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Notice

Preliminary Results of Antidumping Duty Changed Circumstances Review: Light-Walled Rectangular Pipe and Tube From Mexico

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AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

SUMMARY:

On October 27, 2008, the Department of Commerce (the Department) published in the Federal Register a notice of initiation of a changed circumstances review of the antidumping duty order on light-walled rectangular pipe and tube (LWRPT) from Mexico in order to determine whether Ternium Mexico, S.A. de C.V. (Ternium) is the successor-in-interest to Hylsa S.A. de C.V. (Hylsa) for purposes of determining antidumping duty liability. See Notice of Initiation of Antidumping Duty Changed Circumstances Review: Light-Walled Rectangular Pipe and Tube from Mexico, 73 FR 63686 (October 27, 2008) (Notice of Initiation). We have preliminarily determined that Ternium is the successor-in-interest to Hylsa for purposes of determining antidumping duty liability in this proceeding. Interested parties are invited to comment on these preliminary results.

EFFECTIVE DATE:

June 18, 2009.

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FOR FURTHER INFORMATION CONTACT:

John Drury or Brian Davis, 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) 482-0195 or (202) 482-7924, respectively.

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SUPPLEMENTARY INFORMATION:

Background

The Department published the antidumping duty order of LWRPT from Mexico on August 5, 2008. See Light-Walled Rectangular Pipe and Tube from Mexico, the People's Republic of China, and the Republic of Korea (Korea): Antidumping Duty Orders; Light-Walled Rectangular Pipe and Tube from Korea: Notice of Amended Final Determination of Sales at Less Than Fair Value, 73 FR 45403 (August 5, 2008).

On September 3, 2008, Ternium filed a request for a changed circumstances review of the antidumping duty order of LWRPT from Mexico (Initial Submission), claiming that Hylsa, a Mexican producer of LWRPT, changed its name to Ternium. Ternium requested Start Printed Page 28888that the Department determine whether it is the successor-in-interest to Hylsa, in accordance with section 751(b) of the Tariff Act of 1930, as amended (the Act), and 19 CFR 351.216. In its request, Ternium indicated that effective April 1, 2008, the production and sales operations of Hylsa were transferred to Ternium (the transfer).1 In response to this request the Department initiated a changed circumstances review of the antidumping duty order of LWRPT from Mexico. See Notice of Initiation.

On November 13, 2008, the Department issued a questionnaire to Ternium requesting additional information regarding its successor-in-interest changed circumstances review request. On December 9, 2008, Ternium submitted its response to the Department's questionnaire (SQR). On January 16, 2009, the Department issued a second supplemental questionnaire and on February 9, 2009, Ternium submitted its response (SSQR). On April 8, 2009, the Department issued a third supplemental questionnaire, and on April 22, 2009, Ternium submitted its response (SSSQR). In our Notice of Initiation, we invited interested parties to comment. We did not receive any comments.

Scope of the Order

The merchandise subject to this order is certain welded carbon quality light-walled steel pipe and tube, of rectangular (including square) cross section, having a wall thickness of less than 4 mm.

The term carbon-quality steel includes both carbon steel and alloy steel which contains only small amounts of alloying elements. Specifically, the term carbon-quality includes products in which none of the elements listed below exceeds the quantity by weight respectively indicated: 1.80 percent of manganese, or 2.25 percent of silicon, or 1.00 percent of copper, or 0.50 percent of aluminum, or 1.25 percent of chromium, or 0.30 percent of cobalt, or 0.40 percent of lead, or 1.25 percent of nickel, or 0.30 percent of tungsten, or 0.10 percent of molybdenum, or 0.10 percent of niobium, or 0.15 percent vanadium, or 0.15 percent of zirconium.

The description of carbon-quality is intended to identify carbon-quality products within the scope. The welded carbon-quality rectangular pipe and tube subject to this order is currently classified under the Harmonized Tariff Schedule of the United States (HTSUS) subheadings 7306.61.50.00 and 7306.61.70.60. While HTSUS subheadings are provided for convenience and customs purposes, our written description of the scope of this order is dispositive.

