65 FR 25907, May 4, 2000 A-588-850 A-588-851 A-791-808 Investigations 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 Determinations in the Antidumping Duty Investigations of 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 Summary We have analyzed the comments and rebuttal of interested parties in the antidumping duty investigations covering 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. No comments were received in the case involving small diameter carbon and alloy seamless standard, line and pressure pipe from the Republic of South Africa.(1) We recommend that you approve the position we have developed in the Discussion of the Issue section of this memorandum. Background On December 14, 1999, the Department of Commerce (the Department) published the preliminary determinations in the antidumping duty investigations of 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. The merchandise covered by these investigations consists of standard, line and pressure seamless pipes greater than 4.5 inches (114.3 mm) up to and including 16 inches (406.4 mm) in outside diameter (large diameter) or less than or equal to 4.5 inches (114.3 mm) in outside diameter (small diameter), regardless of wall-thickness, manufacturing process (hot finished or cold-drawn), end finish (plain end, beveled end, upset end, threaded, or threaded and coupled), or surface finish. The period of investigation (POI) is April 1, 1998, through March 31, 1999. We invited parties to comment of the preliminary determination. At the request of Sumitomo Metal Industries (SMI), we held a public hearing for the two Japan investigations on March 14, 2000. There was no request for a hearing in the South Africa case. Scope of Investigations (2) Large Diameter Carbon and Alloy Seamless Standard, Line and Pressure Pipe For purposes of the large diameter seamless pipe investigation, the products covered are large diameter seamless carbon and alloy (other than stainless) steel standard, line, and pressure pipes produced, or equivalent, to the American Society for Testing and Materials (ASTM) A-53, ASTM A-106, ASTM A-333, ASTM A-334, ASTM A-589, ASTM A-795, and the American Petroleum Institute (API) 5L specifications and meeting the physical parameters described below, regardless of application. The scope of these investigations also includes all other products used in standard, line, or pressure pipe applications and meeting the physical parameters described below, regardless of specification, with the exception of the exclusions discussed below. Specifically included within the scope of these investigations are seamless pipes greater than 4.5 inches (114.3 mm) up to and including 16 inches (406.4 mm) in outside diameter, regardless of wall-thickness, manufacturing process (hot finished or cold-drawn), end finish (plain end, beveled end, upset end, threaded, or threaded and coupled), or surface finish. The seamless pipes subject to these investigations are currently classifiable under the subheadings 7304.10.10.30, 7304.10.10.45, 7304.10.10.60, 7304.10.50.50, 7304.31.60.50, 7304.39.00.36, 7304.39.00.40, 7304.39.00.44, 7304.39.00.48, 7304.39.00.52, 7304.39.00.56, 7304.39.00.62, 7304.39.00.68, 7304.39.00.72, 7304.51.50.60, 7304.59.60.00, 7304.59.80.30, 7304.59.80.35, 7304.59.80.40, 7304.59.80.45, 7304.59.80.50, 7304.59.80.55, 7304.59.80.60, 7304.59.80.65, and 7304.59.80.70 of the Harmonized Tariff Schedule of the United States (HTSUS). Specifications, Characteristics, and Uses: Large diameter seamless pipe is used primarily for line applications such as oil, gas, or water pipeline, or utility distribution systems. Seamless pressure pipes are intended for the conveyance of water, steam, petrochemicals, chemicals, oil products, natural gas and other liquids and gasses in industrial piping systems. They may carry these substances at elevated pressures and temperatures and may be subject to the application of external heat. Seamless carbon steel pressure pipe meeting the ASTM A-106 standard may be used in temperatures of up to 1000 degrees Fahrenheit, at various American Society of Mechanical Engineers (ASME) code stress levels. Alloy pipes made to ASTM A-335 standard must be used if temperatures and stress levels exceed those allowed for ASTM A-106. Seamless pressure pipes sold in the United States are commonly produced to the ASTM A-106 standard. Seamless standard pipes are most commonly produced to the ASTM A-53 specification and generally are not intended for high temperature service. They are intended for the low temperature and pressure conveyance of water, steam, natural gas, air and other liquids and gasses in plumbing and heating systems, air conditioning units, automatic sprinkler systems, and other related uses. Standard pipes (depending on type and code) may carry liquids at elevated temperatures but must not exceed relevant ASME code requirements. If exceptionally low temperature uses or conditions are anticipated, standard pipe may be manufactured to ASTM A-333 or ASTM A-334 specifications. Seamless line pipes are intended for the conveyance of oil and natural gas or other fluids in pipe lines. Seamless line pipes are produced to the API 5L specification. Seamless water well pipe (ASTM A-589) and seamless galvanized pipe for fire protection uses (ASTM A-795) are used for the conveyance of water. Seamless pipes are commonly produced and certified to meet ASTM A- 106, ASTM A-53, API 5L-B, and API 5L-X42 specifications. To avoid maintaining separate production runs and separate inventories, manufacturers typically triple or quadruple certify the pipes by meeting the metallurgical requirements and performing the required tests pursuant to the respective specifications. Since distributors sell the vast majority of this product, they can thereby maintain a single inventory to service all customers. The primary application of ASTM A-106 pressure pipes and triple or quadruple certified pipes in large diameters is for use as oil and gas distribution lines for commercial applications. A more minor application for large diameter seamless pipes is for use in pressure piping systems by refineries, petrochemical plants, and