pipe is overly broad, and that high-
strength line pipe is specifically designed for the conveyance of oil
and gas only, and in harsh environments. As with alloy pipe, SMI
reiterates that the end-use determines the expectations of the
ultimate user.

SMI states that high-strength line pipe is not sold through
distributors but, rather, is ordered directly from the manufacturers.
The customers define the exact chemistry of the pipe and demand
rigorous pre-qualification/certification requirements. Further, SMI
states, since high-strength line pipe is proprietary oil company
merchandise, it is not advertised or displayed.

The petitioners argue that the relative yield and tensile strength
of seamless pipe manufactured to the various grades withing the A-106
and API 5L specifications represent points on a continuum for which
there is no clear dividing line. Further, the petitioners claim that
high-strength line pipe has the same uses as other API 5L grade and A-
106 pipe: it is used primarily to carry large volumes of gas and oil
over long distances. The fact that is it used in harsh environments
or in low temperatures does not negate the fact that its end use is
as a line pipe. The petitioners agree that the expectations of the
ultimate purchasers are closely related to end use.

Regarding channel of trade and advertising, the petitioners contend
that API 5L pipe grades X-60 and higher may be sold directly to end
users or through distributors. However, they note that high-strength
line pipe is sold to end users more often than is seamless pipe
generally. Using a product guide from U.S. Steel Tubular Products as
an example, the petitioners claim that all grades of A-106 and API
5L, including grades X-60 and higher, are advertised together.

DOC Position:

We determine, consistent with our preliminary determination, that
the products under investigation constitute a single class or kind
within each investigation. Where the petitioners include more than
one class or kind within one petition, the Department treats the
investigation of each class or kind of merchandise as a separate
investigation. Normally, the Department will accept the class or kind
of merchandise as defined by the petitioner. However, where
respondents argue that the class or kind is overly broad, the
Department uses criteria as outlined in Diversified Products and
Kyowa Gas Chemical Industrial Company v. United States, 582 F. Supp.
887, 888 (CIT 1984) (Kyowa Gas) to determine if the merchandise
constitutes more than one class or kind. The CIT has upheld the
Department's use of such criteria in defining and clarifying the
class or kind of merchandise during an investigation. See Mitsubishi
Electric Corp. v. United States,12 CIT 1025, aff'd, 898 F.2d 1577
(Fed. Cir.1990). These criteria are: (1) the general physical
characteristics; (2) the ultimate use; (3) the expectations of the
ultimate purchaser; (4) the channels of trade; and (5) the manner of
advertising and display. See Final Determinations of Sales at Less
than Fair Value: Antifriction Bearings (Other Than Tapered Roller
Bearings) and Parts Thereof From the Federal Republic of Germany, 54
FR 18992, 18999 (May 3, 1989) (AFBs from Germany); see also Notice of
Final Determination of Sales at less Than Fair Value; Stainless Steel
Sheet and Strip from the United Kingdom 64 FR 30588 (June 8,
1999)(SSSS from the U.K.). In applying these criteria, the Department
recognizes that if it were to narrow the definition of end use to
exact applications, each combination of specification and grade could
conceivably be considered a separate class or kind. Therefore, the
Department relies on more generally defined basic uses in making
class or kind determinations.

Alloy Pipe

In deciding whether physical differences in merchandise rise to the
level of a class or kind distinction, the Department looks for a
clear dividing line between product groups, not merely the presence
or absence of physical differences. See Final Affirmative Less Than
Fair Value Determination: Sulfur Dyes, Including Vat Sulfur Dyes,
from the U.K., 58 FR 3253 (January 8, 1993). SMI, the ABMA and MCTP
have all argued that such a line clearly exists between carbon and
alloy pipe and that it is recognized by the industry. However, the
information submitted by the various parties shows a range of
opinions as to exactly what constitutes alloy steel. For example,
SMI, relying on "The Metals Handbook," (see letter from SMI to the
Department, dated December 2, 1999, Attachment 1 at 149 (December 2,
letter)), describes alloy steel as containing a minimum of 2.07
percent alloying elements. Also included in SMI's submission is
another source, "The Making, Shaping and Treating of Steel," which
states that alloy steels "contain from about 1 to 3 or 4 percent
alloying elements." See December 2 letter, Attachment 2 at 6.
Therefore the statements in these sources do not support a conclusion
that there is a clear dividing line between carbon pipe and alloy
pipe covered by the scope of these proceedings.

