Certain Stainless Steel Butt-Weld Pipe Fittings From Taiwan: Preliminary Results of Antidumping Duty Administrative Review and Notice of Intent To Rescind in Part

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

ACTION:

Preliminary results of antidumping duty administrative review and notice of intent to rescind in part.

SUMMARY:

In response to a request from respondent Ta Chen Stainless Pipe Co., Ltd. (“Ta Chen”) and from Markovitz Enterprises, Inc. (Flowline Division), Shaw Alloy Piping Products Inc., Gerlin, Inc., and Taylor Forge Stainless, Inc., collectively (“Petitioners”), the Department of Commerce (“Department”) is conducting an administrative review of the antidumping duty order on certain stainless steel butt-weld pipe fittings from Taiwan. Specifically, the petitioners requested that the Department conduct the administrative review for Ta Chen, Liang Feng Stainless Steel Fitting Co., Ltd. (“Liang Feng”), Tru-Flow Industrial Co., Ltd. (“Tru-Flow”), and PFP Taiwan Co., Ltd. (“PFP”). This review covers Ta Chen, a manufacturer and exporter of the subject merchandise and Liang Feng, Tru-Flow, and PFP, manufacturers of the subject merchandise. The period of review (“POR”) is June 1, 2002, through May 31, 2003. With regard to Ta Chen, we preliminarily determine that sales have been made below normal value (“NV”). With regard to Liang Feng, Tru-Flow, and PFP, we are giving notice that we intend to rescind this review based on record evidence that there were no entries into the United States of subject merchandise during the POR. For a full discussion of the intent to rescind with respect to Liang Feng, Tru-Flow, and PFP, see the “Notice of Intent to Rescind in Part” section of this notice.

If these preliminary results are adopted in our final results of this administrative review, we will instruct U.S. Customs and Border Protection (“CBP”) to assess antidumping duties. The preliminary results and cash deposit instructions are listed below in the section titled “Preliminary Results of Review.”

EFFECTIVE DATE:

July 7, 2004.

FOR FURTHER INFORMATION CONTACT:

Joe Welton or James Doyle, Enforcement Group III—Office 9, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone (202) 482-0165 and (202) 482-0159, respectively.

Background

On June 16, 1993, the Department published in the Federal Register the antidumping duty order on certain stainless steel butt-weld pipe fittings from Taiwan. See Amended Final Determination and Antidumping Duty Order: Certain Stainless Steel Butt-Weld Pipe and Tube Fittings from Taiwan, 58 FR 33250 (June 16, 1993). On June 2, 2003, the Department published a notice of opportunity to request an administrative review of the antidumping duty order on stainless steel butt-weld pipe fittings from Taiwan for the period June 1, 2002, through May 31, 2003. See Notice of Opportunity to Request Administrative Review of Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation, 68 FR 32727 (June 2, 2003).

On June 30, 2003, Petitioners requested an antidumping duty administrative review for the following companies: Ta Chen, Liang Feng, Tru-Flow, and PFP for the period June 1, 2002, through May 31, 2003. On June 30, 2003, Ta Chen requested an administrative review of its sales to the United States during the POR. On July 29, 2003, the Department published in the Federal Register a notice of initiation of this antidumping duty administrative review for the period June 1, 2002, through May 31, 2003. See Notice of Initiation of Antidumping and Countervailing Duty Administrative Reviews and Request for Revocation In Part, 68 FR 44524 (July 29, 2003). On March 3, 2004, the Department extended the deadline for the preliminary results in this administrative review until May 30, 2004. See Stainless Steel Butt-Weld Pipe Fittings from Taiwan: Extension of Time Limit for the Preliminary Results of the Antidumping Duty Administrative Review, 69 FR 9997 (March 3, 2004). On April 27, 2004, the Department extended the preliminary results further, until June 29, 2004. See Stainless Steel Butt-Weld Pipe Fittings From Taiwan: Extension of Time Limit for the Preliminary Results of the Antidumping Duty Administrative Review, 69 FR 22763 (April 27, 2004).

On, August 6, 2003, the Department issued its antidumping questionnaire to Ta Chen, Liang Feng, Tru-Flow, and PFP. On August 26, 2003, Liang Feng, Tru Flow, and PFP each provided letters on the record stating that they had no sales of subject merchandise during the POR. On September 3, 2003, Ta Chen reported in its response to Section A of the Department's questionnaire that it made sales of subject merchandise to the United States during the POR. On October 6, 2003, Ta Chen submitted its response to sections B, C, and D of the Department's questionnaire. On October 17, 2003, and October 21, 2003, Petitioners submitted deficiency comments regarding Ta Chen's Section A response and Section B-D responses, respectively. On October 28, 2003, the Department issued a supplemental Section A questionnaire to Ta Chen. Ta Chen's response to this supplemental Section A was filed on November 19, 2003. Ta Chen submitted additional information in relation to the Section A supplemental on November 24, 2003. On December 1, 2003, the Department issued a supplemental Section B-D questionnaire, to which Ta Chen responded on January 2, 2004. On December 9, 2003, Petitioners submitted deficiency comments regarding Ta Chen's November 19, 2003, supplemental Section A response. These deficiency comments were revised in a submission from Petitioners on December 10, 2003. On December 19, 2003, Ta Chen submitted additional comments expanding upon its November 19, 2003, supplemental Section A response and in response to the Petitioner's December 9 and 10, 2003, deficiency comments.

