[Federal Register Volume 63, Number 115 (Tuesday, June 16, 1998)]
[Notices]
[Pages 32825-32833]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-15873]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-533-502]


Certain Welded Carbon Steel Pipes and Tubes From India; 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 February 9, 1998, the Department of Commerce published the 
preliminary results of administrative review of the antidumping duty 
order on certain welded carbon steel pipes and tubes from India. The 
review covers two manufacturers/exporters. The period of review is May 
1, 1996, through April 30, 1997.
    Based on our analysis of the comments received, we have made 
changes, including corrections of certain inadvertent programming and 
clerical errors, in the margin calculation. Therefore, the final 
results differ from the preliminary results. The final weighted-average 
dumping margin is listed below in the section entitled ``Final Results 
of Review.''

EFFECTIVE DATE: June 16, 1998.

FOR FURTHER INFORMATION CONTACT: Davina Hashmi, at (202) 482-5760, or 
Greg Thompson, at (202) 482-0410, of the Import Administration, 
International Trade Administration, U.S. Department of Commerce.

SUPPLEMENTARY INFORMATION:

The 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 
to 19 CFR Part 353 (1997).

Background

    On February 9, 1998, the Department of Commerce (the Department) 
published the Preliminary Results of Administrative Review of the 
Antidumping Duty Order on Certain Welded Carbon Steel Pipes and Tubes 
from India, 63 FR 6531. The review covers two manufacturers/exporters. 
The period of review (POR) is May 1, 1996, through April 30, 1997. We 
invited interested parties to comment on the preliminary results of 
review. At the request of one respondent, Rajinder Pipes Ltd. and 
Rajinder Steel Ltd. (collectively called ``RSL''), we held a public 
hearing on April 6, 1998. The Department has conducted this 
administrative review in accordance with section 751 of the Act.

Scope of Reviews

    The products covered by this review include circular welded non-
alloy steel pipes and tubes, of circular cross-section, with an outside 
diameter of 0.372 inch or more but not more than 406.4 millimeters (16 
inches) in outside diameter, regardless of wall thickness, surface 
finish (black, galvanized, or painted), or end finish (plain end, 
bevelled end, threaded, or threaded and coupled). These pipes and tubes 
are generally known as standard pipe, though they may also be called 
structural or mechanical tubing in certain applications. Standard pipes 
and tubes are intended for the low-pressure conveyance of water, steam, 
natural gas, air and other liquids and gases in plumbing and heating 
systems, air-conditioner units, automatic sprinkler systems, and other 
related uses. Standard pipe may also be used for light load-bearing and 
mechanical applications, such as for fence tubing, and for protection 
of electrical wiring, such as conduit shells.
    The scope is not limited to standard pipe and fence tubing or those 
types of mechanical and structural pipe that are used in standard pipe 
applications. All carbon-steel pipes and tubes within the physical 
description outlined above are included in the scope of this order, 
except for line pipe, oil-country tubular goods, boiler tubing, cold-
drawn or cold-rolled mechanical tubing, pipe and tube hollows for 
redraws, finished scaffolding, and finished rigid conduit.
    Imports of the products covered by this review are currently 
classifiable under the following Harmonized Tariff Schedule of the 
United States (HTSUS) subheadings: 7306.30.10.00, 7306.30.50.25, 
7306.30.50.32, 7306.30.50.40, 7306.30.50.55, 7306.30.50.85, 
7306.30.50.90. Although the HTSUS subheadings are provided for 
convenience and customs purposes, the written description of the scope 
of this proceeding is dispositive.

Changes Since the Preliminary Results

    Based on our analysis of comments received, we have made certain 
corrections that changed our preliminary results. A discussion of the 
arguments raised in the case and rebuttal briefs submitted to the

[[Page 32826]]

