Import Administration, International Trade Administration, Department of Commerce.
The Department of Commerce (the Department) is conducting an administrative review of the antidumping duty order on certain forged stainless steel flanges (stainless steel flanges) from India manufactured by Echjay Forgings Ltd. (Echjay) and Paramount Forge (Paramount). The period of review (POR) covers February 1, 2004, through January 31, 2005. We preliminarily determine that Echjay did not sell subject merchandise at less than normal value (NV) in the United States during the POR. In addition, we preliminarily determine to apply an adverse facts available (AFA) rate to Paramount's sale.
We invite interested parties to comment on these preliminary results. Parties who submit argument in these proceedings are requested to submit with the argument (1) a statement of the issues and (2) a brief summary of the argument.Start Printed Page 11380
March 7, 2006.Start Further Info
FOR FURTHER INFORMATION CONTACT:
David Cordell (Echjay), Mark Flessner (Paramount), or Robert James, AD/CVD Operations, Office 7, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230, telephone: (202) 482-0408, (202) 482-6312, or (202) 482-0649, respectively.End Further Info End Preamble Start Supplemental Information
On February 9, 1994, the Department published the antidumping duty order on stainless steel flanges from India. See Amended Final Determination and Antidumping Duty Order; Certain Forged Stainless Steel Flanges from India, 59 FR 5994 (February 9, 1994) (Amended Final Determination). On February 1, 2005, the Department published the Notice of Opportunity to Request Administrative Review for this order covering the POR. See Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation; Opportunity to Request Administrative Review, 70 FR 5136 (February 1, 2005). In accordance with 19 CFR 351.213 (b)(2), Echjay, Hilton Forge, Paramount, and Viraj Group Ltd. (Viraj) requested that we conduct this administrative review. On March 23, 2005, the Department published in the Federal Register a notice of initiation of this antidumping duty administrative review covering the POR. See Initiation of Antidumping and Countervailing Duty Administrative Reviews and Requests for Revocation in Part, 70 FR 14643 (March 23, 2005).
On October 13, 2005, we extended the time limit for the preliminary results of this administrative review to February 28, 2006. See Notice of Extension of Time Limit for Preliminary Results of Antidumping Duty Administrative Review and Notice of Partial Rescission: Certain Forged Stainless Steel Flanges from India, 70 FR 59719 (October 13, 2005).
On March 31, 2005, the Department issued its initial questionnaire to Echjay. Echjay submitted its section A response on May 2, 2005, and its section B and C responses on May 12, 2005. The Department issued a supplemental questionnaire on August 5, 2005, to which Echjay responded on August 30, 2005. A second supplemental questionnaire was issued on October 27, 2005, and the Department received the response on November 18, 2005. The Department issued a third supplemental on November 10, 2005, to which Echjay responded (in two parts) on November 30, 2005, and December 1, 2005. A final supplemental was issued on December 19, 2005, and the response was received on January 4, 2006.
The Department sent its questionnaires to Paramount on March 31, 2005. Paramount's response to the section A questionnaire was submitted May 4, 2005. Paramount's responses to sections B and C were submitted on May 18, 2005. A supplemental section A, B, and C questionnaire was sent to Paramount on August 5, 2005. Paramount submitted its response to the first supplemental section A, B, and C questionnaire on September 7, 2005. The Department issued on November 8, 2005, a second supplemental section A, B, and C questionnaire. Paramount submitted its response on November 29, 2005.
Scope of the order
The products covered by this order are certain forged stainless steel flanges, both finished and not finished, generally manufactured to specification ASTM A-182, and made in alloys such as 304, 304L, 316, and 316L. The scope includes five general types of flanges. They are weld-neck, used for butt-weld line connection; threaded, used for threaded line connections; slip-on and lap joint, used with stub-ends/butt-weld line connections; socket weld, used to fit pipe into a machined recession; and blind, used to seal off a line. The sizes of the flanges within the scope range generally from one to six inches; however, all sizes of the above-described merchandise are included in the scope. Specifically excluded from the scope of this order are cast stainless steel flanges. Cast stainless steel flanges generally are manufactured to specification ASTM A-351. The flanges subject to this order are currently classifiable under subheadings 7307.21.1000 and 7307.21.5000 of the Harmonized Tariff Schedule (HTS). Although the HTS subheading is provided for convenience and customs purposes, the written description of the merchandise under review is dispositive of whether or not the merchandise is covered by the scope of the order.
