Oil Country Tubular Goods From Mexico: Final Results of Antidumping Duty Administrative Review

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 references to the provisions codified at

19 CFR part 351 (62 FR 27296, May 19, 1997).

Background

The Department of Commerce published a final determination of sales at less than fair value for OCTG from Mexico on June 28, 1995 (60 FR 33567), and subsequently published the antidumping duty order on August 11, 1995 (60 FR 41056). The Department of Commerce published a notice of ``Opportunity To Request Administrative Review'' of the antidumping order for the 1996/1997 review period on August 4, 1997 (62 FR 41925). Upon receiving requests for administrative review from two respondents, Hylsa and TAMSA, we published a notice of initiation of the review on September 25, 1997 (62 FR 50292). Under section 751(a)(3)(A) of the Act, the Department may extend the deadline for completion of an administrative review if it determines that it is not practicable to complete the review within the statutory time limit of 365 days. On March 19, 1998, the Department extended the time limit for the preliminary results to August 31, 1998. See Oil Country Tubular Goods from Mexico; Extension of Time Limits for Antidumping Duty Administrative Review (63 FR 14422, March 25, 1998). On January 11, 1999, the Department extended the time limit for the final results until March 10, 1999. See Oil Country Tubular Goods from Mexico; Extension of Time Limits for Antidumping Duty Administrative Review (64 FR 3065, January 20, 1999).

Duty Absorption

On October 2, 1997, Maverick Tube Corporation, Lone Star Steel Company, and IPSCO Tubulars, Inc. requested that the Department determine, with respect to Hylsa, whether antidumping duties had been absorbed during the POR. On October 23, 1997, North Star Steel Ohio requested that the Department determine, with respect to TAMSA, whether antidumping duties had been absorbed during the POR. Section 751(a)(4) of the Act provides for the Department, if requested, to determine during an administrative review initiated two or four years after the publication of the order whether antidumping duties have been absorbed by a foreign producer or exporter, if the subject merchandise is sold in the United States through an affiliated importer. Because this review was initiated two years after the publication of the order, we have made a duty absorption determination in this segment of the proceeding. In this case, both TAMSA and Hylsa sold to the United States through importers that are affiliated within the meaning of section 751(a)(4) of the Act. We determine that there is no dumping margin for either TAMSA's sales or Hylsa's sales during the POR. Since we have determined that there are no dumping margins for the respondents with respect to their U.S. sales, we also determine that there is no duty absorption with respect to those sales.

Scope of the Review

Imports covered by this review are oil country tubular goods, hollow steel products of circular cross-section, including oil well casing, tubing, and drill pipe, of iron (other than cast iron) or steel (both carbon and alloy), whether seamless or welded, whether or not conforming to American Petroleum Institute (API) or non-API specifications, whether finished or unfinished (including green tubes and limited service OCTG products). This scope does not cover casing, tubing, or drill pipe containing 10.5 percent or more of chromium. The OCTG subject to this order are currently classified in the Harmonized Tariff Schedule of the United States (HTSUS) under item numbers:

7304.20.10.10, 7304.20.10.20, 7304.20.10.30, 7304.20.10.40, 7304.20.10.50, 7304.20.10.60, 7304.20.10.80, 7304.20.20.10, 7304.20.20.20, 7304.20.20.30, 7304.20.20.40, 7304.20.20.50, 7304.20.20.60, 7304.20.20.80, 7304.20.30.10, 7304.20.30.20, 7304.20.30.30, 7304.20.30.40, 7304.20.30.50, 7304.20.30.60, 7304.20.30.80, 7304.20.40.10, 7304.20.40.20, 7304.20.40.30, 7304.20.40.40, 7304.20.40.50, 7304.20.40.60, 7304.20.40.80, 7304.20.50.15, 7304.20.50.30, 7304.20.50.45, 7304.20.50.60, 7304.20.50.75, 7304.20.60.15, 7304.20.60.30, 7304.20.60.45, 7304.20.60.60, 7304.20.60.75, 7304.20.70.00, 7304.20.80.30, 7304.20.80.45, 7304.20.80.60, 7305.20.20.00, 7305.20.40.00, 7305.20.60.00, 7305.20.80.00, 7306.20.10.30, 7306.20.10.90, 7306.20.20.00, 7306.20.30.00, 7306.20.40.00, 7306.20.60.10, 7306.20.60.50, 7306.20.80.10, and 7306.20.80.50. Although the HTSUS subheadings are provided for convenience and customs purposes, our written description of the scope of this proceeding is dispositive. The Department has determined that couplings, and coupling stock, are not within the scope of the antidumping duty order on OCTG from Mexico. See Letter to Interested Parties; Final Affirmative Scope Decision, August 27, 1998.

Period of Review

The review covers the period August 1, 1996 through July 31, 1997. The Department is conducting this review in accordance within section 751 of the Act, as amended.

Analysis of Comments Received

We invited interested parties to comment on our preliminary results of the reviews. We received both comments and rebuttals from petitioners and TAMSA. Because there were no comments concerning our preliminary results with respect to Hylsa, all comments below pertain to TAMSA. The following is a summary of comments.