Successor-in-Interest Determination

In making a successor-in-interest determination, the Department typically examines several factors including, but not limited to, changes in: (1) management, (2) production facilities, (3) supplier relationships, and (4) customer base. See, e.g., Notice of Final Results of Changed Circumstances Antidumping Duty Administrative Review: Polychloroprene Rubber from Japan, 67 FR 58 (January 2, 2002); Brass Sheet and Strip from Canada: Final Results of Antidumping Duty Administrative Review, 57 FR 20460, 20462 (May 13, 1992). While no single factor or combination of factors will necessarily provide a dispositive indication of a successor-in-interest relationship, the Department will generally consider the new company to be the successor to the previous company if the new company's resulting operation is not materially dissimilar to that of its predecessor. See, e.g., Fresh and Chilled Atlantic Salmon from Norway; Final Results of Changed Circumstances Antidumping Duty Administrative Review, 64 FR 9979 (March 1, 1999); Industrial Phosphoric Acid from Israel; Final Results of Changed Circumstances Review, 59 FR 6944 (February 14, 1994). Thus, if the evidence demonstrates that, with respect to the production and sale of the subject merchandise, the new company operates as the same business entity as the former company, the Department will accord the new company the same antidumping treatment as its predecessor.

Preliminary Results

In accordance with 19 CFR 351.221(c)(3)(i), we preliminarily determine that Ternium is the successor-in-interest to Hylsa.2 In its September 3, 2008, December 9, 2008, February 9, 2009, and April 22, 2009, submissions, Ternium provided evidence supporting its claim to be the successor-in-interest to Hylsa. Documentation attached to Ternium's September 3, 2008, December 9, 2008, February 9, 2009, and April 22, 2009, submissions shows that the transfer of production and sales operations from Hylsa to Ternium resulted in little or no change in management, production facilities, supplier relationships, or customer base. This documentation is identified and discussed further below.

In its Initial Submission, Ternium stated that Ternium S.A., a Luxemburg corporation (Ternium Luxemburg), acquired ownership of 99.3 percent of Hylsamex S.A. de C.V.'s (Hylsamex) 3 (and as a result, Hylsamex's subsidiary Hylsa) outstanding shares on August 22, 2005. See Ternium's Initial Submission at page 2. Ternium also stated that following this acquisition, Hylsa's operating and corporate structure were reorganized in several stages, the most recent of which took effect April 1, 2008, when the production and sales operations of Hylsa were transferred to Ternium. Id. at page 2. Ternium also explained in its Initial Submission that the corporation now known as Ternium was a holding company that was acquired by Ternium Luxemburg in July 2007, when it acquired Grupo IMSA, SAB de C.V. (Grupo IMSA). Id. at page 2. According to Ternium, the name of that holding company was changed from Grupo IMSA to Ternium, effective December 13, 2007. Id. at page 2. Ternium stated that through Ternium Luxemburg's acquisition of Grupo IMSA/Ternium, Ternium Luxemburg also acquired ownership of Grupo IMSA's subsidiary IMSA, S.A. de C.V. (IMSA), a producer of LWRPT. See Ternium's Initial Submission at page 2.

The Department requested information relating to Ternium Luxemburg's acquisition of Grupo IMSA (and its subsidiary IMSA) including: (1) 2006, 2007, and 2008 annual capacity and annual production data for the former IMSA facility (as well as the former Hylsa facilities) that produces subject merchandise (see pages 2-3 and appendix S-1 of Ternium's SSQR) and (2) documentation of the change in corporate name from Grupo IMSA to Ternium (see Ternium's SQR at appendix S-2).

The Department also requested that Ternium provide a current (as of March 2009) management chart of Ternium, listing the former employers of each director/senior management personnel as well as a pre-transfer (June 2007) Hylsa management chart. See Ternium's Start Printed Page 28889SSSQR at appendices S-2 and S-1, respectively. In reviewing the March 2009 and June 2007 management charts, we found that Ternium Luxemburg's acquisition of IMSA resulted in minimal changes to the composition of Hylsa's/Ternium's directors/senior management personnel. Specifically, with regard to the March 2009 chart, of Ternium's 51 directors/senior management personnel, 7 are former IMSA employees, 31 are former Hylsa employees, and the remaining 13 transferred from other Ternium Luxemburg affiliates. Thus, we preliminarily find that former Hylsa employees occupy the majority of director/senior management positions at Ternium.