Department is contained in the following section entitled, ``Analysis 
of Comments Received.''
    Analysis of Comments Received
    Comment 1: The petitioners argue that the Department should apply 
facts available to those selling expenses and costs that could not be 
verified due to Rajinder's failure to prepare for verification 
properly. Specifically, the petitioners posit that the Department 
should disallow the deduction from normal value (NV) certain unverified 
home-market (HM) selling expenses and should deduct from the price in 
the United States the highest reported expense for certain unverified 
U.S. selling expenses.
    The petitioners state that, in accordance with sections 776 and 
782(i) of the Act and Olympic Adhesive Inc. v. United States (899 F.2d 
1565, 1572 (Fed. Cir. 1990)), the Department may disregard respondent's 
information if such information cannot be verified and where 
manipulation of the margins may occur because a respondent may provide 
information selectively that the Department requested. The petitioners 
argue that there is no justification for Rajinder's failure to prepare 
for verification properly and for the frequent delays the Department 
encountered at verification. The petitioners point out that Rajinder 
had been given, in advance, an itinerary of the topics to be covered 
during verification and posit that Rajinder had ample time to prepare 
adequately for the verification. The petitioners also note that 
Rajinder has previous verification experience and, therefore, should 
have known what was needed and expected.
    Finally, the petitioners state that it is Department practice to 
make an adverse inference and to apply facts available in cases where 
respondent impedes the progress of the review and fails to act to the 
best of its ability to comply with the Department's request for 
information. The petitioners contend that, in the instant proceeding, 
the situation warrants the application of adverse facts available.
    Rajinder refutes the petitioners' argument that facts available 
should be applied to certain HM and U.S. selling expenses and argues 
that the petitioners have distorted the facts as they relate to the HM 
verification. Rajinder contends that, although it could have been 
better prepared for verification, its lack of preparation does not 
warrant the use of facts available, nor does it suggest that Rajinder 
in any way has impeded this review or failed to cooperate with the 
Department. Rajinder states that, on the contrary, most of the claimed 
adjustments were verified with very few discrepancies. Rajinder points 
to the verification report as support for the number of tests performed 
and the number of adjustments the verifiers examined, most of which had 
no discrepancies and some of which had discrepancies that were 
disadvantageous to Rajinder.
    Rajinder also refutes the petitioners' assertion that it provided 
requested information selectively. Rajinder explains that, with respect 
to those adjustments that the Department did not examine at 
verification, the verifiers were simply not able to cover those topics 
in the time allotted for the verification. Rajinder argues that, had it 
wanted to select adjustments that it did not want the Department to 
verify, it would have selected the large adjustments, not the minor 
ones.
    Department's Position: We agree with the respondent in part. With 
the exception of HM indirect selling expenses and duty drawback (see 
comment 4), we have accepted all of Rajinder's submitted information. 
Our determination in this regard is consistent with the statute and our 
practice. We have concluded, in accordance with section 776(a) of the 
Act, that the use of facts available for Rajinder's HM indirect selling 
expenses is appropriate because we were unable to verify the accuracy 
of the information Rajinder submitted despite numerous requests on our 
part to obtain the data. By not providing certain basic verification 
documents that were essential to the establishment of the accuracy of 
the data submitted, Rajinder did not cooperate to the best of its 
ability to comply with our requests for such information. Accordingly, 
we are using an adverse inference with respect to this item in full 
accordance with law. See section 776(b) of the Act. While we have 
determined that Rajinder did not cooperate to the best of its ability 
with respect to the HM indirect selling expenses, we do not find that 
this undermines the credibility of the other information Rajinder 
submitted during this review. See Monsanto Co. v. United States, 698 F. 
Supp. 275 281 (CIT 1988). Accordingly, we have calculated Rajinder's 
margin using all the data it submitted with the exception of the two 
items mentioned above.
    As for the petitioners' concerns that Rajinder manipulated the 
process, it should be noted that, from the outset of verification, we 
selected adjustments out of the order from which they were listed in 
the verification outline. In other words, we conducted a ``spot check'' 
of various expense items which would preclude Rajinder from 
``manipulating'' the process and selectively providing information to 
certain adjustments. In this manner, we were able to ensure that all 
items we selected were covered in time.
    Comment 2: The petitioners argue that certain letters Rajinder 
submitted to the Department (dated January 13, 14, 15, 20, and 26, 
1998) were untimely filed and should be removed from the official 
record in this review and not considered by the Department for the 
final results of this review. The petitioners also contend that the 
verifying officials did not request information contained in the 
respective January letters as stated by the respondents. The 
petitioners state further that even the first of the series of January 
letters (dated January 13, 1998) was submitted beyond the normal seven-
day period for submitting information after the date on which 
verification is completed.
    Rajinder contends that the January submissions with which the 
petitioners take issue should not be removed from the official record. 
Rajinder states that the letter dated January 13, 1998, was submitted 
at the request of the Department for the purpose of clarifying 
Rajinder's calculations for its reported variable costs of manufacture. 
Rajinder also states that, in accordance with 19 CFR 353.31(b)(1), the 
Department may solicit information from respondents at any time. 
Rajinder states further that the letters dated January 14, 15, and 20, 
1998, pertain to information contained in Rajinder's Duty Exemption 
Entitlement Certificate (DEEC) book which was in the possession of the 
Customs Authority at the time of verification. Rajinder contends that, 
with respect to the letter dated January 26, 1998, the content of the 
letter was already examined at verification and that Rajinder should 
not be penalized for submitting a document that was not in existence at 
the time of verification. Rajinder points out, however, that, in the 
event that the Department rejects the letters dated January 14, 15, 20, 
and 26, 1998, that these letters are not necessary to demonstrate the 
validity of Rajinder's duty-drawback claim.
    Department's Position: In accordance with 19 CFR 353.31(a)(2) we 
have rejected the January 14, 15, 20, and 26, 1998, letters because 
they were untimely and we did not request the information they 
contained. See letters to the respondent's counsel dated February 12, 
1998, and April 16, 1998. We accepted Rajinder's January 13 letter 
because the information contained in that letter was submitted at our 
request.
    Comment 3: The petitioners contend that the Department erroneously 
found two levels of trade (LOTs) in the HM and argue that the 
Department should

[[Page 32827]]