Comment 1

Petitioners argue that TAMSA should not be granted a constructed export price (``CEP'') offset, as TAMSA neither requested such an adjustment nor provided information to the Department necessary to analyze whether a CEP offset was warranted. Indeed, since TAMSA claimed that its sales were at similar levels of trade, and that the sale to the United States was an export price (``EP'') sale, TAMSA never claimed a CEP offset. The lack of a CEP offset claim by TAMSA, and inadequate information concerning levels of trade, according to petitioners, precludes the Department from granting a CEP offset. Petitioners begin by pointing out that TAMSA maintained that its sale to the United States was an EP sale, not a CEP sale. Because of TAMSA's steadfast insistence that its sale was not a CEP sale, and its alleged refusal to provide any information which might be used in conjunction with a CEP offset, petitioners maintain that TAMSA is not entitled to the offset. Even if TAMSA is not required to request a CEP offset, petitioners argue, TAMSA has the burden to establish an entitlement to an offset by providing sufficient information to demonstrate that sales to the United States and home market were at different levels of trade, that it is not possible to make a level of trade adjustment, and that the level of trade in the home market is more advanced than that of the sale to the United States. Citing Small Diameter Circular Seamless Carbon and Alloy Steel Standard, Line, and Pressure Pipe from Germany (``German Pipe'') (63 FR 13217, March 18, 1998), petitioners assert that TAMSA alone was responsible for providing this information and failed to do so. Petitioners note that, in its initial response, TAMSA did not provide any information about different selling functions in the home market and the United States market which the Department could use in making a level of trade determination. Despite repeated requests by the Department in supplemental questionnaires, petitioners contend, TAMSA provided

little or no new information regarding the various selling functions in both markets. Instead, petitioners state, TAMSA continued to maintain that sales in both the home market and United States markets were at the same level of trade, and at no point requested a level of trade adjustment. Despite the fact that TAMSA provided just-in-time (``JIT'') services to PEMEX, its largest customer, and did not provide them to its United States customers, petitioners note that TAMSA never took the position that JIT services were sufficient to create a difference in levels of trade. Petitioners state that the respondent has the burden of proof to demonstrate that a level of trade adjustment based on price differences is not possible. Petitioners state that TAMSA provided no information to answer this question, and thus the Department's decision in the preliminary results to grant a CEP offset is incorrect. Petitioners believe that the Department did not explain its basis for finding that non-PEMEX sales in the home market were at a different level of trade from the sale to the United States, and that a level of trade adjustment based on price differences is not possible. For all of these reasons, petitioners believe that the Department should not grant a CEP offset to TAMSA. TAMSA counters that the Department's decision to grant a CEP offset was proper if the Department maintains that the sale by TAMSA to the United States was a CEP sale. TAMSA asserts that it did fully cooperate with the Department and provided the necessary information. Furthermore, TAMSA states that it did, in fact, advise the Department that it had provided sufficient information for a CEP offset, in comments which were provided prior to verification. This information, according to TAMSA, includes a detailed explanation of the various selling functions for each channel of distribution in the home market, as well as for the sale to the United States. TAMSA states that if it meets its burden to provide sufficient information for the Department to determine if there is a more advanced level of trade in the home market, yet provides insufficient information for a level of trade adjustment, then it has nevertheless met the conditions for a CEP offset. TAMSA states that it has, in fact, met this burden. Concerning the level of trade question, TAMSA states that the information provided to the Department shows that it sold at different levels of trade in the home market and the United States, and that the home market level of trade was more advanced. TAMSA states that, although it initially classified all customers as ``end users,'' it subsequently provided detailed information regarding channels of distribution, selling functions, and other information which clearly establishes different channels of distribution and different selling functions with respect to the two markets. TAMSA further notes that the Department verified the services provided by TAMSA to its customers, including the provision of JIT services in the home market and services provided by Siderca Corp. in the United States. According to TAMSA, this information, which was also verified, is sufficient to establish that the U.S. sale was made at a different level of trade than TAMSA's home market sales. Regarding the question of whether there is enough information to make a level of trade adjustment, and whether TAMSA cooperated sufficiently in providing such information, TAMSA asserts that the Department found no home market level of trade equal to the level of trade of the United States sale. Consequently, a level of trade adjustment was not feasible.

Department's Position

The question of whether a respondent is entitled to a CEP offset is predicated on a certain pattern of facts. First, there must be a decision that sales to the United States are CEP sales. Second, there must be a determination that there are different levels of trade between the home market and United States, that the home market level of trade is more advanced, and that it is not possible to quantify the price differences related to those sales and different levels of trade to make a level of trade adjustment. Only after these conditions are met can a CEP offset be made. The Department presented a detailed explanation of the process for determining levels of trade and their proper treatment in the preliminary results of this review. See Mexican OCTG, 63 FR 48699. To summarize, the Department examines and compares the distribution systems, including the selling functions, classes of customers, and selling expenses, in the two markets. Further, unless the Department finds that there are substantial differences in selling functions, it will not determine that there are different levels of trade. The Department's use of this test is well documented. In Certain Cold-Rolled Carbon Steel Flat Products from the Netherlands (62 FR 18476, April 15, 1997), the Department stated that:

[t]he existence of different classes of customers, as well as different functions performed by such customers, is not sufficient to establish a difference in the levels of trade. Accordingly, we consider the class of customer as one factor, along with the producer/exporter's selling functions and the selling expenses associated with these functions, in determining the stage of marketing, i.e., the level of trade associated with the sales in question.''

