10552 Federal Register / Vol. 60, No. 38 / Monday, February 27, 1995 / Notices

use of best information available (BIA)

is appropriate for Taekwang Bend Ind.

Co., Inc. (Taekwang), the South Korean

company which accounts for more than

60 percent of all exports of the subject

merchandise to the U.S. during the POI.

Because Taekwang did not respond to

the Department’s questionnaire, we find

that it did not cooperate in this

investigation.

Our BIA methodology for

uncooperative respondents is to assign

the higher of the highest margin alleged

in the petition or the highest rate

calculated for another respondent.

Accordingly, as BIA, we are assigning

the highest margin among the margins

alleged in the petition and subsequent

amendments to the petition, adjusted for

methodological errors as explained in

the Department’s initiation notice. See

Final Determination 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,

19033, May 3, 1989). The Department’s

methodology for assigning BIA has been

upheld by the U.S. Court of Appeals of

the Federal Circuit. (see Allied Signal

Aerospace Co. v. United States, 996

F.2d 1185 (Fed. Cir. 1993)); see also

Krupp Stahl, AG et al. v. United States,

822 F. Supp. 789 (CIT 1993)). The

assigned BIA margin is the same margin

that was assigned for the preliminary

determination.

Suspension of Liquidation

In accordance with section 733(d)(1)

of the Act, (19 U.S.C. 1673b(d)(1)), we

are directing the U.S. Customs Service

to continue to suspend liquidation of all

entries of pipe fittings from South

Korea, as defined in the ‘‘Scope of

Investigation’’ section of this notice, that

are entered, or withdrawn from

warehouse, for consumption on or after

the date of publication of this notice in

the Federal Register. The Customs

Service shall require a cash deposit or

posting of a bond equal to the estimated

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.

Manufacturer/Producer/Exporter

Weighted

average

margin

percent

All Companies .............................. 207.89

International Trade Commission (ITC)

Notification

In accordance with section 735(d) of

the Act, we have notified the ITC of our

determination. As our final

determination is affirmative, the ITC

will determine whether imports of the

subject merchandise are materially

injuring, or threaten material injury to,

the U.S. industry within 45 days.

If the ITC determines that material

injury or threat of material injury does

not exist, the proceedings will be

terminated and all securities posted as

a result of the suspension of liquidation

will be refunded or cancelled. However,

if the ITC determines that such injury

does exist, we will issue an

antidumping duty order directing

Customs officers to assess an

antidumping duty on pipe fittings from

South Korea entered or withdrawn from

warehouse, for consumption on or after

the date of suspension of liquidation.

Notification to Interested Parties

This notice serves as the only

reminder to parties subject to

administrative protective order (APO) in

this investigation of their responsibility

covering the return or destruction of

proprietary information disclosed under

APO in accordance with 19 CFR

353.34(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. 1673d(d)) and 19 CFR

353.20(a)(4).

Dated: February 16, 1995.

Barbara R. Stafford,

Acting Assistant Secretary for Import

Administration.

[FR Doc. 95–4719 Filed 2–24–95; 8:45 am]

BILLING CODE 3510–DS–P

[A–549–809]

Notice of Final Determination of Sales

at Less Than Fair Value: Certain

Carbon Steel Butt-Weld Pipe Fittings

From Thailand

AGENCY: Import Administration,

International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: February 27, 1995.

FOR FURTHER INFORMATION CONTACT:

Vincent Kane or Julie Anne Osgood,

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) 482–2815 or

482–0167, respectively.

Final Determination

We determine that certain carbon

steel butt-weld pipe fittings exported by

Awaji Sangyo (Thailand) Co., Ltd.

(AST), from Thailand 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 50568), the following events have

occurred:

On November 14, 1994, we published

in the Federal Register a notice

postponing the publication of the final

determination in this case until

February 16, 1995 (59 FR 56461). From

October 20 to October 26, 1994, we

verified the sales information of AST at

its offices in Samutprakarn, Thailand.

From December 2 to December 6, 1994,

we verified AST’s cost of production

and constructed value data. On January

23 and January 30, 1995, petitioner and

respondent submitted case and rebuttal

briefs to the Department. A public

hearing in this investigation was held

on February 6, 1995.

We note that all other producers and

exporters of the subject merchandise in

Thailand, which export to the United

States, are subject to an antidumping

duty order currently in effect for this

merchandise. (See 57 FR 29702, July 6,

1992.) AST was excluded from this

order because in the previous

investigation, the Department found its

margin of sales at less than fair value at

that time to be de minimis.