Rescission of the Administrative Review
On April 18, 2005, respondents Viraj and Hilton Forge withdrew their requests for an administrative review. Pursuant to section 351.213(d)(1) of the Department's regulations, the Secretary will rescind an administrative review, in whole or in part, if a party who requested the review withdraws the request within 90 days of the date of publication of notice of initiation of the requested review. Section 351.213(d)(1) of the Department's regulations also states that the Secretary may extend this time limit if the Secretary decides it is reasonable to do so. The initiation notice for this review was published on March 23, 2005. Viraj and Hilton Forge withdrew their requests for review on April 18, 2005, which was within 90 days of the date of publication of the initiation notice of the review. No other party has requested a review of Viraj or Hilton Forge in the POR. Since the two parties which had requested administrative reviews have withdrawn their requests in a timely manner, we are rescinding the administrative reviews of Viraj and Hilton Forge. With respect to Hilton Forge, the Department will issue appropriate assessment instructions to U.S. Customs and Border Protection (CBP) within 15 days of publication of this notice. With respect to Viraj, the Department has already issued liquidation instructions for this period as the order for Viraj was revoked on July 12, 2005. See Stainless Steel Flanges From India: Notice of Final Results of Antidumping Duty Administrative Review and Revocation in Part, 70 FR 39997 (July 12, 2005) and CBP message number 5227209.
Use of Adverse Facts Available
In accordance with section 776(a)(2) of the Tariff Act of 1930, as amended (the Tariff Act), the Department has determined that the use of adverse facts available is appropriate for purposes of determining the preliminary dumping margin for the subject merchandise sold by Paramount. Pursuant to section 776(a)(2) of the Tariff Act the Department shall (with certain exceptions not applicable here) use the facts otherwise available in reaching applicable determinations under this subtitle if an interested party (A) withholds information that has been requested by the administrating authority; (B) fails to provide such information by the deadlines for submission of the information or in the form and manner requested, subject to subsections (c)(1) and (e) of section 782 of the Tariff Act; (C) significantly impedes a proceeding under this subtitle; or (D) provides such information but the information cannot be verified as provided in section 782(i). See Tariff Act section 776(a)(2). Moreover, section 776(b) of the Tariff Act provides, in relevant part, that:Start Printed Page 11381
If the administering authority finds that an interested party has failed to cooperate by not acting to the best of its ability to comply with a request for information from the administering authority or the Commission, the administering authority or the Commission (as the case may be), in reaching the applicable determination under this subtitle, may use an inference that is adverse to the interests of the party in selecting from among the facts otherwise available.
The Department sent standard section A, B, and C questionnaires to Paramount on March 31, 2005. Paramount's response to the section A questionnaire was submitted May 4, 2005. Paramount's responses to sections B and C were submitted on May 18, 2005. The Department discovered dozens of serious deficiencies in all three of these responses. Therefore the Department sent a supplemental section A, B, and C questionnaire to Paramount on August 5, 2005. Paramount submitted its response to the first supplemental section A, B, and C questionnaire on September 7, 2005. More than half of the questions were unanswered. Of those questions to which Paramount did make some response, the Department again found that the majority were deficient. The Department accordingly issued on November 8, 2005, a second supplemental section A, B, and C questionnaire. Paramount submitted its response on November 29, 2005; this response was deficient as well.
Each of the questionnaires sent by the Department contained a warning that determinations on the basis of adverse facts available would be made if Paramount failed to comply. See “Preliminary Results in the Antidumping Duty Administrative Review of Stainless Steel Flanges from India: Total Adverse Facts Available and Corroboration Memorandum for Company Rate,” February 28, 2006 (Corroboration Memorandum) at pages 1 and 2.
Paramount made one sale of subject flanges to the United States during the POR. Paramount reported that there were sales in the home market in its original response to the section A and B questionnaires. In reporting the sales quantity and value of its home market sales (see pages A-2 and A-19) Paramount reported a figure which was widely divergent from what was reported in its databases accompanying the supplemental section B questionnaire responses of September 7, 2005, and November 29, 2005. After extensive questioning by the Department directed specifically at this discrepancy between the reported quantity and value figures in the original and supplemental section A responses and the sales reported in the databases for the original and supplemental section B responses, it became clear that Paramount had reported in its section B databases less than one percent of its home market sales. In its response, Paramount admitted it was reporting “on a sample basis to give insight of our working.” See Paramount's November 29, 2005, response to second supplemental section A, B, and C questionnaire at page 2. Paramount also stated: “We had provided you two bills consisting of eight transactions as samples. This does not reflect our total sales of the year.” See Paramount's November 29, 2005, response to the Department's second supplemental section A, B, and C questionnaire at page 13.
