65 FR 42985, July 12, 2000 A-588-853 Investigation Public Document GRP II Off. 5: CH MEMORANDUM TO: Troy H. Cribb Acting Assistant Secretary for Import Administration FROM: Holly A. Kuga Acting Deputy Assistant Secretary for Group II, Import Administration SUBJECT: Issues and Decision Memorandum for the Final Determination in the Antidumping Duty Investigation of Circular Seamless Stainless Steel Hollow Products from Japan Summary We have analyzed the comments and rebuttal comments of interested parties in the antidumping duty investigation covering circular seamless stainless steel hollow products from Japan. We recommend that you approve the position we have developed in the Discussion of the Issues section of this memorandum. Background On May 1, 2000, the Department of Commerce (the Department) published the preliminary determination in the antidumping duty investigation of circular seamless stainless steel hollow products from Japan. The period of investigation (POI) is October 1, 1998, through September 30, 1999. We invited parties to comment on the preliminary determination. Scope of Investigation (1) The scope of this investigation covers seamless stainless steel hollow products, including pipes, tubes, redraw hollows, and hollow bars, of circular cross section, containing 10.5 percent or more by weight chromium, regardless of production process, outside diameter, wall thickness, length, industry specification (domestic, foreign or proprietary), grade or intended use. Common specifications for the subject seamless stainless steel hollow products include, but are not limited to American Society for Testing and Materials (ASTM)-A-213, ASTM-A-268, ASTM-A-269, ASTM-A-270, ASTM-A-271, ASTM-A-312, ASTM-A-376, ASTM-A-498, ASTM-A-511, ASTM-A-632, ASTM-A-731, ASTM-A-771, ASTM-A-789, ASTM-A-790, ASTM-A-826 and their proprietary or foreign equivalents. The merchandise covered by this investigation is found in the Harmonized Tariff Schedule of the United States (HTSUS) subheadings 7304.10.50.20, 7304.10.50.50, 7304.10.50.80, 7304.41.30.05, 7304.41.30.15,7304.41.30.45, 7304.41.60.05, 7304.41.60.15, 7304.41.60.45, 7304.49.00.05, 7304.49.00.15, 7304.49.00.45, 7304.49.00.60. Although HTSUS subheadings are provided for convenience and customs purposes, the written description of the merchandise is dispositive. Excluded from the scope of the investigation are finished oil country tubular goods (OCTG) certified to a proprietary (non-API) specification if such OCTG products are (1) not certified, marked or otherwise warranted or qualified for use as a non-OCTG product; (2) produced to a common OCTG casing, tubing or drill pipe size as found in the standard size tables of API specifications 5CT and 5D, or produced to standard VTI sizes for deep- water temperature-controlled tubing; (3) rated for a minimum yield strength of not less than 85,000 psi and a minimum tensile strength of not less than 100,000 psi, as noted on the mill certificate or other relevant sales documentation; (4) continuously stenciled with the appropriate proprietary OCTG specification, size (e.g., outside diameter and weight), minimum yield and tensile strength, and the phrase "OCTG," "oil country tubular goods" or a similar phrase, with such information also written on the entry documents; (5) not marked or otherwise certified as meeting a specification other than an API or proprietary OCTG specification whether or not also marked, warranted or certified to an OCTG specification; and (6) not used in any application other than a down-hole, OCTG application. Also excluded from the scope of the investigation are finished OCTG certified to an American Petroleum Institute (API) specification 5D or 5CT if such OCTG products are (1) not certified, marked or otherwise warranted or qualified for use as a non-OCTG product; (2) produced to a common OCTG casing, tubing or drill pipe size as found in the standard size tables of API specifications 5CT and 5D, or produced to standard VTI sizes for deep- water temperature-controlled tubing; (3) designated with the appropriate API OCTG specification and the phrase "OCTG", "oil country tubular goods" or a similar phrase on the entry documents; (4) not marked or otherwise certified as meeting a specification other than an API OCTG specification; and (5) not used in any application other than a down-hole, OCTG application. Any OCTG products marked, certified or otherwise warranted for non-OCTG use, or actually used in a non-OCTG application, are within the scope of this investigation. Also excluded from the scope of this investigation is OCTG coupling stock that (1) is entered within the