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 of 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
Federal Register / Vol. 60, No. 38 / Monday, February 27, 1995 / Notices 10553

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.

Such or Similar Comparisons

In making our fair value comparisons,

in accordance with the Department’s

standard methodology and section

771(16) of the Act, we first compared

sales of merchandise identical in all

respects. If no identical merchandise

was sold, we compared sales of the most

similar merchandise, as determined by

the model-matching criteria contained

in Appendix V of the questionnaire

(‘‘Appendix V’’) (on file in Room B–099

of the main building of the Department

of Commerce (‘‘Public File’’)).

Fair Value Comparisons

To determine whether AST’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. For those U.S. sales

compared to sales of similar

merchandise, we made an adjustment,

pursuant to 19 CFR 353.57 (1994), for

physical differences in the merchandise.

Regarding level of trade, AST reported

that it sells to an importer/distributor in

the United States and directly to

distributors, end users, and a

commissionaire agent in Thailand. AST

negotiates prices on a sale-by-sale basis

and states that it is unable to discern

any correlation between selling prices

and customer categories. Further, AST

states that its selling expenses do not

vary by customer category. We

examined this issue at verification and

found no evidence that AST’s prices or

conditions of sale differed on the basis

of level of trade. Therefore, in keeping

with established practice (see, e.g., Final

Results of Administrative Review:

Antifriction Bearings and Parts Thereof

from the Federal Republic of Germany,

et al. (56 FR 31692, 31709–11; July 11,

1991) and Import Administration Policy

Bulletin 92/1, Matching at Levels of

Trade, issued on July 29, 1992), and in

accordance with 19 CFR 353.58, we

have compared AST’s U.S. sales to its

home market sales to all customers.

We made revisions to AST’s reported

data, where appropriate, based on

findings at verification.

United States Price

Because AST’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 PP based on packed,

c.i.f. import prices to an unrelated

customer in the United States. We made

deductions from the U.S. price for

foreign brokerage, foreign inland freight,

ocean freight and marine insurance.

We made an adjustment to U.S. price

for the consumption tax paid on the

comparison sales in Thailand, 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 and Postponement of

Final Determination; Color Negative

Photographic Paper and Chemical

Components Thereof from Japan, 59 FR

16177, 16179, April 6, 1994, for an

explanation of this tax methodology. In

accordance with section 772(d)(1)(B) of

the Act, we made an addition to the U.S.

price for the amount of import duties

imposed on inputs which were

subsequently rebated upon exportation

of the finished merchandise to the

United States. (See Comment 2, below.)

Upon exportation of finished pipe

fittings, AST receives a drawback of

import duties, which is greater than the

import duties that would have been

assessed had the fittings been sold for

home consumption. In our calculation

of USP, we limited the addition for

drawback to the amount of duties that

would have been assessed had the goods

been sold in the home market. This

approach is consistent with section

772(d)(1)(B) of the Act, which provides

that the USP shall be increased by the

drawback of any import duties

‘‘imposed in the country of exportation

which have been rebated or not

collected by reason of exportation of the

merchandise to the United States.’’

Therefore, we have capped the amount

added to USP at the level of the import

duties imposed in the country of

exportation.

For U.S. sales which had not been

shipped and for which payment had not

been received, we based AST’s credit

expense on the average number of days

outstanding between shipment and

payment for AST’s U.S. sales with

reported shipment and payment dates.

For a discussion of the Department’s

treatment of the appropriate interest rate

to use in the calculation of credit in this

investigation, see Memorandum from

Barbara R. Stafford to Susan G.

Esserman (September 26, 1994) on file

in room B–099 of the U.S. Department

of Commerce.

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.

For purposes of calculating FMV, we

used AST’s sales to its home market

customers and constructed value (CV),

as described below.

Cost of Production

Petitioner alleged that AST made

home market sales during the POI at

prices below the cost of production

(COP). Based on petitioner’s allegation

and other information on the record, we

concluded that we had the requisite

reasonable grounds to believe or suspect

that sales were made below COP. Thus,

in accordance with section 773(b), we

initiated a cost investigation.

In order to determine whether home

market prices were below 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 AST’s cost of

materials, direct labor, variable and

fixed factory overhead, 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 and commissions.

With the following exceptions, we

relied on submitted and verified COP

information. Material costs were

modified to reflect only the cost of

seamless pipe used in manufacturing

the subject merchandise, rather than a

pipe cost which included not only

seamless pipe for fittings within the

scope, but also for fittings outside the

scope, and for welded pipe fittings.

