Notice of Preliminary Determination of Sales at Less Than Fair Value: Light-Walled Rectangular Pipe and Tube From Mexico, 5515-5525 [E8-1654]

Agencies

• DEPARTMENT OF COMMERCE
• International Trade Administration

[Federal Register Volume 73, Number 20 (Wednesday, January 30, 2008)]
[Notices]
[Pages 5515-5525]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-1654]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-201-836]


Notice of Preliminary Determination of Sales at Less Than Fair 
Value: Light-Walled Rectangular Pipe and Tube From Mexico

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

EFFECTIVE DATE: January 30, 2008.

SUMMARY: The U.S. Department of Commerce (the Department) preliminarily 
determines that light-walled rectangular (LWR) pipe and tube from 
Mexico is being, or is likely to be, sold in the United States at less 
than fair value (LTFV), as provided in section 733(b) of the Tariff Act 
of 1930, as amended (the Act). The estimated margins of sales at LTFV 
are listed in the ``Suspension of Liquidation'' section of this notice. 
Interested parties are invited to comment on this preliminary 
determination.

FOR FURTHER INFORMATION CONTACT: Angelica Mendoza, Patrick Edwards 
(PROLAMSA), or Judy Lao (Maquilacero), AD/CVD Operations, Office 7, 
Import Administration, International Trade Administration, U.S. 
Department of Commerce, 14th Street and Constitution Avenue, NW., 
Washington, DC 20230; telephone: (202) 482-3019, (202) 482-8029, or 
(202) 482-7924, respectively.

SUPPLEMENTARY INFORMATION: 

Background

    On July 17, 2007, the Department initiated the antidumping duty 
investigation of LWR pipe and tube pipe and tube from Mexico. See 
Initiation of Antidumping Duty Investigations: Light-Walled Rectangular 
Pipe and Tube from Republic of Korea, Mexico, Turkey, and the People's 
Republic of China, (Initiation Notice), 72 FR 40274 (July 24, 2007). 
The petitioners in this investigation are Allied Tube and Conduit, 
Atlas Tube, Bull Moose Tube Company, California Steel and Tube, 
Hannibal Industries, Leavitt Tube Company, Maruichi American 
Corporation, Searing Industries, Southland Tube, Vest Inc., Welded 
Tube, and Western Tube and Conduit (collectively, petitioners).
    The Department set aside a period of time for parties to raise 
issues regarding product coverage and encouraged all parties to submit 
comments within 20 calendar days of publication of the Initiation 
Notice. See Initiation Notice, 72 FR 40274 (July 24, 2007). No parties 
submitted comments on the scope.
    On August 28, 2007, the United States International Trade 
Commission (ITC) preliminarily determined that there is a reasonable 
indication that imports of LWR pipe and tube from Korea, Mexico, Turkey 
and the People's Republic of China are materially injuring the U.S. 
industry and the ITC notified the Department of its findings. See 
Light-Walled Rectangular Pipe and Tube From China, Korea, Mexico, and 
Turkey Case Numbers: 701-TA-449 (Preliminary) and 731-TA-1118-1121 
(Preliminary), 72 FR 49310, (August 28, 2007).
    Section 777A(c)(1) of the Act directs the Department to calculate 
individual dumping margins for each known

[[Page 5516]]

exporter and producer of the subject merchandise. The Department 
identified a large number of producers and exporters of LWR pipe and 
tube from Mexico and determined that it was not practicable to examine 
each known exporter/producer of the subject merchandise, as provided in 
section 777A(c)(1) of the Act. The Department sent quantity and value 
questionnaires to the companies identified in the petition along with 
any other companies identified during our research. The following 14 
companies were sent quantity and value (Q&V) questionnaires on July 31, 
2007: Arco Metal S.A. de C.V., Hylsa S.A. de C.V., Industrias Monterrey 
S.A. de C.V., Internacional de Aceros, S.A. de C.V., Maquilacero S.A. 
de C.V., Nacional de Acero S.A. de C.V., PEASA-Productos Especializados 
de Acero, Perfiles y Herrajes LM, S.A. de C.V., Productos Laminados de 
Monterrey S.A. de C.V., Regiomontana de Perfiles y Tubos, Talleres 
Acero Rey S.A. de C.V., Tuberias Aspe, Tuberia Laguna, S.A. de C.V., 
and Tuberias y Derivados S.A. de C.V.
    The Department did not receive a response to the Q&V questionnaire 
(or received an improperly filed and/or incomplete response) from the 
following five companies: Industrias Monterrey S.A. de C.V., PEASA--
Productos Especializados de Acero, Tuberias Aspe, Tuberias y Derivados 
S.A. de C.V., and Nacional de Acero S.A. de C.V. (Q&V Non-Responding 
Companies). These five companies that failed to respond, or provided an 
improperly filed and/or incomplete response, were given a second 
opportunity to file a response on August 16, 2007. We received no 
response from these companies.
    The remaining nine exporters/producers responded to the 
Department's Q&V questionnaire: Arco Metal S.A. de C.V., Hylsa S.A. de 
C.V., Internacional de Aceros, S.A. de C.V., Maquilacero S.A. de C.V., 
Perfiles y Herrajes LM, S.A. de C.V., Productos Laminados de Monterrey 
S.A. de C.V., Regiomontana de Perfiles y Tubos, Talleres Acero Rey S.A. 
de C.V., and Tuberia Laguna S.A. de C.V. (Q&V Responding Companies). 
Two Q&V Responding Companies--Maquilacero S.A. de C.V. (Maquilacero) 
and Productos Laminados de Monterrey S.A. de C.V. (PROLAMSA)--accounted 
for the largest volume of subject merchandise exported to the United 
States during the POI. These two companies were selected as mandatory 
respondents pursuant to section 777A(c)(2)(1)(B) of the Act. See the 
September 6, 2007, Memorandum to Deputy Assistant Secretary Stephen J. 
Claeys, titled ``Antidumping Duty Investigation on Light-Walled 
Rectangular Pipe and Tube from Mexico (A-201-836); Respondent 
Selection'' (Respondent Selection Memorandum). We issued antidumping 
duty questionnaires to Maquilacero and PROLAMSA on September 7, 2007.

Maquilacero

    The Department received the Section A response from Maquilacero on 
October 9, 2007. Petitioners filed comments on Maquilacero's Section A 
response on October 16, 2007, and the Department subsequently issued a 
supplemental questionnaire regarding Maquilacero's Section A Response 
on October 23, 2007. We received the Sections B and C responses from 
Maquilacero on October 30, 2007. Petitioners filed comments on 
Maquilacero's Sections B and C responses on November 8, 2007. On 
November 19, 2007, Maquilacero filed its response to the Department's 
supplemental questionnaire regarding Section A. The Department issued a 
supplemental questionnaire to Maquilacero concerning the company's 
Sections B and C responses on November 20, 2007. Maquilacero replied to 
this supplemental questionnaire on December 4, 2007.
    On December 5, 2007, based on an allegation timely filed by 
petitioners, the Department initiated a sales-below-cost investigation 
for Maquilacero, finding reasonable grounds to believe that Maquilacero 
made comparison market sales of LWR pipe and tube at prices below its 
cost of production. See ``Cost of Production Analysis'' section below 
for further information.
    Consequently, the Department requested in a letter dated December 
6, 2007, that Maquilacero respond to section D of the Department's 
antidumping duty questionnaire. We received Maquilacero's section D 
response on December 27, 2007. On January 4, 2008, the Department 
issued a supplemental questionnaire to Maquilacero regarding its 
section A through C supplemental responses. Maquilacero filed its 
response to the supplemental questionnaire on January 22, 2008. We were 
unable to analyze Maquilacero's response prior to the January 23, 2008, 
preliminary determination deadline. We will address any deficiencies in 
its responses for the final determination.