rescind the LOT adjustment it granted Rajinder in the preliminary 
results of review. The petitioners argue that Rajinder prevented the 
examination of the existence of two HM LOTs at verification, despite 
the Department's intention to examine this topic, and therefore, the 
information upon which the Department based its findings of two HM LOTs 
is unsupported.
    The petitioners take issue with the Department's reasoning behind 
its categorization of Rajinder's customers into two channels of 
distribution and assert that such reasoning does not establish two HM 
LOTs. The petitioners argue that, rather than base the determination of 
different LOTs in the HM properly on selling activities of the 
producer, the Department instead considered the selling functions of 
the purchaser. The petitioners also assert that the record does not 
support qualitatively or quantitatively the differences in selling 
activities and functions made between Channel One (sales to government 
agencies, OEMs, and end-users) and Channel Two (sales to local 
distributors and trading companies) customers.
    In addition, the petitioners assert that, if the Department finds 
that two HM LOTs exist, Rajinder has not fulfilled its burden of 
providing evidence that established the claimed price differential 
between sales at the different LOTs, citing the URAA, the Statement of 
Administrative Action (103d Cong. 2d Session, House Doc. 103-316 at 829 
(1994)), and Koyo Seiko Co. Ltd. v. United States, 18 ITRD 1867 at 1870 
(CIT June 19, 1996). The petitioners point out that the CIT has upheld 
the Department's decision to deny respondent's claimed price 
differential where a respondent fails to provide such information 
(citing NTN Bearing Corp. v. United States, 905 F. Supp. 1083, 1093-4 
(Ct. Int'l Trade 1995)).
    The petitioners also argue that Rajinder has not demonstrated a 
causal link between the reported selling functions and the claimed 
differences in price. The petitioners argue further that, on a model-
specific basis, Rajinder's data reveals a highly inconsistent and 
disparate pattern of price differences across different models which, 
the petitioners assert, cannot be attributed to differences in the 
claimed LOTs. The petitioners assert that such disparate price 
differences are attributable to premiums that the Indian government is 
willing to pay for such merchandise. The petitioners argue further that 
an analysis of the weighted-average HM prices of Channels One and Two 
sales are not commensurate with the number of selling activities 
associated with each LOT. For instance, petitioners argue that, given 
the large number of selling activities associated with Channel One 
sales, it does not make sense that the HM prices for Channel Two sales 
are higher than the HM prices for Channel One sales. The petitioners 
state that, because Rajinder has not provided evidence demonstrating a 
consistent pattern of price differences attributable to Rajinder's 
claimed LOTs, the Department should not grant Rajinder a LOT adjustment 
for the final results of review.
    Rajinder argues that, contrary to the petitioners' assertion, the 
record does support a finding of two HM LOTs. Rajinder refutes the 
petitioners' argument that it prevented the Department from examining 
LOT information at verification and asserts that the petitioners 
mischaracterized the events that took place at verification. Rajinder 
notes that, because nearly every adjustment the Department examined at 
verification was accurate with no discrepancies found, there is no 
reason to question the selling activities listed in Rajinder's selling-
functions chart.
    In addition, Rajinder argues that both its original and 
supplemental questionnaire responses demonstrate that a price 
differential at the two claimed LOTs does exist. Rajinder argues 
further that it has explained the causal link between the reported 
selling functions and the claimed differences in price. Regarding the 
petitioners' model-specific analysis, Rajinder notes that this analysis 
incorporates sales that took place over a number of months. Rajinder 
points out that variances in price differences across different models 
over time is a normal phenomenon. Rajinder notes further that its sales 
made to the government involve state government agencies which desire 
lower prices and therefore would not pay premiums as alleged by the 
petitioners.
    Rajinder argues that, with respect to the petitioners' assertion 
that its HM weighted-average prices are not commensurate with the 
number of selling activities associated with each LOT, the petitioners' 
analysis is flawed. Rajinder contends that the wrong months and, thus, 
the incorrect sales were used in the analysis. Rajinder states that, 
because its sales were made in months that have nearly six-month 
intervals between the sales compared, it is likely that prices will 
vary. Finally, Rajinder argues that the petitioners used net HM prices 
which distorted their analysis. Rajinder concludes that, because the 
petitioners' analysis is flawed and is therefore invalid, the 
Department should maintain its finding of two LOTs in the HM and make a 
LOT adjustment for the final results of review.
    Department's Position: We disagree with the petitioners. For the 
final results of review, we have granted Rajinder a LOT adjustment. 
Although we did not specifically examine the issue of LOT at 
verification, the record supports Rajinder's claim of two channels of 
distribution in the HM. As noted previously, the purpose of 
verification is to ensure that a respondent reported the information 
the Department requested accurately (see our response to comment 1). In 
any given proceeding, the information we request from a respondent can 
be extensive. The examination of such information subject to 
verification is an extensive process, particularly given that a HM 
verification of a company's sales or cost information is normally 
conducted within a period of one week or less. The Department, 
therefore, cannot examine each and every adjustment that is included in 
the verification outline. See Monsanto Co. v. United States, 698 F. 
Supp. 275 281 (CIT 1988). In the instant case, Department officials 
selected adjustments to examine randomly and Rajinder was never put in 
a position to control the Department's verification of its response. 
Furthermore, the adjustments we examined at verification were accurate, 
with a few minor exceptions. The fact that we did not examine the issue 
of LOT does not lead us to question the validity of Rajinder's selling 
activities, channels of distribution, or the narrative response 
discussing such selling functions.
    We also disagree with the petitioners' claim that the record lacks 
evidence of two separate LOTs in the HM. In its narrative response, 
Rajinder explained that it sells the foreign like product through two 
channels of distribution (Channel One and Channel Two). In our 
preliminary analysis memorandum, we stated that we grouped Rajinder's 
reported customer categories into two channels of distribution for the 
following reasons: (1) the level of involvement, selling functions and 
expenses for the two categories of customers are significantly 
different; (2) a number of OEM and end-user customers are departments 
within the Indian government and, therefore, we found that it is 
appropriate to place these customers in the same category as state 
government agencies; and (3) Channel One customers use merchandise for 
their own consumption, whereas Channel Two customers resell the 
merchandise purchased from Rajinder. The

[[Page 32828]]