The ABMA states that in the ASTM system, any intentional alloy
addition places that material in another category. With 0.5 percent
of molybdenum, A-335 grade P-1 is placed by the ASTM with alloy
steel. While the ABMA has stated that it does not consider A-335
grade P-1 to be part of the "real category of A-335 material," (see
Letter from the ABMA to the Department, dated January 12, 2000, at 5,
(ABMA Case Brief), SMI on the other hand has argued that a clear
dividing line exists between A-335 and A-106. We note that A-335
grade P-1, which contains less than 2.07 percent alloying elements,
does not meet SMI's definition of an alloy steel. It is unclear
whether A-335 grade P-2, with only 0.5 percent molybdenum and 0.5
percent chromium of deliberately added elements meets that definition
either, yet SMI and MCTP have declared that all A-335 pipe clearly
belongs in the alloy class. Thus, the parties themselves do not
appear able to agree on a clear dividing line.

We acknowledge that, as noted by SMI, a number of antidumping cases
have been limited to either carbon steel or alloy steel. In those
cases, the merchandise included in the scope was limited to the
merchandise for which the petitioners requested relief from unfairly
traded imports. In other cases, where the petitioners requested that
both carbon steel and alloy steel products be included in the scope,
they have been found to be part of the same class or kind of
merchandise. See e.g. Oil Country Tubular Goods from Japan, 65 FR
15305 (March 22, 2000), and Cold-Rolled, Flat-Rolled Carbon-Quality
Steel Products from Argentina, Japan and Thailand, 65 FR 5520
(February 4, 2000). This is consistent with the Department's view
that it should give "ample deference to the petitioners" on the
definition of the product for which they seek relief under the
antidumping law. See Eckstrom Industries, Inc. v. United States, 27
F. Supp. 2d 217, 223 (CIT 1998) (Eckstrom)

With regard to SMI's contention that the Department has been
inconsistent in applying a continuum argument to carbon and alloy
pipe while splitting large and small diameter pipe into separate
classes or kinds, we disagree. The petitioners in each case defined
the scope of the petitions, one on small diameter pipe and one on
large diameter pipe. Consistent with Eckstrom, we deferred to the
petitioners' definition of the scope in each case. Both petitions met
the statutory requirements for initiation, and each petition was
found to have one domestic like product. See Initiation of
Antidumping Duty Investigations: Certain Large Diameter Carbon and
Alloy Seamless Standard, Line and Pressure Pipe from Japan and
Mexico; and Certain Small Diameter Carbon and Alloy Seamless
Standard, Line and Pressure Pipe from the Czech Republic, Japan, the
Republic of South Africa and Romania, 64 FR 40825 July 28, 1999.
Because there were separate petitions we initiated two separate
antidumping duty investigations. Therefore, the Department did not
make a class or kind decision with regard to large/small diameter
pipe, and no party commented on this issue. However, we note that the
International Trade Commission (ITC) found that small and large
diameter pipe have different uses; that small diameter pipe is
generally used in chemical plants and refineries in applications for
conveyance of liquids or gases in production processes, whereas large
diameter pipe is used more in pipeline construction for long distance
transmission of liquids or gasses in high volumes. See Certain
Seamless Carbon and Alloy Steel Standard, Line and Pressure Pipe from
the Czech Republic, Japan, Mexico, Romania and South Africa, Inv.
Nos. 731-TA-846-850 (Preliminary) USITC Pub. 3221 (August 1999) at 9
(ITC Preliminary), where the ITC found that carbon pipe and alloy
pipe are a single like product.

While the ABMA argues that a maximum allowable temperature of 800
degrees Fahrenheit can serve as a clear dividing line, we find that
the ASME code Table 1A shows allowable stress values for A-106 up to
1000 degrees, albeit with a warning that prolonged exposure at
temperatures above 800 degrees may cause graphitization. Note S1 to
Table 1A states that ". . . {e}xcept for tubular products 3 in. O.D.
or less enclosed within the boiler setting, use of {A-106}at these
temperatures is not current practice." See ABMA Case Brief Attachment
2, Table 1A. Moreover, Table 1 in Attachment 4 of the ABMA Case Brief
shows that A-106C can be used at temperatures up to 950 degrees, with
the caveat that it is limited to temperatures of 800 degrees for
"piping 10.75" O.D. and larger outside the boiler setting." It
further notes that carbon steels are not used above 800 degrees
outside the boiler setting. These statements indicate that, although
it may not be optimal, small diameter A-106 can be, and in fact is,
used at temperatures above 800 degrees in the boiler setting.
Therefore, we find the dividing line suggested by the ABMA is not
clear.