PROLAMSA

    The Department received the section A response from PROLAMSA on 
October 9, 2007. Petitioners filed comments on PROLAMSA's section A 
response on October 11, 2007, and the Department subsequently issued a 
supplemental questionnaire regarding PROLAMSA's section A Response on 
October 23, 2007. We received the sections B and C responses from 
PROLAMSA on October 29, 2007. On November 6, 2007, PROLAMSA filed its 
response to the Department's supplemental questionnaire regarding 
section A. Petitioners filed comments on PROLAMSA's sections B and C 
responses on November 8, 2007. The Department issued a supplemental 
questionnaire to PROLAMSA concerning the company's sections B and C 
responses on November 16, 2007. PROLAMSA replied to this supplemental 
questionnaire on December 7, 2007. The Department issued a second 
supplemental questionnaire with regard to PROLAMSA's supplemental 
responses for sections A, B and C of the questionnaire on December 20, 
2007. PROLAMSA submitted its second supplemental response on January 7, 
2008.
    On December 4, 2007, based on an allegation timely filed by 
petitioners, the Department initiated a sales-below-cost investigation 
for PROLAMSA, finding reasonable grounds to believe that PROLAMSA made 
comparison market sales of LWR pipe and tube at prices below its cost 
of production. See ``Cost of Production Analysis'' Section below for 
further information. Consequently, the Department requested in a letter 
dated December 6, 2007, that PROLAMSA respond to Section D of the 
Department's antidumping duty questionnaire. We received PROLAMSA's 
Section D response on December 27, 2007.

Maquilacero and PROLAMSA

    On December 26, 2007, petitioners timely filed with the Department 
separate allegations of targeted dumping for both Maquilacero and 
PROLAMSA. Maquilacero filed comments regarding petitioners' allegation 
of targeted dumping on January 7, 2008. Upon review of petitioners' 
allegations, the Department determined that further information was 
needed in order to adequately analyze petitioners' allegations. The 
Department issued a supplemental questionnaire to petitioners on 
January 11, 2008, requesting they address deficiencies identified by 
the Department. See Letter from Richard O. Weible, Office Director, to 
Petitioners, dated January 11, 2008. On January 15, 2008, PROLAMSA 
filed comments regarding petitioners' allegation of targeted dumping. 
Because there was a need for supplemental

[[Page 5517]]

information regarding these allegations, we do not have sufficient 
bases for making a finding of targeted dumping prior to the January 23, 
2008, deadline for issuance of the preliminary determination. We intend 
to address these allegations in full upon receipt of a satisfactory 
response by petitioners to our request for additional information.
    On January 18, 2008, two business days prior to the signature date 
for this preliminary determination, petitioners filed comments 
regarding the responses and data of Maquilacero and PROLAMSA for the 
Department's consideration for the preliminary determination. 
Petitioners' comments were specific to both companies' reported post-
sale adjustments, and also, that the Department should not deduct 
negative margins from positive margins for the preliminary 
determination. Accordingly, the Department does not have sufficient 
time to address these comments for the preliminary determination.

Postponement of Preliminary Determination

    On October 19, 2007, petitioners requested that the Department 
postpone the preliminary determination by 50 days. The Department 
published an extension notice on November 14, 2007, which set the new 
deadline for the preliminary determination at January 23, 2008. See 
Light-Walled Rectangular Pipe and Tube from Mexico, Turkey, and the 
Republic of Korea: Postponement of Preliminary Determination of 
Antidumping Duty Investigations, 72 FR 64044 (November 14, 2007).

Period of Investigation

    The period of investigation (POI) is April 1, 2006, to March 31, 
2007.

Scope of Investigation

    The merchandise that is the subject of this investigation is 
certain welded carbon quality light-walled steel pipe and tube, of 
rectangular (including square) cross section, having a wall thickness 
of less than 4 mm.
    The term carbon-quality steel includes both carbon steel and alloy 
steel which contains only small amounts of alloying elements. 
Specifically, the term carbon-quality includes products in which none 
of the elements listed below exceeds the quantity by weight 
respectively indicated:
    1.80 percent of manganese, or 2.25 percent of silicon, or 1.00 
percent of copper, or 0.50 percent of aluminum, or 1.25 percent of 
chromium, or 0.30 percent of cobalt, or 0.40 percent of lead, or 1.25 
percent of nickel, or 0.30 percent of tungsten, or 0.10 percent of 
molybdenum, or 0.10 percent of niobium, or 0.15 percent vanadium, or 
0.15 percent of zirconium. The description of carbon-quality is 
intended to identify carbon-quality products within the scope. The 
welded carbon-quality rectangular pipe and tube subject to this 
investigation is currently classified under the Harmonized Tariff 
Schedule of the United States (HTSUS) subheadings 7306.61.50.00 and 
7306.61.70.60. While HTSUS subheadings are provided for convenience and 
Customs purposes, our written description of the scope of this 
investigation is dispositive.