It appears that Paramount has selectively reported certain transactions instead of reporting all of its sales in the home market as it was repeatedly instructed to do. Hence Paramount has withheld information requested by the Department, has failed to provide such information by the deadlines for submission of the information, has failed to provide such information in form and manner requested, and has significantly impeded this proceeding. With regard to the limited remainder of the information conveyed in Paramount's three sets of responses, the deficiencies are so prevalent and on such a scale that very little of the submitted data can be trusted as reliable. (For examples, see Corroboration Memorandum at pages 3 to 4.) We find that Paramount has failed to cooperate by not acting to the best of its ability to comply with this request for information from the Department. (For discussion of the “acting to the best of its ability” standard under section 776(b) of the Tariff Act, please see Corroboration Memorandum at pages 5-6.)
The Department preliminarily determines that Paramount's questionnaire responses cannot serve as the basis for the calculation of Paramount's margin. In the instant review, Paramount did not contend that it did not have pertinent records; rather, it admitted to furnishing only “samples.” By declining to provide the requested information, Paramount failed to cooperate to the best of its ability in that it did not put forth its maximum efforts to obtain the requested information from its records. Consequently, the Department finds that an adverse inference is warranted in determining an antidumping duty margin for Paramount. As a result, we are basing Paramount's margin on the facts otherwise available, in accordance with sections 776(a)(2)(A) - (C) and section 776(b) of the Tariff Act. See, e.g., Notice of Final Determination of Sales at Less Than Fair Value and Affirmative Final Determination of Critical Circumstances: Certain Orange Juice From Brazil, 71 FR 2183 (January 13, 2006). See also Notice of Final Determination of Sales of Less Than Fair Value and Final Negative Critical Circumstances: Carbon and Certain Alloy Steel Wire Rod from Brazil, 67 FR 55792, 55794-96 (Aug. 30, 2002); Notice of Final Determination of Sales at Less Than Fair Value: Certain Cold-Rolled Flat-Rolled Carbon Quality Steel Products From Brazil, 65 FR 5554, 5567 (Feb. 4, 2000); Static Random Access Memory Semiconductors from Taiwan: Final Determination of Sales at Less than Fair Value, 63 FR 8909 (Feb. 23, 1998).
If the Department finds that an interested party “has failed to cooperate by not acting to the best of its ability to comply with a request for information,” the Department may use information that is adverse to the interests of the party as the facts otherwise available. See section 776(b) of the Tariff Act. Adverse inferences are appropriate “to ensure that the party does not obtain a more favorable result by failing to cooperate than if it had cooperated fully.” See Statement of Administrative Action (SAA) accompanying the Uruguay Round Agreement Act, H.R. Doc. No. 103-316 (1994), at 870. Under the statutory scheme, such adverse inferences may include reliance on: information derived from (1) the petition; (2) a final determination in the investigation; (3) any previous review or determination; or (4) any other information placed on the record. See section 776(b) of the Tariff Act. The SAA authorizes the Department to consider the extent to which a party may benefit from its own lack of cooperation. Id. The Department's practice when selecting an adverse rate from among the possible sources of information is to ensure that the margin is sufficiently adverse to induce the respondents to provide the Department with complete and accurate information in a timely manner. See Notice of Final Determination of Sales of Less Than Fair Value and Final Negative Critical Circumstances: Carbon and Certain Alloy Steel Wire Rod from Brazil, 67 FR 55792, 55796 (Aug. 30, 2002). Because Paramount currently has the “All Others” cash deposit rate of 162.14 Start Printed Page 11382percent, the Department determines that assigning the highest margin from the original petition and investigation in this case, 210.00 percent, will prevent Paramount from benefitting from its failure to cooperate with the Department's requests for information. See Amended Final Determination. Furthermore, a lower rate would effectively reward Paramount for not cooperating by not acting to the best of its ability.
To assess the reliability of the petition margin in accordance with section 776(c) of the Tariff Act, to the extent practicable, we examined the key elements of the calculations of export price and normal value upon which the margins in the petition were based. (For discussion of “reliance on secondary information,” standard under section 776(c) of the Tariff Act, please see Corroboration Memorandum at pages 7-8.) The U.S. prices in the petition were based upon quotes to U.S. customers, most of which were obtained through market research. See Petition for the Imposition of Antidumping Duties, December 29, 1993. The Department was able to corroborate the U.S. prices in the petition, which were used as the basis of the 210.00 percent rate (based on the highest rate in the original petition and antidumping duty order) by comparing these prices to publicly available information based on IM-145 import statistics from the U.S. International Trade Commission's Web site via Dataweb for HTS numbers 7307215000 and 7307211000. The weighted average reported CBP unit value for these products in calendar year 2004, which overlaps eleven months of the POR, was $4.83/kg. This value approximates those cited in the petition, which ranged from $4.77 to $47.32, thus corroborating the petition's U.S. price. The NVs in the petition were based on actual price quotations obtained through market research. At present, the Department is not aware of other independent sources of information at its disposal which would enable it to corroborate the margin calculations in the petition further.