Also, we used an interest cost based on

the combined interest cost of AST and
10554 Federal Register / Vol. 60, No. 38 / Monday, February 27, 1995 / Notices

its parent, ASK, rather than one based

on AST’s interest costs alone.

Section 773(b) of the Act requires us

to examine whether below cost sales

were made 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 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 COP,

we disregarded those home market sales

which were priced below COP for

purposes of calculating FMV, 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 COP, and such sales were

over an extended period of time, we

disregarded all sales of that product for

purposes of calculating FMV.

In order to determine whether belowcost sales had been made over an

extended period of time, we compared

the number of months in which belowcost 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 fewer than three

months during the POI, we did not

exclude sales unless there were below

cost sales in each month of sale. If a

product was sold in three or more

months, we did not exclude the belowcost sales unless there were below-cost

sales in at least three months during the

POI.

If sales below cost occurred in three

or more months of the POI, they are

considered to be made over an extended

period of time. When items are sold in

just two or three months of the POI, we

would consider below cost sales of these

items to be over an extended period of

time, if they occurred in at least two

months of the three months. When

items are sold in just one month of the

POI, we would consider any below cost

sales of these items to be over an

extended period of time. (See Final

Determination of Sales at Less Than

Fair Value: Saccharin from Korea (59

FR 58826, November 15, 1994); and

Preliminary Results and Partial

Termination of Antidumping

Administrative Review: Tapered Roller

Bearings, Four Inches or Less in Outside

Diameter, and Components Thereof (58

FR 69336, 69338, December 10, 1993)).

AST provided no evidence that the

disregarded 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).

Constructed Value

In accordance with section 773(e), we

calculated CV based on the sum of the

cost of materials (with adjustments as

described in the ‘‘Cost of Production’’

section of this notice), fabrication,

general expenses, U.S. packing costs

and profit. The cost of materials

included import duties paid on

imported seamless pipe used to produce

the pipe fittings. The amount of import

duties included in CV was equivalent to

the duties that would have been

imposed had the fittings been sold for

home consumption. In accordance with

section 773(e)(1)(B)(i) and (ii) of the Act

we: 1) included the greater of AST’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 because actual profit was less

than the statutory minimum.

Price-to-Price Comparisons

For price-to-price comparisons, we

calculated FMV based on packed, exfactory or delivered prices to home

market customers. From these prices,

we deducted commission, where

appropriate. We deducted home market

packing costs and added U.S. packing

costs in accordance with section

773(a)(1) of the Act. We also made

adjustments, where appropriate, for

differences in the physical

characteristics of the merchandise 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 no longer can

deduct home market movement charges

from FMV pursuant to its inherent

power to fill in gaps in the antidumping

statute. Instead, we adjust for those

expenses under the circumstance-of-sale

provision of 19 CFR 353.56(a) and the

exporter’s sales price offset provision of

19 CFR 353.56(b)(2), as appropriate.

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.

For both price-to-price comparisons

and comparisons to CV, we also made

circumstance-of-sale adjustments, where

appropriate, for differences in credit

expenses, pursuant to 19 CFR

353.56(a)(2). In accordance with 19 CFR

353.56(b)(1), we added U.S. indirect

selling expenses as an offset to the home

market commission, but capped this

addition by the amount of the home

market commission.

We adjusted for a consumption tax

collected in the Thai home market. (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 C.F.R. 353.60.

Verification

As provided in section 776(b) of the

Act, we verified information provided

by the respondent using standard

verification procedures, including the

examination of relevant sales, cost and

financial records, and selection of

original source documentation. The

public versions of the November 29,

1994, and the January , 1995 verification

reports are available for review in the

Central Records Unit located in room B–

099 of the Department’s main building,

the Herbert C. Hover Building.

Interested Party Comments

Comment 1

Petitioner observes that according to

AST’s response, it did not commence

integrated production of tees in

Thailand until after the POI. However,

tees were shipped during the POI.

Petitioner claims that these tees must be

of Chinese origin because AST

identified certain other tees sold during

the POI as being of Chinese origin.

Petitioner argues that, because the tees

in question could not have been

produced by AST, the Department

should exclude sales of these tees from

the investigation.

AST maintains that it has correctly

identified all of the Chinese tees which

it sold in the home market during the

POI. Moreover, AST points out that it

indicated in its response that it began a

lengthy testing of its integrated

production of tees during the POI. AST

claims that a limited quantity of tees

was produced from these test runs and

was sold in the home market. Therefore,

AST argues that it properly included

these sales in its home market sales

listing.