On January 9, 2004, the Department issued a second supplementary Section A questionnaire to Ta Chen, to which Ta Chen responded on January 23, 2004. On March 9, 2004, the Department issued a third supplemental Section A questionnaire, to which Ta Chen responded on April 14, 2004. On March 23, 2004, the Department issued a supplemental Section C-D questionnaire to Ta Chen, to which Ta Chen responded on April 15, 2004.

On April 28, 2004, Petitioners submitted deficiency comments regarding Ta Chen's April 14, 2004 supplemental Section A questionnaire response. On May 11, 2004, Ta Chen filed comments in response to the deficiency comments from Petitioners, and expanding upon its April 14, 2004 supplemental Section A response.

The Department is conducting this administrative review in accordance with section 751 of the Tariff Act of 1930, as amended (“the Act”).

Notice of Intent To Rescind Review in Part

Pursuant to 19 CFR 351.213 (d)(3), the Department may rescind an administrative review, in whole or with respect to a particular exporter or producer, if the Secretary concludes that, during the period covered by the review, there were no entries, exports, or sales of the subject merchandise. The Department explained this practice in the preamble to the Department's regulations. See Antidumping Duties; Countervailing Duties 62 FR 27296, 27317 (May 19, 1997) (“Preamble”); see also Stainless Steel Plate in Coils from Taiwan: Notice of Preliminary Results and Rescission in Part of Antidumping Duty Administrative Review, 67 FR 5789, 5790 (February 7, 2002) and Stainless Steel Plate in Coils from Taiwan: Final Rescission of Antidumping Duty Administrative Review, 66 FR 18610 (April 10, 2001).

On August 26, 2003, Liang Feng, Tru Flow, and PFP each submitted letters on the record stating that they had no sales of subject merchandise during the POR. To confirm their statements, on September 5, 2003, the Department conducted a customs inquiry and determined to its satisfaction that there were no entries of subject merchandise during the POR. Therefore, pursuant to 19 CFR 351.213(d)(3), the Department preliminarily intends to rescind this review as to Liang Feng, Tru Flow, and PFP. The Department may take additional steps to confirm that these companies had no sales of subject merchandise to the United States.

Scope of the Review

The products covered by this order are certain stainless steel butt-weld pipe fittings, whether finished or unfinished, under 14 inches inside diameter. Certain welded stainless steel butt-weld pipe fittings (“pipe fittings”) are used to connect pipe sections in piping systems where conditions require welded connections. The subject merchandise is used where one or more of the following conditions is a factor in designing the piping system: (1) Corrosion of the piping system will occur if material other than stainless steel is used; (2) contamination of the material in the system by the system itself must be prevented; (3) high temperatures are present; (4) extreme low temperatures are present; and (5) high pressures are contained within the system.

Pipe fittings come in a variety of shapes, with the following five shapes the most basic: “elbows”, “tees”, “reducers”, “stub ends”, and “caps.” The edges of finished pipe fittings are beveled. Threaded, grooved, and bolted fittings are excluded from this review. The pipe fittings subject to this review are currently classifiable under subheading 7307.23.00 of the Harmonized Tariff Schedule of the United States (“HTSUS”).

Although the HTSUS subheading is provided for convenience and customs purposes, our written description of the scope of this review is dispositive. Pipe fittings manufactured to American Society of Testing and Materials specification A774 are included in the scope of this order.

Period of Review

The POR for this administrative review is June 1, 2002, through May 31, 2003.

Affiliations

Section 771(33) of the Act states that the Department considers the following as affiliated: (A) Members of a family, including brothers and sisters (whether by the whole or half blood), spouse, ancestors, and lineal descendants; (B) any officer or director of an organization and such organization; (C) partners; (D) employer and employee; (E) any person directly or indirectly owning, controlling, or holding with power to vote, 5 percent or more of the outstanding voting stock or shares of any organization and such organization; (F) two or more persons directly or indirectly controlling, controlled by, or under common control with, any person; and (G) any person who controls any other person and such other person. For purposes of affiliation, section 771(33) states that a person shall be considered to control another person if the person is legally or operationally in a position to exercise restraint or direction over the other person.

The petitioners assert that Ta Chen was affiliated with numerous companies involved in the trading, distribution, and/or production of specialty steel products during the POR under section 771(33) of the Act. Ta Chen has denied that affiliations exist with these entities. In addition, Ta Chen asserts that these companies have no involvement with the subject merchandise or foreign like product. Applying the standard outlined in section 771(33) of the Act, the evidence on the record supports a finding that the following five entities were affiliated with Ta Chen during the entire POR: Emerdex Stainless Flat-Rolled Products, Inc. (“Emerdex 1”), Emerdex Stainless Steel, Inc. (“Emerdex 2”), Emerdex Group (“Emerdex 3”), Emerdex Shutters, Inc. (“Emerdex 4”) (Collectively, these four companies are referred to as the “Emerdex Companies”), and Dragon Stainless, Inc. (“Dragon”). See Memorandum for Jeffrey May, Deputy Assistant Secretary, from Joseph Welton, Analyst, Ta Chen Affiliations Memorandum: Stainless Steel Butt-Weld Pipe Fittings from Taiwan 2002-2003 Review (June 29, 2004) (“Affiliation Memo”)