petitioners argue factors two and three do not establish different 
LOTs. However, the categorization of such customers into two channels 
of distribution does not, in and of itself, establish two different 
LOTs. Rather, the three factors emphasize similarities between 
different customer types so that they can be placed in categories for 
the purpose of determining whether different LOTs exist. Further, while 
the significance of the three factors may vary across customer types, 
we have determined, based on an analysis of these three factors, that 
the customers fall into two distinct groups.
    The petitioners' argument that LOT is determined by the selling 
activity of the producer, not the selling functions of the purchasers, 
is true, but misplaced. In order to determine the LOT of U.S. sales and 
comparison sales, we review and compare distribution systems that 
include not only selling activities of the producer, but also the class 
of its customer (point in the distribution chain). Furthermore, there 
is a direct relationship between the classification of a given entity 
and the function of that entity. Therefore, as part of our LOT 
analysis, we classify the producer's customers (e.g., wholesaler, 
retailer) based on the activities they perform in selling the product 
under review. We do not, however, consider the selling functions of the 
customer when determining whether different LOTs exist.
    We have accepted the selling-function chart Rajinder provided as 
part of its verified questionnaire response. As we stated in 
preliminary results of review, we used six of the listed functions to 
make a distinction between selling activities associated with Channels 
One and Two: market research, professional services and business 
systems development, engineering services, agent coordination, research 
and development, and advertising. As the chart that the petitioners 
included in their brief shows, there is a marked difference between the 
selling functions being performed in the two channels of distribution.
    Based on the above factors, we determined that there are two LOTs 
in the HM. One of these (Channel Two) is equivalent to the sales made 
at the constructed export price (CEP). However, since some of our U.S. 
sales matched to the other LOT we reviewed the data to determine if a 
LOT adjustment was appropriate.
    Sales at the other channel are made at a more advanced level; 
therefore, we next determined whether there was a pattern of consistent 
price differences between the two HM LOTs and whether a LOT adjustment 
was appropriate. The analysis we performed on Rajinder's information 
indicated that an adjustment was appropriate. The petitioners' argument 
regarding causation is misguided. The statute requires that the price 
differences be ``wholly or partly due'' to differences in LOTs; it does 
not require a determination of the exact price effect caused by LOT 
differences and it would not be possible to do so, given the variety of 
market forces that affect the sales price of each transaction we review 
(see Antifriction Bearings (Other Than Tapered Roller Bearings) and 
Parts Thereof From France et.al: Final Results of Antidumping Duty 
Administrative Reviews, 62 FR 2081, 2108 (January 15, 1997) (AFBs)).
    Comment 4: Rajinder argues that the Department's denial of its 
claimed duty-drawback adjustment is unreasonable. Rajinder contends 
that it met both parts of the Department's test: (a) Whether the import 
duty and rebate are directly linked to, and dependent upon, one 
another; and (b) whether the company claiming the adjustment can show 
that there were sufficient imports of the imported raw materials to 
account for the drawback received on the exported product. Rajinder 
contends further that, for the purpose of satisfying part one of the 
Department's two-part test, it provided record evidence demonstrating 
how the import duty and the duty drawback are related to one another. 
Rajinder indicates that it explained on the record how India's Advanced 
Licensing system operates and that India's duty-exemption schemes are 
well known by the Department and points to several administrative 
reviews involving Indian companies that subscribe to India's Advanced 
Licensing system. In addition, Rajinder indicates that it provided both 
the duty-drawback calculation methodology it used to calculate the 
adjustment and the respective advanced licenses under which it could 
import raw materials free of duty, provided such materials were used in 
the production of the exported product.
    Rajinder points to the verification report and accompanying 
exhibits as evidence of its eligibility for exemption from customs 
duties. Rajinder states that the advanced licenses state explicitly 
that the respective materials would be ``eligible'' for exemption from 
customs duties and that the underlying licenses are replete with the 
term ``Duty Exemption.'' Rajinder contends that the verification team 
did not indicate that additional information was necessary to satisfy 
part one of the Department's two-part test. Rajinder also argues that 
it supplemented the record with the very information that prompted the 
Department to deny the claimed duty-drawback adjustment for the Final 
Results of the New Shippers Antidumping Duty Administrative Review 62 
FR 47632, (September 10, 1997).
    Rajinder contends further that it satisfied part two of the 
Department's two-part test. Rajinder points to the verification report 
and accompanying exhibits which it asserts demonstrate that it imported 
sufficient amounts of hot-rolled coil and steel to qualify for duty 
drawback. Rajinder refers to the check marks and notations on the 
verification exhibits that the Department's verifiers made which, 
Rajinder asserts, is an indication that the Department verified the 
quantities of hot-rolled coil Rajinder imported.
    Rajinder argues that the Department misstated the purpose of 
Rajinder's January 20, 1998, submission of Rajinder's DEEC book. 
Rajinder indicates that, in the preliminary analysis memorandum, the 
Department stated that the purpose of submitting the DEEC book was to 
provide evidence that sufficient imports of raw materials were received 
for the final exported product. Rajinder contends that, contrary to the 
Department's statement regarding the purpose of the DEEC book, the 
actual purpose of submitting this book was merely to corroborate the 
data already on the record. Rajinder argues that the relevant 
verification exhibit already demonstrates the sufficiency of import 
quantities.
    Rajinder states that it submitted the DEEC book for the record 
because the Department requested it at verification. Rajinder points 
out that it explained to the verifiers that only the completed DEEC 
book, which was at that time in the possession of the Indian Customs 
Service, would satisfy the additional information they sought.
    The petitioners contend that the Department denied Rajinder's 
claimed duty-drawback adjustment correctly because Rajinder failed to 
meet either part of the Department's two-part test. The petitioners 
assert that, despite the fact that Rajinder was on notice from the New 
Shippers Review as to the information necessary to demonstrate its 
claimed duty-drawback adjustment adequately, Rajinder missed the 
opportunities to supplement the record with the necessary information. 
The petitioners point out that, throughout this review, the Department 
informed Rajinder of its need to provide additional information to 
satisfy the two-part test. The petitioners state, however, that in 
accordance with the

[[Page 32829]]