As noted in the preliminary results, we compared sales to unaffiliated customers in the home market to the constructed sales to the importer in the United States. This is consistent with the Department's previous practice. See Id. At 18480. In this instance, TAMSA's home market sales to unaffiliated parties are compared to the sale to Siderca Corp., TAMSA's U.S. affiliate. All sales in the home market are to end users, i.e. manufacturers which consume the final product. The sale to Siderca Corp., by contrast, is similar to a sale to a distributor. Siderca Corp. does not consume the product, but rather acts as a reseller. Therefore, the sales in the home market and the U.S. sale appear to be made at different points in the chain of distribution. With respect to the selling functions, TAMSA provided sufficient information for the Department to compare selling functions in the two markets. Information provided by TAMSA, and verified by the Department, demonstrates that TAMSA's selling functions for home market sales are different than those associated with TAMSA's sale to Siderca Corp. First, TAMSA provides JIT services to the vast majority of its home market customers. The Department verified the extent and the nature of the expenses associated with JIT services. Also, as TAMSA stated in submitting its chart of selling functions, TAMSA provides customer visits in the home market. Neither of these services was provided in connection with the U.S. sale to Siderca Corp. Services provided by Siderca Corp. to end users in the United States are not relevant to this analysis, because the appropriate comparison for LOT purposes is between the ``starting price'' sale to the first unaffiliated customer in the home market, and the constructed export price sale (i.e. the sale to Siderca Corp.) in the United States. See Sec. 351.412(c) of the Department's regulations. Based on information provided by TAMSA and on the Department's verification, the Department's analysis of the selling functions provided by TAMSA in both the home and U.S. markets indicates that there are selling functions provided in sales to the home market which are not provided in the U.S. market and that

all home market sales are made at a single level of trade. Based on the facts of the case, the Department finds that sales by TAMSA in the home market are at a different level of trade than the sale to the United States. Sales in the home market are to end-users, while the sale to Siderca Corp. is a sale to a distributor. Furthermore, the provision of JIT services to the vast majority of home market customers, as well as visits to customers, demonstrates that TAMSA's sales in the home market and its sale to Siderca Corp. are characterized by different selling functions. Therefore, the facts on the record indicate that TAMSA's sales were made at different levels of trade. Next, the Department must determine if the home market level of trade is more advanced than the U.S. level of trade. The Department's analysis of the different selling functions indicates that the home market sales are indeed made at a more advanced level of trade. The home market sales to end users, who are further down the chain of distribution than distributors such as Siderca Corp., and the selling functions provided in the home market, especially JIT services, constitute a far greater level of service and expense for TAMSA than the services provided to Siderca Corp. in connection with the sale to the United States. Finally, the information on the record indicates that it is not possible for the Department to make a level of trade adjustment. Specifically, because there are no home market sales at the same level of trade as the U.S. sale, it is not possible to quantify the extent to which price differences are due to the level of trade differences. Given that the home market sales are at a more advanced level of trade, and that it is not possible to make a level of trade adjustment, section 773(a)(7)(B) of the Act directs the Department to make a CEP offset. The statutory provision is not limited to situations in which a respondent requests such an offset. The record indicates that TAMSA provided sufficient information for the Department to conduct a level of trade analysis and to determine that a CEP offset was appropriate. Thus, petitioners' reliance on the German Pipe case is off point. In that case, the respondent did not provide sufficient information either before or during verification for the Department to conduct a level of trade analysis. In the instant case, in contrast, TAMSA provided information prior to verification, and Department officials were able to verify the accuracy of the information during verification. Thus, based on the facts in the case, we agree with respondent that a CEP offset is warranted if the Department continues to classify the sale to the United States as a CEP sale. The question of whether the sale is classified properly as a CEP sale is addressed in the next comment.