There is also information on the record concerning Ta Chen's relationships with numerous other companies. However, there is no evidence indicating that these companies were involved in any way that potentially affected the production, pricing, costs, or sales of subject merchandise or foreign like product, or that these companies had any direct transactions with Ta Chen. Because these companies were not involved in subject merchandise or foreign like product, it is not necessary to consider further whether the following companies are affiliated with Ta Chen: AMS Specialty Steel, Inc., AMS Specialty Steel, LLC SOSID #0654511, AMS Specialty Steel LLC SOSID #552293, AMS Steel Corporation, Stainless Express, Inc., Stainless Express Products, Inc., Estrela Steel, Inc., Estrela, LLC, South Coast Stainless, Inc., Millennium Stainless, Inc., DNC Metals, Inc., Billion Stainless, Inc., Southstar Steel Corporation, NASTA International, Inc., Becman, LLC, Becmen Specialty Steels, Inc., Becmen Trading International, KSI Steel, Inc., K. Sabert, Inc., Sabert Investments, PFP, and two companies owned by the immediate family of the President of Ta Chen whose names are considered business proprietary information by Ta Chen. (See Affiliation Memo)

Ta Chen's Reporting

In this proceeding, the interested parties have introduced to the record information identifying numerous commercial entities with various degrees of affiliations with Ta Chen (identified in the “Affiliations” section above), nearly all of which trade or produce specialty steel products. Petitioners have alleged that affiliations exist with these companies, however, Petitioners have not provided evidence indicating that these companies were involved in subject merchandise or the foreign like product. Nevertheless, the Department further investigated Ta Chen's dealings with these potentially affiliated companies to determine whether there was any potential effect on the margin if they were affiliated with Ta Chen.

The Department issued several supplemental questionnaires seeking information concerning these steel trading companies. Specifically, the Department requested disclosure of Ta Chen's affiliated parties in the original Section A questionnaire, dated August 26, 2004. In addition, we repeated requests for information concerning the identification of affiliated parties in our October 28, 2003, January 9, 2004, and March 9, 2004, supplemental Section A questionnaires. Ta Chen submitted its responses to our questionnaires on September 3, 2003, November 19, 2003, January 23, 2004, and April 14, 2004. Subsequent to each of Ta Chen's responses to our requests for supplemental information (November 19, 2003, January 23, 2004, and April 14, 2004), Petitioners submitted comments asserting that there were additional allegedly affiliated parties which had not been disclosed by Ta Chen, and which the record shows trade or produce specialty steel products. However, Petitioners did not support any allegations that the alleged affiliates were involved in the specialty steel product which is the subject of this review. In addition, Ta Chen submitted rebuttal information identifying certain potentially affiliated parties on November 24, 2003, December 19, 2003, and May 11, 2004, again noting that the companies were not involved in the subject merchandise or foreign like product.

The Department has reviewed all available information regarding Ta Chen's possible affiliates, particularly those which trade or produce specialty steel products. (See Affiliation Memo). Although the business activities of these potential affiliates appear to involve products which are close to the subject merchandise, there is no information on the record supporting Petitioners' assertions that most of these companies are involved in subject merchandise or foreign like product. We did, however, find evidence indicating that two of these entities were involved in a certain number of transactions involving subject merchandise. See Analysis Memorandum for Certain Stainless Steel Butt-Weld Pipe Fittings from Taiwan: Preliminary Results of the 2001-2002 Administrative Review of Certain Stainless Steel Butt-weld Pipe Fittings from Taiwan (June 29, 2004) (“Analysis Memo”). We have applied adverse facts available in those instances. Since we only found two entities that clearly deal in subject merchandise, we have limited our affiliation and facts available findings to those two entities.

Partial Adverse Facts Available

For the reason stated before, we determine that the use of partial AFA is appropriate for the preliminary determination with respect to Ta Chen. For a description of the calculations which apply AFA in this review, see Analysis Memo.

A. Use of Partial Facts Available

Section 776(a)(2) of the Act provides that, if an interested party withholds information requested by the Department, fails to provide such information by the deadline or in the form or manner requested, significantly impedes a proceeding, or provides information which cannot be verified, the Department shall use facts otherwise available in reaching the applicable determination.

Section 782(e) of the Act requires the Department to consider information that is submitted by the respondent and is necessary to the determination but does not meet all the applicable requirements established by the Department if (1) the information is submitted by the deadline established for its submission; (2) the information can be verified; (3) the information is not so incomplete that it cannot serve as a reliable basis for reaching the applicable determination; (4) the interested party has demonstrated that it acted to the best of its ability in providing the information and meeting the requirements established by the Department with respect to the information; and (5) the information can be used without undue difficulties.

The record shows that Ta Chen sold subject merchandise to Emerdex 2, an affiliated company under common control with the Emerdex Companies (See Analysis Memo at 2), but Ta Chen failed to report Emerdex 2's downstream sales of subject merchandise to unaffiliated customers during the POR, despite being instructed to report downstream sales to unaffiliated customers (See August 6, 2003 questionnaire at G-5). In addition, the record shows that Dragon, an affiliated company, incurred U.S. selling expenses for subject merchandise on behalf of Ta Chen (See Analysis Memo at 2-3). Ta Chen failed to report the total amount of these expenses, and the record does not indicate that these expenses were captured in Ta Chen's U.S. sales database. Therefore, with respect to these transactions, we have applied FA under section 776(a)(2)(B) of the Act.