chemical plants, as well as in power generation plants and in some oil field uses (on shore and off shore) such as for separator lines, gathering lines and metering runs. These applications constitute the majority of the market for the subject seamless pipes. However, ASTM A-106 pipes may be used in some boiler applications. The scope of these investigations includes all seamless pipe meeting the physical parameters described above and produced to one of the specifications listed above, regardless of application, with the exception of the exclusions discussed below, whether or not also certified to a non-covered specification. Standard, line, and pressure applications and the above-listed specifications are defining characteristics of the scope of these investigations. Therefore, seamless pipes meeting the physical description above, but not produced to the ASTM A-53, ASTM A-106, ASTM A-333, ASTM A-334, ASTM A-589, ASTM A-795, and API 5L specifications shall be covered if used in a standard, line, or pressure application, with the exception of the specific exclusions discussed below. For example, there are certain other ASTM specifications of pipe which, because of overlapping characteristics, could potentially be used in ASTM A-106 applications. These specifications generally include ASTM A-161, ASTM A-192, ASTM A-210, ASTM A-252, ASTM A-501, ASTM A-523, ASTM A-524, and ASTM A-618. When such pipes are used in a standard, line, or pressure pipe application, such products are covered by the scope of these investigations. Specifically excluded from the scope of these investigations are: A. Boiler tubing and mechanical tubing, if such products are not produced to ASTM A-53, ASTM A-106, ASTM A-333, ASTM A-334, ASTM A- 589, ASTM A-795, and API 5L specifications and are not used in standard, line, or pressure pipe applications. Finished and unfinished oil country tubular goods (OCTG), if covered by the scope of another antidumping duty order from the same country. If not covered by such an OCTG order, finished and unfinished OCTG are included in this scope when used in standard, line or pressure applications. Products produced to the A-335 specification unless they are used in an application that would normally utilize ASTM A-53, ASTM A-106, ASTM A-333, ASTM A-334, ASTM A-589, ASTM A-795, and API 5L specifications. Line and riser pipe for deepwater application, i.e., line and riser pipe that is (1) used in a deepwater application, which means for use in water depths of 1,500 feet or more; (2) intended for use in and is actually used for a specific deepwater project; (3) rated for a specified minimum yield strength of not less than 60,000 psi; and (4) not identified or certified through the use of a monogram, stencil, or otherwise marked with an API specification (e.g., "API 5L"). With regard to the excluded products listed above, the Department will not instruct Customs to require end-use certification until such time as petitioner or other interested parties provide to the Department a reasonable basis to believe or suspect that the products are being utilized in a covered application. If such information is provided, we will require end-use certification only for the product(s) (or specification(s)) for which evidence is provided that such products are being used in a covered application as described above. For example, if, based on evidence provided by petitioner, the Department finds a reasonable basis to believe or suspect that seamless pipe produced to the A-335 specification is being used in an A-106 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. Although the HTSUS subheadings are provided for convenience and customs purposes, our written description of the merchandise subject to this scope is dispositive. Small Diameter Carbon and Alloy Seamless Standard, Line and Pressure Pipe For purposes of the small diameter seamless pipe investigations, the products covered are seamless carbon and alloy (other than stainless) steel standard, line, and pressure pipes and redraw hollows produced, or equivalent, to the ASTM A-53, ASTM A-106, ASTM A-333, ASTM A-334, ASTM A-335, ASTM A-589, ASTM A-795, and the American Petroleum Institute (API) 5L specifications and meeting the physical parameters described below, regardless of application. The scope of these investigations also includes all products used in standard, line, or pressure pipe applications and meeting the physical parameters described below, regardless of specification. Specifically included within the scope of these investigations are seamless pipes and redraw hollows, less than or equal to 4.5 inches (114.3 mm) in outside diameter, regardless of wall-thickness, manufacturing process (hot finished or cold-drawn), end finish (plain end, beveled end, upset end, threaded, or threaded and coupled), or surface finish. The seamless pipes subject to these investigations are currently classifiable under the subheadings 7304.10.10.20, 7304.10.50.20, 7304.31.30.00, 7304.31.60.50, 7304.39.00.16, 7304.39.00.20, 7304.39.00.24, 7304.39.00.28, 7304.39.00.32, 7304.51.50.05, 7304.51.50.60, 7304.59.60.00, 7304.59.80.10, 7304.59.80.15, 7304.59.80.20, and 7304.59.80.25 of the HTSUS. Specifications, Characteristics, and Uses: Seamless pressure pipes are intended for the conveyance of water, steam, petrochemicals, chemicals, oil products, natural gas and other liquids and gasses in industrial piping systems. They may carry these substances at elevated pressures and temperatures and may be subject to the application of external heat. Seamless carbon steel pressure pipe meeting the ASTM A-106 standard may be used in temperatures of up to 1000 degrees Fahrenheit, at various ASME code stress levels. Alloy pipes made to ASTM A-335 standard must be used if temperatures and stress levels exceed those allowed for ASTM A-106. Seamless pressure pipes sold in the United States are commonly produced to the ASTM A-106 standard. Seamless standard pipes are most commonly produced to the ASTM A-53 specification and generally are not intended for high temperature service. They are intended for the low temperature and pressure conveyance of water, steam, natural gas, air and