Comment 2

TAMSA contends that the Department erred in classifying TAMSA's sale to the United States as a CEP sale. Instead, TAMSA maintains that the Department should classify TAMSA's United States sale as an EP sale. In support of its argument, TAMSA begins by restating the three- prong test that the Department undertakes to determine if sales made through a U.S. affiliate should be classified as CEP sales or ``indirect'' EP sales. The test examines three criteria: (1) Whether merchandise sold to the United States entered into the physical inventory of the affiliate or was shipped directly to the United States customer; (2) whether a direct shipment to the unaffiliated customer was the customary channel of trade, and; (3) whether the affiliate acted only as a processor of documentation and as a communications link between the unaffiliated customer and the producer or exporter. Where one or more of these conditions is not met, the Department treats sales through a U.S. affiliate as CEP sales. Noting that the Department relied on the third prong of the test in rejecting its claim that the sale was an EP sale, TAMSA lists the reasons cited by the Department for its determination that the role of its affiliate, Siderca Corp., was more than ancillary, and argues that Siderca Corp. in fact served only as a document processor and a communications link. TAMSA denies any suggestion that Siderca Corp. solicited the sale, or in any way negotiated the price of the sale. TAMSA states that the record shows clearly that TAMSA, and not Siderca Corp., set the terms and price for the sale in question. TAMSA cites a number of instances in which it contends that the Department has treated sales as EP sales when the United States affiliate has no authority to set prices or is not in a position to negotiate prices, and states that the fact pattern in this case is consistent with those cases. See Notice of Final Determination of Sales at Less Than Fair Value: Beryllium Metal and High Beryllium Alloys from the Republic of Kazakhstan (``Beryllium from Kazakhstan''), 62 FR 2648 (January 17, 1997); Certain Corrosion Resistant Carbon Steel Flat Products and Certain Cut-to-Length Carbon Steel Plate from Canada: Final Results of Antidumping Duty Administrative Review (``Canadian Steel''), 63 FR 12725 (March 16, 1998), Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel Wire Rod from Korea (``Wire Rod from Korea''), 63 FR 40404 (July 29, 1998); and U.S. Steel Group v. United States, 15 F. Supp. 2d 892 (CIT 1998). Regarding the sales agreement between TAMSA and Siderca Corp., which confers exclusive marketing and sales agency powers on Siderca Corp. with respect to TAMSA products, TAMSA argues that the antidumping duty order rendered this agreement moot with respect to any sales to the United States of subject merchandise. Furthermore, TAMSA states that Siderca Corp. merely received a request from the U.S. customer, and passed it on to TAMSA in Mexico. TAMSA depicts the role of Siderca Corp. in finalizing the sale as the passive role of a mere conduit for information passing between the U.S. customer and TAMSA during the initial sales process. TAMSA states that Siderca Corp. did not match the order to TAMSA's inventory, did not find a buyer for the merchandise, and did not finalize the sale. Once the sale terms were finalized, TAMSA asserts, the functions performed by Siderca Corp. were all ``ancillary'' and therefore should not weigh in the decision to treat this sale as a CEP sale. These included paying for certain charges, such as brokerage and insurance, serving as the importer of record, accepting payment, and other such services. TAMSA concludes by stating that the Department must go beyond a listing of activities and must analyze the various activities involved with the sale. TAMSA contends that the record, properly analyzed, shows that this sale should be treated as an EP sale. Petitioners respond by stating that the Department's normal practice is to consider a sale made through a U.S. affiliate to be a CEP sale unless the record indicates that all three prongs are met. Petitioners state that Siderca Corp. had more than ancillary or incidental involvement in the U.S. sale and that these activities were sufficient to warrant the Department's treatment of the sale as a CEP sale. Petitioners rely upon Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products from Korea, Final Results of Antidumping Duty Administrative Review, (``Korean Steel''), 63 FR 13170 (March 18, 1998) and Stainless Steel Wire Rod from Spain, Final Determination of Sales at Less Than Fair Value, (``Wire Rod from Spain''), 63

FR 40391 (July 29, 1998) in which the Department treated the sales at issue as CEP sales. Petitioners note in particular that the sales agency agreement between TAMSA and Siderca Corp. names Siderca Corp. as TAMSA's exclusive selling agent in the United States market, and further points out that the terms of the sale and the selling activities performed by Siderca Corp. appear to follow the terms of this agreement. Furthermore, petitioners note that the agreement was extended, without amendment, after the antidumping duty order went into effect. Petitioners further assert that the contacts between Siderca Corp. and the U.S. customer were consistent with the functions described in the agreement. For example, according to petitioners, the U.S. customer contacted Siderca Corp., not TAMSA, regarding this sale, and Siderca Corp. had exclusive contact with the customer throughout the sales process. Additionally, Siderca Corp. had longstanding and frequent contacts with the customer and worked regularly with it to meet its needs as they arose for a variety of products and services. These contacts and activities, petitioners believe, indicate that Siderca Corp.'s efforts brought about the sale of TAMSA merchandise in the United States. While not disputing that TAMSA may have set the price for the sale, petitioners reiterate that the selling agreement between TAMSA and Siderca Corp. grants Siderca Corp. certain rights in negotiating and setting prices as part of its work in marketing TAMSA products. Petitioners state that the Department should discount other assertions on the record regarding TAMSA's role in setting the price, and instead should concentrate on the selling agreement. As for the other functions carried out with respect to this sale, petitioners believe that these activities, taken as a whole, indicate more than ancillary involvement by Siderca Corp. Petitioners urge the Department to consider the range of services and activities in the aggregate, rather than line by line, in making its determination. Petitioners also advise the Department to examine the differences in indirect selling expenses incurred by Siderca Corp. and TAMSA when making its determination on this question. Finally, petitioners state that it is also doubtful that TAMSA passed the second prong of the CEP test. Petitoners note that, in the original investigation, the merchandise sold to the U.S. was produced to order and the U.S. sales were made through a different U.S. affiliate. Comparing the fact pattern in this review to the one from the original investigation, petitioners find the two to be different and conclude that the current United States sale does not represent the customary commercial channel between the parties involved in the sale. According to petitioners, this sale therefore failed two of the three prongs of the ``indirect EP sale'' test, and the Department should therefore treat this sale as a CEP sale.