For the preliminary determination, under section 776(a)(2)(B) of the Act, we have used facts otherwise available on the record of this review to calculate a dumping margin for Emerdex 2's downstream sales of subject merchandise in the United States, as the record does not contain those sales. Section 772(b) of the Act states that the Department must base its constructed export price calculations on the price at which the subject merchandise is first sold in the United States to a purchaser not affiliated with the producer or exporter, as adjusted. Ta Chen did not report Emerdex 2's downstream sales of subject merchandise. Therefore, we must use facts otherwise available to determine the constructed export price of those sales.

Also, under section 776(a)(2)(B) of the Act, we have used the facts otherwise available on the record of this review to calculate Dragon's total U.S. selling expenses for subject merchandise which were incurred on behalf of Ta Chen, and to allocate those selling expenses to Ta Chen's U.S. sales of subject merchandise. Section 772(d) of the Act states that the Department must adjust the constructed export price for the amount of any selling expenses incurred in the United States by or for the account of the producer or exporter. The record shows that Dragon incurred selling expenses in the United States related to sales of subject merchandise for the account of Ta Chen (See May 11, 2004, comments at Exhibit I-C). However, Ta Chen did not describe the nature or extent of these expenses. We have used facts otherwise available under section 776(a)(2)(B) of the Act to determine the amount of these U.S. selling expenses for our calculation of Ta Chen's constructed export price for the relevant sales.

B. Application of Adverse Inferences for Partial Facts Available

In applying facts otherwise available, section 776(b) of the Act provides that the Department may use an inference adverse to the interests of a party that has failed to cooperate by not acting to the best of its ability to comply with the Department's requests for information. See e.g., Notice of Final Determination of Sales at Less Than Fair Value and Final Negative Critical Circumstances: Carbon and Certain Alloy Steel Wire Rod from Brazil, 67 FR 55792, 55794-96 (August 30, 2002). 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 accompanying the Uruguay Round Agreements Act, H.R. Rep. No. 103-316, at 870 (1994) (“SAA”).

In selecting from among the facts available, the Department finds it appropriate to apply an adverse inference because Ta Chen did not cooperate to the best of its ability to provide information concerning Emerdex 2 or Dragon. The Department has determined that each of these companies was controlled by Ta Chen throughout the POR, and thus Ta Chen had the ability to provide such information. (See Affiliation Memo)

As noted in the Analysis Memo at 2 and the Affiliation Memo at 7, Ta Chen failed to report its downstream sales to Emerdex 2, an affiliated company. In our March 9, 2004, supplemental questionnaire, prior to the identification on the record of Emerdex 2, the Department requested Ta Chen to identify any sales of subject merchandise to Emerdex 1, an affiliate of Ta Chen, a steel trader and steel producer, and a customer of and vendor to Ta Chen. (See March 9, 2004, questionnaire at 4). Ta Chen responded that no sales of subject merchandise existed. (See April 14, 2004, response at 28). Ta Chen also did not identify the sales of subject merchandise to Emerdex 2. Given this opportunity to identify sales to affiliated parties, Ta Chen chose to interpret the Department's question in the narrowest possible manner, and thus only reported whether sales existed to Emerdex 1, an entity which is legally separate, but, as the record indicates, is not commercially separate from Emerdex 2 or the other Emerdex Companies. Thus, with respect to the Emerdex Companies, Ta Chen did not cooperate to the best of its ability because it has withheld information from the Department concerning its relationship with these companies, its sales of subject merchandise to these companies, and its purchases of inputs from these companies.

Regarding Dragon, Ta Chen did not report the total amount of U.S. selling expenses incurred by Dragon for U.S. sales of subject merchandise, and the record does not indicate that these expenses were reported in Ta Chen's Section C database. The Department clearly indicated its interest in Dragon's activities in supplemental questionnaires, dated October 28, 2004, and March 9, 2004. Ta Chen made no indication that Dragon incurred any expenses on behalf of Ta Chen in its responses to those questionnaires, or in its original Section C questionnaire response (See October 6, 2003, November 19, 2003, and April 14, 2004, responses). Ta Chen also failed to respond to the Department's request for a full description of its relationship with Dragon. (See April 14, 2004, response at 2). Subsequently, Ta Chen provided evidence to the Department on May 11, 2004, which indicated that Dragon was responsible for certain selling activities related to the subject merchandise in the United States, and therefore, that such selling expenses exist (See May 11, 2004, comments at Exhibit I-C). However, Ta Chen has failed to describe the nature of those expenses or to report the extent of those expenses. Although this evidence does show one relevant aspect of Ta Chen's relationship with Dragon, the respondent has still not given a clear or full description of the relationship. As such, the Department cannot ascertain whether any additional effects on the margin calculation exist due to transactions between Ta Chen and Dragon. Because the record shows that Ta Chen has the ability to control Dragon, and thus had the ability to provide the information, we find that Ta Chen did not act to the best of its ability to provide such information necessary for the Department to make its preliminary determination, despite repeated requests for information concerning Dragon.

