[Federal Register Volume 60, Number 38 (Monday, February 27, 1995)]
[Notices]
[Pages 10538-10542]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-4724]



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DEPARTMENT OF COMMERCE

International Trade Administration
[A-427-813]


Notice of Final Determination of Sales at Less Than Fair Value: 
Certain Carbon Steel Butt-Weld Pipe Fittings From France

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

EFFECTIVE DATE: February 27, 1995.

FOR FURTHER INFORMATION CONTACT: Penelope Naas or Gary Bettger, Office 
of Countervailing Investigations, Import Administration, International 
Trade Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW, Washington, DC 20230; telephone (202) 482-3534 
or 482-2239, respectively.

Final Determination

    We determine that certain carbon steel butt-weld pipe fittings from 
France are being sold in the United States at less than fair value, as 
provided in section 735 of the Tariff Act of 1930, as amended (the 
``Act''). The estimated margin is shown in the ``Suspension of 
Liquidation'' section of this notice.

Case History

    Since the publication of the preliminary determination in the 
Federal Register on October 4, 1994 (59 FR 50565), the following events 
have occurred:
    On October 5, 1994, pursuant to Sec. 353.20(b)(1) of the 
Department's regulations, Interfit, S.A. (``Interfit''), requested that 
the final determination in this case be postponed. On November 14, 
1994, the Department published in the Federal Register a notice 
postponing the publication of the final determination in this case no 
later than February 16, 1995 (59 FR 56461).
    From October 10 through October 14, 1994, we verified the responses 
of Interfit at its offices in Maubeuge, France and Starval in Marly La 
Ville, France, respectively. On October 17, 1994, we conducted a 
verification of related party and certain other issues at Vallourec 
Group Headquarters in Boulogne-Bilancourt, France. During the period of 
December 20 to 21, 1994, we verified the responses of Interfit, Starval 
and Vallourec Inc. in Houston, Texas. From December 12 to December 16, 
1994, we verified Interfit's cost of production data at its offices in 
Maubeuge.
    On January 23, 1995, and on January 30, 1995, petitioner and 
respondent submitted case and rebuttal briefs to the 
[[Page 10539]] Department. On February 1, 1995, the Department held a 
public hearing in this investigation.

Scope of the Investigation

    The products covered by this investigation are certain carbon steel 
butt-weld pipe fittings having an inside diameter of less than fourteen 
inches (355 millimeters), imported in either finished or unfinished 
condition. Pipe fittings are formed or forged steel products used to 
join pipe sections in piping systems where conditions require permanent 
welded connections, as distinguished from fittings based on other 
methods of fastening (e.g., threaded, grooved, or bolted fittings). 
Butt-weld fittings come in a variety of shapes which include 
``elbows,'' ``tees,'' ``caps,'' and ``reducers.'' The edges of finished 
pipe fittings are beveled, so that when a fitting is placed against the 
end of a pipe (the ends of which have also been beveled), a shallow 
channel is created to accommodate the ``bead'' of the weld which joins 
the fitting to the pipe. These pipe fittings are currently classifiable 
under subheading 7307.93.3000 of the Harmonized Tariff Schedule of the 
United States (``HTSUS''). Although the HTSUS subheading is provided 
for convenience and Customs purposes, our written description of the 
scope of this investigation is dispositive.

Period of Investigation

    The period of investigation (``POI'') is September 1, 1993, through 
February 28, 1994.

Fair Value Comparisons

    To determine whether Interfit's sales for export to the United 
States were made at less than fair value, we compared the United States 
price (``USP'') to the foreign market value (``FMV''), as specified in 
the ``United States Price'' and ``Foreign Market Value'' sections of 
this notice.
    Regarding level of trade, Interfit reported that it sells only to 
distributors in the United States and the home market.
    We made revisions to Interfit's reported data, where appropriate, 
based on findings at verification.