Department's Position

Section 772(b) of the Act defines CEP as ``the price at which the subject merchandise is first sold (or agreed to be sold) in the United States before or after the date of importation by or for the account of the producer or exporter of such merchandise or by a seller affiliated with the producer or exporter, to a purchaser not affiliated with the producer or exporter, as adjusted.'' Section 772(a) of the Act defines EP as ``the price at which the subject merchandise is first sold (or agreed to be sold) before the date of importation by the producer or exporter of the subject merchandise outside of the United States to an unaffiliated purchaser in the United States, or to an unaffiliated purchaser for exportation to the United States, as adjusted.'' When sales are made prior to importation through an affiliated U.S. sales agent to an unaffiliated customer in the United States, our practice is to examine several criteria in order to determine whether or not the sales are ``indirect'' EP sales. Those criteria are: (1) Whether the merchandise was shipped directly from the manufacturer to the unaffiliated U.S. customer; (2) whether this was the customary commercial channel between the parties involved; and (3) whether the function of the U.S. selling agent was limited to that of a ``processor of sales-related documentation'' and a ``communications link'' between the exporter and the unaffiliated U.S. buyer. See Canadian Steel 63 FR at 12738. Where all three criteria are met, the Department has regarded the routine selling functions of the exporter as merely having been relocated geographically from the country of exportation to the United States where the sales agent performs them, and has determined the sales to be EP sales. Where one or more of these conditions is not met, the Department has classified the sales in question as CEP sales. In attempting to determine whether a sale should be treated as EP or CEP, the Department looks at the overall role of an affiliate in the sales process. Essentially, the Department wishes to determine whether the affiliate is substantially involved in the sales process. While each of the three prongs addresses this question to some extent, the third prong of the test is the most important with respect to resolving the question. After carefully examining the evidence, the Department believes that the fact pattern indicates clearly that the affiliate, Siderca Corp., played the leading role in the U.S. sale made during this administrative review and was substantially involved in the sales process. As an initial matter, the selling agreement between TAMSA and Siderca Corp. is quite clear with respect to the services that Siderca Corp. performs. Siderca Corp. is the exclusive selling agent for TAMSA products in the United States and other parts of the world, and has certain rights affecting the price for any sales under the agreement. In exchange for providing marketing and selling functions, and for providing other services, such as paying for brokerage and importer duties, Siderca Corp. is entitled to receive compensation under the agreement. The record indicates that Siderca Corp. did receive, in connection with this sale, the compensation provided for under the agreement, and performed functions for which it is responsible under the agreement. In addition, Siderca Corp. played the primary role in generating this sale by bringing the customer to TAMSA. The record shows that Siderca Corp. has a longstanding working relationship with the United States customer, is in frequent contact with that customer, and that sales of other TAMSA products to this and other customers occur because of these contacts. Conversely, TAMSA itself appears to have little, if any, contact outside of Mexico with regard to the sale of its products in the United States. Indeed, under the terms of the agreement, TAMSA is precluded from soliciting or negotiating sales directly in the United States. The agreement places the rights and responsibilities of selling and marketing TAMSA products in the United States squarely on Siderca Corp. Based on this fact pattern, it appears that, contrary to TAMSA's claims, the sale to the United States of subject merchandise was within the framework of the agreement between TAMSA and Siderca Corp. Evidence on the record indicates that, consistent with its rights and responsibilities under the selling agreement, Siderca Corp. maintained contacts with the United States customer and, through these contacts, was able to match that customer's requirements with subject merchandise available from TAMSA. Siderca Corp.