Department's regulations and practice, Rajinder failed to provide the 
necessary evidence to satisfy the requirements of its claimed duty 
drawback, citing Nachi-Fujikoshi v. U.S., 890 F. Supp. 1008, 1015 
(1992).
    The petitioners argue that the fact that the Department recognizes 
India's Advanced Licensing scheme is irrelevant to the instant case. 
The petitioners contend that Rajinder merely provided a general 
description of the Advanced Licensing scheme and that the possession of 
the advanced licenses alone does not demonstrate the linkage between 
the import duty and the drawback.
    The petitioners indicate their support for the Department's 
decision to require Rajinder to provide historical documentation 
demonstrating how Rajinder received advanced licenses and satisfied the 
requirements of those licenses. The petitioners point out that the 
advanced licenses stipulate the submission of quarterly reports to the 
government of India and that such reports should provide detail of the 
goods imported against the licenses. The petitioners assert that such 
reports or other similar documentation demonstrating that Rajinder 
fulfilled the obligations of the advanced license could have been 
submitted as proof of entitlement to the claimed duty drawback. The 
petitioners explain further that, because importation of raw materials 
may occur before or after exportation, historical records documenting 
how the program was applied to a specific company and product are 
necessary to demonstrate linkage. The petitioners contend that the 
advanced licenses alone do not serve as proof that the drawback was 
received, but instead establish the right to import raw materials.
    The petitioners argue that Rajinder also failed to satisfy the 
second part of the Department's two-part test. With respect to the 
verification exhibit with which Rajinder claims the Department was 
satisfied, given the check marks placed on it, the petitioners assert 
that the check marks are merely indications that the numbers on the 
respective worksheets reconciled with the reported figures. The 
petitioners also argue that the record does not demonstrate adequately 
that the amount of steel coil Rajinder claims to have imported 
qualified for duty-free status under the advanced license.
    In addition, the petitioners argue that, even if the Department 
permits Rajinder's steel duty-drawback adjustment, it should deny 
Rajinder's claim for the zinc duty-drawback adjustment. The petitioners 
argue that Rajinder did not import zinc during the POR and, instead, 
used the calculation it provided in the previous New Shippers Review. 
The petitioners contend that the zinc information submitted in January 
constitutes new information, which was illegible and should have been 
submitted prior to verification if Rajinder desired due consideration 
of the information. The petitioners contend further that Rajinder has 
not provided any evidence that the imports of zinc met the Department's 
two-part test. Specifically, the petitioner states that Rajinder did 
not provide any evidence that sufficient quantities of zinc were 
imported to cover the zinc incorporated into the pipe or that 
qualifying inputs of zinc were made within twelve months of the date of 
issuance of its advanced licenses.
    Department's Position: For both steel and zinc, we agree with the 
petitioners that Rajinder has not satisfied either part of our test. 
While Rajinder is correct in stating that we found the figures in the 
verification exhibits we reviewed to be accurate, the figures did not 
establish a direct link between the import duty and the drawback 
Rajinder claimed it received. Based on our understanding of the system, 
as explained at verification, the imported goods may enter free of 
duties, but the company must prove to Indian Customs that the goods 
were used in a product that was or will be exported or the importer of 
the goods will be liable for the foregone duty. This is why we 
requested documentation from the DEEC book. Without such information 
there is no established link between the import duty and the drawback. 
Inasmuch as Rajinder knew that it would not have the documents needed 
to establish this link at verification, Rajinder should have explained 
to us in advance that we would not be able to review such documents 
until after verification. Rajinder's arguments concerning part two of 
the test are irrelevant since both parts of the test must be met in 
order to receive the adjustment.
    Comment 5: Rajinder contends that the model-match methodology that 
the Department employed in the preliminary results is inaccurate and 
does not provide a fair comparison between U.S. and HM models. Rajinder 
argues that it provided the Department with the best possible matches 
between HM and U.S. models sold during the POR subject to the 
Department's model-match hierarchy set forth in the Department's 
original questionnaire. Rajinder argues, however, that the Department 
disregarded its own hierarchical model-match methodology and instead 
grouped certain models into ``families'' based on the model's nominal 
pipe size. Rajinder contends that the Department's family model-match 
methodology is unfair because it includes models that are not the most 
similar to the products sold to the United States.
    Rajinder also points out that the Department did not provide an 
explanation as to why its family model-match methodology provides 
better results and the Department did not explain why it did not use 
the model matches Rajinder provided in its response. Rajinder asserts 
further that grouping models into families has never been employed in 
other standard pipe and tube cases and was not the approach employed in 
the previous New Shippers Review in which Rajinder participated. In 
addition, Rajinder asserts that the Department's model-match 
methodology does not provide the most similar comparisons and is 
contrary to antidumping law and to the CIT's ruling that comparisons 
should be based on the most similar merchandise, absent identical 
merchandise sold in either the home or U.S. markets (citing Torrington 
Co. v. United States, 881 F. Supp. 622, 634 (Ct. Int'l Trade 1995)).
    In addition, Rajinder argues that the Department is using only one 
physical attribute, the nominal pipe size, as the basis for model 
matching and is disregarding another significant attribute, wall 
thickness, which, in the Department's model-match hierarchy, is one of 
the most important factors next to nominal pipe size. Rajinder asserts 
that matching models using only the nominal pipe size rather than 
including wall thickness as an important criterion by which to find the 
most similar matches produces an apples-to-oranges comparison.
    Rajinder asserts further that the Department apparently selected HM 
models as matches to U.S. models based on size of the difference-in-
merchandise adjustments associated with the selected models. Rajinder 
contends that differences in costs are not physical characteristics and 
that such figures should not be relied upon for the purpose of matching 
models. Moreover, Rajinder argues that the HM models that the 
Department selected as matches to U.S. models did not produce the 
smallest difference-in-merchandise adjustments.
    Rajinder also points out that pipes sold in India are categorized 
by light, medium, and heavy pipe which is reflective of the wall 
thickness. Rajinder explains that the uses of the pipes are a direct 
determinant of whether light,

[[Page 32830]]

medium, or heavy pipe is necessary. Rajinder explains further that a 
light pipe cannot be compared with a medium pipe, as was done in the 
preliminary results.
    For the above-mentioned reasons, Rajinder argues that the 
Department should use the models that Rajinder selected as the most 
similar HM models to the models sold in United States for the final 
results of review.
    The petitioners claim that the Department's model-match methodology 
is not unreasonable and is not contrary to the statute. The petitioners 
assert that there is no reason for the Department to alter its approach 
for the final results of review. The petitioners argue that, in 
accordance with section 771(16) of the Act, the HM models the 
Department selected as potential matches meet the definition of foreign 
like product. The petitioners also argue that, although this model-
match methodology deviates from that employed in other standard pipe 
cases, the Department has wide discretion in determining model matches 
in antidumping cases (citing Torrington Co. v. United States, 881 F. 
Supp. 622 at 634 (Ct. Int'l Trade 1995); (Smith-Corona v. United 
States, 713 F. 2d 1568, 1571 (Fed Cir. 1983), cert. denied, 465 U.S. 
1022(1984)). The petitioners explain that the Department's methodology 
selects the most similar models that match as closely as possible the 
five physical characteristics in the hierarchy, classifies models into 
families on the basis of nominal pipe size, and selects the models that 
produce the smallest difference-in-merchandise adjustment. The 
petitioners point out that selecting model matches on the basis of 
difference-in-merchandise takes into account a combination of physical 
characteristics and, moreover, it is in accordance with section 771 
(16)) of the Act, which calls for finding the closest possible match.
    The petitioners contend that, although the Department's model-match 
methodology is different from the methodology employed in the previous 
New Shippers Review and other pipe cases, the use of this methodology 
in the instant case does not preclude it from being a reasonable model-
matching approach. The petitioners contend further that, while 
controversy has arisen in the antifriction bearings proceedings 
regarding the family model-match methodology, such controversy is 
irrelevant given that the methodology was approved by the Court of 
International Trade, citing Torrington Co. v. United States, 881 F. 
Supp. 622 (CIT 1995). The petitioners note that the Department's model 
matching meets the statutory goal of matching products with the most 
similar characteristics.
    The petitioners also rebut Rajinder's claim that the Department 
disregarded wall thickness that Rajinder claims to be the most 
important factor. The petitioners point out that determining whether 
certain characteristics are more important over others has been an 
ongoing controversial topic between the Department and certain domestic 
interested parties and various respondents in other proceedings. The 
petitioners note that the Department's methodology takes into account a 
combination of physical characteristics, including wall thickness.
    In addition, the petitioners argue that differences in cost are 
reflective of differences in physical characteristics which is the 
premise behind the difference-in-merchandise adjustments. The 
petitioners also contend that, despite whether the pipe is light, 
medium, or heavy, all of the products used for comparison purposes have 
the same end use--the conveyance of gases and liquids and light 
structural uses. The petitioners argue that the Department's 
hierarchical approach to matching models that are most similar as set 
forth in its original questionnaire arbitrarily assigned a level of 
importance to certain characteristics and did not take into account 
differences in physical characteristics. The petitioners assert that a 
change in any one of the characteristics included in the hierarchy 
causes changes in other characteristics included in the hierarchy. The 
petitioners explain that a change in wall thickness can alter the 
thickness as well as the costs associated with end and surface finish, 
both of which are characteristics included in the hierarchy.
    The petitioners point out that, under the hierarchical approach, 
the Department would, in ascending order, find matches at the highest 
level of the hierarchy and would, thereby, disregard any changes in 
characteristics at the lower levels as a result of finding a match at 
the higher level. The petitioners argue that, in essence, this approach 
may find matches at higher levels within the hierarchy with a higher 
difference-in-merchandise even though another match might yield a lower 
adjustment.
    The petitioners argue that Rajinder has not provided evidence that 
the differences in wall thickness and the claimed specialized uses of 
the different wall thicknesses yield differences in market values. The 
petitioners therefore argue that, for the foregoing reasons, the 
Department should maintain the model-match methodology it used in the 
preliminary margin calculations for the final results of review.
    Department's Position: We agree with Rajinder in part. We agree 
that we should alter the model-match methodology from what we used in 
the preliminary results, but we do not agree that we should 
automatically accept the matches that Rajinder suggested in its 
response. In the preliminary results, we matched each U.S. model to a 
``family'' of home-market models.
    Sections 771(16)(B) and (C) of the Act define foreign like product 
merchandise as identical products or products in the following two 
categories:

    (B) Produced in the same country and by the same person as the 
merchandise which is the subject of the investigation, like that 
merchandise in component material or materials and in the purposes 
for which used and approximately equal in commercial value to that 
merchandise.
    (C) Produced in the same country and by the same person and of 
the same general class or kind as the merchandise which is the 
subject of the investigation, like that merchandise in the purposes 
for which used, and which the administering authority determine may 
reasonably be compared with that merchandise.

In accordance with section 771(16) of the Act, we modified our matching 
methodology and applied the criteria as follows. We did not consider 
grade and finish since those categories were the same for all HM 
models. The remaining criteria are size, wall thickness, and end 
finish. For size, we agree with the respondent, as we did in the 
preliminary results, that the U.S. models should be matched to HM 
models with a size of 32 mm or 40 mm. Each of the U.S. models fell 
between two HM models with essentially equivalent differences in wall 
thickness. For these four models, we reviewed the end finishes. All of 
these models had the same end finish, so that was not a determinant. 
This left two possible HM matches for each U.S. model. For these final 
results, unlike the preliminary results, we compared the variable cost 
of manufacture for all of these products and matched those products 
with the smallest differences (see analysis memorandum dated May 20, 
1998).
    Comment 6: The petitioners argue that the Department should not 
make a deduction from NV for Rajinder's reported HM credit expenses. 
The petitioners assert that, based on Rajinder's methodology for 
calculating credit expenses, one cannot discern the invoice against 
which payment was being made because these expenses were not calculated 
on an order-or product-specific basis. The petitioners

[[Page 32831]]