DOC Position

While there are statements in AST’s

response that would support petitioner’s
Federal Register / Vol. 60, No. 38 / Monday, February 27, 1995 / Notices 10555

conclusion, AST’s Section D response

does refer to a lengthy testing period

commencing during the POI. In

addition, AST’s July 25, 1994,

supplemental response in Exhibit 1

specifically identifies certain tees as

Chinese tees and the remaining as tees

being produced by AST, including

certain tees which were shipped during

the POI. Because AST identified the

Chinese tees in Exhibit 1 of its July 25

response and because the quantity of

tees shipped during the POI is

commensurate with production over a

prolonged test run, we have accepted

these tees as tees produced by AST and

have included them in the home market

data base.

Comment 2

Petitioner claims that the duty

drawback amount added to purchase

price was greater than the drawback

amount included in the constructed

value, because the drawback amount

added to purchase price included both

import duty and value added tax (VAT)

paid on purchases of imported pipe,

whereas the drawback added to

constructed value included only the

import duty.

AST maintains that the Department

properly excluded the VAT on

component material from the

constructed value, because AST

received a rebate of this VAT upon

exportation of the finished product.

Section 773(e)(1)(A) of the Act states, in

part, that constructed value shall

include the cost of materials exclusive

of any internal tax applicable in the

country of exportation directly to such

materials or their disposition, but

remitted or refunded upon the

exportation of the article in the

production of which such materials

were used. Therefore, AST contends

that the VAT on component materials

was properly excluded in the

calculation of CV.

DOC Position

In accordance with the section

773(e)(1)(A) of the Act, our practice is

to exclude indirect taxes on component

materials from CV, if the taxes are

rebated upon export. Once we have

excluded the VAT on component

materials from the constructed value,

we must also exclude it from the USP

because section 772(d)(1)(C) the Act

requires that we add internal taxes to

USP but only to the extent that these

taxes are included in the FMV. When

FMV is based on CV, no VAT is

included in CV and we are, thus,

precluded from adding VAT to the USP.

Comment 3

AST states that following the rationale

of section 773(e)(1)(A), the Department

should also not include the import

duties on component materials in

constructed value because this duty is

also either refunded upon export or an

exemption of the duty is granted by

reason of exportation of the

merchandise.

DOC Position

Section 773(e)(1)(A) directs the

Department to exclude from constructed

value internal taxes applicable in the

country of exportation but rebated upon

export. We do not consider import

duties to be internal taxes. The courts

also have recognized that the term

‘‘internal tax’’ denotes taxes other than

import duties. See Serampore Indus.

Pvt. Ltd. v. United States Dep’t of

Commerce, Int’l Trade Admin., 675 F.

Supp. 1354, 1357 (CIT 1987). Therefore,

in accordance with past practice (see,

e.g., Offshore Platform Jackets and Piles

from the Republic of Korea, 51 FR

11,795, 11,796 (April 7, 1986)), we have

included the import duties on

component materials as part of the cost

of materials in our calculation of

constructed value.

Comment 4

AST states that in July 1992, it was

excluded from the July 6, 1992

antidumping duty order on pipe fittings

from Thailand (57 FR 29702) because its

less than fair value margins were de

minimis. In view of this fact, AST

maintains that the Department should

have applied a more rigorous standard

in determining whether to initiate an

investigation in this case and that, had

it done so, the case never would have

been initiated. Contrary to suggestions

in the petition, AST argues that there

was no basis to assume that AST’s costs

had increased by 100 percent in two

years, or that U.S. prices showed

significant movement during that time.

Therefore, the Department should reexamine its initiation and terminate the

instant proceeding.

Petitioner maintains that nothing in

the statute bars the filing of an

antidumping petition against a specific

exporter merely because other exporters

of the same product from the same

country are already subject to an

antidumping duty order, nor does the

statute impose a higher burden on

petitioner in such circumstances.

Because the proceeding was lawfully

initiated, no basis exists for questioning

the Department’s decision to initiate.

DOC Position

The fact that a petition on the same

merchandise was filed in 1991 and AST

was excluded from the subsequent

antidumping duty order was not taken

into account in our decision to initiate

the current case. A finding at one point

in time that a company is not dumping

does not create a presumption that the

company will not dump in the future.

Lacking such a presumption, there is no

basis for applying a higher initiation

threshold for later filed cases on the

same merchandise.

Comment 5

AST claims that the Department

should apply the sales-below-cost test to

all sales of such or similar merchandise

on a combined basis, before applying it

on a model-specific basis. This was the

approach used in the prior investigation

of the subject merchandise (Final

Determination of Sales at Less Than

Fair Value: Certain Carbon Steel ButtWeld Pipe Fittings from Thailand, 57 FR

21065, 21070, May 18, 1992).