Model Match

    In accordance with section 771(16) of the Act, all products 
produced by the respondents covered by the description in the ``Scope 
of Investigation'' section above, and sold in Mexico during the POI, 
are considered to be foreign like products for purposes of determining 
appropriate product comparisons to U.S. sales.
    On August 16, 2007, the Department asked all parties in this 
investigation and in the concurrent antidumping duty investigations of 
LWR pipe and tube from the Republic of Korea, Turkey, and the People's 
Republic of China, for comments on the appropriate product 
characteristics for defining individual products. In addition, the 
Department requested that all parties in this investigation and in the 
concurrent antidumping duty investigations of LWR pipe and tube from 
the Republic of Korea and Turkey submit comments on the appropriate 
model matching methodology. See Letter from Richard Weible, Office 
Director, AD/CVD Enforcement 7, dated August 16, 2007. The Department 
received comments from the Mexican company Perfiles y Herrajes LM, S.A. 
de C.V. on August 23, 2007; from the Mexican companies PROLAMSA and 
Prolamsa USA, Inc. (PROLAMSA's U.S. sales affiliate) on August 27, 
2007, and September 4, 2007; from the Turkish company Noksel Celik Boru 
Sanayi A.S. on August 24, 2007; from the Chinese producer/exporter 
Zhangjiagang Zhongyuan Pipe-Making Co., Ltd.; and from the petitioners 
on August 24, 2007. However, the Department has not made any changes to 
its proposed characteristics and model matching methodology as a result 
of the comments submitted by parties.
    We have relied on six criteria to match U.S. sales of subject 
merchandise to comparison market sales of the foreign like product: 
steel input type, whether metallic coated or not, whether painted or 
not, perimeter, wall thickness, and shape. Where there were no sales of 
identical merchandise in the comparison market made in the ordinary 
course of trade to compare to U.S. sales, we compared U.S. sales to the 
next most similar foreign like product on the basis of the 
characteristics listed above. For both PROLAMSA and Maquilacero, it was 
necessary to rely on facts available in order to properly match U.S. 
sales of subject merchandise to comparison market sales of the foreign 
like product as discussed below.
    Maquilacero's home market sales included sales of non-prime 
merchandise. As noted in Maquilacero's original and supplemental 
questionnaire responses, Maquilacero does not record certain product 
characteristics for its sales of non-prime merchandise. Specifically, 
Maquilacero does not document the perimeter, thickness, or shape of its 
non-prime sales on the documents produced in its ordinary course of 
trade. As such, these product characteristics for non-prime merchandise 
were not specifically identified in Maquilacero's home market database 
(in neither their respective field and nor in the control number 
(CONNUM) string). Section 776(a)(1) of the Act provides that the 
Department may use facts otherwise available if necessary information 
is not available on the record. Because the necessary product 
characteristic information needed to properly perform our margin 
calculations with respect to these sales is not on the record of this 
investigation, we must rely on facts otherwise available. In order for 
the Department to accurately compare Maquilacero's comparison market 
sales to its U.S. sales and its cost of production data, the Department 
applied, as neutral facts available, the product characteristics of the 
most common type of LWR pipe and tube (CONNUM) sold in the comparison 
market to the missing product characteristics of non-prime merchandise 
(i.e., perimeter, thickness, and shape). For more details regarding the 
application of neutral facts available to Maquilacero's sales of non-
prime LWR pipe and tube, see Memorandum to the File titled ``Analysis 
of Data Submitted by Maquilacero S.A. de C.V. (Maquilacero) in the 
Preliminary Determination of the Antidumping Duty Investigation of 
Light-Walled Rectangular Pipe and Tube from Mexico,'' dated January 23, 
2008 (Maquilacero Preliminary Analysis Memo).

[[Page 5518]]

    With respect to PROLAMSA's reported steel input type (INPUTH/U), we 
note that the model matching criteria designated by the Department in 
its antidumping duty questionnaire requested that respondent report 
steel input type as either: hot-rolled steel or cold-rolled steel. In 
its initial and supplemental questionnaire responses, PROLAMSA reported 
a third designation in its fields for INPUTH/U as it claims to not know 
whether these coils were of hot-rolled or cold-rolled steel. As noted 
above, section 776(a)(1) of the Act provides that the Department may 
use facts otherwise available if necessary information is not available 
on the record. Because the necessary product characteristic information 
needed to properly perform our margin calculations with respect to 
these sales is not on the record of this investigation, we must rely on 
facts otherwise available. Therefore, for purposes of this preliminary 
determination, we have revised PROLAMSA's reported steel input type for 
those sales that PROLAMSA could not identify as hot-rolled or cold-
rolled steel in both PROLAMSA's comparison market and U.S. sales 
databases. Specifically, based on neutral facts available, we re-coded 
the reported CONNUMH/U and INPUTH/U as either hot-rolled or cold-rolled 
steel depending upon the reported thickness (THICKH/U) for these 
products. Due to the proprietary nature of this issue, see Memorandum 
to the File titled ``Analysis of Data Submitted by Productos Laminados 
de Monterrey S.A. de C.V. (PROLAMSA) in the Preliminary Determination 
of the Antidumping Duty Investigation of Light-Walled Rectangular Pipe 
and Tube from Mexico,'' dated January 23, 2008 (PROLAMSA Preliminary 
Analysis Memo) for further details.

Use of Facts Otherwise Available

    For the reasons discussed below, we determine that the use of 
adverse facts available (AFA) is appropriate for the preliminary 
determination with respect to the Q&V Non-Responding Companies. As 
noted in the ``Supplementary Information'' section above, the Q&V Non-
Responding Companies failed to respond (or to respond in a timely 
fashion) to the Department's Q&V questionnaire and to the Department's 
follow up letter dated August 16, 2007.
    Section 776(a)(2) of the Act provides that, (1) if an interested 
party withholds information requested by the administering authority, 
(2) fails to provide such information by the deadlines for submission 
of the information and in the form or manner requested, subject to 
subsections (c)(1) and (e) of section 782, (3) significantly impedes a 
proceeding under this title, or (4) provides such information but the 
information cannot be verified as provided in 782(i), the administering 
authority shall use, subject to section 782(d) of the Act, facts 
otherwise available in reaching the applicable determination. Section 
782(d) of the Act provides that, if the administering authority 
determines that a response to a request for information does not comply 
with the request, the administering authority shall promptly inform the 
responding party and provide an opportunity to remedy the deficient 
submission. Section 782(e) of the Act states further that the 
Department shall not decline to consider submitted information if all 
of the following requirements are met: (1) The information is submitted 
by the established deadline; (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; and 
(5) the information can be used without undue difficulties.
    In this case, the Q&V Non-Responding Companies all failed to 
provide the information requested by the deadlines for submission of 
the information and/or in the form or manner requested. Specifically, 
the Q&V Non-Responding Companies did not respond to our Q&V 
questionnaires and, as such, they failed to provide pertinent 
information that we requested for our consideration and selection of 
mandatory respondents, thereby significantly impeding this proceeding. 
Thus, for these companies, in reaching our preliminary determination, 
pursuant to sections 776(a)(2)(A), (B), and (C) of the Act, we have 
based their dumping margin on facts otherwise available.

Application of Adverse Inferences for Facts Available

    According to section 776(b) of the Act, if the Department finds 
that an interested party fails to cooperate by not acting to the best 
of its ability to comply with requests for information, the Department 
may use an inference that is adverse to the interests of that party in 
selecting from the facts otherwise available. See, e.g., Notice of 
Final Results of Antidumping Duty Administrative Review: Stainless 
Steel Bar from India, 70 FR 54023, 54025-54026 (September 13, 2005); 
and 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, 55794-55796 (August 30, 2002). The 
SAA explains that the Department may apply adverse inferences 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, Vol. 1, at 870 (1994) (SAA), reprinted in 1994 
U.S.C.C.A.N. 4040, 4198-4199. Furthermore, ``affirmative evidence of 
bad faith on the part of a respondent is not required before the 
Department may make an adverse inference.'' See Antidumping Duties; 
Countervailing Duties; Final Rule, 62 FR 27296, 27340 (May 19, 1997); 
see also Nippon Steel Corp. v. United States, 337 F.3d 1373, 1382-83 
(Fed. Cir. 2003) (Nippon); and Certain Polyester Staple Fiber from 
Korea: Final Results of the 2005-2006 Antidumping Duty Administrative 
Review, 72 FR 69663 (December 10, 2007).
    Although the Department provided the Q&V Non-Responding Companies 
with notice informing them of the consequences of their failure to 
respond adequately to the Q&V questionnaire in this case, pursuant to 
section 782(d) of the Act, these companies did not respond as 
requested. This constitutes a failure on the part of these companies to 
cooperate to the best of their ability to comply with a request for 
information by the Department within the meaning of section 776(b) of 
the Act. Because these companies did not provide the information 
requested, section 782(e) of the Act is not applicable. Based on the 
above, the Department has preliminarily determined that the Q&V Non-
Responding Companies failed to cooperate to the best of their ability 
and, therefore, in selecting from among the facts otherwise available, 
an adverse inference is warranted. See, e.g., Notice of Final 
Determination of Sales at Less than Fair Value: Circular Seamless 
Stainless Steel Hollow Products from Japan, 65 FR 42985 (July 12, 2000) 
(the Department applied total AFA where the respondent failed to 
respond to the antidumping questionnaire).