other liquids and gasses in plumbing and heating systems, air conditioning units, automatic sprinkler systems, and other related uses. Standard pipes (depending on type and code) may carry liquids at elevated temperatures but must not exceed relevant ASME code requirements. If exceptionally low temperature uses or conditions are anticipated, standard pipe may be manufactured to ASTM A-333 or ASTM A-334 specifications. Seamless line pipes are intended for the conveyance of oil and natural gas or other fluids in pipe lines. Seamless line pipes are produced to the API 5L specification. Seamless water well pipe (ASTM A-589) and seamless galvanized pipe for fire protection uses (ASTM A-795) are used for the conveyance of water. Seamless pipes are commonly produced and certified to meet ASTM A- 106, ASTM A-53, API 5L-B, and API 5L-X42 specifications. To avoid maintaining separate production runs and separate inventories, manufacturers typically triple or quadruple certify the pipes by meeting the metallurgical requirements and performing the required tests pursuant to the respective specifications. Since distributors sell the vast majority of this product, they can thereby maintain a single inventory to service all customers. The primary application of ASTM A-106 pressure pipes and triple or quadruple certified pipes is in pressure piping systems by refineries, petrochemical plants, and chemical plants. Other applications are in power generation plants (electrical-fossil fuel or nuclear), and in some oil field uses (on shore and off shore) such as for separator lines, gathering lines and metering runs. A minor application of this product is for use as oil and gas distribution lines for commercial applications. These applications constitute the majority of the market for the subject seamless pipes. However, ASTM A-106 pipes may be used in some boiler applications. Redraw hollows are any unfinished pipe or "hollow profiles" of carbon or alloy steel transformed by hot rolling or cold drawing/hydrostatic testing or other methods to enable the material to be sold under ASTM A-53, ASTM A-106, ASTM A-333, ASTM A-334, ASTM A-335, ASTM A-589, ASTM A-795, and API 5L specifications. The scope of these investigations includes all seamless pipe meeting the physical parameters described above and produced to one of the specifications listed above, regardless of application, with the exception of the specific exclusions discussed below, and whether or not also certified to a non-covered specification. Standard, line, and pressure applications and the above-listed specifications are defining characteristics of the scope of these investigations. Therefore, seamless pipes meeting the physical description above, but not produced to the ASTM A-53, ASTM A-106, ASTM A-333, ASTM A-334, ASTM A-335, ASTM A-589, ASTM A-795, and API 5L specifications shall be covered if used in a standard, line, or pressure application, with the exception of the specific exclusions discussed below. For example, there are certain other ASTM specifications of pipe which, because of overlapping characteristics, could potentially be used in ASTM A-106 applications. These specifications generally include ASTM A-161, ASTM A-192, ASTM A-210, ASTM A-252, ASTM A-501, ASTM A-523, ASTM A-524, and ASTM A-618. When such pipes are used in a standard, line, or pressure pipe application, with the exception of the specific exclusions discussed below, such products are covered by the scope of these investigations. Specifically excluded from the scope of these investigations are boiler tubing and mechanical tubing, if such products are not produced to ASTM A-53, ASTM A-106, ASTM A-333, ASTM A-334, ASTM A- 335, ASTM A-589, ASTM A-795, and API 5L specifications and are not used in standard, line, or pressure pipe applications. In addition, finished and unfinished OCTG are excluded from the scope of these investigations, if covered by the scope of another antidumping duty order from the same country. If not covered by such an OCTG order, finished and unfinished OCTG are included in this scope when used in standard, line or pressure applications. With regard to the excluded products listed above, the Department will not instruct Customs to require end-use certification until such time as petitioner or other interested parties provide to the Department a reasonable basis to believe or suspect that the products are being used in a covered application. If such information is provided, we will require end-use certification only for the product(s) (or specification(s)) for which evidence is provided that such products are being used in covered applications as described above. For example, if, based on evidence provided by petitioner, the Department finds a reasonable basis to believe or suspect that seamless pipe produced to the A-161 specification is being used in a standard, line or pressure 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. Although the HTSUS subheadings are provided for convenience and customs purposes, our written description of the merchandise subject to this scope is dispositive. Discussion of the Issue 1. Class or Kind Respondent SMI, the American Boiler Manufacturers Association (ABMA) and MC Tubular Products, Inc. (MCTP) contend that on the basis of information on the record of these investigations the Department should treat seamless alloy pressure pipe differently from seamless triple-stenciled commodity carbon pipe. SMI adds that high-strength carbon line pipe should also be treated as a separate class of merchandise from triple-stenciled commodity carbon pipe. SMI argues that, in making a class or kind determination, the Department is not limited to the five Diversified Products (3) criteria outlined in the Memorandum from Case Analysts to Holly Kuga Re: Class or Kind Determination (Class or Kind Memo). SMI claims that the CIT, in Diversified Products, did not enunciate five criteria that it considered appropriate for clarifying the scope of an order, but rather described the five criteria used by the Department (physical characteristics, expectations, channels, use and cost) in a class or kind decision involving an investigation