was aware of the existence of the merchandise from a canceled sale that it had previously arranged, and upon receiving the inquiry forwarded it to TAMSA for approval. The fact that Siderca Corp. may not have fully exercised its rights with regards to price negotiation, deferring to TAMSA with respect to the final approval, neither negates the substance and importance of the agreement nor diminishes the importance of Siderca Corp.'s role in arranging this sale. Simply put, under the current agreement, it appears that TAMSA would be precluded from seeking sales in the United States directly. Sales of TAMSA products in the United States must, as a condition of the agreement, begin with Siderca Corp. The fact that Siderca Corp. performed other functions as specified in the agreement, even if these were ancillary services, and received compensation according to the terms of the agreement, reinforces the conclusion that Siderca Corp.'s activities under the agreement were the primary factors in creating the sale to the United States. The cases cited by both TAMSA and petitioners, when compared with the fact pattern of the case, reinforce the conclusion that this sale should be classified as a CEP sale. In Wire Rod from Korea, the Department treated the sales as EP sales because the Department ``(c)onfirmed Changwon's assertions that POSAM (the U.S. affiliate) is not in a position to negotiate, confirm, or reject prices without approval from Changwon'' and ``POSAM * * * did not solicit business on behalf of Changwon'' and ``Changwon itself contacted its potential U.S. customers'' (63 FR at 40418-19). In this instance, in contrast, Siderca Corp. had the authority to negotiate, confirm, or reject prices through its selling agreement. Additionally, the Department determined at the Siderca Corp. verification that Siderca Corp. maintains a sales staff which is in active contact with U.S. customers, whereas TAMSA had no contact with the potential U.S. customers. In Beryllium from Kazakhstan, the Department treated the sales as EP because ``verification findings confirmed the limits on BMI's (the U.S. affiliate) authority to finalize the sales and that BMI is acting solely as a processor of documentation and communications link'' (62 FR at 2649). In the instant case, in contrast, the verification findings indicate that Siderca Corp.'s authority is not limited, because of the existence of the selling agreement. As for the Canadian Steel case relied upon by the respondent, the U.S. affiliate whose sales were deemed to be EP sales in that case did not solicit sales, negotiate contracts or prices, or provide customer support. Siderca Corp., in contrast, regularly did all of the above on behalf of TAMSA. Even if it did not expressly solicit this particular sale, its function, which included negotiation with respect to this sale, clearly exceeded the Canadian Steel definition of ancillary functions. Although TAMSA relied upon U.S. Steel Group v. United States, that case actually involved CEP, not EP, sales. In that case, the Court of International Trade (``CIT'') examined the Department's determination in Certain Cut-to-Length Carbon Steel Plate from Germany; Final Results of Antidumping Duty Administrative Review, 62 FR 18391 (April 15, 1997). The CIT noted that, during the review, the producer, Dillinger, stated that it set the terms of the sale, including the final price. The Court further noted that the Department had found that the U.S. affiliate, Francosteel, among other things, either solicited or responded to the initial U.S. customer contact, received the purchase orders, negotiated the final sale with the U.S. customer using the pricing and term guidelines provided by Dillinger, took title to the merchandise, acted as importer of record, and invoiced the U.S. customer. Finally, Francosteel had the flexibility to make decisions on its own as to price. All of these factors, ``[c]ombined with all the normal selling functions, which have not always led to CEP classification, legitimately may be viewed as pushing this sale over the edge into CEP rather than the EP category.'' U.S. Steel Group, 15 F. Supp. 2d at 903. A similar fact pattern exists in this case. Siderca Corp. has the authority to make pricing decisions on its own; it made the first contact with the customer and performed all of the selling functions listed above. The case cited by petitioners also support a conclusion that this sale is best classified as a CEP sale. In Wire Rod from Spain, 63 FR at 40394, the Department treated the U.S. sales as CEP sales under a similar fact pattern. The Department noted that the U.S. affiliate (Acerinox) ``will contact U.S. customers that it has not dealt with for some time. Otherwise, U.S. customers contact Acerinox to inquire about purchasing'' Roldan's SSWR, the product made by the parent company. The Department further stated that Acerinox ``(m)ay accept the customer's order, if it is a small order. * * * For inquiries regarding significant purchases, Acerinox will contact (the parent company) to determine the sales terms' that are acceptable. After taking an order, Acerinox transmits it to the parent company. Acerinox then coordinates freight in the United States and collects and transfers payment to the parent company. Based upon this fact pattern, the Department stated that ``[t]he record shows that Acerinox was involved in every aspect of the sales process except for arranging for shipment [of the product] to the United States and invoicing the U.S. customers. Moreover, Acerinox's involvement in the sales process was extensive * * *'' when compared to that of the parent company. The Department further stated that ``[t]he preponderance of selling functions incurred to sell Roland's (wire rod) to the U.S. customers occurred in the United States. Furthermore, Acerinox's role in negotiating the terms of certain U.S. sales is not indicative of the ancillary role normally played by a ``processor of sales-related documentation'' and a ``communication link.'' Specifically, Acerinox's authority to negotiate and accept sales terms * * * as well as its authority to initiate contact with U.S. customers * * * contradicts' the parent company's claim that the U.S. affiliate's activities were ancillary. Thus, the Department classified these sales as CEP sales. Again, the fact pattern in Wire Rod from Spain is consistent with that found in this review. TAMSA had no direct contact with the U.S. customer, whereas Siderca Corp., through its selling agreement, had the authority to set the price and terms. While TAMSA had a role in setting the price, as did the parent of Acerinox, Siderca Corp.''s contacts with customers, its flexibility in negotiating terms of sale, and its other sales-related activities, indicate that the sale is appropriately classified as CEP. Finally, in Korean Steel, 63 FR at 13177, the Department again found that a fact pattern similar to that in this case warranted CEP treatment of the U.S. sales. In the Korean Steel case, the Department stated that ``(a)ll of Dongbu's U.S. sales are made through DBLA [the U.S. affiliate], and that Dongbu's U.S. customers seldom have contact with Dongbu. Furthermore, it is DBSA (and not Dongbu) that writes and signs the sales contract. * * * Furthermore, we find that, in addition to playing a key role in the sales negotiation process, DBLA played a central role in all sales activities after the merchandise arrived in the United States.'' Based on the facts of the case, and their similarity to previous cases concerning the issue of whether a sale should be classified as CEP or EP, we believe that TAMSA's sale to the United

States is properly classified as a CEP sale.

Comment 3

Petitioners argue that the Department should apply partial facts available for certain selling expenses incurred in the United States. Petitioners believe that TAMSA did not cooperate fully, or to the best of its ability, in providing proper figures and supporting documentation for various expenses such as brokerage. Petitioners present a sequence of events which purport to show that TAMSA did not cooperate to the best of its ability. Petitioners point to the first price build-up submitted by TAMSA and assert that it contained numerous errors and omissions. Petitioners state that, despite requests for clarification of the expenses in the price build- up, TAMSA did not present all of the expenses or a satisfactory explanation until verification. During the verification in Veracruz, petitioners state that the Department discovered previously unknown and unreported expenses. Similarly, according to petitioners, at the verification of Siderca Corp. in Houston, the Department discovered new supporting documentation for the various expenses. Because neither all expenses nor all supporting documents were provided before the two verifications, petitioners urge the Department to use partial facts available with regard to these expenses. TAMSA retorts that it did, in fact, cooperate fully and to the best of its ability. TAMSA states that, contrary to petitioners' claims, all expenses related to the sale into the United States were reported before verification in Veracruz. Of the three charges mentioned by petitioners (brokerage charges, stevedoring, and wharfage), TAMSA points out that each was reported before verification. While acknowledging that two of the three charges were reported late or were initially mis-reported, TAMSA attributes this delay to clerical errors or omissions that TAMSA itself discovered and corrected prior to the Department's first verification in Veracruz. Because the errors were minor, and were corrected either before or at verification, TAMSA contends that it is the Department's practice to accept such corrections. See Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel Wire Rod from Sweden, 63 FR 40449 (July 29, 1998); Notice of Final Determination of Sales at Less Than Fair Value: Static Random Access Memory Semiconductors from Taiwan, 63 FR 8909 (February 23, 1998); Final Determination of Sales at Less Than Fair Value: Certain Cut-to-Length Carbon Steel Plate from the People's Republic of China, 62 FR 61964 (November 20, 1997).