As such, under section 776(b) of the Act, the Department has made adverse inferences in selecting among the facts otherwise available concerning (1) the Emerdex Companies' downstream sales of subject merchandise; and (2) Dragon's selling expenses in the United States. (See Analysis Memo at 2-3)

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 “as to effectuate the purpose of the facts available role to induce respondents to provide the Department with complete and accurate information in a timely manner.” See Static Random Access Memory Semiconductors from Taiwan; Final Determination of Sales at Less than Fair Value, 63 FR 8909, 8932 (Feb. 23, 1998). The Department applies AFA “to ensure that the party does not obtain a more favorable result by failing to cooperate than if it had cooperated fully.” See SAA at 870. The Department also considers the extent to which a party may benefit from its own lack of cooperation in selecting a rate. See Roller Chain, Other than Bicycle, From Japan; Notice of Final Results and Partial Recision of Antidumping Duty Administrative Review, 62 FR 60472, 60477 (Nov. 10, 1997), SAA at 870. Petitioners have suggested that the Department use 76.20 percent, the highest margin in this proceeding, in its application of AFA to the current review. (See December 9, 2003 submission at 6).

Section 776(b) of the Act authorizes the Department to use as partial AFA, information derived from the petition, the final determination from the less-than fair value (“LTFV”) investigation, a previous administrative review, or any other information placed on the record. Section 776(c) of the Act requires the Department to corroborate, to the extent practicable, secondary information used as facts available. Secondary information is defined as “information derived from the petition that gave rise to the investigation or review, the final determination concerning the subject merchandise, or any previous review under section 751 concerning the subject merchandise.” See SAA at 870 and 19 CFR 351.308(d). The SAA clarifies that “corroborate” means that the Department will satisfy itself that the secondary information to be used has probative value. See SAA at 870.

To choose a substitute margin for Emerdex 2's known U.S. sales of subject merchandise, we have selected a margin from among all other sales of subject merchandise in the United States by Ta Chen during the POR. We note that the range of margins calculated on these sales is substantially untainted by our application of partial AFA to inputs purchased from Emerdex 1 and expenses incurred by Dragon. However, there is an abnormally wide range of potential values from which to choose. In addition, given the very large number of sales observations with positive margins, a virtual continuum of values exists between the minimum and the maximum margin for these sales, such that no single margin within the continuous range appears to be more reasonable than any other.

We note that the 76.20 percent margin suggested by Petitioners originated from the petition, was applied to Ta Chen as AFA in the 1992-1994 review, and continues to be applicable for imports of subject merchandise from Tru-Flow. (See Certain Stainless Steel Butt-Weld Pipe Fittings From Taiwan; Final Results of Administrative Review 65 FR 2116 (January 13, 2000); and Amended Final Determination and Antidumping Duty Order: Certain Welded Stainless Steel Butt-Weld Pipe Fittings From Taiwan 58 FR 33250, 33251, (June 16, 1993)). Given that no new information has been presented to indicate that the rate is unreliable subsequent to its applications in this proceeding as described above, we find that the rate is reliable. We also note that 76.20 percent falls within the range of margins calculated for Ta Chen's U.S. sales of subject merchandise in the POR of the current review, and that a substantial portion of Ta Chen's margins for these sales were both greater than and less than 76.20 percent. Therefore, the 76.20 percent margin is currently relevant to Ta Chen's U.S. sales of subject merchandise.

Therefore, for Ta Chen's known sales of subject merchandise in the United States to Emerdex 2, we preliminarily assigned 76.20 percent as partial AFA. (See Analysis Memo at 2).

For selling expenses incurred by Dragon, we have allocated the total amount of all known payments from Ta Chen to Dragon, for its services, to the U.S. sales of subject merchandise for which Dragon was responsible. (See Analysis Memo at 2-3) We note that the record indicates that additional payments for services related to selling activities may have been made to Dragon, but we are unaware of the amounts.

Product Comparison

For the purpose of determining appropriate product comparisons to pipe fittings sold in the United States, we considered all pipe fittings covered by the scope of review Section Above, which were sold by Ta Chen in the home market during the POR, to be “foreign like products” in accordance with section 771(16) of the Act. 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 physical characteristics reported by Ta Chen as follows (listed in order of preference): Specification, seam, grade, size and schedule.

As some of Ta Chen's sales were actually produced by other unaffilated Taiwanese manufacturers, the Department has incorporated that information into the product comparison methodology. The record shows that Ta Chen both purchased from, and entered into tolling arrangements with, unaffiliated Taiwanese manufacturers of subject merchandise, and the record does not indicate that the manufacturers had knowledge that the subject merchandise would be sold into the United States market. See Ta Chen's September 3, 2003, Section A questionnaire response at A-19-20. According to Ta Chen's September 3, 2003, Section A response, for subcontracted and resold fittings, Ta Chen labels itself as the producer. We have preliminarily determined that Ta Chen is the sole exporter, and that it is not appropriate to exclude sales of subject merchandise produced by unaffiliated manufacturers from Ta Chen's U.S. sales database.

However, section 771(16)(A) of the Act defines “foreign like product” to be “[t]he subject merchandise and other merchandise which is identical in physical characteristics with, and was produced in the same country by the same person as, that merchandise.” Thus, consistent with the Department's past practice, for products that Ta Chen has identified with certainty that it purchased from a particular unaffiliated producer and resold in the U.S. market, we have restricted the matching of products to identical or similar products purchased by Ta Chen from the same unaffiliated producer and resold in the home market.

Fair Value Comparisons

To determine whether sales of subject merchandise by Ta Chen to the United States were made at prices below NV, we compared, where appropriate, the constructed export price (“CEP”) to the NV, as described below. Pursuant to section 777A(d)(2) of the Act, we compared the CEPs of individual U.S. transactions to the monthly weight-averaged NV of the foreign like product.