SMI, the ABMA and MCTP discussed the fact that increased costs
associated with the production of alloy pipe are necessary to give
the alloy pipe its unique physical characteristics. However,
consistent with recent investigations we did not consider cost as one
of the class or kind criteria. See e.g. SSSS from the U.K. at 5352.
Moreover, because the respondents to whom the Department issued
questionnaires did not respond, the record contains no documented,
verifiable cost information. Likewise, although MCTP has provided
some specific price information, price is also not a factor in the
Department's class or kind decisions.

While the ABMA would like us to disregard the ambiguous A-335 grade
P-1, we find that it is an important link in the continuum. Its
higher levels of carbon make it fit into the carbon category, whereas
the deliberately added molybdenum ties it to the alloys. As the
Department stated in AFBs from Germany, "[t]he real question is
whether the physical differences are so material as to alter the
essential nature of the product, and, therefore, rise to the level of
class or kind distinctions."

SMI, MCTP and the ABMA focus their arguments for treating A-335
alloy pipe as a separate class or kind on the more demanding
metallurgical requirements this product must meet, the different
environmental applications for which this product will be used, and
the different channels of distribution through which this product is
sold. However, the criteria that the Department considers in
determining class or kind indicate that A-335 alloy pipe is in the
same class or kind as other in-scope pipe. Regarding physical
characteristics, the A-335 alloy pipe has minimal differences from
other types of seamless line pipe included in this scope. All of the
products included in the scope, including A-335 alloy pipe, are
produced in the same range of specific outside diameters and wall
thicknesses, and to the same dimensional tolerances. In fact, even
the chemical content of these products can overlap with that of other
in-scope products. SMI, MCTP and the ABMA focus their physical
characteristics argument on the chemical differences in the products,
which result in a higher-strength product. However, what they neglect
to acknowledge is that all grades of pipe within the scope, not just
A-335 alloy pipe, have ranges of differences which result in lower to
higher strength products.

As noted, pressure pipe is intended for the conveyance of water,
steam, natural gas, air, and other liquids and gasses, with each
grade meeting certain mechanical characteristics. As the application
becomes more demanding, the performance characteristics increase.
Accordingly, there are different grades of pressure pipe. But these
increasing demands of a pressure pipe conveyance application cannot
be sufficient grounds to establish a separate class or kind of
merchandise; otherwise, there would be a separate class or kind for
each grade of pressure pipe or, for that matter, each grade of each
specification of pipe in general. While it is theoretically possible
to draw any number of dividing lines based on the exact application
for which the pipe is intended, in practice, this would result in an
unmanageable number of classes or kinds for products intended
essentially for the same types of applications. Therefore, we must
rely on a more general description of the merchandise. Perfect
substitutability is not required for merchandise to be part of the
same class or kind; we only need demonstrate that the general
characteristics of the product are "sufficiently similar." See
Eckstrom Industries v. United States 70 F Supp. 2d. 1360, 1364 (CIT
1999). Although there are degrees of difference between standards and
grades of pipe, evidence on the record, including the American
Society of Engineers (AMSE) Boiler and Pressure Vessel Code and the
ASTM standards, indicates that these differences are merely part of a
continuum within one class or kind, with no clear point along the
continuum at which to make a class or kind distinction between these
products based on physical characteristics.

As stated in the preliminary determination, end use is one of the
most important characteristics of the subject merchandise. The terms
standard, line and pressure pipe, used in the name of the
investigation to describe the covered products, refer to
applications, not physical characteristics. The uses of these
products are outlined in the scope of the investigations. In the
preliminary determinations we recognized that there is not perfect
substitutability between pressure pipe products. While SMI and the
ABMA have argued that the lack of interchangeability between A-106
carbon pipe and A-335 alloy pipe indicates that they have different
end uses, we note that perfect substitutability is not the test for
end use. We note, for example, that A-335 grade P-91 may be used at
temperatures of up to 1200 degrees, while A-335 grade P-2 may be used
at temperatures of up to only 1000 degrees. Yet SMI and MCTP both
agree that all grades of A-335 are part of the same class or kind,
while ABMA states that all grades of A-335 except P-1 are part of the
same class or kind. Thus, the parties themselves do not make a
consistent class or kind distinction with regard to the relationship
between interchangeability and end use.