With respect to the relevance aspect of corroboration, the Department will consider information reasonably at its disposal as to whether there are circumstances which would render a margin not relevant. Where circumstances indicate that the selected margin is not appropriate as adverse facts available, the Department will disregard the margin and determine an appropriate margin. See Fresh Cut Flowers from Mexico; Final Results of Antidumping Duty Administrative Review, 61 FR 6812 (February 22, 1996) (the Department disregarded the highest dumping margin as best information available because the margin was based on another company's uncharacteristic business expense resulting in an unusually high margin). Further, in accordance with F. LII De Cecco Di Filippo Fara S. Martino S.p.A. v. United States, 216 F. 3d 1027 (Fed. Cir. June 16, 2000), we also examine whether information on the record would support the selected rates as reasonable facts available.
The Department finds the 210 percent rate used in these preliminary results has probative value. (Note: The consideration of the probative value relies upon information which is business proprietary and covered by an Administrative Protection Order; for a full discussion, see Corroboration Memorandum under the heading “Specifics on Corroboration of Rate from Investigation.”) The Department is not aware of any circumstances which would render this rate inappropriate. In fact, other Indian manufacturers currently have a 210 percent margin under this order.
The implementing regulation for section 776 of the Tariff Act, codified at 19 CFR 351.308(d), states, “[t]he fact that corroboration may not be practicable in a given circumstance will not prevent the Secretary from applying an adverse inference as appropriate and using the secondary information in question.” Additionally, the SAA at 870 states specifically that, where “corroboration may not be practicable in a given circumstance,” the Department may nevertheless apply an adverse inference. The SAA at 869 emphasizes that the Department need not prove that the facts available are the best alternative information. Therefore, based on the Department's efforts described above to corroborate information contained in the petition, and in accordance with 776(c) of the Tariff Act which discusses facts available and corroboration, the Department considers the margins in the petition to be corroborated to the extent practicable for purposes of this preliminary determination. See Certain Cut-to-Length Carbon Steel Plate from Mexico: Final Results of Antidumping Duty Administrative Review, 64 FR 76, 84 (January 4, 1999).
Pursuant to section 771(33)(A) of the Tariff Act, the following persons, among others, are affiliated: “members of a family, including brothers and sisters (whether by the whole or half blood), spouse, ancestors, and lineal descendants. . . .” See section 771(33)(A) of the Tariff Act). The record shows the board members (and managers) of Echjay Industries and Echjay are descendants of a common progenitor, the late Harilal Jechand Doshi. They are related as the uncle and nephews (and as first cousins). Accordingly, consistent with the definition of “family” under section 771(33)(A) of the Tariff Act, the Department's prior practice, and the controlling precedent, (see Ferro Union Inc. v. Wheatland Tube Co., 44 F. Supp. 2d 1310, 1324 (Ct. Int'l Trade 1999) (Ferro Union Inc.)), the Department preliminarily determines that the board members and managers of Echjay Industries and those of Echjay constitute the Doshi family. See Memorandum on Relationship of Echjay Forgings (Echjay) and Echjay Industries in the 2004-2005 Administrative Review of AD Order on Certain Forged Stainless Steel Flanges From India, dated February 28, 2006, which accompanies this notice (Affiliation Memorandum).
Section 771(33)(F) of the Tariff Act defines affiliates as “[t]wo or more persons directly or indirectly controlling, controlled by, or under common control with, any person.” The statutory definition states that “control” exists where one person “is legally or operationally in a position to exercise restraint or direction over the other person.” The record shows the Doshi family controls the boards of directors of Echjay and Echjay Industries because these boards comprise the members of the Doshi family. Accordingly, the Doshi family is legally and operationally in a position to exercise restraint or direction over both Echjay and Echjay Industries. Based on the particular facts of this case, we preliminarily find there is sufficient evidence of the record to find Echjay and Echjay Industries affiliated by virtue of common control of the Doshi family. See sections 771(33)(A) and (F) of the Tariff Act. See also Affiliation Memorandum.
Section 351.401(f)(1) of the Department's regulations states that in an antidumping proceeding the Department “will treat two or more affiliated producers as a single entity where those producers have production facilities for similar or identical products that would not require substantial retooling of either facility in order to restructure manufacturing priorities and the Secretary concludes that there is a significant potential for the manipulation of price or production.”Start Printed Page 11383
Section 351.401(f)(2) of the Department's regulations identifies factors to be considered to determine whether there is a significant potential for manipulation. These include: (i) the level of common ownership; (ii) the extent to which managerial employees or board members of one firm sit on the board of directors of an affiliated firm; and (iii) whether operations are intertwined, such as through the sharing of sales information, involvement in production and pricing decisions, the sharing of facilities or employees, or significant transactions between the affiliated producers.