Selection and Corroboration of Information Used as Facts Available

    Where the Department applies AFA because a respondent failed to 
cooperate by not acting to the best of its ability to comply with a 
request for information, section 776(b) of the Act authorizes the 
Department to rely on information derived from the petition, a final 
determination, a previous administrative review, or other

[[Page 5519]]

information placed on the record. See also, 19 CFR 351.308(c) and the 
SAA at 829-831. It is the Department's practice to use the highest 
calculated rate from the petition in an investigation when a respondent 
fails to act to the best of its ability to provide the necessary 
information. See, e.g., Notice of Preliminary Determination of Sales at 
Less Than Fair Value and Postponement of Final Determination: Purified 
Carboxymethylcellulose From Finland, 69 FR 77216 (December 27, 2004) 
(unchanged in Notice of Final Determination of Sales at Less Than Fair 
Value: Purified Carboxymethylcellulose From Finland, 70 FR 28279 (May 
17, 2005)). Therefore, because an adverse inference is warranted, we 
have assigned to the Q&V Non-Responding Companies the highest margin 
alleged in the petition, as referenced in the Initiation Notice, of 
11.50 percent. (See Initiation Notice at 40278.)
    When using facts otherwise available, section 776(c) of the Act 
provides that, when the Department relies on secondary information 
(such as the petition) rather than on information obtained in the 
course of an investigation, it must corroborate, to the extent 
practicable, information from independent sources that are reasonably 
available at its disposal.
    The SAA clarifies that ``corroborate'' means the Department will 
satisfy itself that the secondary information to be used has probative 
value. See SAA at 870. As stated in Tapered Roller Bearings and Parts 
Thereof, Finished and Unfinished, from Japan, and Tapered Roller 
Bearings, Four Inches or Less in Outside Diameter, and Components 
Thereof, from Japan; Preliminary Results of Antidumping Duty 
Administrative Reviews and Partial Termination of Administrative 
Reviews, 61 FR 57391, 57392 (November 6, 1996) (unchanged in Tapered 
Roller Bearings and Parts Thereof, Finished and Unfinished, From Japan, 
and Tapered Roller Bearings, Four Inches or Less in Outside Diameter, 
and Components Thereof, From Japan; Final Results of Antidumping Duty 
Administrative Reviews and Termination in Part, 62 FR 11825, 11843 
(March 13, 1997)), to corroborate secondary information, the Department 
will examine, to the extent practicable, the reliability and relevance 
of the information used. The Department's regulations state that 
independent sources used to corroborate such evidence may include, for 
example, published price lists, official import statistics and customs 
data, and information obtained from interested parties during the 
particular investigation. See 19 CFR 351.308(d) and the SAA at 870.
    For the purposes of this investigation, to the extent appropriate 
information was available, we reviewed the adequacy and accuracy of the 
information in the Petition during our pre-initiation analysis and for 
purposes of this preliminary determination. See Initiation Checklist. 
We examined evidence supporting the calculations in the Petition to 
determine the probative value of the margins alleged in the Petition 
for use as AFA for purposes of this preliminary determination. During 
our pre-initiation analysis, we examined the key elements of the 
export-price and normal-value calculations used in the Petition to 
derive margins. During our pre-initiation analysis, we also examined 
information from various independent sources provided either 
voluntarily in the Petition or, based on our requests, in supplements 
to the Petition, that corroborates key elements of the export-price and 
normal-value calculations used in the Petition to derive estimated 
margins.
    Specifically, the petitioners calculated a single export price 
using the average monthly Customs Unit Values (AUVs) ((Free Alongside 
Ship) (FAS)) of LWR pipe and tube from Mexico for consumption in the 
United States, classified under HTSUS numbers 7306.60.50.00 and 
7306.61.50.00. As the IM145 data is considered direct import data from 
CBP, we consider petitioners' AUVs based on this data to be reliable. 
Further, we obtained no other information that would make us question 
the reliability of the pricing information provided in the Petition.
    The petitioners adjusted export prices for inland freight from the 
plant to the port of importation, specifically, Laredo, Texas. The 
petitioners used inland freight charges obtained from inland freight 
price quotes from certain Mexican producers of LWR pipe and tube. See 
Petition at page II-10 and July 6, 2007 Supplement to the Petition at 
7. This is a source of information that we consider reliable. See, 
e.g., Notice of Preliminary Determination of Sales at Less than Fair 
Value: Superalloy Degassed Chromium from Japan, 70 FR 48538 (August 18, 
2005) (unchanged in Notice of Final Determination of Sales at Less Than 
Fair Value: Superalloy Degassed Chromium from Japan, 70 FR 65886 
(November 1, 2005)). Further, we obtained no other information that 
would make us question the reliability of the adjusted information 
provided in the Petition, nor the July 6, 2007, deficiency response.
    Based on our examination of the aforementioned information, we 
consider the petitioners' calculation of net U.S. prices corroborated.
    With respect to normal value, petitioners derived Mexican 
comparison market prices by obtaining price quotations from certain 
Mexican manufacturers of LWR pipe and tube through an economic 
consultant, which identified specific terms of sale and payment terms. 
Petitioners made no adjustments to the quoted prices, as the terms of 
delivery for the quotations were ``free on board'' (FOB) at the 
respective manufacturing facilities. See Volume II of the Petition at 
6-7, Exhibits II-14 and II-15, and Volume II of the Supplement to the 
Petition, dated July 6, 2007, at 1, 3-5 and Exhibits 4 and 5.
    Based on our examination of the aforementioned information, we 
consider the petitioners' calculation of net comparison market prices 
corroborated.
    We also examined information obtained from interested parties 
during this particular investigation to corroborate the home market and 
U.S. prices. Certain transaction-specific margin percentages calculated 
for Maquilacero and PROLAMSA exceeded those from the Petition.
    Therefore, because we confirmed the accuracy and validity of the 
information underlying the derivation of margins in the Petition by 
examining source documents, publically available information and 
primary information submitted by respondents Maquilacero and PROLAMSA, 
we preliminarily determine that the margins in the Petition are 
reliable for the purposes of this investigation.
    In making a determination as to the relevance aspect of 
corroboration, the Department will consider information reasonably at 
its disposal as to whether there are circumstances that would render a 
margin not relevant. Where circumstances indicate that the selected 
margin is not appropriate as adverse facts available, the Department 
will disregard the margin and determine an appropriate margin. For 
example, in Fresh Cut Flowers from Mexico: Final Results of Antidumping 
Duty Administrative Review, 61 FR 6812 (February 22, 1996), the 
Department disregarded the highest margin as ``best information 
available'' (the predecessor to ``facts available'') because the margin 
was based on another company's uncharacteristic business expense that 
resulted in an unusually high dumping margin.
    In Am. Silicon Techs. v. United States, 273 F. Supp. 2d 1342, 1346 
(CIT 2003), the court found that the adverse