In the instant case, both carbon and alloy pipe are used in pressure
pipe applications. The severity of the pressure and temperature
conditions under which the pipe is used dictates where a product
falls on the spectrum. Applications in harsher conditions require
higher-end alloy products, whereas lower-end carbon products are used
in less harsh conditions. However, both

carbon and alloy pipe fall within the definition of a pressure pipe
presented in the scope; that is, seamless pressure pipes are intended
for the conveyance of water, steam, petrochemicals, chemicals, oil
products, natural gas and other liquids and gasses in industrial
piping systems. They may carry these substances at elevated pressures
and temperatures and may be subject to the application of external
heat.

Like A-106, A-335 pipe is sold through distributors. This is not
mere nomenclature as SMI, ABMA and MCTP suggest, but rather a
description of a position in the channel of trade. No one has
suggested, or put evidence on the record to demonstrate, that the
distributors carrying alloy pipe do not perform the same selling
functions with regard to their merchandise as the numerous commodity
distributors which do not carry alloy pipe perform with regard to
theirs. Further, there is no evidence on the record to suggest that
the distributors that do carry both A-335 and A-106 treat them any
differently in terms of the way they are purchased, stocked or
marketed. A difference in the number of distributors alone is not
sufficient to be considered a separate channel of trade.

With respect to the manner in which the subject merchandise is
advertised, we note that the record evidence in the form of
producers' and distributors' catalogues, brochures and web sites,
demonstrate that carbon pipe and alloy pipe are presented in the same
manner.

High Strength Line Pipe

As discussed above with respect to alloy pipe, high strength line
pipe has the same general physical characteristics as all other line
pipe. In this particular situation, the only API specifications that
are different for high strength line pipe are those for tensile and
yield strengths. These specifications, like all increasing grades of
pipe in a particular specification such as the API, show a gradual
increase over the continuum, with the noted grades X-60, X-70 and X-
80 representing the high end of the continuum. See Letter from the
Petitioners to the Department, dated November 8, 1999, Exhibit 2,
Specification for Line Pipe, page 2.

Although the information on the record is somewhat contradictory, it
appears that, unlike the majority of seamless pipe products which are
sold through distributors, the majority of high-strength line pipe is
sold directly to end-users. Even conceding this to be the case, that
factor alone would not be sufficient to deem high-strength line pipe
a separate class or kind of merchandise.

As for advertising, the only catalogue on the record includes high-
strength line pipe with other seamless pipe products. Therefore, we
conclude that high strength line pipe, to the extent it is
advertised, is advertised in the same manner as other types of line
pipe.

Conclusion

For the reasons stated above, we determine that within each
investigation, the merchandise under investigation is part of the
same class or kind of merchandise. As we stated in the preliminary
determination, while some differences exist between the various
specifications/grades of pipe under investigation, there is not the
clear dividing line needed to make the class or kind distinction
being requested here. Record evidence demonstrates that commodity
grade carbon, alloy and high-strength line pipe are part of a
continuum of seamless standard, line and pressure pipe sizes and
strengths with the same general physical characteristics, uses,
customer expectations, channels of distribution and advertising.

Recommendation

Based on our analysis of the comments received, we recommend
adopting the above position.

If this recommendation is accepted, we will publish the final
determination in the Federal Register.

AGREE____ DISAGREE____

_________________________

Troy H. Cribb

Acting Assistant Secretary

for Import Administration

_________________________

Date

1. Although we received no comments on the case involving South
Africa, the decision on the class or kind issue made in the
investigations involving Japan applies to the South African
investigation as well.

2. On March 9, 2000, the petitioners requested that the scope of the
large diameter investigation be amended to exclude products made to
the A-335 specification. On April 26, 2000, the petitioners requested
that the scope of the large diameter case be amended to exclude line
and riser pipe for deepwater applications. These changes from the
scope of the preliminary determination are reflected in the current
scope. These changes also apply to the investigation on large
diameter carbon and alloy seamless standard, line and pressure pipe
from Mexico, which is ongoing.

3. Diversified Products Corp. v. United States, 572 F. Supp. 883
(CIT 1983) (Diversified Products). The five criteria used in the
preliminary determination are (1) the general physical
characteristics of the merchandise, (2) the expectations of the
ultimate purchaser, (3) the ultimate use of the merchandise, (4) the
channels of trade in which the merchandise moves, and (5) the manner
in which the product is advertised or displayed.

4. Unlike other grades of A-335 grade P-1 contains no chromium.