AST points out that the viability test

required by section 773(a) of the Act is

done on a such or similar category basis.

AST maintains that section 773(b) of the

Act, in discussing sales below cost,

makes reference to section 773(a).

Therefore, the test for below cost sales

should also be done on a such or similar

category basis.

Further, the language in section

773(b) suggests that the cost test be

applied on a such or similar category

basis rather than on a model-specific

basis. Section 773(b) requires the

Department to determine whether ‘‘sales

were made at less than the cost of

producing the merchandise.’’ Because

the term ‘‘merchandise’’ has a broader

connotation than the term ‘‘model’’ or

‘‘product, the cost test must be done on

a such or similar category basis.

AST claims that the Department’s

Policy Bulletin 92/3, dated December

15, 1992, on the 10/90/10 test for below

cost sales does not provide any basis for

performing the cost test solely on a

model-specific basis and bypassing the

test on a such or similar category basis.

In addition, AST maintains that the

legislative history of section 773(b)

indicates that Congress intended that

the Department consider the rationality

of exporter’s pricing practices,

specifically by giving allowances for

model-specific below cost sales at the

end of a model year.

Finally, AST points out that it was

excluded from the original antidumping

duty order on butt-weld pipe fittings

from Thailand, because its overall

margin of sales at less than fair value
10556 Federal Register / Vol. 60, No. 38 / Monday, February 27, 1995 / Notices

was de minimis. During the original

investigation, the Department applied

the two-tiered cost test and AST has

continued to use this test to avoid the

possibility of dumping margins. For the

Department to apply a new test in this

investigation is unfair.

Petitioner asserts that the

Department’s model-specific cost test is

in full accord with the requirements and

purpose of Section 773(b) of the Act

because this test is the first step to be

taken in determining FMV, which is

based on sales of particular models or

products.

Petitioner adds that the need for a

model-specific cost test is particularly

evident for a product like pipe fittings.

Despite the fact that pipe fittings come

in a wide range of sizes, only about 20

percent of the sizes account for about 80

percent of the fittings sold. Below cost

sales of low-volume items in the home

market might not be screened out by a

cost test applied on a such or similar

category basis. If these sales happen to

be compared to high volume items sold

for export to the United States, many

less than fair value sales would go

undetected. Clearly, the purpose of the

cost test would be defeated by such an

outcome.

DOC Position

In our final determination, we have

adhered to the Department’s Policy

Bulletin 92/3, which provides that the

cost test be done on a model-specific

basis. Policy Bulletin 92/3 is in

complete accordance with the statute

and has been consistently applied by

the Department for over two years. The

Policy Bulletin states that the cost test

is intended to avoid basing FMV on

below cost sales. Because FMV is

determined on a model-specific basis,

the Department has chosen to apply the

cost test on a model-specific basis, as

well. Otherwise, for certain models,

FMV would likely be calculated on

below cost sales.

AST claims that because 773(b) of the

Act contains a reference to 773(a), the

Department is required to conduct the

below cost sales test on the same basis

as the market viability test. The such or

similar viability test is a general test to

determine the level of sales activity to

determine the efficacy of spending

resources in examination of those home

market sales. The cost test, on the other

hand, is designed to determine which

market sales may be used for

comparison purposes. Nothing in the

statute, the regulations, or the legislative

history suggests that tests for general

home market activity and for sales

below cost must be on the same basis.

Because the purposes of the two tests

are different and because the reference

in section 773(b) to section 773(a)

clearly does not compel the Department

to use the same procedure for these

tests, we followed Department policy

and used the model-specific cost test.

AST’s claim that use of the term

‘‘merchandise’’ in section 773(b)

requires the Department to apply the

cost test broadly is erroneous. The term

‘‘merchandise’’ is used throughout the

statute, in some cases with a broad

connotation and in others, in a narrower

sense. For example, when the statute

refers to ‘‘the same general class or kind

of merchandise,’’ the connotation is

broad and includes the entire class or

kind of merchandise under

investigation. However, when the

statute defines ‘‘such or similar

merchandise,’’ the connotation is

narrow, referring to the particular model

sold in the home market which is

identical, or most similar to, a particular

model sold for export to the United

States. The fact that section 773(b) of the

Act uses the term ‘‘merchandise’’ with

respect to the cost test does not require

us to apply the cost test on a broad

basis.