United States Price

    Because Interfit's U.S. sales of certain carbon steel butt-weld 
pipe fittings were made to an unrelated distributor in the United 
States prior to importation, and the exporter's sales price methodology 
was not indicated by other circumstances, we based USP on the purchase 
price (``PP'') sales methodology in accordance with section 772(b) of 
the Act.
    We calculated Interfit's USP sales based on packed, c.i.f., duty 
paid, landed prices to unrelated customers in the United States. We 
made deductions, where appropriate, for foreign inland freight, foreign 
brokerage, marine insurance, ocean freight, U.S. brokerage, U.S. 
duties, and rebates. Reported U.S. duties were adjusted based on 
information collected at verification.
    We made an adjustment to USP for value-added tax (``VAT'') assessed 
on comparison sales in France in accordance with our practice, pursuant 
to the Court of International Trade (``CIT'') decision in Federal-
Mogul, et al. v. United States, 834 F. Supp. 1391. See, Preliminary 
Antidumping Duty Determination: Color Negative Photographic Paper and 
Chemical Components from Japan (59 FR 16177, 16179, April 6, 1994), for 
an explanation of this tax methodology.

Foreign Market Value

    In order to determine whether there was a sufficient volume of 
sales in the home market to serve as a viable basis for calculating 
FMV, we compared the volume of home market sales of subject merchandise 
to the volume of third country sales of subject merchandise, in 
accordance with section 773(a)(1)(B) of the Act. On this basis, we 
determined that the home market was viable.
    In its May 13, 1994, response, Interfit reported that all home 
market sales were made to distributors, three of which were related to 
Interfit. Based on information verified in this investigation, we do 
not consider Interfit's indirect minority interest in Hardy-Tortauax 
(``H-T'') and Trouvay & Cauvin (``T&C'') to be a sufficient basis to 
determine that the parties are ``related,'' as defined in section 
771(13) of the Act and 19 CFR 353.45(b). See, the Department's 
concurrence memorandum from the preliminary determination (September 
26, 1994, at page 3). However, with respect to the third related 
distributor, Starval, we determined that its relationship to Interfit 
(e.g., 100 percent common ownership) satisfies the definition of a 
related party.
    Therefore, we compared Interfit's prices to Starval with Interfit's 
prices to unrelated parties using the arm's length test as set forth in 
Appendix II to Final Determination of Sales at Less than Fair Value: 
Certain Cold-rolled Carbon Steel Flat Products from Argentina, 58 FR 
37062 (July 9, 1994), and determined that the sales made to Starval 
were not at arm's length. Accordingly, we requested and received 
Starval's sales to unrelated customers in the home market. While 
verifying Starval's sales response, we found that several sales had 
been reported a number of times. This rendered Starval's home market 
database unusable for purposes of the final determination. Thus, we 
have disregarded a small portion of Interfit's home market sales and 
used sales made by Interfit directly to unrelated parties.