[[Page 5520]]

facts-available rate bore a ``rational relationship'' to the 
respondent's ``commercial practices,'' and was, therefore, relevant. In 
the pre-initiation stage of this investigation, we confirmed that the 
calculation of margins in the Petition reflects commercial practices of 
the particular industry during the period of investigation. Further, no 
information has been presented in the investigation that calls into 
question the relevance of this information. As such, we preliminarily 
determine that the highest margin in the Petition, which we determined 
during our pre-initiation analysis was based on adequate and accurate 
information and which we have corroborated for purposes of this 
preliminary determination, is relevant as the adverse facts-available 
rate for the Q&V Non-Responding Companies in this investigation.
    Similar to our position in Polyethylene Retail Carrier Bags from 
Thailand: Preliminary Results of Antidumping Duty Administrative 
Review, 71 FR 53405 (September 11, 2006) (unchanged in Polyethylene 
Retail Carrier Bags from Thailand: Final Results of Antidumping Duty 
Administrative Review, 72 FR 1982 (January 17, 2007)), because this is 
the first segment of this proceeding involving these companies, there 
are no probative alternatives. Accordingly, by using information that 
was corroborated for the initiation stage of this investigation and 
preliminarily determined to be relevant to the Q&V Non-Responding 
Companies in this investigation, we have corroborated the adverse 
facts-available rate ``to the extent practicable.'' See section 776(c) 
of the Act, 19 CFR 351.308(d), and NSK Ltd. v. United States, 346 F. 
Supp. 2d 1312, 1336 (CIT 2004) (stating, ``pursuant to the `to the 
extent practicable' language, the corroboration requirement itself is 
not mandatory when not feasible''). Therefore, we find that the 
estimated margin of 11.50 percent in the Initiation Notice has 
probative value. Consequently, in selecting AFA with respect to the Q&V 
Non-Responding Companies, we have applied the margin rate of 11.50 
percent, the highest estimated dumping margin set forth in the notice 
of initiation. See Initiation Notice at 40278.

Date of Sale

    Section 351.401(i) of the Department's regulations states the 
Department normally will use the date of invoice, as recorded in the 
producer's or exporter's records kept in the ordinary course of 
business, as the date of sale. The regulations further provide that the 
Department may use a date other than the date of the invoice if the 
Secretary is satisfied that a different date better reflects the date 
on which the material terms of sale are established. See 19 CFR 
351.401(i). Maquilacero reported the sales invoice date as the date of 
sale for all sales in the U.S. and in the comparison market. See 
Maquilacero's Section B and C Response at B-23 and C-19, respectively. 
PROLAMSA reported the sales invoice date as the date of sale for all 
sales in the comparison and U.S. markets. See PROLAMSA's Section B and 
C Response at B-18 and C-15, respectively. However, with regard to 
PROLAMSA, the company reported two invoice dates as all of its sales 
are back-to-back CEP sales. The first invoice date (which is identical 
to the date of shipment) is the date on which PROLAMSA invoices its 
U.S. affiliate, Prolamsa, Inc. The second reported invoice date is the 
date on which Prolamsa, Inc. invoices the unaffiliated U.S. customer. 
We have preliminarily determined that the date of PROLAMSA's invoice to 
Prolamsa, Inc. is the appropriate date to use as PROLAMSA's date of 
sale as it is the date that the material terms of sale are set.
    Based on the responses of both companies, and having no record 
evidence that would indicate otherwise, we preliminarily determine that 
the sales invoice date is the appropriate date of sale in both markets 
for Maquilacero and PROLAMSA. For a further discussion of this issue, 
see Maquilacero Preliminary Analysis Memo; see also, PROLAMSA 
Preliminary Analysis Memo.

Fair Value Comparisons

    To determine whether sales of LWR pipe and tube from Mexico were 
made in the United States at less than normal value (NV), we compared 
the export price (EP) or constructed export price (CEP) to the NV, as 
described in the ``Export Price and Constructed Export Price'' and 
``Normal Value'' sections below. In accordance with section 777A(d)(1) 
of the Act, we calculated the weighted-average prices for NV and 
compared these to the weighted-average of EP (and CEP), when 
appropriate.

Export Price and Constructed Export Price

    For the price to the United States, we used, as appropriate, EP or 
CEP, in accordance with sections 772(a) and (b) of the Act. Pursuant to 
section 772(a) of the Act, we used the EP methodology when the 
merchandise was sold by the producer or exporter outside the United 
States directly to the first unaffiliated purchaser in the United 
States prior to importation and when CEP was not otherwise warranted 
based on the facts on the record. We calculated CEP for those sales 
where a person in the United States, affiliated with the foreign 
exporter or acting for the account of the exporter, made the sale to 
the first unaffiliated purchaser in the United States of the subject 
merchandise. See section 772(b) of the Act. We based EP and CEP on the 
packed prices charged to the first unaffiliated customer in the United 
States and the applicable terms of sale.

Maquilacero

    Maquilacero classified its sales to the United States solely as EP 
sales, i.e., sales to unaffiliated direct end user customers. 
Maquilacero's U.S. sales were made directly to unaffiliated customers 
in the United States prior to importation, and CEP is not otherwise 
warranted based on Maquilacero's questionnaire response. Therefore, for 
purposes of this preliminary determination, we have accepted 
Maquilacero's classification of its sales to the United States as EP 
sales.
    Accordingly, we calculated EP based on prices charged to the first 
unaffiliated U.S. customer. We based EP on the packed and delivered (to 
port and/or to customer) prices to the first unaffiliated purchasers in 
the United States. We made deductions for movement expenses in 
accordance with section 772(c)(2)(A) of the Act, including foreign 
inland freight, and foreign brokerage and handling. When appropriate, 
we adjusted prices to reflect deductions and/or increases to prices due 
to billing adjustments, early payment discounts and rebates. See 
Maquilacero Preliminary Analysis Memo.