AST claims that Policy Bulletin 92/3

does not provide any basis for

‘‘bypassing’’ a cost test using such or

similar categories. The Department

formulated Policy Bulletin 92/3 as a

statement of its intent to implement

uniformly a cost test methodology. The

Policy Bulletin itself states that the

Department’s practice will be to apply

the model-specific cost test in all future

investigations and reviews. The Policy

Bulletin need not explain ‘‘bypassing’’

the such-or-similar cost test because, to

the extent that the such-or-similar test

had been used in prior cases, it was no

longer Department practice when the

Department adopted the model-specific

test advocated in the Policy Bulletin.

The Department uniformly has

applied the model-specific cost test in

both investigations and reviews since

the bulletin was released. (See, e.g.,

Final Determination of Sales at Less

Than Fair Value: Ferrosilicon from

Venezuela, 58 FR 27522, 27533 (May

10, 1993); Final Results of Antidumping

Administrative Review: Sweaters,

Wholly or Chiefly of Man Made Fiber,

from Korea, 59 FR 17513, 17515 (April

13, 1994)). Given these circumstances,

AST had adequate notice as to Policy

Bulletin 92/3’s contents and that the

Department would apply the modelspecific cost test for all future

investigations and administrative

reviews.

Regarding the legislative history’s

reference to below-cost end-of-modelyear sales, we note that this reference

concerns whether below-cost sales are

made over an extended period of time.

The end-of-model-year sales are not

relevant to a discussion of whether or

not the cost test can be applied on a

model-specific basis.

Comment 6

When AST imports seamless pipe

under bond, it becomes liable for the

normal duty of 15 percent, plus an

additional surcharge of 3 percent,

because the import is made under bond.

AST states that it receives a rebate or an

exemption upon export of finished pipe

fittings of the surcharge, as well as the

normal duty. Therefore, AST claims

that, in accordance with section

772(d)(1)(B) of the Act, both duty and

surcharge should be added to the USP.

Petitioner claims that AST has

acknowledged that the three percent

surcharge is not imposed on seamless

pipe used to produce pipe fittings for

home consumption. Section 772(D)(1)(c)

provides for an increase in USP for taxes

rebated upon export but only to the

extent that such taxes are added to or

included in the home market price.

Because the surcharge is not imposed in

the home market, the rebate of the

surcharge on export should not be

added to USP. In the alternative, if the

Department determines that the three

percent surcharge is imposed on

imported pipe used to produce for home

consumption, then it should include the

full 18 percent duty in the COP.

DOC Position

During verification, we established

that the three percent surcharge was

imposed on seamless pipe used in the

production of home market fittings, in

addition to the normal 15 percent duty.

Therefore, because both duty and

surcharge are assessed on pipe used for

home market production and because

both are exempted on pipe used for

export production, it is appropriate to

include both the duty and the surcharge

in the drawback amount added to USP.

In addition, because both duty and

surcharge are clearly a part of the cost

of home market pipe fittings, we

included both in our calculation of the

cost of production.

Comment 7

AST maintains that the Department

should not recompute AST’s submitted

COP and CV interest expense to account

for the financing costs of its Japanese

parent, Awaji Sangyo K.K. (‘‘ASK’’).

According to AST, under Japanese

generally accepted accounting

principles (‘‘GAAP’’), only publiclyheld companies are required to prepare

consolidated financial statements that
Federal Register / Vol. 60, No. 38 / Monday, February 27, 1995 / Notices 10557

include the operating results of their

subsidiaries. Because ASK is a

privately-held Japanese company and

not required to prepare consolidated

financial data under Japanese GAAP,

AST argues that the Department should

base COP and CV interest solely upon

AST’s audited (unconsolidated)

financial statement information.

AST notes that the Department has a

long-standing practice of accepting

home-country GAAP for purposes of

computing COP and CV, unless it can be

shown that those practices distort

production costs. In this case, AST

maintains that use of a consolidated

interest calculation would violate ASK’s

normal GAAP and produce distorted

results since AST receives no loans from

ASK and did not receive any new

investment from its parent during the

POI.

AST further asserts that despite ASK’s

ownership interest in AST, the parent

company does not exert ‘‘control’’ over

its subsidiary’s operations. Instead, AST

maintains that it operates independently

from its parent and does not rely on

ASK for its production, sales (other than

export sales), engineering, financing,

research and development, or

management activities.

Lastly, AST argues that the premise

underlying the Department’s policy of

using consolidated interest expense in

computing COP and CV (i.e., the

fungible nature of invested capital) does

not apply in this case. AST asserts that

the presumption of easy transfer

(fungibility) of money between parent

and related affiliate is vitiated by the

fact that ASK and AST are located in

different countries, whose currency

regulation requirements significantly

impede the free flow of money between

countries.