As discussed above and in the accompanying Affiliation Memorandum, based on the evidence on the record in this review, we have preliminarily determined that Echjay is affiliated with Echjay Industries by virtue of common control by the Doshi family. See sections 771(33)(A) and (F) of the Tariff Act. Accordingly, the Department preliminarily determines that the first of the three requirements for collapsing the companies has been met.
Having determined that the two companies are affiliated, the Department examines whether the producers have production facilities for similar or identical products that would not require “substantial retooling ... in order to restructure manufacturing priorities.” See Notice of Preliminary Results of New Shipper Review of the Antidumping Duty Order on Certain Pasta From Italy, 69 FR 319 (January 5, 2004). Based on Echjay's questionnaire responses, the Department has preliminarily determined that the two companies' production facilities would require substantial retooling to restructure manufacturing priorities. See Affiliation Memorandum.
Further, based on the record of this proceeding, the Department preliminarily determines that significant potential for manipulation does not exist. The third factor of the Department's collapsing analysis, i.e., the significant potential for manipulation, requires consideration of three sub-factors: (1) the level of common ownership; (2) the extent to which managerial employees or directors of one firm also sit on the board of the other firm; and (3) whether operations are intertwined. See 19 C.F.R. 351.401(f)(2). The Department preliminarily determines that none of these factors have been satisfied in this segment of the proceeding. See Affiliation Memorandum for a full discussion of the issues.
Because two of the three factors in the collapsing analysis have not been satisfied, the Department has preliminarily determined not to collapse Echjay and Echjay Industries in this segment of the proceeding pursuant to section 351.401(f)(1)(2) of the Department's regulations. See Affiliation Memorandum.
Universe of Sales
The universe of U.S. sales reported to the Department includes constructed export price (CEP) sales with entry dates outside of the POR. Consistent with the Department's practice and the antidumping duty questionnaire, the Department bases its analysis on “each U.S. sale of merchandise entered for consumption during the POR, except ... for CEP sales made after importation” where the Department will base its analysis on “each transaction that has a date of sale within the POR.” See Department's questionnaire issued to Echjay, dated March 31, 2005, at C-1; see also Certain Hot-Rolled Carbon Steel Flat Products from the Netherlands and the accompanying unpublished Issues and Decisions Memorandum at comment 10, 69 FR 33630 (June 16, 2004); see also Circular Welded Non-Alloy Steel Pipe from the Republic of Korea, 63 FR 39071 (July 21, 1998). Because all sales made by Echjay to the United States are back-to-back CEP sales (i.e., the sales were made prior to importation and the merchandise was shipped directly to unaffiliated customers in the United States), the Department will only use entries of subject merchandise made during the POR. Because a small number of these sales were examined last year, the Department has excluded those sales which were entered in this POR but reviewed in the last POR. See Analysis Memorandum, dated February 28, 2006, which accompanies this notice for more details (Analysis Memorandum).
Date of Sale
In determining the appropriate date of sale, the Department normally uses the date of invoice as the date of sale. See 19 CFR 351.401(i); see also Allied Tube and Conduit Corp. v. United States, 132 F. Supp. 2d 1087 (CIT 2001). Moreover, the preamble to the Department's regulations expresses a strong preference for the Department to choose a single date of sale across the full period of review. See Antidumping Duties; Countervailing Duties: Final Rule, 62 FR 27296, 27349 (May 19, 1997). For these preliminary results, the Department will use the invoice date as the appropriate date of sale for the POR, because this date best represents the date upon which the material terms of sale are set.
Normal Value Comparisons
To determine whether sales of subject merchandise to the United States by Echjay were made at less than NV, we compared the export price (EP) or constructed export price (CEP), as appropriate, to the NV (as described in the “Export Price and Constructed Export Price” and “Normal Value” sections of this notice, below.) In accordance with section 777A(d)(2) of the Tariff Act, the Department calculated monthly weighted-average prices for NV and compared these to the prices of individual EP or CEP transactions.
In accordance with section 771(16) of the Tariff Act, the Department considered all products described by the Scope of the Order section, above, produced and sold by Echjay in the home market to be foreign like products for purposes of determining appropriate comparisons to U.S. sales. Where there were no sales of identical merchandise in the home market to compare to U.S. sales, we compared U.S. sales to the next most similar foreign like product on the basis of the characteristics and reporting instructions listed in the Department's questionnaire. Where there were no sales of identical or similar merchandise in the home market suitable for comparing to U.S. sales, the Department compared these sales to constructed value (CV), pursuant to section 773(a)(4) and 773(e) of the Tariff Act.