Ternium presented the following documentation in support of its assertion that it is the successor-in-interest to Hylsa: (1) a copy of documentation of the acquisition of Hylsamex by Ternium Luxemburg (see Ternium's SQR at appendix S-3), (2) diagrams depicting Ternium Luxemburg's corporate structure throughout the different stages of its acquisition of Hylsa, see Ternium's Initial Submission at attachment 3-A for corporate structure as of September 30, 2006 (i.e., Ternium Luxemburg's corporate structure prior to the transfer) (see also Ternium's Initial Submission at attachment 3-D for corporate structure as of April 30, 2008 (i.e., Ternium Luxemburg's corporate structure after the transfer)), (3) tables depicting the management structure of Hylsa as of June, 2007, i.e., prior to the transfer (see Ternium's SSSQR at appendix S-1) and the current management structure of Ternium Luxemburg as of March 2009, i.e., after the transfer of Hylsa (see Ternium's SSSQR at appendix S-2), (4) listings of Hylsa's suppliers of major inputs for production of subject merchandise in 2007 (i.e., before the final transfer took place) and of Ternium's suppliers of inputs for production of subject merchandise in the second quarter of 2008, i.e., after the transfer took effect (see Ternium's Initial Submission at attachment 6), (5) a list of Hylsa and Ternium facilities which have the capacity to produce subject merchandise (see Ternium's Initial Submission at attachment 4), (6) data on annual capacity and actual production of LWRPT for 2006, 2007, and 2008 (see Ternium's SSQR at appendix S-1) at said facilities, and (7) listings of (a) Hylsa's LWRPT customers in the home market and United States during 2007 (prior to the final transfer) (see Ternium's Initial Submission at attachment 5-A), (b) IMSA's LWRPT home market customers during 2007 (see Ternium's Initial Response at attachment 5-B), and (c) of Ternium's LWRPT home market and U.S. customers during the second quarter of 2008 (after the transfer took effect) (see Ternium's Initial Submission at attachment 5-C).

We examined the diagrams depicting Ternium Luxemburg's corporate structure throughout the different stages of its acquisition of Hylsa. See Ternium's Initial Submission at attachment 3 for diagrams of Ternium Luxemburg's corporate structure as of (1) September 2006 (attachment 3-A), (2) September 30, 2007 (attachment 3-B), (3) December 31, 2007 (attachment 3-C), and (4) April 30, 2008 (attachment 3-D).

We reviewed tables depicting the management structure of Hylsa as of June, 2007, i.e., prior to the transfer of production and sales operations from Hylsa to Ternium (see Ternium's SSSQR at appendix S-1), and the current management structure of Ternium as of March 2009, i.e., after the transfer of Hylsa's production and sales operations (see Ternium's SSSQR at appendix S-2). As noted in Ternium's Initial Submission on page 3 at footnote 2, the only significant changes involve: (1) transfers of personnel from other Ternium Luxemburg affiliates, (2) the promotion of former Hylsa employees to higher positions, and (3) changes to the structure of the organization chart (i.e., the creation of new positions). Based on our examination of the diagrams and tables described above, we preliminarily find that Ternium's management structure, for the most part, resembles Hylsa's prior to its acquisition by Ternium Luxemburg. See Ternium's SSSQR at appendices S-1 and S-2.

We also reviewed the list of major input suppliers that Ternium provided at attachment 6 of its Initial Submission. We compared Hylsa's 2007 (i.e., prior to the transfer) suppliers for each input to Ternium's second quarter 2008 (i.e., after the transfer) suppliers for each input. We noted no changes in suppliers between Hylsa and Ternium's lists, except changes relating to input suppliers that supply the former IMSA facility of Apodaca.

We examined the customer lists that Ternium provided in its Initial Submission at attachment 5. Specifically, we compared Hylsa's 2007 (i.e., prior to the transfer) list of home and export customers (including U.S. customers) for LWRPT (see attachment 5-A) to Ternium's second quarter 2008 (i.e., after the transfer) list of home and export market customers (including U.S. customers) (see attachment 5-C) and also examined IMSA's 2007 home market customer list (see attachment 5-B). Ternium affirmed in their SQR at page 11 and in their SSSQR at page 8, that none of the former Hylsa customers discontinued their relationship with Ternium due to the acquisition of Hylsamex by Ternium Luxemburg. The Department requested clarification as to why certain customer's appeared on Hylsa's 2007 and IMSA's 2007 customer lists but did not appear on Ternium's second quarter 2008 customer list and vice versa. Ternium explained in its SSSQR at pages 6 and 7 that the customer lists in its Initial Submission at attachment 5 identified: (1) the home market and U.S. customers that actually purchased subject merchandise from Hylsa during 2007 and the home market customers that actually purchased subject merchandise from IMSA during 2007, and (2) the home market and U.S. customers that actually purchased subject merchandise from Ternium during the second quarter of 2008. In other words, the lists did not purport to reflect all of the customers that maintained relationships with Hylsa, IMSA, and Ternium during each period which is why several of the names on each list did not match. Ternium also explained that all former Hylsa customers were maintained as customers in Ternium's sales computer following the merger and were eligible to make purchases at any time. See Ternium's SSSQR at page 7. While we note that some of the customers from IMSA's 2007 customer list are present in Ternium's second quarter 2008 customer list (and were not present in Hylsa's 2007 list), given the overall Ternium second quarter 2008 customer list, we preliminarily find that Ternium's customer list is representative of Hylsa's prior to its acquisition by Ternium Luxemburg. Therefore, based on record information, we preliminarily find that Ternium's customer base resembles Hylsa's prior to its acquisition by Ternium Luxemburg.