Export Price/Constructed Export Price

Section 772(a) of the Act defines export price 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 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. * * * ” Section 772(b) of the Act defines CEP as “the price at which the subject merchandise is first sold (or agreed to be sold) in the United States before or after the date of importation by or for the account of the producer or exporter of such merchandise or by a seller affiliated with the producer or exporter, to a purchaser not affiliated with the producer or exporter. * * * ”

Consistent with recent past reviews, certain sales are being considered CEP sales because the sale to the first unaffiliated customer was made between Ta Chen International (CA) Corp. (“TCI”), located in the United States, and the unaffiliated customer in the United States (See Analysis Memo). TCI takes title to the subject merchandise, invoices the U.S. customer, and receives payment from the U.S. customer. In addition, TCI handles all communication with the U.S. customer, incurs risk of non-payment, relays orders and price requests from the U.S. customer to Ta Chen, and pays for U.S. customs duties, brokerage charges, U.S. antidumping duties, ocean freight and U.S. inland freight. See Ta Chen's January 28, 2003 Section A questionnaire response at pages 8.

Having determined such sales are CEP sales, pursuant to section 772 (b) of the Act, we calculated the price of Ta Chen's sales based on CEP. We calculated CEP based on FOB or delivered prices to unaffiliated purchasers in the United States and, where appropriate, we deducted discounts. In addition, in accordance with section 772(d)(1) of the Act, the Department deducted commissions, direct selling expenses and indirect selling expenses, including inventory carrying costs, which related to commercial activity in the United States. We also made deductions for movement expenses, which include foreign inland freight, foreign brokerage and handling, ocean freight, containerization expense, harbor construction tax, marine insurance, U.S. inland freight, U.S. brokerage and handling, and U.S. customs duties. Finally, where appropriate, in accordance with sections 772(d)(3) and 772(f) of the Act, we deducted CEP profit.

U.S. Dollar Short Term Interest Rate

As explained in Policy Bulletin 98.2, Imputed Credit Expenses and Interest Rates, (February 23, 1998) (“Policy Bulletin 98.2”), the imputation of credit cost is a reflection of the time value of money that must correspond to a figure reasonably calculated to account for such value during the gap period between delivery and payment, and it should conform with “commercial reality.” See Policy Bulletin 98.2 citing LMI-La Metalli Industriale, S.p.A. v. United States, 912 F.2d 455 (Fed. Cir. 1990) (“LMI”). Imputed credit represents “the cost to the respondent for not receiving immediate payment for its sales.” See Policy Bulletin 98.2. “To calculate the credit expense on U.S. sales, the Department generally uses the weighted-average borrowing rate realized by a respondent on its U.S. dollar-denominated short-term borrowings.” See Policy Bulletin 98.2.

Ta Chen reported its costs in the Section C U.S. sales database for imputed credit costs and inventory carrying costs based on the Federal Reserve's short-term prime rate. Ta Chen argued in its original Section C response that it did not borrow short-term in U.S. dollar-denominated loans during the POR. (See October 6, 2003 response at 32.) In its April 15, 2004, supplementary Section C response, Ta Chen argued that certain outstanding U.S. dollar-denominated loans related to a revolving line of credit were classified in its financial statements as non-current liabilities because Ta Chen had the ability and intent to refinance those short-term loans over the long-term. (See April 15, 2004 response at 4.) Ta Chen noted that this practice of classification of short-term or current loans as non-current liabilities is in accordance with generally accepted accounting principles (“GAAP”) in the United States. We note that these particular loans mature in less than one year, according to the terms of Ta Chen's financing agreement which covers these loans. (See April 15, 2004, response at Exhibit C-3-2.) We also note that the record indicates that the terms of these loans, which were determined under the financing agreement signed several years ago, have remained unchanged since the previous review. (See April 15 2004, questionnaire response at Exhibit C-3-2.) Finally, we note that in the most recent review the Department used these same loans as its basis to calculate Ta Chen's U.S. short-term interest rate, and that these same loans were also classified by Ta Chen as non-current liabilities in its financial statements during that review. (See Certain Stainless Steel Butt-Weld Pipe Fittings From Taiwan: Final Results and Final Rescission in Part of Antidumping Duty Administrative Review, 67 FR 78417 (December 24, 2002); and accompanying Issues and Decision Memorandum at Comment 12; and TCI's 2001 audited financial statements in Exhibit 12 of the September 3, 2003, Section A response of this review). Therefore, the record indicates that the terms of these short-term loans have not changed since the previous review, and Ta Chen's presentation of these short-term loans as non-current liabilities in its annual financial statements has been consistent since the previous review.

Thus, in accordance with the above, the Department has determined that these loans continue to be short-term loans for antidumping purposes, as was the case in the previous review. Accordingly, we recalculated U.S. imputed credit costs using Ta Chen's weighted average U.S. dollar-denominated short-term interest rate reported in Ta Chen's January 2, 2004, response. This average rate was based on the actual borrowing experience of Ta Chen for its U.S.-dollar-denominated short-term loans. (See Analysis Memo at 3-4.) The recalculated imputed credit costs and inventory carrying costs were deducted from the CEP sales price in accordance with section 772(d)(1) of the Act.

Normal Value

After testing home market viability, as discussed below, we calculated NV as noted in the “Price-to-CV Comparisons” and “Price-to-Price Comparisons” sections of this notice.