Export Price and Constructed Export Price
In accordance with section 772(a) of the Tariff Act, EP is defined 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 under section 772(c) of the Tariff Act. In accordance with section 772(b) of the Tariff Act, CEP is 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 under subsections (c) and (d).
Based on the record evidence, the Department preliminarily determines Start Printed Page 11384that Echjay's U.S. sales, all of which were through its U.S. affiliate Echjay U.S.A., Inc., were made in the United States within the meaning of section 772(b) of the Tariff Act and thus are properly classified as CEP sales.
The Department calculated CEP based on the prices charged to the first unaffiliated customer in the United States. The Department based CEP on the packed C&F, CIF duty paid, FOB, or ex-dock duty paid prices to the first unaffiliated purchasers in the United States. The Department made deductions for movement expenses in accordance with section 772(c)(2)(A) of the Tariff Act, including foreign inland freight, foreign brokerage and handling, ocean freight, and marine insurance as required. The Department also deducted those selling expenses incurred in selling the subject merchandise in the United States, including direct selling expenses (e.g., bank commissions and charges, documentation fees, etc.), and imputed credit. In accordance with section 772(d)(3) of the Tariff Act, the Department deducted an amount for profit allocated to the expenses deducted pursuant to sections 772(d)(1) and (2) of the Tariff Act. See Analysis Memorandum for more details.
Section 772(c)(1)(B) of the Tariff Act provides that EP or CEP shall be increased by “the amount of any import duties imposed by the country of exportation which have been rebated, or which have not been collected, by reason of the exportation of the subject merchandise to the United States.” The Department determines that an adjustment to U.S. price for claimed duty drawback is appropriate when a company can demonstrate that there is (i) a sufficient link between the import duty and the rebate, and (ii) sufficient imports of the imported material inputs to account for the duty drawback received for the export of the manufactured product (the so-called “two-prong test”). See Rajinder Pipes, Ltd. v. United States, 70 F. Supp. 2d 1350, 1358 (Ct. Int'l Trade 1999).
Echjay claimed it received Duty Entitlement Pass Book (DEPB) certificates from the Indian government which it books in an “Export Incentives Ledger.” See Echjay's Section C Response at Annexure H. According to Echjay, these DEPB certificates, awarded based on the FOB value of the shipment, are intended to offset import duties on raw materials “and also to nullify the incidence of interest rates higher than international rates, high indigenous cost of electricity and fuels, and local taxes which are built into the cost of locally produced and sold steel.” Id. Echjay contends it “sold” all of its DEPB certificates for which it was claiming a duty drawback adjustment. See Echjay's August 30, 2005, Supplemental Response at page 23. Echjay did not provide the Department with any documents supporting its contention.
The Department finds that Echjay has not provided substantial evidence on the record to meet the requirement of the first prong of the two-prong test, to wit, to establish the necessary link between the import duty and the reported rebate for duty drawback. Even if Echjay provided evidence demonstrating that it received duty drawback in the form of certificates issued by the Government of India, Echjay has failed to establish the necessary direct link between the import duty paid and the rebate given by the Government of India. Echjay's response suggests that much of the DEPB certificate program has no bearing on home market import duties of any kind. Finally, the Department notes the value of the DEPB certificates is normally calculated based upon the FOB prices of the finished goods, as exported. All of these factors demonstrate that there is no direct link between these certificates, the company's own imports of inputs, and the eventual production of finished goods for export. Therefore, the Department is denying a duty drawback credit for the preliminary results of this review.
In determining NV, the statute requires the Department to determine the price at which the foreign like product is first sold (or, in the absence of a sale, offered for sale) for consumption in the exporting country in the usual commercial quantities and in the ordinary course of trade and, to the extent practicable, at the same level of trade as the export price or constructed export price. In order to determine whether there is sufficient volume of sales in the home market to serve as a viable basis for calculating NV (i.e., the aggregate volume of home market sales of the foreign like product during the POR is equal to or greater than five percent of the aggregate volume of U.S. sales of subject merchandise during the POR), the Department compared the volume of home market sales of the foreign like product to the volume of U.S. sales of the subject merchandise. The Department found no reason to determine that quantity was not the appropriate basis for these comparisons, so value was not used. See section 773(a)(1)(C) of the Tariff Act; see also 19 CFR 351.404(b)(2). Therefore, the Department based NV on home market sales to unaffiliated purchasers made in the usual quantities and in the ordinary course of trade.