PROLAMSA

    PROLAMSA's U.S. sales were made by its U.S. affiliate, Prolamsa, 
Inc. We therefore based all of PROLAMSA's prices to the United States 
on CEP. When appropriate, we adjusted prices to reflect deductions and/
or increases to price due to billing adjustments, early payment 
discounts and rebates. In accordance with section 772(c)(2) of the Act, 
we made deductions, where appropriate, for movement expenses including 
inland freight, brokerage and handling in the country of manufacture, 
international freight, and U.S. brokerage and handling.
    In its supplemental questionnaire responses, PROLAMSA explained 
that it was never invoiced for foreign inland freight services provided 
on certain U.S. sales. As such, PROLAMSA reported no

[[Page 5521]]

inland freight expense for these observations. See PROLAMSA's Second 
Supplemental Response at 9. As a general matter, our calculations 
include the value of foreign inland freight services because these 
services are not provided on a gratuitous basis. Although PROLAMSA 
claims that it was never invoiced for these services on certain U.S. 
sales, the suppliers of said services still could invoice PROLAMSA for 
these services provided in connection with certain POI sales. There is 
no record evidence that the suppliers wrote off the value of these 
services from their accounts receivable. Section 776(a)(1) of the Act 
provides that the Department may use facts otherwise available if 
necessary information is not available on the record. Because the 
expenses needed to properly calculate net CEP for these sales are not 
on the record of this investigation, we must rely on facts otherwise 
available. Accordingly, based on neutral facts available, we revised 
PROLAMSA's reported foreign inland freight to account for missing 
values for certain U.S. sales. Specifically, we used a weighted average 
of all observations where a positive value was reported under the 
inland freight field (DINLFTPU), and where those observations had an 
identical destination and customer code in PROLAMSA's dataset, for the 
sales in question. For further details, see PROLAMSA's Preliminary 
Analysis Memo dated January 23, 2008.
    For CEP, in accordance with section 772(d)(1) of the Act, when 
appropriate, we deducted from the starting price those selling expenses 
that were incurred in selling the subject merchandise in the United 
States, including direct selling expenses (i.e., commissions and 
imputed credit expenses). We also deducted from CEP an amount for 
profit in accordance with sections 772(d)(3) and (f) of the Act. See 
PROLAMSA Preliminary Analysis Memo.

Normal Value

A. Home Market Viability and Comparison Market Selection

    To determine whether there was a sufficient volume of sales in the 
home market (i.e., Mexico) to serve as a viable basis for calculating 
NV, we compared the respondents' volume of home market sales of the 
foreign like product to the volume of its U.S. sales of the subject 
merchandise. Pursuant to section 773(a)(1)(B)(I) of the Act, because 
each respondent had an aggregate volume of home market sales of the 
foreign like product that was greater than five percent of its 
aggregate volume of U.S. sales of the subject merchandise, we 
determined that the respondents' sales of LWR pipe and tube in Mexico 
were sufficient to find the home market as viable for comparison 
purposes. Accordingly, we calculated NV for Maquilacero and PROLAMSA 
based on sales prices to Mexican customers.

B. Arm's-Length Test

    Maquilacero and PROLAMSA reported sales of the foreign like product 
to affiliated and unaffiliated customers in the comparison market. The 
Department calculates NV based on a sale to an affiliated party only if 
it is satisfied that the price to the affiliated party is comparable to 
the price at which sales are made to parties not affiliated with the 
producer or exporter, i.e., sales at ``arm's-length.'' See 19 CFR 
351.403(c). To test whether these sales were made at arm's-length, we 
compared the starting prices of sales to affiliated and unaffiliated 
customers net of all movement charges, direct selling expenses, 
discounts and packing. In accordance with the Department's current 
practice, if the prices charged to an affiliated party were, on 
average, between 98 and 102 percent of the prices charged to 
unaffiliated parties for merchandise identical or most similar to that 
sold to the affiliated party, we considered the sales to be at arm's-
length prices and included such sales in the calculation of NV. See 19 
CFR 351.403(c). Conversely, where sales to the affiliated party did not 
pass the arm's-length test, all sales to that affiliated party were 
excluded from the NV calculation. See Antidumping Proceedings: 
Affiliated Party Sales in the Ordinary Course of Trade, 67 FR 69186 
(November 15, 2002); see also, Maquilacero Preliminary Analysis Memo 
and PROLAMSA Preliminary Analysis Memo.

C. Cost of Production Analysis

    Based on our analysis of petitioners' allegation, we found that 
there were reasonable grounds to believe or suspect that Maquilacero's 
and PROLAMSA's sales of LWR pipe and tube in the comparison market were 
made at prices below their COP. Accordingly, pursuant to section 773(b) 
of the Act, we initiated a sales-below-cost investigation to determine 
whether these companies had sales that were made at prices below their 
respective COPs. See Memorandum to Richard O. Weible, Director, Office 
7, titled ``Petitioners' Allegation of Sales Below the Cost of 
Production for Maquilacero S.A. de C.V.,'' dated December 5, 2007 
(Maquilacero Cost Initiation Memo); see also, Memorandum to Richard O. 
Weible, Director, Office 7, titled ``Petitioners' Allegation of Sales 
Below the Cost of Production for Productos Laminados de Monterrey S.A. 
de C.V.,'' dated December 4, 2007 (PROLAMSA Cost Initiation Memo).
1. Calculation of Cost of Production
    In accordance with section 773(b)(3) of the Act, we calculated the 
respondents' COP based on the sum of their costs of materials and 
conversion for the foreign like product, plus an amount for home market 
selling expenses, general and administrative (G&A) expenses, interest 
expenses and packing costs. See the ``Test of Comparison Market Sales 
Prices'' section below for the treatment of comparison market selling 
expenses.
    The Department relied on the COP data submitted by Maquilacero and 
PROLAMSA, in their respective section D questionnaire responses for the 
COP calculation, except for the following instances:
    Maquilacero: We adjusted Maquilacero's reported total cost of 
manufacturing (TOTCOM) to include certain rebates which Maquilacero 
received from its supplier of hot-rolled coils; rebates which 
Maquilacero had previously included as an adjustment to price. We 
adjusted Maquilacero's data to apply this ratio to the reported TOTCOM 
of each CONNUM.
    PROLAMSA: We adjusted PROLAMSA's G&A expense ratio to include 2006 
profit-sharing costs included in PROLAMSA's 2006 audited financial 
statements and applied the adjusted G&A ratio to the revised TOTCOM of 
each CONNUM.
    For a complete discussion of the changes made to the cost 
information submitted by Maquilacero and PROLAMSA, see Memorandum to 
Neal M. Halper, Director, Office of Accounting, titled ``Cost of 
Production and Constructed Value Calculation Adjustments for the 
Preliminary Determination--Maquilacero, S.A. de C.V.,'' dated January 
23, 2008 (Maquilacero COP Memo); see also, Memorandum to Neal M. 
Halper, Director, Office of Accounting, titled ``Cost of Production and 
Constructed Value Calculation Adjustments for the Preliminary 
Determination--Productos Laminados de Monterrey, S.A. de C.V. 
(Prolamsa),'' dated January 23, 2008 (PROLAMSA COP Memo).
2. Test of Comparison Market Sales Prices
    On a product-specific basis, we compared the adjusted weighted-