on bicycle speedometers. SMI added that the CIT also cited two decisions that listed various factors for making a class or kind determination in the context of customs classifications, which together list more than just the five criteria stated above. Further, SMI contends that an analysis based on the five criteria in section 351.225(k)(2) of the Department's regulations is not relevant for establishing the necessary criteria for defining class or kind during an investigation. Instead, SMI claims, the regulation only addresses rulings regarding the scope of a previously issued antidumping or countervailing duty order. Nevertheless, SMI (as well as the ABMA and MCTP) addressed the five criteria listed under section 351.225(k)(2) of the Department's regulations in making its case for separate classes or kinds of merchandise in the instant investigation. Alloy pipe SMI objects to the Department's position that a continuum exists with regard to the carbon/alloy distinction while allowing large diameter and small diameter pipe to be split into separate classes or kinds. SMI argues that large/small diameter pipe are part of a continuum of sizes. It further argues that, using the Department's logic that a continuum exists, cast iron, carbon steel, alloy steel and stainless steel should all be part of the same continuum. However, SMI points out that in most instances the Department separates those four categories of ferrous metal, and notes that a number of antidumping cases have been limited to either carbon steel or alloy steel, (see e.g. 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; Final Determination of Sales at Less than Fair Value: Circular Welded Non- Alloy Steel Pipe from South Africa, 61 FR 24271, May 14, 1996). Further, SMI states that each of the four categories listed above is recognized by the industry as a unique product, as evidenced by textbooks on the subject and by the HTSUS. SMI states that alloying elements are added in carefully measured quantities to achieve specific, unique characteristics unattainable by carbon steel. These unique physical characteristics include improved yield strength, tensile strength, creep strength, and elongation. Although SMI concedes that a continuum does exist within steel products, it contends that it is possible to draw a clear dividing line between carbon pipe and alloy pipe based on industry standards. For instance, SMI states that the standard for alloy steel is that it contains a minimum of 2.07 percent alloying elements. Therefore, SMI argues, an industry-recognized clear dividing line exists between ASTM standard A-106 carbon pipe and ASTM standard A- 335 alloy pipe. With regard to the use of the products, SMI argues that 1) alloying elements are added to achieve specific goals related to ultimate use; 2) there is danger in choosing overly broad descriptions of end use; and 3) the correct divisional descriptions of end use would be that carbon steel involves moving liquids and gases at mild temperatures whereas alloy steel involves moving liquids and gases at high temperatures or high pressures. SMI argues further that, contrary to what the Department stated in its preliminary determination, there is no degree of substitution of one type of product for another along the continuum, and that the lack of interchangeability clearly indicates that the products have different uses. It states that carbon can never be substituted for alloy; that anyone doing so runs the risk of having the pipe explode. In addition, SMI maintains that alloy pipe, because of its cost, is never substituted for carbon pipe, and there is no evidence on the record suggesting that such substitution ever occurs. The clear dividing line between carbon pipe and alloy pipe, according to SMI, can be drawn using the ASME Boiler and Pressure Vessel Code (ASME Code), which requires the use of alloy pipe at temperatures above 800 degrees Fahrenheit. SMI further states that end-use, in this case, also determines the expectations of the user. Therefore, SMI states that all arguments relevant to end-use are relevant to the expectations of the ultimate user as well. The ABMA states that the physical difference between alloy pressure pipe and carbon pressure pipe is the presence or absence of alloying elements, and that the separation between carbon pipe and alloy pipe is made clear by the ASME Code, which defines 800 degrees Fahrenheit as the point at which carbon steel may be converted to graphite. The ABMA states that A-335 alloy steels are used in applications where temperatures exceed 800 degrees, and that A-335 grade P-2 is usable in applications facing temperatures of up to 1000 degrees, appreciably more than the 800 degree-maximum under which A-106 carbon steel can be used. The ABMA maintains that A-335 grade P-1 is an "aberrational grade"(4) and states that all grades other than P-1 form the "real" category of A-335 material. The ABMA emphasizes the danger of using an A-106 carbon pipe in an application calling for A-335 alloy pipe, stating that doing so could lead to "extensive and costly damage and injuries and death." It states that the use of alloy pipes is necessary in modern boilers, which rely on super-heated steam, and that using carbon pipe would limit the boiler service temperature to an impractically low 800 degrees. Finally, the ABMA states that the ultimate purchasers expect merchandise to perform in conformity with its physical characteristics. MCTP argues that alloy pipe and carbon pipe have different physical characteristics by virtue of the fact that adding alloying elements gives alloy pipe a different chemistry from carbon pipe. MCTP believes that the continuum reasoning used by the Department in its preliminary determination creates an overly broad continuum, with extremely dissimilar products on either end of the spectrum. Therefore, MCTP argues, the Department should divide the continuum along the recognized industry division between carbon pipe and A-335 alloy pipe. Further, MCTP states that the physical differences described above lead to differences in the expectations of the ultimate user and in ultimate use. SMI, the ABMA and MCTP all state