Cost of Production

    Petitioner alleged that Interfit made home market sales during the 
POI at prices below the cost of production (``COP''). Based on 
petitioner's allegation, we concluded that we had reasonable grounds to 
believe or suspect that sales were made below COP. In the course of 
this investigation, we gathered and verified data on production costs.
    For purposes of the preliminary determination, because Interfit's 
cost data was incomplete and submitted too late for consideration, as 
best information available (``BIA''), we made an adverse assumption 
that all home market sales were below the COP and based foreign market 
value on constructed value (``CV''). We then calculated the CV using 
Vallourec's transfer prices. We stated that we would verify whether 
those prices were at arm's length.
    For the final determination, however, we have reviewed and analyzed 
respondents COP data. In accordance with our standard practice, we 
asked Interfit to provide cost data for inputs produced by related 
parties. Interfit failed to provide data on the cost of pipe, a major 
input, produced by its related supplier, Vallourec. Therefore, we have 
valued the input on the basis of BIA and used the resulting COP to test 
home market sale prices. As BIA we adjusted the transfer prices for the 
input upward by the average difference between petitioner's acquisition 
cost of pipe, as reported in the petition, and the transfer price 
Interfit pays to its supplier.
    In order to determine whether home market prices were below the COP 
within the meaning of section 773(b) of the Act, we performed a 
product-specific cost test, in which we examined whether each product 
sold in the home market during the POI was priced below the COP of that 
product. We calculated COP based on the sum of Interfit's cost of 
materials, fabrication, general expenses, and packing, in accordance 
with 19 CFR 353.51(c). For each product, we compared this sum to the 
home market unit price, net of movement expenses, rebates and selling 
expenses. We made changes, where appropriate, to submitted COP data, as 
[[Page 10540]] discussed above and in the Interested Party Comments 
section of this notice, below.
    In accordance with section 773(b) of the Act, we also examined 
whether the home market sales of each product were made at prices below 
their COP in substantial quantities over an extended period of time, 
and whether such sales were made at prices that would permit recovery 
of all costs within a reasonable period of time in the normal course of 
trade.
    For each product where less than ten percent, by quantity, of the 
home market sales during the POI were made at prices below the COP, we 
included all sales of that model for the computation of FMV. For each 
product where ten percent or more, but less than 90 percent, of the 
home market sales during the POI were priced below the COP, we 
disregarded from the calculation of FMV those home market sales which 
were priced below the COP, provided that the below-cost sales of that 
product were made over an extended period of time. Where we found that 
more than 90 percent of respondent's sales were at prices below the 
COP, and such sales were over an extended period of time, we 
disregarded all sales of that product.
    In order to determine whether below-cost sales had been made over 
an extended period of time, in accordance with section 773(b)(1) of the 
Act, we compared the number of months in which below-cost sales 
occurred for each product to the number of months in the POI in which 
that product was sold. If a product was sold in three or more months of 
the POI, we did not exclude below-cost sales unless there were below-
cost sales in at least three months during the POI. When we found that 
sales of a product only occurred in one or two months, the number of 
months in which the sales occurred constituted the extended period of 
time; i.e., where sales of a product were made in only two months, the 
extended period of time was two months, where sales of a product were 
made in only one month, the extended period of time was one month. (See 
Preliminary Results and Partial Termination of Antidumping Duty 
Administrative Reviews: Tapered Roller Bearings, Four Inches or Less in 
Outside Diameter, and Components Thereof, From Japan (58 FR 69336, 
69338, December 10, 1993).
    Interfit provided no indication that its below cost sales were at 
prices that would permit recovery of all costs within a reasonable 
period of time and in the normal course of trade. (See, section 
773(b)(2); 19 U.S.C. 1677b(b)(2)).

Constructed Value

    Where all home market sales of a product were disregarded, we based 
FMV on CV. We calculated CV based on the sum of the adjusted cost of 
materials, fabrication, general expenses, U.S. packing costs and 
profit. We adjusted the cost of materials as discussed in the 
Interested Party Comments section of this notice, below. In accordance 
with section 773(e)(1)(B) (i) and (ii) of the Act, we (1) included the 
greater of Interfit's reported general expenses or the statutory 
minimum of ten percent of the cost of manufacture (``COM''), as 
appropriate, and (2) for profit, we used the statutory minimum of eight 
percent of the sum of COM and general expenses.