[[Page 5522]]

average COP to the comparison market sales of the foreign like product, 
as required under section 773(b) of the Act, in order to determine 
whether the sale prices were below the COP. For purposes of this 
comparison, we used the COP exclusive of selling and packing expenses. 
The prices were exclusive of any applicable movement charges, direct 
and indirect selling expenses, and packing expenses.
3. Results of the COP Test
    Pursuant to section 773(b)(2)(C)(i) of the Act, where less than 20 
percent of a respondent'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.'' Where 20 percent or more of a respondent's 
sales of a given product during the POI were at prices less than COP, 
we determined that such sales have been made in ``substantial 
quantities.'' See section 773(b)(2)(C) of the Act. Further, the sales 
were made within an extended period of time, in accordance with section 
773(b)(2)(B) of the Act, because we examined below-cost sales occurring 
during the entire POI. In such cases, because we compared prices to 
POI-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.
    We found that, for certain specific products, more than 20 percent 
of Maquilacero's and PROLAMSA's sales were at prices less than the COP 
and, in addition, such sales did not provide for the recovery of costs 
within a reasonable period of time. We therefore excluded these 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 Normal Value Based on Comparison Market Prices

    Maquilacero: We calculated NV based on prices to unaffiliated 
customers (as well as those affiliated customers which passed the arm's 
length test) and matched U.S. sales to NV. We made deductions, where 
appropriate, for billing adjustments, discounts, rebates, movement 
expenses, and packing pursuant to section 773(a)(6)(B) of the Act. In 
addition, we made adjustments for differences in cost attributable to 
differences in physical characteristics of the merchandise, pursuant to 
section 773(a)(6)(C)(ii) of the Act and 19 CFR 351.411, as well as for 
differences in circumstances of sale (COS) as appropriate (i.e., 
commissions and credit), in accordance with section 773(a)(6)(C)(iii) 
of the Act and 19 CFR 351.410.
    PROLAMSA: We based comparison market prices on packed prices to 
unaffiliated customers (as well as those affiliated customers which 
passed the arm's length test) in Mexico. Starting with gross prices, we 
added or subtracted billing adjustments and rebates, where appropriate, 
and deducted early payment discounts. We adjusted the starting price 
for inland freight and insurance, where appropriate, pursuant to 
section 773(a)(6)(B)(ii) of the Act. In addition, as PROLAMSA's sales 
were all CEP sales, for comparisons made to those CEP sales, we only 
deducted Mexican credit expenses and commissions from comparison market 
prices, because U.S. credit expenses and commissions were deducted from 
U.S. price, as noted above and in accordance with section 772(c)(2) of 
the Act.
    When comparing U.S. sales with comparison market sales of similar, 
but not identical, merchandise, we also made adjustments for physical 
differences in the merchandise in accordance with section 
773(a)(6)(C)(ii) of the Act and 19 CFR 351.411. We based this 
adjustment on the difference in the variable cost of manufacturing for 
the foreign like product and subject merchandise. See 19 CFR 
351.411(b).

E. Level of Trade/Constructed Export Price Offset

    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 EP or CEP transaction. The LOT in 
the comparison market is the LOT of the starting-price sales in the 
comparison market or, when NV is based on CV, the LOT of the sales from 
which we derive SG&A expenses and profit. With respect to U.S. price 
for EP transactions, the LOT is also that of the starting-price sale, 
which is usually from the exporter to the importer. See section 
351.412(c)(i) of the Department's regulations. For CEP, the LOT is that 
of the constructed sale from the exporter to the affiliated importer. 
See section 351.412(c)(ii) of the Department's regulations. See also 
Micron Technology, Inc. v. United States, 243 F.3d 1301, 1314 (Fed. 
Cir. 2001).
    To determine whether comparison market sales are at a different LOT 
from U.S. sales, we examined 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 
different LOTs, and the difference affects price comparability, as 
manifested in a pattern of consistent price differences between the 
sales on which NV is based and comparison market sales at the LOT of 
the export transaction, the Department makes an LOT adjustment in 
accordance with section 773(a)(7)(A) of the Act. For CEP sales, we 
examine stages in the marketing process and selling functions along the 
chain of distribution between the producer and the customer. We analyze 
whether different selling activities are performed, and whether any 
price differences (other than those for which other allowances are made 
under the Act) are shown to be wholly or partly due to a difference in 
LOT between the CEP and NV. Under section 773(a)(7)(A) of the Act, we 
make an upward or downward adjustment to NV for LOT if the difference 
in LOT involves the performance of different selling activities and is 
demonstrated to affect price comparability, based on a pattern of 
consistent price differences between sales at different LOTs in the 
country in which NV is determined. Finally, if the NV LOT is at a more 
advanced stage of distribution than the LOT of the CEP, but the data 
available do not provide an appropriate basis to determine a LOT 
adjustment, we reduce NV by the amount of indirect selling expenses 
incurred in the foreign comparison market on sales of the foreign like 
product, but by no more than the amount of the indirect selling 
expenses incurred for CEP sales.
    See section 773(a)(7)(B) of the Act (the CEP offset provision).
    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). If the claimed LOTs are the same, we expect that the functions 
and activities of the seller should be similar. Conversely, if a party 
claims that LOTs are different for different groups of sales, the 
functions and activities of the seller should be dissimilar. See 
Porcelain-on-Steel Cookware from Mexico: Final Results of 
Administrative Review, 65 FR 30068 (May 10, 2000) and accompanying 
Issues and Decision Memorandum at Comment 6.
    Maquilacero: Maquilacero reported two channels of distribution in 
the comparison market (i.e., Mexico): (1) Distributors and end-users. 
Maquilacero reported its selling functions to both distributors and 
end-users in the home market as: sales forecasting, strategic/economic 
planning, advertising, sales

[[Page 5523]]

promotion, packing, inventory maintenance, order input/processing, 
direct sales personnel, market research, providing cash and early 
payment discounts, providing warranty services, providing freight and 
delivery, travel to customer location, collections, and paying 
commissions. We examined the selling activities reported for each 
channel of distribution and organized the reported selling activities 
into the following four selling functions: sales process and marketing 
support, freight and delivery, inventory maintenance and warehousing, 
and warranty and technical services. We found that Maquilacero's level 
of selling functions to its home market customers for each of the four 
selling function categories did not vary significantly by channel of 
distribution. See Maquilacero's Supplemental Section A Response at 
Exhibit 16. Therefore, we preliminarily conclude that the selling 
functions for the reported channels of distribution constitute one LOT 
in the comparison market.
    Maquilacero reported that all of its sales to the United States 
were EP sales made through two channels of distribution, i.e., 
distributors and end-users. For EP sales, we examined the selling 
activities related to each of the selling functions between Maquilacero 
and its U.S. customers. Maquilacero reported its selling functions to 
both distributors and end-users in the United States as: sales 
forecasting, strategic/economic planning, engineering services, 
advertising, sales promotion, packing, inventory maintenance, order 
input/processing, direct sales personnel, market research, providing 
cash and early payment discounts, providing warranty services, 
providing freight and delivery, travel to customer location, 
collections, and paying commissions. We examined the four selling 
function categories and found that Maquilacero's selling functions for 
its U.S. sales did not vary significantly by channel of distribution. 
Therefore, we preliminary determine that Maquilacero's U.S. sales 
constitute a single LOT.
    We then compared the selling functions Maquilacero provided in the 
comparison market LOT with the selling functions provided to the U.S. 
LOT. On this basis, we determined that the comparison market LOT is 
similar to Maquilacero's U.S. LOT. We made this determination based 
upon the minor differences that exist between Maquilacero's comparison 
and U.S. markets in terms of the selling functions that are provided to 
Maquilacero's customers in each market. Moreover, we find that the 
degree to which Maquilacero provides these identical selling functions 
for its customers in both markets to be similar (i.e., sales 
forecasting, strategic/economic planning, advertising and promotion, 
packing, order input/processing, market research, cash and early 
payment discounts, warranty service, sales and marketing support, 
technical assistance, and after-sales services). Therefore, we 
preliminarily determine that Maquilacero is not entitled to a LOT 
adjustment.
    PROLAMSA: In the present investigation, PROLAMSA did not request a 
LOT adjustment. See PROLAMSA's Section B Response at B-27. In order to 
determine whether the comparison market sales were at different stages 
in the marketing process than the U.S. sales, we reviewed the 
distribution system in each market (i.e., the ``chain of 
distribution''),\1\ including selling functions, class of customer 
(customer category), and the level of selling expenses for each type of 
sale.
---------------------------------------------------------------------------