The Department based its comparisons of the volume of U.S. sales to the volume of home market and third country sales on reported stainless steel flange weight, rather than on number of pieces. The record demonstrates that there can be large differences between the weight (and corresponding cost and price) of stainless steel flanges based on relative sizes, so comparisons of aggregate data would be distorted for these products if volume comparisons were based on the number of pieces.
The statue requires the Department to determine whether subject merchandise is being, or is likely to be, sold at less than fair value by making a fair comparison between the EP or CEP and NV. For Echjay, the Department compared U.S. sales with contemporaneous sales of the foreign like product in India. As noted, the Department considered stainless steel flanges identical based on the following five criteria: grade; type; size; pressure rating; and finish. The Department used a 20 percent difference-in-merchandise (difmer) cost deviation cap as the maximum difference in cost allowable for similar merchandise, which we calculated as the absolute value of the difference between the U.S. and comparison market variable costs of manufacturing divided by the total cost of manufacturing of the U.S. product. The Department made adjustments for differences in packing costs between the two markets and for movement expenses in accordance with sections 773(a)(6)(A) and (B) of the Tariff Act. The Department adjusted for differences in the circumstances of sale (COS) pursuant to section 773(a)(6)(C)(iii) of the Tariff Act and 19 CFR 351.410. Finally, the Department made adjustments in accordance with 19 CFR 351.410(e) for indirect selling expenses incurred in the home market or United States where commissions were granted on sales in one market but not in the other (the “commission offset”).
In accordance with section 773(a)(4) of the Tariff Act, the Department based NV on CV if the Department was unable to find a contemporaneous comparison market match for the U.S. sale. The Department calculated CV based on the cost of materials and fabrication employed in producing the subject Start Printed Page 11385merchandise, SG&A, and profit. In accordance with 772(e)(2)(A) of the Tariff Act, the Department based SG&A expenses and profit on the amounts incurred and realized by the respondent in connection with the production and sale of the foreign like product in the ordinary course of trade for consumption in the foreign country. For selling expenses, the Department used the weighted-average comparison market selling expenses. Where appropriate, the Department made COS adjustments to CV in accordance with section 773(a)(8) of the Tariff Act and 19 CFR 351.410. For comparisons to EP, the Department made COS adjustments by deducting home market direct selling expenses and adding U.S. direct selling expenses.
Level of Trade
In accordance with section 773(a)(1)(B)(i) of the Tariff Act, to the extent practicable, the Department determines NV based on sales in the home market at the same level of trade (LOT) as EP or the CEP. The NV LOT is that of the starting-price sales in the home market or, when NV is based on CV, that of the sales from which we derive SG&A expenses and profit. For CEP it is the level of the constructed sale from the exporter to an affiliated importer after the deductions required under section 772(d) of the Tariff Act.
To determine whether NV sales are at a different LOT than EP or CEP, the Department examines stages in the marketing process and selling functions along the chain of distribution between the producer and the unaffiliated customer. If the comparison-market sales are at a different LOT and the difference affects price comparability, as manifested in a pattern of consistent price differences between the sales on which NV is based and comparison-market sales at the LOT of the export transaction, the Department makes a LOT adjustment under section 773(a)(7)(A) of the Tariff Act. Finally, for CEP sales, if the NV level is more remote from the factory than the CEP level and there is no basis for determining whether the difference in the levels between NV and CEP affects price comparability, the Department adjusts NV under section 773(a)(7)(B) of the Tariff Act (the CEP-offset provision). See Final Determination of Sales at Less Than Fair Value: Certain Cut-to-Length Carbon Steel Plate from South Africa, 62 FR 61731, 61732-33 (November 19, 1997).
In implementing these principles in this review, the Department obtained information from Echjay about the marketing stages involved in its U.S. and home market sales, including a description of the selling activities in the respective markets. In identifying levels of trade for CEP, the Department considered only the selling activities reflected in the price after the deduction of expenses and profit under section 772(d) of the Tariff Act. See Micron Technology v. United States, 243 F.3d 1301, 1314 (Fed. Cir. 2001). Generally, if the reported levels of trade are the same in the home and U.S. markets, the functions and activities of the seller should be similar. Conversely, if a party reports differences in levels of trade, the functions and activities should be dissimilar.
Echjay reported one channel of distribution and one LOT in the home market, contending that home market sales to distributors and wholesalers were made at the same level of trade and involved the same selling activities. See Echjay's Section A Response at 13-15. In fact, all merchandise was sold in the home market on ex works terms. See, e.g., Echjay's Section B Response at 7. After examining the record evidence provided, the Department preliminarily determines that for Echjay, a single LOT exists in the home market.