Petitioner alleges that AST has

understated its COP and CV by

excluding ASK’s financing expense.

Petitioner states that, because capital is

fungible, the Department requires

consolidated interest expense when the

parent company maintains control over

the subsidiary. ASK maintained control

over AST’s operations and, for this

reason, the financing expenses of ASK

and AST were combined in the

Department’s prior antidumping

investigation involving AST. (Final

Determination of Sales at LTFV: Certain

Carbon Steel Butt-Weld Pipe Fittings

from Thailand, 57 F.R. 21065–69 May

18,1992) Petitioner asserts that there is

no reason for the Department to deviate

from its approach in the previous

determination.

DOC Position

We agree with petitioner and have

based our calculation of AST’s interest

expense for COP and CV on the

consolidated operations of AST and

ASK. This methodology is consistent

with our long-standing practice for

computing interest expense in cases

involving parent-subsidiary corporate

relationships. This methodology has

been upheld by the CIT in Camargo

Correa Metals, S.A. v. U.S., Consol. Ct.

No. 91–09–00641, Slip Op. 93–163, at

14 (CIT August 13, 1993).

As petitioner has pointed out, AST

has not provided us with any additional

information that would lead us to

change our determination, from the

1992 LTFV investigation of Butt-Weld

Pipe Fittings from Thailand, that the

company’s interest should be computed

based on the consolidated operations of

AST and its parent, ASK. AST’s

argument that ASK is not required

under Japanese GAAP to prepare

consolidated financial statements

ignores the fact that, as a privately-held

corporation, ASK is not subject to the

same set of accounting principles as

publicly-held entities in Japan. As in

most countries, one of the major

objectives of Japanese GAAP is to

ensure consistency in the accounting

principles practiced by publicly-held

corporations so that investors may make

informed decisions as to how they

invest their capital. There is no such

objective under the Japanese

Commercial Code which governs the

accounting practices of privately-held

companies like ASK. It should be noted,

however, that were ASK a public

company, certain information submitted

by AST indicates that ASK would be

required under Japanese GAAP to

consolidate the operations of AST in its

financial statements.

ASK’s ownership interest in AST

places the parent in a position to

influence AST’s financial borrowing

and overall capital structure. We note

that, contrary to AST’s assertions that

AST is an independent company and

not ‘‘controlled’’ by its parent, the two

companies share common directors and

other corporate officials. In fact,

according to AST, the two companies

share the same managing director. ASK

also acts as the selling agent for AST’s

export sales and provided the

technology, equipment, training,

engineers, and capital to establish AST.

Based on this information, it is difficult

to see how AST’s operations are

independent of its parent to such an

extent that we should ignore our normal

practice of computing interest expense

on the basis of the consolidated parent

and subsidiary.

Regarding AST’s claim that it received

no intercompany loans or additional

capital investment from its parent

during the POI, we note that this

argument fails to take into consideration

any borrowing costs associated with

ASK’s initial capital investment in the

company. AST maintains that all

interest expense incurred by ASK

pertains solely to the parent’s

operations. Under this principle, AST

would have us accept that its parent

funds its own operations largely through

borrowing while, at the same time,

funding its initial investment in AST

solely through equity capital. Such a

principle ignores the fact that ASK’s

capital structure is comprised of both

debt and equity and, as such, it is

neither possible nor appropriate in our

analysis for the company to pick and

chose which portions of its parent’s

operations should incur the additional

interest costs associated with borrowed

funds.

Lastly, with regard to AST’s claim

that transfers between AST and its

parent are not ‘‘fungible’’ due to

currency fluctuations and restrictions

on currency flows between Thailand

and Japan, we note that this argument

misrepresents the fungibility principle

underlying the Department’s practice

regarding consolidated interest expense

for COP and CV. As noted above, ASK

has already purchased a controlling

capital interest in AST. ASK’s capital

structure is comprised of both debt and

equity. These monies are fungible. That

is, one cannot reasonably know which

portion of ASK’s capital was used for a

specific activity. AST would have us

believe that ASK’s debt-based capital

was used to fund the company’s

production of nonsubject merchandise,

while its less costly equity-based capital

was used to establish AST’s operations.

This ignores the fact that the parent

company’s capital is used to fund all of

its operations and cannot be segmented

and apportioned to specific operations

in any justifiable manner. Thus, it is the

fungibility of the controlling parent’s

capital structure that is at issue and not,

as AST argues, the parent’s future

ability to transfer funds to its subsidiary.