that the unique physical characteristics of alloy pipe are a result of the addition of alloying elements, and further processing in the form of heat treatment, with both elements requiring the incursion of additional production costs, arguing that these additional costs are reflected in higher prices for alloy pipe, estimated by one distributor to be between 50 and 250 percent higher than for carbon steel (see MCTP case brief at 12). In addressing the channels of trade through which these products are sold, SMI, the ABMA and MCTP all state that there are approximately only five U.S. distributers who are specialized intermediaries dealing exclusively or predominately with alloy pipe. These distributors, according to SMI, form a unique backbone of distribution distinct from the general distribution system of the approximately 3,000 commodity pipe dealers, despite that fact that both groups can nominally be referred to as "distributors." Even with these differences in distribution channels, MCTP submits, the channels of trade factor probably never has played a determinative role in a class or kind ruling, citing Memorandum to Assistant Secretary for Import Administration from Barbara R. Stafford, Deputy Assistant Secretary, Antidumping Duty Investigations of Seamless Pipe from Argentina, Brazil, Germany, and Italy, Class or Kind (June 12, 1995) (at 9). There the Department stated that it divides a single class or kind in a petition into multiple classes or kinds primarily based on the physical characteristics of the merchandise, and then on the fact that the differences in physical characteristics affect the capabilities of the merchandise, which in turn establishes the boundaries of the ultimate use and of the customers' expectations of the products involved. All three parties agree that some pipe distributors do some advertising through their catalogues and web sites, but point out that in those listings the distributors distinguished between carbon and alloy products. SMI states that it does not advertise or display its pipe products because its customers are intimately familiar with the products. The ABMA concurs that its members are intimately familiar with the merchandise and states that pressure pipe is not the kind of merchandise which requires advertising or display. Furthermore, MCTP asserts it does not believe that advertising and display has ever been a determining factor in a class or kind argument. The petitioners believe that the issue was adequately analyzed in the preliminary determination and contended that no new information has been presented that should lead the Department to revisit the issue. The petitioners point out that A-335 grade P-1, like the A-106 grades, contains carbon, and that the permissible carbon levels decrease and the alloying elements increase incrementally in the subsequent A-335 grades. Further, they note that there is an incremental change in permissible temperature ranges, as well. Both of these factors, according to the petitioners, point to the fact that A-106 and A-335 are part of a continuum with no clear dividing line between A-106 carbon pipe and A-335 alloy pipe based on physical characteristics. In addition, the petitioners note that A-106 and A- 335 pipe are used in the same types of industrial applications, including the conveyance of water, steam petrochemicals and chemicals at high temperatures under pressure, with A-335 being used at the high end of the spectrum. With regard to channels of trade and advertising, the petitioners state that several major pipe distributors carry both A-335 and A-106 seamless pipe. They state further that A-335 and A-106 are advertised in the same manner, and have provided the product guide of Vision Metals as an example of this (see Exhibit 10 to the petitioners' rebuttal brief), as well as the web sites of several distributors. High Strength Line Pipe SMI argues that there is a clear dividing line between all grades of API 5L line pipe through X-60 and the three grades above X-60, which have specifications set by agreement between the purchaser and the manufacturer. According to SMI, customers for these grades insist on their individual stringent metallurgy requirements and require a heavy wall thickness. With regard to the end use of the merchandise, SMI contends that the Department's definition of a line pipe is overly broad, and that high- strength line pipe is specifically designed for the conveyance of oil and gas only, and in harsh environments. As with alloy pipe, SMI reiterates that the end-use determines the expectations of the ultimate user. SMI states that high-strength line pipe is not sold through distributors but, rather, is ordered directly from the manufacturers. The customers define the exact chemistry of the pipe and demand rigorous pre-qualification/certification requirements. Further, SMI states, since high-strength line pipe is proprietary oil company merchandise, it is not advertised or displayed. The petitioners argue that the relative yield and tensile strength of seamless pipe manufactured to the various grades withing the A-106 and API 5L specifications represent points on a continuum for which there is no clear dividing line. Further, the petitioners claim that high-strength line pipe has the same uses as other API 5L grade and A- 106 pipe: it is used primarily to carry large volumes of gas and oil over long distances. The fact that is it used in harsh environments or in low temperatures does not negate the fact that its end use is as a line pipe. The petitioners agree that the expectations of the ultimate purchasers are closely related to end use. Regarding channel of trade and advertising, the petitioners contend that API 5L pipe grades X-60 and higher may be sold directly to end users or through distributors. However, they note that high-strength line pipe is sold to end users more often than is seamless pipe generally. Using a product guide from U.S. Steel Tubular Products as an example, the petitioners claim that all grades of A-106 and API 5L, including grades X-60 and higher, are advertised together. DOC Position: We determine, consistent with our preliminary determination, that