As to CEP sales, in Echjay's Section A Response it indicated that its U.S. subsidiary, Echjay USA, Inc., performed no selling activities or services beyond notifying the final customer of the merchandise's arrival at the U.S. port; customers were responsible for arranging shipment and CBP clearance at their own expense. See Echjay's Section A Response at 7. Echjay further asserts that selling activities remain the same regardless of customer or geographical location. See Echjay's Section A Response at 17.
The record evidence supports a finding that in both markets and in all channels of distribution, Echjay performs essentially the same level of services. These include order processing, packing, shipping and invoicing of sales, and processing of payments. Based on our analysis of the selling functions performed on CEP sales in the United States and of sales in the home market, the Department determines that the CEP and the starting price of home market sales represent the same stage in the marketing process and are thus at the same LOT. Accordingly, the Department preliminarily finds that no level of trade adjustment or CEP offset is appropriate for Echjay.
The Department made currency conversions into U.S. dollars in accordance with section 773(a) of the Tariff Act, based on the exchange rates in effect on the dates of the U.S. sales, as certified by the Federal Reserve Bank of the United States.
Preliminary Results of Review
As a result of our review the Department preliminarily finds the following weighted-average dumping margins exist for the period February 1, 2004, through January 31, 2005:
|Manufacturer / Exporter||Margin (percent)|
|Echjay Forgings, Ltd||0.38|
The Department will disclose calculations performed within five days of the date of publication of this notice in accordance with 19 CFR 351.224(b). An interested party may request a hearing within 30 days of publication of the preliminary results. See CFR 351.310(c). Any hearing, if requested, will be held 37 days after the date of publication, or the first business day thereafter, unless the Department alters the date per 19 CFR 351.310(d).
Interested parties may submit case briefs or written comments no later than 30 days after the date of publication of these preliminary results of review. Pursuant to 19 CFR 309(d), rebuttal briefs and rebuttals to written comments, limited to issues raised in the case briefs and comments, may be filed no later than 5 days after the time limit for filing the case briefs. Parties who submit argument in these proceedings are requested to submit with the argument: (1) a statement of the issue; (2) a brief summary of the argument; and (3) a table of authorities. Further, the Department requests parties submitting written comments to provide the Department with an additional copy of the public version of any such comments on diskette. The Department will issue final results of this administrative review, including the results of our analysis of the issues raised in any such written comments or at a hearing, within 120 days of publication of these preliminary results.
Upon issuance of the final results of this review, the Department shall determine, and CBP shall assess, antidumping duties on all appropriate entries. In accordance with 19 CFR 351.212(b)(1), the Department has calculated importer-specific ad valorem assessment rates based on the total amount of antidumping duties calculated for the examined sales made during the POR divided by the total entered value, or quantity (in kilograms), as appropriate, of the Start Printed Page 11386examined sales. Upon completion of this review, where the assessment rate is above de minimis (i.e., at or above 0.50 percent) the Department will instruct CBP to assess duties on all entries of subject merchandise by that importer. See 19 CFR 351.106(c)(1).
Cash Deposit Requirements
The following deposit requirements will be effective upon completion of the final results of this administrative review for all shipments of flanges from India entered, or withdrawn from warehouse, for consumption on or after the publication date of the final results of this administrative review, as provided by section 751(a)(1) of the Tariff Act: (1) the cash deposit rates for the reviewed companies will be the rates established in the final results of administrative review; if the rate for a particular company is zero or de minimis (i.e., less than 0.50 percent), no cash deposit will be required for that company; (2) for manufacturers or exporters not covered in this review, but covered in the original less-than-fair-value investigation or a previous review, the cash deposit will continue to be the most recent rate published in the final determination or final results for which the manufacturer or exporter received a company-specific rate; (3) if the exporter is not a firm covered in this review, a prior review or the original investigation, but the manufacturer is, the cash deposit rate will be that established for the most recent period for that manufacturer of the merchandise; and (4) if neither the exporter nor the manufacturer is a firm covered in this or any previous reviews, the cash deposit rate will be 162.14 percent, the “all others” rate established in the LTFV investigation. See Amended Final Determination. These deposit requirements, when imposed, shall remain in effect until publication of the final results of the next administrative review.
Notification to Interested Parties
This notice also serves as a preliminary reminder to importers of their responsibility under 19 CFR 351.402(f) 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.
We are issuing and publishing this notice in accordance with sections 751(a)(1) and 777(i)(1) of the Tariff Act and 19 CFR 351.221(b)(4).Start Signature
Dated: February 28, 2006.
David M. Spooner,
Assistant Secretary for Import Administration.
[FR Doc. E6-3173 Filed 3-6-06; 8:45 am]
BILLING CODE 3510-DS-S