Comment 8

Petitioner contends that all subject

fittings sold in the United States and the

home market were made from seamless

pipe. AST’s submitted pipe costs,

however, included welded pipe and

pipe used to produce pipe fittings

outside the scope of the investigation.

Petitioner states that for purposes of the

final determination, AST’s raw material
10558 Federal Register / Vol. 60, No. 38 / Monday, February 27, 1995 / Notices

costs should reflect only those costs

attributable to seamless pipe used in

manufacturing the subject merchandise.

AST states that its pipe consumption

was calculated based on its normal

accounting inventory subledgers which

do not track welded and seamless pipe

separately. Furthermore, the Department

verified that welded pipe accounted for

a small percentage of total pipe costs

and the price of seamless pipe was not

always higher than welded pipe.

Therefore, AST argues that excluding

welded pipe would not materially alter

the weighted average cost of pipe used

to produce the subject merchandise.

DOC Position

In computing COP and CV, it is the

Departments’s practice to include only

those costs incurred in manufacturing

the subject merchandise. Therefore, we

adjusted AST’s reported material costs

to exclude the costs incurred for welded

pipe and pipe inputs that were used to

produce merchandise outside the scope

of this investigation.

Suspension of Liquidation

In accordance with section 733(d)(1)

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 Thailand, as defined

in the ‘‘Scope of Investigation’’ section

of this notice, that are produced and

sold by AST 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 AST’s 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 margin is as follows:

Manufacturer/Producer/

Exporter

Margin

percent

Deposit

percent

Awaji Sangyo (Thailand)

Co., Ltd. ........................ 38.41 37.67

Adjustment of Deposit Rate for

Countervailing Duties

Article VI, paragraph 5 of the General

Agreement on Tariffs and Trade

provides that ‘‘[no] product . . . shall be

subject to both antidumping and

countervailing duties to compensate for

the same situation for dumping or

export subsidization.’’ This provision is

implemented by section 772(d)(1)(D) of

the Act. Because antidumping duties

cannot be assessed on the portion of the

margin attributable to export subsidies,

there is no basis to require a cash

deposit or bond for that amount.

Accordingly, the level of export

subsidies as determined in the most

recent administrative review of the

countervailing duty order, Carbon Steel

Butt-Weld Pipe Fittings From Thailand;

Final Results of Countervailing Duty

Administrative Review (57 FR 5248,

February 13, 1992), which was 0.74

percent, will be subtracted from the

margin for cash deposit or bonding

purposes. This results in a deposit rate

of 37.67 percent for AST. We did not

determine an ‘‘all others’’ rate in this

investigation, because all other

producers and exporters of butt-weld

pipe fittings from Thailand are already

subject to an antidumping duty order on

this merchandise, which was published

in the Federal Register on July 6, 1992

(57 FR 29702).

ITC Notification

In accordance with section 735(b) 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. 95–4727 Filed 2–24–95; 8:45 am]

BILLING CODE 3510–DS–P

[A–412–816]

Notice of Final Determination of Sales

at Less Than Fair Value: Certain

Carbon Steel Butt-Weld Pipe Fittings

From the United Kingdom

AGENCY: Import Administration,

International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: February 27, 1995.

FOR FURTHER INFORMATION CONTACT: Julie

Anne Osgood or Todd Hansen, Office of

Countervailing Investigations, Import

Administration, International Trade

Administration, U.S. Department of

Commerce, 14th Street and Constitution

Avenue, NW, Washington, D.C. 20230;

telephone (202) 482–0167 or 482–1276,

respectively.

Final Determination

We determine that certain carbon

steel butt-weld pipe fittings from the

United Kingdom 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 margins are 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 50571), the following events have

occurred:

On October 3, 1994, pursuant to the

Department’s regulations (19 CFR

353.20(b)(1) (1994)), BKL Fittings, Ltd.

(‘‘BKL’’), 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 final

determination in this case until

February 16, 1995 (59 FR 56461). From

November 21 through 23, and November

29 and 30, 1994, we verified the further

manufacturing operations and exporter’s

sales price information of BKL’s related

entity in Union, New Jersey. From

December 12 through 23, 1994, we

verified BKL’s responses to the

Department’s antidumping duty

questionnaire at company headquarters

in Redditch, England. On January 23

and 30, 1995, petitioner and respondent

submitted case and rebuttal briefs to the

Department. The Department held a

public hearing in this investigation on

February 2, 1995.

Scope of the Investigation

The products covered by this

investigation are certain carbon steel

butt-weld pipe fittings (‘‘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 includes

‘‘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