Price-to-Price Comparisons

    For price-to-price comparisons, we calculated FMV based on ex-
factory or delivered prices, inclusive of packing to home market 
customers. We deducted rebates, where appropriate. We also deducted 
home market packing costs and added U.S. packing costs in accordance 
with section 773(a)(1) of the Act.
    In light of the Court of Appeals for the Federal Circuit's decision 
in Ad Hoc Committee of AZ-NM-TX-FL Producers of Gray Portland Cement V. 
United States, 13 F. 3d 398 (Fed. Cir., January 5, 1994), the 
Department can no longer deduct home market movement charges from FMV 
pursuant to the Department's inherent power to fill in gaps in the 
antidumping statute. Instead, we adjust for direct movement expenses 
under the circumstance-of-sale provision of 19 CFR 353.56(a). 
Accordingly, in the present case, we deducted post-sale home market 
movement charges from the FMV under the circumstance-of-sale provision 
of 19 CFR 353.56(a). This adjustment included home market inland 
freight and insurance.
    For both price-to-price comparisons and comparisons to CV, we made 
circumstance-of-sale adjustments, where appropriate, for differences in 
credit expenses, pursuant to 19 CFR 353.56(a)(2). In calculating U.S. 
credit expense, we used the respondent's cost of borrowing in U.S. 
dollars during the POI. In instances where Interfit had not reported a 
shipment and/or payment date, we recalculated Interfit's reported 
credit expense.
    We have not made a deduction for direct selling expenses reported 
by respondent because we determined that these expenses (product 
liability and inventory carrying costs) are, in fact, indirect selling 
expenses. However, we have deducted indirect selling expenses, capped 
by the commissions paid to Vallourec Inc., a related party in the U.S. 
market. For the preliminary determination, we did not recognize these 
commissions because we did not have an appropriate benchmark against 
which to test whether the commission arrangement was at arm's length. 
However, we verified that Interfit pays the same commissions to both 
related and unrelated parties, with the exception of a single unrelated 
party that receives a higher rate. In LMI-La Metalli Industriale, 
S.p.A. v. United States, 912 F.2d 455, 459 (Fed. Cir. 1990) (LMI), the 
CAFC indicated that related party commissions can and should be 
adjusted for if the commissions are at arm's length and are directly 
related to the sales under review. Because the vast majority of 
commissions to related and unrelated parties are at a single rate, we 
find these conditions are met in this case. Therefore, we deducted 
indirect expenses incurred for home market sales up to the amount of 
the U.S. commission. We then added the U.S. commission to the FMV or 
CV, as appropriate.
    We adjusted for VAT in the home market in accordance with our 
practice. (See the United States Price section of this notice, above.)

Currency Conversion

    We made currency conversions based on the official exchange rates 
in effect on the dates of the U.S. sales as certified by the Federal 
Reserve Bank of New York. See 19 CFR 353.60.

Final Negative Determination of Critical Circumstances

    Petitioner alleged that critical circumstances exist with respect 
to imports of pipe fittings from France. In our preliminary 
determination, pursuant to section 733(e)(1) of the Act and 19 CFR 
353.16, we analyzed the allegation using the Department's standard 
methodology. Because no additional information has been submitted since 
the preliminary determination, the Department performed the same 
analysis as explained in its preliminary finding. Based on this 
analysis, the Department determines, in accordance with section 
735(a)(3) of the Act, that critical circumstances do not exist with 
respect to imports of certain carbon steel butt-weld pipe fittings from 
France.

Verification

    As provided in section 776(b) of the Act, we verified information 
provided by the respondent using standard verification procedures, 
including the [[Page 10541]] examination of relevant sales, cost and 
financial records, and selection of original source documentation. The 
public versions of the January 10, 1995, verification reports are 
available in the Central Unit located in room B-99 of the Department's 
main building, the Herbert C. Hoover building.