Department's Position

We agree with respondent. While the Department generally requires respondents to report all expenses and provide any requested supporting documentation in accordance with established deadlines, the fact is that TAMSA provided data on nearly all expenses in a timely manner. TAMSA reported only one minor expense prior to the Department's verification in Veracruz. Furthermore, the Department verified the accuracy of the reported expenses. The additional support documentation added to the record at the verification in Houston did not reflect a change in the expenses reported. Although they demonstrated that Siderca Corp. did have greater control in the price build-up than originally claimed by TAMSA, the additional support documentation added to the record at the verification in Houston did not reflect a change in the expenses reported. Finally, although TAMSA did not provide all of the supporting documentation for all of the expenses incurred prior to the verifications, the Department was able to supplement and verify all relevant information during the two verifications. Therefore, we will not make any changes with regard to these expenses.

Comment 4

Petitioners assert that the Department should deduct commissions paid to Siderca Corp. from the United States price. Assuming that TAMSA's United States sale is classified properly as a CEP sale, petitioners argue that the statute calls for commissions to be deducted from the United States Price. Petitioners note that Siderca Corp. is entitled, under its selling agreement with TAMSA, to receive a ``commission'' equal to a percentage of the actual price charged to customers. If this figure is intended to offset expenses incurred by Siderca Corp., petitioners argue, the amount of the commission which exceeds the expenses should be deducted. TAMSA counters that these are related party commissions and are thus intra-company transfers. TAMSA states that the general practice of the Department is to treat related party mark-ups in price not as commissions, but as intra-company transfers rather than as expenses. Since these are not sales expenses, they should not be deducted from United States price. TAMSA cites various cases in which the Department did not deduct commissions between affiliated parties. See Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof from France, Germany, Italy, Japan, Romania, Singapore, Sweden, and the United Kingdom, 63 FR 33320 (June 18, 1998); Korean Steel, 63 FR 13170.

Department's Position

We agree with respondent. The Department does not generally treat price mark-ups between affiliates such as the ones in this case as commissions. See U.S. Steel Group, 15 F. Supp. 2d at 903, and Floral Trade Council v. United States, Slip-Op. 99-10 (CIT January 27, 1999). Instead, these are intra-company transfers which the Department treats as part of the general operating expenses of the company. Thus we generally do not deduct them from U.S. price. Instead, in accordance with 19 CFR 351.402(e), we deduct the actual expenses of the affiliated importer. ``Although the statute appears to require the expense represented by commissions to be deducted from CEP whether or not the producer/exporter and U.S. [affiliate] are related, the statute does not define `commissions.' '' Floral Trade Council, Slip Op. 99-10 at 10. Therefore, the Court has sustained the Department's practice of treating commissions paid by the producer/exporter to an affiliate as an intra-company transfer, rather than as a true commission. Id. Petitioners cite section 771(d) of the Act (19 U.S.C. 1677a(d)) in support of their contention that commissions should be deducted. However, the opinion in U.S. Steel Group makes clear that, ``[i]f expenses represented by the commissions are already accounted for by means of a deduction for selling expenses nominally made under another provision of 19 U.S.C.A. 1677a(d), or the expense does not truly exist, no additional commission deduction need be made.'' 15 F. Supp. 2d at 903. Because the Department has already made adjustments for all of TAMSA's selling expenses under 19 U.S.C. 1677a(d) related to the sale in question, an additional adjustment for ``commission'' would constitute double-counting. Consequently, the Department has made no further adjustments in this regard. Petitioners' claim that the amount of the ``commission'' that exceeds the expenses incurred by Siderca Corp. is also already addressed by another provision of section 772(d) of the Act (19 U.S.C. 1677a(d)), specifically the CEP profit provision, section 772(d)(3) of the Act (19 U.S.C. 1677a(d)(3)). The

Court has also affirmed the Department's position that the amount by which ``commissions'' paid to affiliates represents profit for the affiliate receiving them. A profit amount has already been accounted for under the CEP profit provision. Floral Trade Council, Slip Op. 99- 10 at 13.