also note that Rajinder used an arbitrary method for determining 
payment dates based on whether a certain customer owed Rajinder more or 
less than fifty percent of its outstanding balance which, the 
petitioners argue, does not correlate to a customer's actual payment 
history. The petitioners suggest that the Department use instead a 
customer-specific average credit period as it has done in the past with 
cases in which a respondent's system utilized revolving accounts rather 
than rely upon any arbitrary method for determining payment dates.
    The petitioners also argue that Rajinder did not provide a reliable 
HM short-term interest rate. The petitioners note that, at 
verification, Rajinder provided the Department with statements from two 
of its banks that specify the short-term interest rate charged to 
Rajinder. However, the petitioners point out that Rajinder received a 
number of short-term loans from various financial institutions and that 
the interest rates charged by the two banks are not representative of 
the interest rates incurred on the short-term loans that Rajinder has 
outstanding with the various other financial institutions. The 
petitioners assert that Rajinder is therefore manipulating the interest 
rate used in the credit expense calculation by providing the interest 
rates selectively. The petitioners argue that, because the cost of 
working capital is fungible, the Department should calculate an average 
short-term interest rate from all short-term loans Rajinder has 
outstanding with the various financial institutions. In addition, the 
petitioners contend that, because Rajinder has failed to provide the 
Department with information necessary to calculate an average short-
term interest rate, the Department should disallow an adjustment to NV 
for credit expenses.
    Rajinder argues that credit expenses were verified with very few 
discrepancies and notes that the few discrepancies the Department found 
were disadvantageous to Rajinder. Rajinder argues, therefore, that 
because the credit expense calculation was verified and found to be 
accurate there is no reason to deny an adjustment to NV for this 
expense. Rajinder also refutes the petitioners' assertion that Rajinder 
used an arbitrary method to calculate its HM credit expenses. Rajinder 
points out that the calculation methodology was reasonable and 
consistent with the manner in which Rajinder's customers remit payment. 
Rajinder also states that petitioners' suggested methodology is only 
one of several methodologies that can be used to calculate credit 
expenses. Rajinder also argues that, if the Department rejects 
Rajinder's reported HM credit expenses, it should provide Rajinder with 
an opportunity to use a different method.
    Rajinder contends further that the short-term interest rate was 
verified and found to be accurate. Rajinder argues that it did not 
select the interest rate to be used in the calculation and there is 
nothing on the record or in the verification report or accompanying 
exhibits to suggest that it is unrepresentative of its short-term cost 
of borrowing. Rajinder notes that high interest rates are common in 
India, given the rate of inflation and devaluation. Rajinder asserts 
that, for the final results of review, the Department should accept 
Rajinder's credit expense calculation including the short-term interest 
rate used in the calculation.
    Department's Position: We agree with Rajinder. Rajinder calculated 
credit periods based on the manner in which its payment system 
operates. Many companies have revolving lines of credit for their 
customers. Despite the fact that such a system may make it difficult to 
tie specific sales to subsequent payments from the customer, 
calculation of average credit periods based on such a system is not 
unreasonable. In fact, as the verification report alludes, Rajinder's 
reported figures generally erred on the conservative side.
    We have also accepted Rajinder's reported interest rate. Rajinder 
did not, as the petitioners suggest, supply the verifiers with 
interest-rate information selectively for two of its bank loans. The 
verifiers reviewed all of Rajinder's outstanding loans (short-and long-
term) and traced the short-term loans to entries in the general ledger 
and Rajinder's financial statements showing outstanding balances and 
payments. In addition, the verifiers randomly chose two of the loans 
and reviewed all of the supporting documentation from which the 
interest rates were drawn. The interest rate charged on the two loans 
reviewed by the Department in detail corresponded with the rate 
Rajinder used in its calculation of credit expenses.
    Comment 7: Rajinder contends that, while the Department deducted 
U.S. selling expenses from U.S. prices, it failed to deduct HM indirect 
selling expenses from NV, creating an apples-to-oranges comparison. 
Rajinder states that, for the final results of review, the Department 
should deduct HM indirect selling expenses subject to the amount 
permissible under the CEP-offset provision.
    The petitioners refute Rajinder's argument that HM indirect selling 
expenses should be deducted from NV. The petitioners argue that, 
because the Department made a LOT adjustment which accounts for 
differences in selling expenses, including indirect selling expenses, 
the Department cannot make a CEP offset for HM indirect selling 
expenses. The petitioners point out that, if the Department compared 
sales at the same LOT, a CEP offset could not be performed (citing 
Antidumping Duties, Final Rule, 62 FR 27296, 27372 (May 19, 1997)).
    Department's Position: The statute directs us to adjust NV for HM 
indirect selling expenses where we are not able to make a LOT 
adjustment. See sections 773(a)(7)(A)(i) and (ii) and section 
773(a)(7)(B) of the Act. Since we made a LOT adjustment to NV for the 
final results of review, we may not deduct HM indirect selling expenses 
from NV as an offset to U.S. indirect selling expenses.
    Comment 8: The petitioners argue that, for the final results of 
review, the Department should not make a deduction from NV for 
Rajinder's claimed HM indirect selling expenses.* The petitioners 
contend that Rajinder has not documented these selling expenses 
adequately and has not clarified its calculation of how it allocated 
such expenses to black and galvanized pipe, despite the Department's 
request for additional information in its supplemental questionnaire. 
The petitioners also argue that company officials provided conflicting 
information on this subject at verification.
---------------------------------------------------------------------------

    * Given the lack of clarity from both parties, we assume the 
comments in this section are referring to the use of indirect-
selling expenses as the commission offset.
---------------------------------------------------------------------------

    Rajinder argues that there is no basis for disallowing a deduction 
from NV for these selling expenses merely because they were not 
verified. Rajinder notes that, for those expenses that were examined, 
the Department found such expenses to be reported accurately. Rajinder 
argues that it did respond to the Department's request for additional 
information in its supplemental questionnaire response by providing a 
breakdown of the expenses attributable to HM indirect selling expenses, 
including worksheets demonstrating the calculation of pipe based on the 
weight and type of the pipe.
    Department's Position: As discussed in our response to Comment One, 
we have not accepted Rajinder's HM

[[Page 32832]]