We also examined Ternium's list of production facilities that are capable of producing LWRPT (including merchandise that falls within the scope of the antidumping duty order on LWRPT) provided at attachment 4 of its Initial Submission. Ternium stated in its SSQR at page 3 that none of the LWRPT produced at the facility formerly operated by IMSA is certified to meet any ASTM A-500 or A-513 standards for LWRPT or any other industry specifications for LWRPT, and as a result, are not exported to the United States. Because the former IMSA facility is limited in its abilities to produce Start Printed Page 28890subject merchandise that is appealing to customers in the United States, i.e., not certified to meet ASTM, and its capacity to produce subject merchandise is relatively small when compared to both former Hylsa facilities, we preliminarily determine that although production facilities for LWRPT have changed between pre-transfer Hylsa and post-transfer Ternium (which includes both the former Hylsa facilities and the facility formerly operated by IMSA), the post-transfer Ternium's production facilities are not so significantly different from the former Hylsa production facilities that Ternium would be precluded from being a successor to Hylsa.

The documentation and analysis thereof described above, both with regard to the transfer of production and sales operations from Hylsa to Ternium as well as Ternium Luxemburg's acquisition of Grupo IMSA (and its subsidiary IMSA), demonstrates that there was little to no change in management structure, supplier relationships, production facilities, or customer base between pre-acquisition Hylsa and post-acquisition (after the acquisitions of Hylsamex and Grupo IMSA) Ternium. For these reasons, we preliminarily find that Ternium is the successor-in-interest to Hylsa and, thus, should be accorded the same antidumping duty treatment with respect to LWRPT from Mexico as Hylsa. If the above preliminary results are affirmed in the Department's final results, the cash deposit rate from this changed circumstances review will apply to all entries of the subject merchandise entered, or withdrawn from warehouse, for consumption on or after the date of publication of the final results of this changed circumstances review. See Granular Polytetrafluoroethylene Resin from Italy; Final Results of Antidumping Duty Changed Circumstances Review, 68 FR 25327 (May 12, 2003).

Public Comment

In accordance with 19 CFR 351.310(c), any interested party may request a hearing within 30 days of publication of this notice. Any hearing, if requested, will be held no later than 37 days after the date of publication of this notice, or the first workday thereafter. Case briefs from interested parties may be submitted not later than 30 days after the date of publication of this notice, in accordance with 19 CFR 351.309(c)(ii). Rebuttal briefs, limited to the issues raised in those comments, may be filed not later than 5 days after the time limit for filing the case brief, in accordance with 19 CFR 351.309(d). All written comments shall be submitted in accordance with 19 CFR 351.303. Persons interested in attending the hearing, if one is requested, should contact the Department for the date and time of the hearing. In accordance with 19 CFR 351.216(e), the Department will issue the final results of its antidumping duty changed circumstances review not later than 270 days after the date on which the review is initiated.

During the course of this antidumping duty changed circumstances review, deposit requirements for the subject merchandise exported and manufactured by Ternium will continue to be the all-others rate established in the investigation. See Light-Walled Rectangular Pipe and Tube from Mexico, the People's Republic of China, and the Republic of Korea (Korea): Antidumping Duty Orders; Light-Walled Rectangular Pipe and Tube from Korea: Notice of Amended Final Determination of Sales at Less Than Fair Value, 73 FR 45403 (August 5, 2008). The cash deposit rate will be altered, if warranted, pursuant only to the final results of this review.

We are issuing and publishing these preliminary results and notice in accordance with sections 751(b)(1) and 777(i)(1) and (2) of the Act and 19 CFR 351.216.

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Dated: June 11, 2009.

Ronald K. Lorentzen,

Acting Assistant Secretary for Import Administration.

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Footnotes

1.  Prior to the reorganization effective April 1, 2008, Ternium was a holding company and did not have any production or sales operations. See Ternium's Initial Submission at page 2.

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2.  In our Notice of Initiation, we referred to Ternium's request as a “name change.” However, as explained above it is related to the transfer of production and sales functions from Hylsa to Ternium (i.e., an acquisition). Effective April 1, 2008, Hylsa exists solely as a service company which employs workers at the former Hylsa facilities and provides its services to Ternium on a contract basis. See Ternium's Initial Submission at page 2.

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3.  Hylsamex is the former parent company of Hylsa. On August 22, 2005, Ternium Luxemburg (the corporate parent of Ternium (see Ternium's SQR at page 7)), acquired Hylsamex. See Ternium's Initial Submission at page 2.

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[FR Doc. E9-14369 Filed 6-17-09; 8:45 am]

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