Comment 5

Petitioners urge the Department to correct TAMSA's reported warehousing expenses in connection with the provision of Just In Time services to certain domestic customers. Petitioners assert that TAMSA's methodology, which reports expenses on a monthly basis by regional warehouse, is distortive. Petitioners cite changes in the actual expenses per month, and state that there appears to be no correlation between these expenses and the tonnage shipped or warehoused in that month. In particular, there appear to be instances where costs go up even though tonnages go down for a month. Petitioners urge the Department to recalculate warehousing expenses for each region on a per-ton amount for the entire period of review. TAMSA counters that its methodology is reasonable, that it acted to the best of its ability in providing information, and that its reporting methodology was not unreasonably distortive. Because of the nature of Just In Time services (i.e., rapid delivery upon order), expenses incurred in a month usually correspond closely to tonnages shipped and sold in that month. To relate expenses from one month to sales in a different month, as petitioners' methodology would, is more distortive, according to TAMSA. TAMSA further explains how lower tonnages in a month might incur higher expenses. For example, TAMSA could incur more customer support expenses during a month in which it made many smaller sales than in a month in which it made a single larger tonnage sale. TAMSA cites Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, from Japan, and Tapered Roller Bearings, Four Inches or Less in Outside Diameter, and Components Thereof, from Japan: Final Results of Antidumping Duty Administrative Reviews (63 FR 63860, November 17, 1998) in support of its assertion that the Department should accept this methodology.

Department's Position

We agree with respondent. The methodology which TAMSA used is based on actual, verified monthly figures. By using this methodology, TAMSA has provided the Department with a more detailed, and more accurate, warehousing cost. Adopting the petitioners' methodology would be less accurate, as it would spread out monthly costs over the entire period of review. As it is generally the Department's preference to use the most accurate and reasonable methodology possible, a warehousing expense methodology which is based on monthly figures is preferable to one based on annual averages.

Comment 6

Petitioners request that the Department adjust the reported home market freight charges for inland freight from the plant to the warehouse. Since TAMSA was unable to report the actual freight charges, it took the price lists for freight and adjusted these using a methodology to take into account trucks which did not ship with a full load. Petitioners argue that this ``constructed'' freight charge is distortive. As partial facts available, petitioners suggest using the prices from the price lists as a surrogate for the freight costs. TAMSA counters that its allocation methodology was reasonable. As directed by the Department's original questionnaire, TAMSA attempted to allocate freight costs on the basis of the unit weight of the individual products shipped. Because it used actual price lists, as adjusted for instances not involving full truck loads, TAMSA claims that its methodology more closely reflects the actual prices paid for freight.

Department's Position

We agree with respondent. While the Department prefers to have actual freight costs, a reasonable allocation methodology that most closely reflects the actual costs is acceptable. The Department verified information regarding price lists and payment for freight. Based upon this verified information, the Department believes that this methodology most closely reflects actual costs.

Comment 7

Both petitioners and respondents request that the Department correct certain clerical errors. Petitioners request that the Department make an adjustment to its cost calculation methodology by eliminating the field titled ``SEPTADJ,'' that it correct the direct selling expenses calculation by adding CREDITU to the expense, and that it correct the application of exchange rates to packing expenses. TAMSA requests that the Department calculate normal value based on monthly averages (instead of on averages for the ``90-60 window'' as it has done in the current program), that it add BILLADJH to the cost calculation program, that it correct a conversion error in the CEP ratio calculation, and that it not deduct CREDITU from U.S. direct selling expenses.

Department's Position

The Department has examined the error allegations, and has made the changes requested by both parties. Petitioners' and TAMSA's clerical error requests regarding direct selling expenses address the same issue. Both parties proposed programming language to address the issue. Because we believe that petitioners most closely follow the proper methodology, we have adopted their suggested programming language for the final results. Because the details of these clerical error issues involve proprietary data, see Analysis Memorandum for Final Results, March 8, 1999.

Final Results of the Review

As a result of this review, we determine that the following weighted-average dumping margins exist:

Circular Welded Non-Alloy Steel Pipes and Tubes ------------------------------------------------------------------------ Weighted- Producer/manufacturer/exporter average margin ------------------------------------------------------------------------ Hylsa...................................................... 0.00 TAMSA...................................................... 0.00 ------------------------------------------------------------------------

The Department shall determine, and the Customs Service shall assess, antidumping duties on all appropriate entries. The Department will issue appraisement instructions directly to the Customs Service. Furthermore, the following deposit requirements will be effective upon publication of this notice of final results of review for all shipments of oil country tubular goods from Mexico entered, or withdrawn from warehouse, for consumption on or after the publication date, as provided for by section 751(a)(1) of the Act: (1) The cash deposit rate for the reviewed company will be the rate for that firm as stated 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, 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) if neither the exporter nor the manufacturer is a firm

covered in this review, the cash deposit rate will be 23.79 percent. This is the ``all others'' rate from the LTFV investigation. These deposit requirements, when imposed, shall remain in effect until publication of the final results of the next administrative review. This notice serves as a final reminder to importers of their responsibility under 19 CFR 351.402(f) of the Department's regulations 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 a reminder to parties subject to administrative protective order (APO) of their responsibility concerning the disposition of proprietary information disclosed under APO in accordance with 19 CFR 351.306 of the Department's regulations. Timely written notification of 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 administrative review and this notice are in accordance with section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and Sec. 351.221 of the Department's regulations.

Dated: March 10, 1999. Robert S. LaRussa, Assistant Secretary for Import Administration. [FR Doc. 99-7100 Filed 3-22-99; 8:45 am] BILLING CODE 3510-DS-P