Interested Party Comments

Comment 1
    Petitioner contends that Interfit willfully refused, on four 
separate occasions, to provide from its related party, Vallourec 
Industries (``Vallourec''), the actual cost of producing carbon steel 
pipe, a major input in the production of the subject merchandise. 
Petitioner argues that by repeatedly refusing to respond to the 
Department's requests for this information, Interfit has not allowed 
the Department to properly conduct this investigation. Therefore, the 
Department should apply adverse best information available (``BIA'') in 
the final determination. Petitioner notes that the BIA approach 
employed at the preliminary determination (i.e., the assumption that 
all home market sales are below COP) rewards Interfit for its failure 
to cooperate. Accordingly, as BIA, the Department should use the margin 
reported for France in the petition or, in the alternative, the highest 
non-aberrational margin calculated for Interfit in the preliminary 
determination.
    Interfit argues that it informed the Department that it was willing 
to accept the consequences of not supplying the cost information, as 
this task would have required Interfit to provide cost information from 
four separate related manufacturing units. Thus, Interfit is prepared 
to accept a BIA finding that all home market sales were below COP.
DOC Position
    In light of Interfit's cooperation in this investigation, we 
disagree with petitioner's argument that the Department should use 
total BIA in the form of the margin reported for France in the 
petition, or the highest non-aberrant margin calculated for Interfit in 
the preliminary determination. Our use of partial BIA is adequate 
because it allows us to draw an adverse assumption only with respect to 
the information that Interfit failed to provide. Because we were able 
to perform a BIA cost test, we have adequately ensured that Interfit 
does not benefit from its failure to provide information. Therefore, 
total BIA is unnecessary.
Comment 2
    Regarding the constructed value, petitioner contends that the 
prices from Vallourec to Interfit for carbon steel pipe do not satisfy 
the statutory requirements outlined in section 773(e)(2). According to 
petitioner, section 773(e)(2) requires Interfit to demonstrate that: 
(1) It has sales to unrelated customers in the market under 
consideration (i.e., France); (2) the prices to those unrelated 
customers are for pipe that was ``identical or demonstrably comparable 
to the pipe used by Interfit;'' and (3) the prices that Interfit pays 
Vallourec are at arm's length. By its own admission, Interfit cannot 
satisfy the first two elements of the statute, because it concedes that 
``Vallourec sells no similar pipe to unrelated customers in France.'' 
With respect to the third element, according to petitioner, the 
Department's verification of the prices charged by Vallourec to 
Interfit and to other unrelated customers demonstrate that the prices 
to Interfit are preferential.
    Thus, petitioner argues that the Department should disregard the 
transfer prices and use the actual cost of producing the input supplied 
by Vallourec (carbon steel pipe). However, because Interfit repeatedly 
refused to provide Vallourec's actual cost of producing carbon steel 
pipe, the Department is prevented from determining CV and conducting a 
complete investigation. Therefore, the Department should apply best 
information available (``BIA'') in the final determination. In 
particular, the Department should use the margin reported for France in 
the petition or, in the alternative, the highest non-aberrational 
margin calculated for Interfit in the preliminary determination.
    Lastly, Petitioner argues that even if the Department determines 
that transfer prices between Vallourec and Interfit are at arm's 
length, the Department has ``reasonable grounds to believe or suspect'' 
that the transfer price of the carbon steel pipe is less than the cost 
of producing the pipe. Petitioner contends that several factors in this 
investigation provide the Department with ``reasonable grounds to 
believe or suspect'' that Interfit purchased the pipe from Vallourec at 
less than the COP. Most notably, petitioner claims Interfit did not 
provide evidence that Vallourec's price for the pipe was above the cost 
of producing such pipe, even though the information was requested by 
the Department numerous times.
    Petitioner thus argues that, because the Department has 
``reasonable grounds to believe or suspect'' that pipe is being sold at 
less than COP, even if the transfer prices are accepted under section 
773(e)(2), those prices cannot be used in determining CV. Rather, the 
Department should apply adverse BIA in the final determination, as 
detailed above.
    Interfit claims that the prices it pays to Vallourec reflect the 
market value (i.e., they are arm's length prices) and therefore, in 
accordance with section 773(e)(2), should be used for purposes of 
calculating constructed value. To substantiate its claim that the 
transfer prices between Vallourec and Interfit are arm's length, 
Interfit has provided the Department with prices of similar pipe sold 
to unrelated customers in the European Union (``E.U.''). Interfit 
argues that, because ``the E.U. is a fully integrated market, with no 
barriers to trade between its members,'' these sales are, in fact, in 
the same market (i.e., the market under consideration). Interfit also 
contends that the term ``merchandise under consideration'' includes 
both similar and identical merchandise, not only identical merchandise. 
With respect to the arm's length nature of these sales, Interfit argues 
that information submitted in this investigation demonstrates that the 
prices Vallourec charges Interfit are comparable to the prices charged 
to unrelated customers for almost identical pipe. Moreover, the pipe 
sold to Vallourec's unrelated customers includes additional processing 
costs which are not included in the pipe sold to Interfit. These 
additional costs would more than account for the difference in price. 
Thus, pursuant to section 773(e)(2), Interfit claims that the 
Department should use the transfer prices in calculating CV.
    With respect to section 773(e)(3), Interfit claims that this 
section contains a presumption that transfer prices are valid for 
purposes of calculating CV unless the Department has ``reasonable 
grounds to believe or suspect'' that they are below COP. To support its 
claim, Interfit cites Al Tech Specialty Steel Corporation v. United 
States, 575 F.Supp. 1277, 1282 (C.I.T. 1983); FMC Corp. v. United 
States, 3 F.3d 424 (CAFC 1993); and Antifriction Bearings (Other Than 
Tapered Roller Bearings) and Parts Thereof From the Federal Republic of 
Germany, 54 FR 18992, 19020, Comment 4 (1989). Therefore, where 
constructed value is concerned, petitioner, not respondent, must first 
provide evidence that the transfer prices are below COP; a simple 
allegation by petitioner is not sufficient. Interfit also argues that 
its failure to provide evidence that the transfer prices were 
[[Page 10542]] above COP does not imply that they were below cost.
    Interfit claims that the concurrence memorandum from the 
preliminary determination (September 26, 1994, at page 3) and a 
November 15, 1994 letter from the Department to the counsel for 
Interfit, led the company to believe that the transfer prices would be 
used so long as they were determined to be at arm's length. Interfit 
assumed that if the Department had at that time ``reasonable grounds'' 
to believe that the pipe was sold to Interfit at less than the COP, the 
Department would have stated that cost was an issue.
DOC Position
    The fact that Interfit failed to provide evidence that Vallourec's 
price for the input pipe was above the cost of producing the pipe, 
despite numerous requests from the Department for this information, 
provides the Department with ``reasonable grounds to believe or 
suspect'' that the transfer prices paid by Interfit were less than 
Vallourec's cost of production. Therefore, in computing the CV, we have 
valued the pipe on the basis of the BIA used to calculate COP for the 
home market sales below cost test. Because the transfer prices have 
been disregarded in accordance with section 773(e)(3) of the Act, we do 
not need to address the issue of whether the transfer prices satisfy 
the criteria under section 773(e)(2). The Department's preliminary 
determination expressly noted that whether the transfer prices were at 
arm's length would be examined at verification. In addition, the 
Department continued to pursue data that would confirm that the 
transfer prices are above COP. See, Supplemental/Deficiency Section D 
Questionnaire (November 15, 1994), Section D Verification Agenda 
(December 5, 1994), Fax to Counsel for Interfit (December 8, 1994), and 
Section D Verification Report (January 12, 1995). Therefore, contrary 
to Interfit's claims, the question of cost remained an issue.