indirect selling expenses. Therefore, this argument is moot.
    Comment 9: The petitioners contend that the Department should 
revise the CEP-profit ratio calculated in the preliminary results of 
review. The petitioners assert that the cost of goods sold (total costs 
minus the change in inventory) should be subtracted from the total 
revenues because only those products that were sold generated revenue. 
The petitioners point out that incorporating this change into the 
calculation will increase the CEP-profit ratio considerably.
    Rajinder refutes the change in the numerator of the CEP-profit 
ratio that the petitioners propose, arguing that profit is the 
difference between revenue and expenses which includes the cost for 
inventory that has not yet been sold. Rajinder contends, however, that 
the CEP-profit ratio is overstated because the Department deducted an 
amount for imputed expenses incorrectly. Rajinder also points out that 
the Department deducted an incorrect figure for ``Total Costs'' which 
erroneously yields a profit, instead of a loss, for the period.
    Department's Position: We agree with both the petitioners and 
Rajinder in part. We agree that the cost of goods sold should be 
subtracted from the total revenue (see Calculation of Profit for 
Constructed Export Price Transactions Policy Bulletin, dated September 
4, 1997). The calculations that we performed added the change-in-
inventory figure to the total revenue after deducting the total costs. 
This calculation produces the same results that the petitioners 
suggest.
    We also agree with Rajinder that we made some arithmetic errors in 
the calculation. We have corrected these errors (see analysis 
memorandum, dated May 20, 1998).
    Comment 10: Rajinder argues that the Department incorrectly 
included imputed credit expenses and inventory carrying costs in the 
CEP-profit calculation.
    The petitioners agree with Rajinder that the CEP-profit calculation 
is incorrect and provide suggested changes to correct the calculation.
    Department's Position: We disagree with both the respondent and the 
petitioners. The suggested approaches blur the definition of U.S. 
expenses, as defined in section 772(f)(2)(B) of the Act, and U.S. 
selling expenses, as defined in sections 772(d)(1) and (2). As we 
discussed in AFBs at 2126, sections 772(f) (1) and 772(f)(2)(D) of the 
Act state, the per-unit profit amount shall be an amount determined by 
multiplying the total actual profit by the applicable percentage (ratio 
of total U.S. expenses to total expenses). Specifically, the Act 
defines ``total actual profit'' as the total profit earned by the 
foreign producer, exporter, and affiliated parties described in 
subparagraph (C) with respect to the sale of the merchandise for which 
total expenses are determined under such subparagraph. In accordance 
with the statute, we base the calculation of the total actual profit 
used in calculating the per-unit profit amount for CEP sales on actual 
revenues and expenses recognized by the company. In calculating the 
per-unit cost of the U.S. sales, we have included net interest expense. 
Therefore, we do not need to include imputed interest expenses in the 
``total actual profit'' calculation since we have already accounted for 
actual interest in computing this amount under section 772(f)(1) of the 
Act.
    When we allocated a portion of the actual profit to each CEP sale, 
we have included imputed credit and inventory carrying costs as part of 
the total U.S. expense allocation factor. This methodology is 
consistent with section 772(f)(1) of the Act, which defines ``total 
United States Expense'' as the total expenses described under sections 
772(d)(1) and (2). Such expenses include both imputed credit and 
inventory carrying costs. See Certain Stainless Wire Rods from France, 
61 FR 47874, 47882 (September 11, 1996).
    Comment 11: Rajinder contends that, in the Department's 
recalculation of HM imputed credit expenses, excise taxes should not be 
deducted because the amount of credit extended to the customer is 
inclusive of excise tax.
    The petitioners contend that the Department should continue to 
exclude Rajinder's excise taxes in the calculation of Rajinder's HM 
imputed credit expense calculation because, to do otherwise, is 
inconsistent with and contrary to both Department policy and practice. 
The petitioners contend further that, because the taxes are ultimately 
rescinded to the government as revenue, it does not serve the purpose 
of the adjustment to price for imputed credit expenses.
    Department's Position: We have not deducted excise taxes in the 
recalculation of HM imputed credit expense. This tax is included in the 
price Rajinder charged to the customer and is paid to the government 
when the goods are removed from the factory. Therefore, the amount of 
the tax is an imputed credit expense brought on by the sale of the pipe 
and, as such, is appropriate to include in the interest expense 
calculation.
    Comment 12: Rajinder contends that the Department matched certain 
U.S. sales transactions to the incorrect HM sales transactions. 
Specifically, Rajinder argues that the Department inadvertently defined 
a certain computer variable, which it used for matching purposes, by 
the date of payment. Rajinder argues that, for the final results of 
review, the Department should define the variable as the sale date.
    Department's Position: We agree with Rajinder and have corrected 
this clerical error.
    Comment 13: Rajinder contends that, despite the Department's 
inclusion of language in the program to change the sale dates of 
certain U.S. sales transactions, the computer output demonstrates that 
such changes were not implemented. Rajinder requests that the 
Department make such changes for the final results of review.
    The petitioners agree with Rajinder that changes to the sale dates 
are appropriate and provide suggestions for those changes.
    Department's Position: We agree and have corrected this error for 
the final results (see analysis memorandum, dated May 20, 1998).
    Comment 14: Rajinder contends that the Department inadvertently 
failed to make corrections to its reported HM shipment dates as 
presented at the outset of verification. Rajinder requests that the 
Department make these changes for the final results of review because 
corrections to the shipment date ultimately affect HM prices.
    Department's Position: We agree with respondent and have made the 
necessary changes for the final results of review.

Final Results of Review

    As a result of our analysis of the comments received and the 
correction of certain inadvertent clerical errors, we find that the 
following margins exist for the period May 1, 1996, through April 30, 
1997:

------------------------------------------------------------------------
                                                              Percentage
                   Manufacturer/Exporter                        margin  
------------------------------------------------------------------------
RSL........................................................        31.13
Lloyd's Metals & Engineers*................................         0.00
------------------------------------------------------------------------
*This firm made no shipments of subject merchandise to the United States
  during the instant POR. Rate is from the last segment of the          
  proceeding in which the firm had shipments/sales.                     

Assessment Rates

    The Department shall determine, and the Customs Service shall 
assess, antidumping duties on all appropriate entries. For CEP sales, 
we divided the total dumping margins for the reviewed sales by the 
total entered value of those

[[Page 32833]]

reviewed sales for each importer/customer. We will direct Customs to 
assess the resulting percentage margin against the entered Customs 
values for the subject merchandise on each of the importer's/customer's 
entries during the review period. While the Department is aware that 
the entered value of sales during the POR is not necessarily equal to 
the entered value of entries during the POR, use of entered value of 
sales as the basis of the assessment rate permits the Department to 
collect a reasonable approximation of the antidumping duties which 
would have been determined if the Department had reviewed those sales 
of merchandise actually entered during the POR.
    To calculate the cash deposit rate for each exporter, we divided 
the total dumping margins for each exporter by the total net value (EP 
or CEP) for that exporter's sales of subject merchandise in the United 
States during the review period. The following deposit requirements 
will be effective for shipments of subject merchandise entered, or 
withdrawn from warehouse, for consumption on or after the publication 
date of these final results of administrative review, as provided by 
section 751(a)(1) of the Tariff Act: (1) the cash deposit rate for the 
reviewed companies will be the rates outlined 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, a prior 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) the cash deposit rate for all other 
manufacturers or exporters will continue to be 7.08 percent, the ``All 
Others'' rate made effective by the final determination of sales at 
LTFV, as explained in the 1995/96 New Shippers Review of this order. 
See Certain Welded Carbon Steel Pipes and Tubes from India; Final 
Results of New Shippers Antidumping Duty Administrative Review, 62 FR 
47632, 47644 (September 10, 1997).
    These deposit requirements shall remain in effect until publication 
of the final results of the next administrative review.
    This notice also serves as a final reminder to importers of their 
responsibility under 19 CFR 353.26 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 the only reminder to parties subject to 
administrative protective orders (APO) of their responsibility 
concerning the return or destruction of proprietary information 
disclosed under APO in accordance with 19 CFR 353.34(d)(1). Timely 
written notification of the 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 determination is issued and published in accordance with 
sections 751(a)(1) and 777(i)(1) of the Act.

    Dated: June 8, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-15873 Filed 6-15-98; 8:45 am]
BILLING CODE 3510-DS-P