    \1\ The marketing process in the United States and comparison 
market begins with the producer and extends to the sale to the final 
user or customer. The chain of distribution between the two may have 
many or few links, and the respondent's sales occur somewhere along 
this chain. In performing this evaluation, we considered PROLAMSA's 
narrative response to properly determine where in the chain of 
distribution the sale occurs.
---------------------------------------------------------------------------

    PROLAMSA reported one LOT in the comparison market, Mexico, with 
two channels of distribution to five classes of customers: (1) Direct 
sales to distributors, builders (construction), and industrial end-
users (collectively, Channel 1), and (2) direct sales to automotive and 
original equipment manufacturers (OEMs) and furniture producers 
(collectively, Channel 2). PROLAMSA further identified its customer 
categories by those that typically order stock subject merchandise 
(i.e., Channel 1 customers), and those that typically order non-stock 
(or ``made to order'') subject merchandise (i.e., Channel 2 customers). 
See PROLAMSA's Section A Response at A-11 through A-12; see also, 
PROLAMSA's Section A Response at Exhibit A-5 and PROLAMSA's 
Supplemental A Response at Exhibit A-18.
    Based on our review of the record evidence, we find that comparison 
market sales to both customer categories and through both channels of 
distribution were substantially similar with respect to selling 
functions and stages of marketing. See PROLAMSA's Supplemental A 
Response at Exhibit A-18 (i.e., the revised selling functions chart). 
Specifically, PROLAMSA performed the same selling functions at a 
similar level of performance for sales in both comparison market 
channels of distribution (e.g., packing, order input/processing, direct 
sales personnel and marketing support, technical assistance, rebates, 
cash discounts, commissions, freight and delivery). Id. We find that 
the only meaningful difference between the two channels in terms of the 
services provided in the stages of marketing (and the degree of 
performance of those services) is that PROLAMSA provides inventory 
maintenance services at a higher degree for its Channel 1 customers. We 
do not find this difference alone to be sufficient for finding more 
than one LOT. Accordingly, we preliminarily find that PROLAMSA had only 
one LOT for its comparison market sales.
    PROLAMSA reported one LOT with regard to its CEP sales through 
Prolamsa, Inc., with two channels of distribution in the United States, 
and with four classes of customers for those CEP sales: (1) Sales 
through U.S. affiliate (CEP sales) to other producers of LWR pipe and 
tube, distributors and service centers, and metal building and 
component manufacturers (collectively, Channel (1) and (2) sales 
through U.S. affiliates (CEP sales) to OEMs (Channel 2). Similar to its 
comparison market customers, PROLAMSA further identified its U.S. 
customer categories by those that typically order stock subject 
merchandise (i.e., Channel 1 customers), and those that typically order 
non-stock (or ``made to order'') subject merchandise (i.e., Channel 2 
customers). See PROLAMSA's section A Response at A-11 through A-12; see 
also, PROLAMSA's Supplemental A Response at Exhibit A-18.
    For CEP sales, we consider only the selling activities reflected in 
the price after the deduction of expenses and CEP profit under section 
772(d) of the Act. See Micron Technology Inc. v. United States, 243 
F.3d 1301, 1314-1315 (Fed. Cir. 2001). We reviewed the selling 
functions and services performed by PROLAMSA on CEP sales for both 
channels of distribution relating to the CEP LOT, as described by 
PROLAMSA in its questionnaire responses, after these deductions. We 
have determined that the selling functions performed by PROLAMSA on its 
U.S. sales (all of which are CEP sales) are similar because for all 
U.S. sales, PROLAMSA provides almost no selling functions to its U.S. 
affiliate, Prolamsa, Inc., in support of either channel of 
distribution. PROLAMSA reported that the only services it provided for 
its CEP sales were packing, freight and delivery direct to the U.S. 
customer (which included documentation preparation related to packing 
and shipment of the

[[Page 5524]]

merchandise to the U.S. port of importation) \2\ and very limited 
sales/marketing support services through customer visits.
---------------------------------------------------------------------------

    \2\ PROLAMSA explained in its quetionnaire responses that the 
U.S. affiliate, Prolamsa, Inc., does not take physical possession of 
the merchandise when it arrives in the United States. See PROLAMSA's 
Supplemental A Response at A-8 through A-9.
---------------------------------------------------------------------------

    See PROLAMSA's Supplemental A Response at A-9 and Exhibit A-18. 
Accordingly, because the selling functions provided by PROLAMSA for CEP 
sales are comparably minimal, and the selling functions provided by 
Prolamsa, Inc. to unaffiliated customers in the United States in both 
channels of distribution are substantially similar and provided at the 
same degree of service (i.e., order input/processing, direct sales 
personnel, provide cash discounts, commissions, warranty service, 
visits to customers, calls and correspondence to U.S. customers), we 
preliminarily determine that there is one CEP LOT in the U.S. market. 
As PROLAMSA made no direct sales to unaffiliated customers in the 
United States during the POI, there is no additional analysis required 
to compare LOTs in the U.S. market.
    According to section 773(a)(7)(B) of the Act, a CEP offset is 
appropriate when the LOT in the home market is at a more advanced stage 
than the LOT of the CEP sales and there are no data available to 
determine the existence of a pattern of price difference. PROLAMSA 
reported that it provided minimal selling functions and services for 
the one (CEP) LOT in the United States and that, therefore, the 
comparison market LOT is more advanced than the CEP LOT. Based on our 
analysis of the channels of distribution and selling functions 
performed by PROLAMSA for sales in the comparison market and CEP sales 
in the U.S. market, we preliminarily find that the comparison market 
LOT is at a more advanced stage of distribution when compared to CEP 
sales because PROLAMSA provides many more selling functions in the 
comparison market at a higher level of service as compared to selling 
functions performed for its CEP sales (i.e., inventory maintenance, 
order input/processing, direct sales personnel, sales/marketing 
support, technical assistance, provide rebates, rebates, cash 
discounts, pay commissions, provide warranty service, provide freight 
and delivery, visit customers, and call and correspond with customers). 
Thus, we find that PROLAMSA's comparison market sales are at a more 
advanced LOT than its CEP sales. There was only one LOT in the 
comparison market, and there are no data available to determine the 
ex