the products under investigation constitute a single class or kind within each investigation. Where the petitioners include more than one class or kind within one petition, the Department treats the investigation of each class or kind of merchandise as a separate investigation. Normally, the Department will accept the class or kind of merchandise as defined by the petitioner. However, where respondents argue that the class or kind is overly broad, the Department uses criteria as outlined in Diversified Products and Kyowa Gas Chemical Industrial Company v. United States, 582 F. Supp. 887, 888 (CIT 1984) (Kyowa Gas) to determine if the merchandise constitutes more than one class or kind. The CIT has upheld the Department's use of such criteria in defining and clarifying the class or kind of merchandise during an investigation. See Mitsubishi Electric Corp. v. United States,12 CIT 1025, aff'd, 898 F.2d 1577 (Fed. Cir.1990). These criteria are: (1) the general physical characteristics; (2) the ultimate use; (3) the expectations of the ultimate purchaser; (4) the channels of trade; and (5) the manner of advertising and display. See Final Determinations of Sales at Less than Fair Value: Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From the Federal Republic of Germany, 54 FR 18992, 18999 (May 3, 1989) (AFBs from Germany); see also Notice of Final Determination of Sales at less Than Fair Value; Stainless Steel Sheet and Strip from the United Kingdom 64 FR 30588 (June 8, 1999)(SSSS from the U.K.). In applying these criteria, the Department recognizes that if it were to narrow the definition of end use to exact applications, each combination of specification and grade could conceivably be considered a separate class or kind. Therefore, the Department relies on more generally defined basic uses in making class or kind determinations. Alloy Pipe In deciding whether physical differences in merchandise rise to the level of a class or kind distinction, the Department looks for a clear dividing line between product groups, not merely the presence or absence of physical differences. See Final Affirmative Less Than Fair Value Determination: Sulfur Dyes, Including Vat Sulfur Dyes, from the U.K., 58 FR 3253 (January 8, 1993). SMI, the ABMA and MCTP have all argued that such a line clearly exists between carbon and alloy pipe and that it is recognized by the industry. However, the information submitted by the various parties shows a range of opinions as to exactly what constitutes alloy steel. For example, SMI, relying on "The Metals Handbook," (see letter from SMI to the Department, dated December 2, 1999, Attachment 1 at 149 (December 2, letter)), describes alloy steel as containing a minimum of 2.07 percent alloying elements. Also included in SMI's submission is another source, "The Making, Shaping and Treating of Steel," which states that alloy steels "contain from about 1 to 3 or 4 percent alloying elements." See December 2 letter, Attachment 2 at 6. Therefore the statements in these sources do not support a conclusion that there is a clear dividing line between carbon pipe and alloy pipe covered by the scope of these proceedings. The ABMA states that in the ASTM system, any intentional alloy addition places that material in another category. With 0.5 percent of molybdenum, A-335 grade P-1 is placed by the ASTM with alloy steel. While the ABMA has stated that it does not consider A-335 grade P-1 to be part of the "real category of A-335 material," (see Letter from the ABMA to the Department, dated January 12, 2000, at 5, (ABMA Case Brief), SMI on the other hand has argued that a clear dividing line exists between A-335 and A-106. We note that A-335 grade P-1, which contains less than 2.07 percent alloying elements, does not meet SMI's definition of an alloy steel. It is unclear whether A-335 grade P-2, with only 0.5 percent molybdenum and 0.5 percent chromium of deliberately added elements meets that definition either, yet SMI and MCTP have declared that all A-335 pipe clearly belongs in the alloy class. Thus, the parties themselves do not appear able to agree on a clear dividing line. We acknowledge that, as noted by SMI, a number of antidumping cases have been limited to either carbon steel or alloy steel. In those cases, the merchandise included in the scope was limited to the merchandise for which the petitioners requested relief from unfairly traded imports. In other cases, where the petitioners requested that both carbon steel and alloy steel products be included in the scope, they have been found to be part of the same class or kind of merchandise. See e.g. Oil Country Tubular Goods from Japan, 65 FR 15305 (March 22, 2000), and Cold-Rolled, Flat-Rolled Carbon-Quality Steel Products from Argentina, Japan and Thailand, 65 FR 5520 (February 4, 2000). This is consistent with 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) (Eckstrom) With regard to SMI's contention that the Department has been inconsistent in applying a continuum argument to carbon and alloy pipe while splitting large and small diameter pipe into separate classes or kinds, we disagree. The petitioners in each case defined the scope of the petitions, one on small diameter pipe and one on large diameter pipe. Consistent with Eckstrom, we deferred to the petitioners' definition of the scope in each case. Both petitions met the statutory requirements for initiation, and each petition was found to have one domestic like product. See Initiation of Antidumping Duty Investigations: Certain Large Diameter Carbon and Alloy Seamless Standard, Line and Pressure Pipe from Japan and Mexico; and Certain Small Diameter Carbon and Alloy Seamless Standard, Line and Pressure Pipe from the Czech Republic, Japan, the Republic of South Africa and Romania, 64 FR 40825 July 28, 1999. Because there were separate petitions we initiated two separate antidumping duty investigations. Therefore, the Department did not make a class or kind decision with regard to large/small diameter pipe, and no party commented on this issue. However, we note that the International Trade Commission (ITC) found that small and large diameter pipe have different