same entry as matching (complementary) sizes and matching grades of exempted OCTG, or (2) is entered with documentation linking the entered OCTG coupling stock products to another entry of matching sizes and grades of OCTG, and (3) is actually used in the production of OCTG couplings or other OCTG accessories. All coupling stock that does not have such "Mother - Child Traceability" remains within the scope of the investigation, and coupling stock that is traceable remains within the scope if used in an application other than the production of OCTG couplings or accessories. Line pipe marked, produced, warranted, or certified only to API or proprietary line pipe specifications and used in a pipeline application is excluded from the scope of the investigation. Line pipe products are included in the scope if (1) marked, produced, warranted, or certified to one of the covered seamless stainless steel hollow products specifications listed above (or their proprietary or foreign equivalents), whether or not also certified to an API, proprietary, or foreign line pipe specification, or (2) they are used in an application other than in an oil or gas pipeline. Also excluded are hollow drill bars and rods, classifiable under item number 7228.80 of the HTSUS. With regard to the excluded OCTG products, OCTG coupling stock, and line pipe used in oil or gas pipeline applications, the Department will not instruct Customs to require end-use certification until such time as petitioner or other interested parties provide a reasonable basis to believe or suspect that imports of these products are not being used for their intended purpose of OCTG or oil or gas line pipe. If such information is provided, we will require end-use certification only for the product(s) (or specification(s)) for which the evidence demonstrates such new use. For example, if, based on evidence provided by petitioner, the Department finds a reasonable basis to believe or suspect that seamless pipe produced to a proprietary specification is being used in a non-OCTG application, we will require end-use certifications for imports of that specification. Normally we will require only the importer of record to certify to the end use of the imported merchandise. If it later proves necessary for adequate implementation, we may also require producers who export such products to the United States to provide such certification on invoices accompanying shipments to the United States. Class or Kind In the course of this investigation, SMI and the American Boiler Manufacturers Association (ABMA) have argued that the scope of the investigation should be divided into two classes or kinds of merchandise, hot-finished SSHP and cold-finished SSHP. In our preliminary determination, we treated all SSHP as one class or kind of merchandise. In determining whether merchandise covered by an investigation constitutes more than one class or kind, the Department normally refers to the following criteria: (1) general physical characteristics; (2) ultimate use; (3) expectations of the ultimate purchaser; (4) channels of trade; and (5) manner of advertising and display. See Notice of Final Determination of Sales at Less Than Fair Value; Stainless Steel Sheet and Strip from the United Kingdom, 64 FR 30688, 30706 (June 8, 1999) (SSSS from the U.K.). As revealed by the following application of these criteria to the merchandise at issue, the Department properly considers this merchandise to constitute a single class or kind. As its name implies, the most important physical characteristic of stainless steel is its resistance to corrosion. This resistance to corrosion is brought about by the addition of chromium; it is the presence of this element that allows a steel to be defined as "stainless." The scope of the order adopts the HTSUS definition of stainless steel as being one which contains 10.5 percent or more of chromium. This is the key physical characteristic of stainless steel hollow products, whether hot- or cold-finished. Further, the ASTM book of standards shows that both hot- and cold- finished SSHP may be produced to the same grades and specifications. For products over one inch in diameter, there is also an overlap in the dimensions to which hot- and cold-finished SSHP are produced. The end-use of the product and the expectations of the end user are also similar. The ASTM book of standards shows that both hot- and cold-finished SSHP may be used in a wide range of overlapping types of applications, such as boiler tubing, heat-exchanger tubing and pipes for general service. The primary reason ultimate users choose a stainless steel product over other