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Circular Welded Standard Pipes Not Subject to AD on Standard Pipe From Mexico

Certain types of circular welded non-alloy steel pipe exported from the U.S. to Mexico for reprocessing and subsequent re-importation are not covered by the antidumping duty order on Mexican standard pipe, the Commerce Department said in a March 13 scope ruling. The products’ country of origin is the U.S., not Mexico, the department said.

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The ruling was sought by pipe producer Productos Laminados de Monterrey and its affiliate PML Steel Tubes, known collectively as Prolamsa.

The merchandise in question was six models of Schedule 40 pipe, 1.315 inches in diameter, produced from either Mexican-origin or U.S.-origin steel coil. Some models included threading or plastic coverings added in Mexico. Prolamsa said it manufactured the pipes at two affiliated facilities in Texas, but that the pipes are too large to be processed at those facilities, so Prolamsa ships them across the border to be processing before re-entering them to the U.S.

The AD order covers circular welded non-alloy steel pipes and tubes, generally known as standard pipe, that are not more than 16 inches in diameter and come from Mexico.

Commerce said that the language of the scope of the order was enough on its own for it to make its determination.

Prolamsa’s products meet the physical descriptions of the merchandise covered by the AD order, the department said. However, Commerce said it next had to determine the pipes’ country of origin and conduct a substantial transformation analysis, which looks for changes in things such as the products’ class or kind, physical characteristics and intended end-use, as well as to the value added to the product after processing and the nature, sophistication, and level of investment in the processing facilities.

The pipes, when re-entered in the U.S., are not of a different class or kind than they were when they left, Commerce decided. It said that the “chemical and dimensional” characteristics of the pipes also are unchanged upon reentry, and that the hydrostatic testing that occurs during processing “confirms, rather than imparts,” the pipes’ technical characteristics.

Processing in Mexico also doesn't change the pipes’ intended use as fluid conductors, Commerce said, and the value added by that processing is not a “major portion of the overall value of the product.” Finally, it said that the nature of that processing was “inexpensive, common, simple, and unsophisticated.”

The level of investment in the third country or countries is a factor Commerce may consider in conducting a substantial transformation analysis. Prolamsa does invest a large amount of money in Mexico, but “with regard specifically to its Mexican-finished pipe, its costs are not properly characterized as ‘investment,’” Commerce said, citing information that was redacted from the public version of the ruling.

As a result, the pipes’ country of origin is the U.S., not Mexico, the department said. Therefore, it said, they are not covered by the AD order on standard pipe from Mexico.