uses; that small diameter pipe is generally used in chemical plants and refineries in applications for conveyance of liquids or gases in production processes, whereas large diameter pipe is used more in pipeline construction for long distance transmission of liquids or gasses in high volumes. See Certain Seamless Carbon and Alloy Steel Standard, Line and Pressure Pipe from the Czech Republic, Japan, Mexico, Romania and South Africa, Inv. Nos. 731-TA-846-850 (Preliminary) USITC Pub. 3221 (August 1999) at 9 (ITC Preliminary), where the ITC found that carbon pipe and alloy pipe are a single like product. While the ABMA argues that a maximum allowable temperature of 800 degrees Fahrenheit can serve as a clear dividing line, we find that the ASME code Table 1A shows allowable stress values for A-106 up to 1000 degrees, albeit with a warning that prolonged exposure at temperatures above 800 degrees may cause graphitization. Note S1 to Table 1A states that ". . . {e}xcept for tubular products 3 in. O.D. or less enclosed within the boiler setting, use of {A-106}at these temperatures is not current practice." See ABMA Case Brief Attachment 2, Table 1A. Moreover, Table 1 in Attachment 4 of the ABMA Case Brief shows that A-106C can be used at temperatures up to 950 degrees, with the caveat that it is limited to temperatures of 800 degrees for "piping 10.75" O.D. and larger outside the boiler setting." It further notes that carbon steels are not used above 800 degrees outside the boiler setting. These statements indicate that, although it may not be optimal, small diameter A-106 can be, and in fact is, used at temperatures above 800 degrees in the boiler setting. Therefore, we find the dividing line suggested by the ABMA is not clear. SMI, the ABMA and MCTP discussed the fact that increased costs associated with the production of alloy pipe are necessary to give the alloy pipe its unique physical characteristics. However, consistent with recent investigations we did not consider cost as one of the class or kind criteria. See e.g. SSSS from the U.K. at 5352. Moreover, because the respondents to whom the Department issued questionnaires did not respond, the record contains no documented, verifiable cost information. Likewise, although MCTP has provided some specific price information, price is also not a factor in the Department's class or kind decisions. While the ABMA would like us to disregard the ambiguous A-335 grade P-1, we find that it is an important link in the continuum. Its higher levels of carbon make it fit into the carbon category, whereas the deliberately added molybdenum ties it to the alloys. As the Department stated in AFBs from Germany, "[t]he real question is whether the physical differences are so material as to alter the essential nature of the product, and, therefore, rise to the level of class or kind distinctions." SMI, MCTP and the ABMA focus their arguments for treating A-335 alloy pipe as a separate class or kind on the more demanding metallurgical requirements this product must meet, the different environmental applications for which this product will be used, and the different channels of distribution through which this product is sold. However, the criteria that the Department considers in determining class or kind indicate that A-335 alloy pipe is in the same class or kind as other in-scope pipe. Regarding physical characteristics, the A-335 alloy pipe has minimal differences from other types of seamless line pipe included in this scope. All of the products included in the scope, including A-335 alloy pipe, are produced in the same range of specific outside diameters and wall thicknesses, and to the same dimensional tolerances. In fact, even the chemical content of these products can overlap with that of other in-scope products. SMI, MCTP and the ABMA focus their physical characteristics argument on the chemical differences in the products, which result in a higher-strength product. However, what they neglect to acknowledge is that all grades of pipe within the scope, not just A-335 alloy pipe, have ranges of differences which result in lower to higher strength products. As noted, pressure pipe is intended for the conveyance of water, steam, natural gas, air, and other liquids and gasses, with each grade meeting certain mechanical characteristics. As the application becomes more demanding, the performance characteristics increase. Accordingly, there are different grades of pressure pipe. But these increasing demands of a pressure pipe conveyance application cannot be sufficient grounds to establish a separate class or kind of merchandise; otherwise, there would be a separate class or kind for each grade of pressure pipe or, for that matter, each grade of each specification of pipe in general. While it is theoretically possible to draw any number of dividing lines based on the exact application for which the pipe is intended, in practice, this would result in an unmanageable number of classes or kinds for products intended essentially for the same types of applications. Therefore, we must rely on a more general description of the merchandise. Perfect substitutability is not required for merchandise to be part of the same class or kind; we only need demonstrate that the general characteristics of the product are "sufficiently similar." See Eckstrom Industries v. United States 70 F Supp. 2d. 1360, 1364 (CIT 1999). Although there are degrees of difference between standards and grades of pipe, evidence on the record, including the American Society of Engineers (AMSE) Boiler and Pressure Vessel Code and the ASTM standards, indicates that these differences are merely part of a continuum within one class or kind, with no clear point along the continuum at which to make a class or kind distinction between these products based on physical characteristics. As stated in the preliminary determination, end use is one of the most important characteristics of the subject merchandise. The terms standard, line and pressure pipe, used in the name of the investigation to describe the covered products, refer to applications, not physical characteristics. The uses of these products are outlined in