1. Home Market Viability

In accordance with section 773(a)(1)(C) of the Act, to determine whether there was a 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 is greater than or equal to five percent of the aggregate volume of U.S. sales), we compared Ta Chen's volume of home market sales of the foreign like product to the volume of U.S. sales of the subject merchandise, and found that the home market sales are greater than five percent of U.S. sales by volume. In its original Section A response, Ta Chen stated that the home market is viable, as sales to the home market are more than five percent by quantity of sales in the United States. (See Ta Chen's September 3, 2003, Section A questionnaire response at page A-3.) Because Ta Chen's aggregate volume of home market sales of the foreign like product was greater than five percent of its aggregate volume of U.S. sales for the subject merchandise, we preliminarily determine that the home market is viable. We, therefore, based NV on home market sales.

2. Cost of Production Analysis

Because we disregarded sales below the cost of production (“COP”) in the most recently completed segment of this proceeding, we have reasonable grounds to believe or suspect that sales by Ta Chen in its home market were made at prices below the COP, pursuant to sections 773(b)(1) and 773(b)(2)(A)(ii) of the Act. Therefore, pursuant to section 773(b)(1) of the Act, we conducted a COP analysis of home market sales by Ta Chen.

A. Calculation of COP

In accordance with section 773(b)(3) of the Act, we calculated a weight-averaged COP based on the sum of Ta Chen's cost of materials and fabrication for the foreign like product, plus amounts for general and administrative expenses (“G&A”), interest expenses, and packing costs. We relied on the COP data submitted by Ta Chen in its original and supplemental cost questionnaire responses. For these preliminary results, we did not make any adjustments to Ta Chen's submitted costs.

B. Test of Home Market Prices

We compared the weight-averaged COP for Ta Chen to home market sales of the foreign like product, as required under section 773(b) of the Act in order to determine whether these sales had been made at prices below the COP. In determining whether to disregard home market sales made at prices below the COP, we examined whether such sales were made within an extended period of time in substantial quantities, and were not at prices which permitted the recovery of all costs within a reasonable period of time, in accordance with sections 773(b)(1)(A) and (B) of the Act. On a product-specific basis, we compared the COP to home market prices, less any movement charges, discounts, and direct and indirect selling expenses.

C. Results of COP Test

In accordance with section 773(b)(1) of the Act, when less than 20 percent of Ta Chen's sales of a given product were at prices less than the COP, we did not disregard any below-cost sales of that product because we determined that the below-cost sales were not made in substantial quantities as defined by section 773(b)(2)(C) of the Act. When 20 percent or more of Ta Chen's sales of a given product during the POR were at prices less than the COP, we determined that such sales have been made in “substantial quantities” within an extended period of time, in accordance with sections 773(b)(2)(B) and 773(b)(2)(C) of the Act. In such cases, because we use POR average costs, we also determined that such sales were not made at prices which would permit recovery of all costs within a reasonable period of time, in accordance with section 773(b)(2)(D) of the Act. Therefore, for purposes of this administrative review, we appropriately disregarded below-cost sales and used the remaining sales as the basis for determining NV, in accordance with section 773(b)(1) of the Act.

D. Calculation of Constructed Value

In accordance with section 773(e)(1) of the Act, we calculated CV based on the sum of Ta Chen's cost of materials, fabrication, G&A (including interest expenses), U.S. packing costs, direct and indirect selling expenses, and profit. In accordance with section 773(e)(2)(A) of the Act, we based selling expenses and G&A (“SG&A”) and profits on the actual amounts incurred and realized by Ta Chen 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, we used the actual weight-averaged home market direct and indirect selling expenses.

3. Price-to-Price Comparisons

For those product comparisons for which there were sales at prices above the COP, we based NV on prices to home market customers. Where appropriate, we deducted early payment discounts, credit expenses, and inland freight. We also made adjustments, where applicable, for home market indirect selling expenses to offset U.S. commissions in CEP comparisons. We made adjustments, where appropriate, for physical differences in the merchandise in accordance with section 773(a)(6)(C)(ii) of the Act. Additionally, in accordance with section 773(a)(6) of the Act, we deducted home market packing costs and added U.S. packing costs. In accordance with section 773(b)(1) of the Act, where there were no usable contemporaneous matches to a U.S. sale observation, we based NV on CV.

Level of Trade

In accordance with section 773(a)(1)(B) of the Act, to the extent practicable, we determine NV based on sales in the comparison market at the same level of trade (“LOT”) as the CEP transaction. The NV LOT is that of the starting-price sales in the comparison 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 the importer.

To determine whether NV sales are at a different LOT than CEP sales, we examine 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, we make an LOT adjustment under section 773(a)(7)(A) of the 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 levels between NV and CEP sales affects price comparability, we adjust NV under section 773(a)(7)(B) of the Act (the CEP offset provision). See Notice of Final Determination of Sales at Less Than Fair Value: Certain Cut-to-Length Carbon Steel Plate From South Africa, 62 FR 61731, 61732-61733 (November 19, 1997).

In reviewing a respondent's request for an LOT adjustment, we examine all types of selling functions and activities reported in respondent's questionnaire response on LOT. In analyzing differences in selling functions, we determine whether the LOTs identified by the respondent are meaningful. See Antidumping Duties; Countervailing Duties, Final Rule, 62 FR 27296, 27371 (May 19, 1997). In the present review, Ta Chen did not request an LOT adjustment, but did request a CEP offset.