steel products is for its anti-corrosive properties, which are the same for both hot- and cold-finished SSHP. With regard to advertising and channels of distribution, all parties agree that there is significant overlap for both hot- and cold-finished products. Further, treating hot- and cold-finished SSHP as one class or kind of merchandise is consistent with recent Department precedent. Numerous other orders on stainless steel products include cold-finished and hot-finished products within the same class or kind. See, e.g., SSSS from the U.K. and Stainless Steel Bar From Japan: Final Results of Antidumping Administrative Review, 65 FR 13717 (March 14, 2000). Recent cases involving pipe have also treated hot- and cold-finished products as a single class or kind. See, e.g., Notice of Final Determinations of Sales at Less Than Fair Value: Certain Large Diameter Carbon and Alloy Seamless Standard, Line and Pressure Pipe from Japan; and Certain Small Diameter Carbon and Alloy Seamless Standard, Line and Pressure Pipe from Japan and the Republic of South Africa, 65 FR 25907 (May 4, 2000), and Small Diameter Circular Seamless Carbon and Alloy Steel Standard, Line and Pressure Pipe From Germany: Final Results of Antidumping Duty Administrative Review, 63 FR 13217 (March 18, 1998). Therefore, in this final determination, we have continued to treat hot- and cold- finished SSHP as a single class or kind of merchandise. Discussion of the Issues 1. Ultra-high purity 316L Redraw Hollows Plymouth Tube Company (Plymouth Tube) requests that ultra-high purity 316L redraw hollows (316L redraw hollows) be excluded from the scope of the investigation because it claims there is no U.S. industry producing this product and because ultra-high purity redraw hollows are a distinct and different product from the SSHP covered in this investigation. According to Plymouth Tube, it has tried to purchase ultra-high purity 316L redraw hollows from a U.S. producer, but it has been unable to do so. To support its contention, Plymouth Tube described and documented its correspondence with Sandvik/PEXCO in which the two companies failed to come to an agreement after Sandvik/PEXCO stated it could not guarantee Plymouth Tube's chemistry requirements on an order of only 20,000 lbs. per month. Plymouth Tube claims there is no evidence to indicate that Sandvik/PEXCO could have met Plymouth Tube's requirements even at a higher rate of consumption. Using criteria outlined in Diversified Products Corp. v. United States, 572 F. Supp. 883 (CIT 1983) (Diversified Products), Plymouth Tube argues that ultra-high purity redraw hollows differ from the other covered products With regard to physical characteristics, Plymouth Tube states that ultra-high purity redraw hollows differ from standard 316L redraw hollows in that they have significantly lower levels of manganese, copper and tin. The ultimate use of the merchandise is, according to Plymouth Tube, to produce ultra-high purity cold-finished tubes for use in the semiconductor industry. Plymouth Tube states that this industry demands ultra-high purity tubes to be suitable for use in its production process and, to the best of its knowledge, would not accept tubes produced from standard purity redraw hollows. Finally, Plymouth Tube states that while the channels of trade are similar for ultra-high purity redraw hollows and other types of redraw hollows, Plymouth Tube markets its ultra-high purity cold finished tubing through special brochures directed exclusively at the semiconductor industry. The petitioners object to excluding ultra-high purity 316L redraw hollows from the scope of the investigation. First, the petitioners argue, ultra- high purity 316L redraw hollows clearly fit into the scope description. The petitioners point out that the scope, as published in the preliminary determination, covers all seamless stainless steel hollow products regardless of production process, industry specification, grade, or intended use. Citing to Wheatland Tube Co. v. United States, 161 F. 3d 1365 (Fed. Cir. 1998), the petitioners argue that because the description of the merchandise is unambiguous, it is unnecessary for the Department to do a Diversified Products analysis. Second, the petitioners point out that the statute does not require the Department to consider the domestic availability of a particular product within the scope when considering a scope request. See Notice of Final Determination of Sales at Less Than Fair Value: Certain Cold-Rolled Carbon Steel Flat Products from Argentina, 58 FR 37062, 37070-1 (July 9, 1993). In any event, the petitioners state that Sandvik/PEXCO makes