Suspension of Liquidation

    In accordance with section 735(c)(4) of the Act, we are directing 
the U.S. Customs Service to continue to suspend liquidation of all 
entries of butt-weld pipe fittings from France, as defined in the 
``Scope of Investigation'' section of this notice, that are produced 
and sold by Interfit and that are entered, or withdrawn from warehouse, 
for consumption on or after October 4, 1994.
    The Customs Service shall require a cash deposit or the posting of 
a bond equal to the estimated weighted-average amount by which the 
foreign market value of the subject merchandise exceeds the United 
States price as shown below. The suspension of liquidation will remain 
in effect until further notice. The weighted-average dumping margins 
are as follows:

------------------------------------------------------------------------
                                                                Margin  
               Manufacturer/producer/exporter                 (percent) 
------------------------------------------------------------------------
Interfit, S.A..............................................        32.58
All Others.................................................        32.58
------------------------------------------------------------------------

ITC Notification

    In accordance with section 735(d) of the Act, we have notified the 
ITC of our determination.

Notice to Interested Parties

    This notice also serves as the only reminder to parties subject to 
administrative protective order (APO) of their responsibility 
concerning the return or destruction of proprietary information 
disclosed under APO in accordance with 19 CFR 353.35(d). Failure to 
comply is a violation of the APO.
    This determination is published pursuant to section 735(d) of the 
Act (19 U.S.C. 1671(d)).

    Dated: February 16, 1995.
Barbara R. Stafford,
Acting Assistant Secretary for Import Administration.
[FR Doc. 95-4724 Filed 2-24-95; 8:45 am]
BILLING CODE 3510-DS-P