Ta Chen reported one LOT in the home market based on two channels of distribution: Trading companies and end-users. We examined the reported selling functions and found that Ta Chen's selling functions to its home market customers, regardless of channel of distribution, include inventory maintenance, technical services, packing, after-sales services, freight and delivery arrangements, general selling functions, some research and development, and customer service. See Ta Chen's September 3, 2003, Section A questionnaire response at page 8; Therefore, we preliminarily conclude that the selling functions for the reported channels of distribution are sufficiently similar to consider them as one LOT in the comparison market.

Because Ta Chen reported that all of its CEP sales are made through TCI, Ta Chen is claiming that there is only one LOT in the U.S. market for its CEP sales and we preliminarily agree with Ta Chen's assertion that its U.S. sales constitute a single LOT. We examined the reported selling functions and found that Ta Chen's selling functions for sales to TCI include order processing, payment of marine insurance and packing for shipment to the United States. TCI handles the remaining selling functions for U.S. sales, such as: Communicating with U.S. customers; handling customer orders; dealing with U.S. customs duties, brokerage, inland freight and U.S. warehousing; taking seller's risk; and incurring inventory carrying costs on the water and ocean freight.

The Department compared Ta Chen's selling functions offered to its home market customers, trading companies and end users with Ta Chen's selling functions for U.S. sales offered to its wholly-owned subsidiary, TCI. Ta Chen's selling functions for sales to the United States, namely, order processing, payment of marine insurance and packing for shipment, are less numerous and less advanced than Ta Chen's selling functions to its home market customers, which include inventory maintenance, technical services, packing, after-sales services, freight and delivery arrangements, general selling functions, some research and development, and customer service. Therefore, we preliminarily find that Ta Chen performed fewer selling functions for its U.S. sales than it did in the home market. Ta Chen requested a CEP offset due to differences in level of trade between its home market and U.S. sales (see Ta Chen's September 3, 2002, Section A questionnaire response at 11). The NV is established at an LOT that is at a more advanced stage of distribution than the LOT of the CEP transactions. However, we were unable to quantify an LOT adjustment pursuant to section 773(a)(7)(A) of the Act. Therefore, we applied a CEP offset to the NV-CEP comparisons, in accordance with section 773(a)(7)(B) of the Act.

Currency Conversion

For purposes of the preliminary results, we made currency conversions into U.S. dollars based on the exchange rates in effect on the dates of the U.S. sales, as certified by the Federal Reserve Bank, in accordance with section 773A(a) of the Act.

Preliminary Results of the Review

As a result of our review, we preliminarily determine that the following weighted-average dumping margin exists for Ta Chen for the period June 1, 2002, through May 31, 2003:

The Department will disclose calculations performed for these preliminary results to the parties within five days of the date of publication of this notice in accordance with 19 CFR 351.224(b). Any interested party may request a hearing within 30 days of publication of these preliminary results. See 19 CFR 351.310(c). Any hearing, if requested, will be held two days after the scheduled date for submission of rebuttal briefs. See 19 CFR 351.310(d). Interested parties may submit case briefs and/or written comments no later than 30 days after the date of publication of these preliminary results of review. See 19 CFR 351.309(c)(ii). Rebuttal briefs and rebuttals to written comments, limited to issues raised in such briefs or comments, may be filed no later than 35 days after the date of publication. See 19 CFR 351.309(d). Further, we would appreciate that parties submitting written comments also provide the Department with an additional copy of those comments on diskette. The Department will issue the final results of this administrative review, which will include the results of its analysis of issues raised in any such comments, within 120 days of publication of these preliminary results, pursuant to section 751(a)(3)(A) of the Act.

Assessment

Upon issuance of the final results of this review, the Department shall determine, and CBP shall assess, antidumping duties on all appropriate entries. Pursuant to 19 CFR 351.212(b), the Department has calculated an assessment rate applicable to all appropriate entries. We calculated importer-specific duty assessment rates on the basis of the ratio of the total amount of antidumping duties calculated for the examined sales to the total entered value, or entered quantity, as appropriate, of the examined sales for that importer. Upon completion of this review, where the assessment rate is above de minimis, we will instruct CBP to assess duties on all entries of subject merchandise by that importer.

Cash Deposit

The following cash deposit requirements will be effective upon publication of the final results of this administrative review for all shipments of the subject merchandise 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 Act: (1) The cash deposit rate for each of the reviewed companies will be the rate listed in the final results of review (except that if the rate for a particular product is de minimis, i.e., less than 0.5 percent, no cash deposit will be required for that company); (2) for previously investigated companies not listed above, the cash deposit rate will continue to be the company-specific rate published for the most recent period; (3) if the exporter is not a firm covered in this review, a prior review, or the original LTFV investigation, but the manufacturer is, the cash deposit rate will be the rate established for the most recent period for the manufacturer of the merchandise; and (4) the cash deposit rate for all other manufacturers or exporters will continue to be the “All Others” rate of 51.01 percent, which is the “All Others” rate established in the LTFV investigation. 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)(2) 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 the antidumping duties occurred and the subsequent assessment of double antidumping duties.

This notice also serves as a reminder to parties subject to administrative protective orders (APOs) of their responsibility concerning the disposition of the proprietary information disclosed under APO in accordance with 19 CFR 351.305, that continues to govern business proprietary information in this segment of the proceeding. Timely written notification of the return/destruction of APO materials or conversion to judicial protective order is hereby requested. Failure to comply with the regulations and the terms of an APO is a sanctionable violation.

This determination is issued and published in accordance with sections 751(a)(1) and 777(i)(1) of the Act.