the product required by Plymouth Tube. According to the petitioners, the fact that the sale did not take place due to a disagreement over quantity does not mean that Sandvik/PEXCO is incapable of producing the product. DOC Position: We agree with the petitioners, and we have not excluded ultra-high purity 316L redraw hollows from the scope of this investigation. It is the Department's view that it should give "ample deference to the petitioners" on the definition of the product for which they seek relief under the antidumping law. See Eckstrom Industries, Inc. v. United States, 27 F. Supp. 2d 217, 223 (CIT 1998). In this case, the petitioners have expressly stated that they intend the scope to include ultra-high purity 316L redraw hollows. Furthermore, Plymouth Tube filed scope comments on December 13, 1999, in which it admitted (at 2) that ultra-high purity redraw hollows "come within the literal terms of the petition and the Department's scope decision." As described above, the scope of this investigation covers seamless stainless steel hollow products, including pipes, tubes, redraw hollows, and hollow bars . . . regardless of production process, outside diameter, wall thickness, length, industry specification (domestic, foreign or proprietary), grade or intended use. As a consequence, it is unnecessary to do a Diversified Products analysis. Finally, both the Department and the International Trade Commission have determined that all products described in the scope of the investigation constitute a single like product, and that the petitioners manufacture products that fit into the like product description. Section 732(c)(4)(A) of the Tariff Act of 1930, as amended, states that the Department will determine that a petition has been filed on behalf of the industry if the domestic producers or workers who support the petition account for: (1) at least 25 percent of the total production of the domestic like product; and (2) more than 50 percent of the production of the domestic like product produced by that portion of the industry expressing support for, or opposition to, the petition (emphasis added). There is no statutory requirement that the petitioners produce all products covered by the scope. In other words, while the petitioners are required to produce the domestic like product, they need not produce every permutation or model of the domestic like product. Notwithstanding this, evidence on the record indicates that there is a domestic producer that may be able to make the exact merchandise that Plymouth Tube wants excluded. Therefore, since the ultra-high purity 316L redraw hollows clearly meet the definition of covered merchandise, and the petitioners have specifically stated that the petition covers this merchandise, we continue to include ultra-high purity 316L redraw hollows in the scope of the investigation. 2. OCTG Scope Exclusion The petitioner requested that the scope be amended to differentiate between the requirements for OCTG made to API 5D or 5CT specifications and OCTG made to proprietary specifications. In short, API grades 5D and 5CT would not have to have a minimum tensile strength of 85,000 psi, and would not have to have the information relating to yield and tensile strength stenciled along the length of the pipe. SMI agrees with the petitioners' clarification of the OCTG exclusion as it applies to API grades, and requests that the Department direct the Customs Service to apply the revised criteria to all pending entries immediately after the final determination. DOC Position: We have adopted the petitioners' scope revisions, and will instruct the Customs Service to release bonds posted and refund any cash deposits made on all merchandise that is not subject to any antidumping duty order resulting from this investigation. Recommendation Based on our analysis of the comments received, we recommend adopting the above positions. If this recommendation is accepted, we will publish the final determination in the Federal Register. AGREE____ DISAGREE____ _________________________ Troy H. Cribb Acting Assistant Secretary for Import Administration _________________________ Date _________________________________________________________________________ footnote: 1. In their case brief, filed May 31, 2000, Altx, Inc., American Extruded Products, PMAC Ltd, DMV Stainless USA, Inc., Salem Tube Inc., Sandvik Steel Co., International Extruded Products LLC, Pennsylvania Extruded Company (PEXCO) and the United Steel Workers of America, AFL-CIO/CLC (the petitioners) requested a change to the scope clarifying the OCTG exemption. This change is reflected in the current scope.