the scope of the investigations. In the preliminary determinations we recognized that there is not perfect substitutability between pressure pipe products. While SMI and the ABMA have argued that the lack of interchangeability between A-106 carbon pipe and A-335 alloy pipe indicates that they have different end uses, we note that perfect substitutability is not the test for end use. We note, for example, that A-335 grade P-91 may be used at temperatures of up to 1200 degrees, while A-335 grade P-2 may be used at temperatures of up to only 1000 degrees. Yet SMI and MCTP both agree that all grades of A-335 are part of the same class or kind, while ABMA states that all grades of A-335 except P-1 are part of the same class or kind. Thus, the parties themselves do not make a consistent class or kind distinction with regard to the relationship between interchangeability and end use. In the instant case, both carbon and alloy pipe are used in pressure pipe applications. The severity of the pressure and temperature conditions under which the pipe is used dictates where a product falls on the spectrum. Applications in harsher conditions require higher-end alloy products, whereas lower-end carbon products are used in less harsh conditions. However, both carbon and alloy pipe fall within the definition of a pressure pipe presented in the scope; that is, seamless pressure pipes are intended for the conveyance of water, steam, petrochemicals, chemicals, oil products, natural gas and other liquids and gasses in industrial piping systems. They may carry these substances at elevated pressures and temperatures and may be subject to the application of external heat. Like A-106, A-335 pipe is sold through distributors. This is not mere nomenclature as SMI, ABMA and MCTP suggest, but rather a description of a position in the channel of trade. No one has suggested, or put evidence on the record to demonstrate, that the distributors carrying alloy pipe do not perform the same selling functions with regard to their merchandise as the numerous commodity distributors which do not carry alloy pipe perform with regard to theirs. Further, there is no evidence on the record to suggest that the distributors that do carry both A-335 and A-106 treat them any differently in terms of the way they are purchased, stocked or marketed. A difference in the number of distributors alone is not sufficient to be considered a separate channel of trade. With respect to the manner in which the subject merchandise is advertised, we note that the record evidence in the form of producers' and distributors' catalogues, brochures and web sites, demonstrate that carbon pipe and alloy pipe are presented in the same manner. High Strength Line Pipe As discussed above with respect to alloy pipe, high strength line pipe has the same general physical characteristics as all other line pipe. In this particular situation, the only API specifications that are different for high strength line pipe are those for tensile and yield strengths. These specifications, like all increasing grades of pipe in a particular specification such as the API, show a gradual increase over the continuum, with the noted grades X-60, X-70 and X- 80 representing the high end of the continuum. See Letter from the Petitioners to the Department, dated November 8, 1999, Exhibit 2, Specification for Line Pipe, page 2. Although the information on the record is somewhat contradictory, it appears that, unlike the majority of seamless pipe products which are sold through distributors, the majority of high-strength line pipe is sold directly to end-users. Even conceding this to be the case, that factor alone would not be sufficient to deem high-strength line pipe a separate class or kind of merchandise. As for advertising, the only catalogue on the record includes high- strength line pipe with other seamless pipe products. Therefore, we conclude that high strength line pipe, to the extent it is advertised, is advertised in the same manner as other types of line pipe. Conclusion For the reasons stated above, we determine that within each investigation, the merchandise under investigation is part of the same class or kind of merchandise. As we stated in the preliminary determination, while some differences exist between the various specifications/grades of pipe under investigation, there is not the clear dividing line needed to make the class or kind distinction being requested here. Record evidence demonstrates that commodity grade carbon, alloy and high-strength line pipe are part of a continuum of seamless standard, line and pressure pipe sizes and strengths with the same general physical characteristics, uses, customer expectations, channels of distribution and advertising. Recommendation Based on our analysis of the comments received, we recommend adopting the above position. 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 1. Although we received no comments on the case involving South Africa, the decision on the class or kind issue made in the investigations involving Japan applies to the South African investigation as well. 2. On March 9, 2000, the petitioners requested that the scope of the large diameter investigation be amended to exclude products made to the A-335 specification. On April 26, 2000, the petitioners requested that the scope of the large diameter case be amended to exclude line and riser pipe for deepwater applications. These changes from the scope of the preliminary determination are reflected in the current scope. These changes also apply to the investigation on large diameter carbon and alloy seamless standard, line and pressure pipe from Mexico, which is ongoing. 3. Diversified Products Corp. v. United States, 572 F. Supp. 883 (CIT 1983) (Diversified Products). The five criteria used in the preliminary determination are (1) the general physical characteristics of the merchandise, (2) the expectations of the ultimate purchaser, (3) the ultimate use of the merchandise, (4) the channels of trade in which the merchandise moves, and (5) the manner in which the product is advertised or displayed. 4. Unlike other grades of A-335 grade P-1 contains no chromium.