[Federal Register Volume 60, Number 5 (Monday, January 9, 1995)]
[Notices]
[Pages 2378-2382]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-450]
-----------------------------------------------------------------------
DEPARTMENT OF COMMERCE
International Trade Administration
[A-201-504]
Porcelain-on-Steel Cooking Ware From Mexico; Final Results of
Antidumping Duty Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of Final Results of Antidumping Duty Administrative
Review.
-----------------------------------------------------------------------
SUMMARY: On February 11, 1994, the Department of Commerce (the
Department) published the preliminary results of its administrative
review of the antidumping duty order on porcelain-on-steel cooking ware
(POS cooking ware) from Mexico. The review covers two manufacturers/
exporters of this merchandise to the United States and the period
December 1, 1990 through November 30, 1991.
Based on our analysis of the comments received and the corrections
of certain clerical and computer program errors, we have changed the
preliminary results.
EFFECTIVE DATE: January 9, 1995.
FOR FURTHER INFORMATION CONTACT: Lorenza Olivas or Rick Herring, Office
of Countervailing Compliance, Import Administration, International
Trade Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-
2786.
SUPPLEMENTARY INFORMATION:
Background
On February 11, 1994, the Department published in the Federal
Register (59 FR 6616) the preliminary results of its administrative
review of the antidumping duty order (51 FR 43415) on POS cooking ware
from Mexico for the period December 1, 1990 through November 30, 1991.
The review covers two manufacturers/exporters, Acero Porcelanizado,
S.A. de C.V. (APSA) and CINSA, S.A. de C.V. (CINSA). The Department has
now completed that administrative review in accordance with section 751
of the Tariff Act of 1930, as amended (the Act).
Scope of Review
Imports covered by this review are shipments of POS cooking ware,
including tea kettles, which do not have self-contained electric
heating elements. All of the foregoing are constructed of steel and are
enameled or glazed with vitreous glasses. This merchandise is currently
classifiable under Harmonized Tariff Schedule (HTS) item number
7323.94.00. Kitchenware currently entering under HTS item number
7323.94.00.30 is not subject to the order. The HTS item number is
provided for convenience and Customs purposes. The written description
remains dispositive.
Analysis of Comments Received
We gave interested parties an opportunity to comment on the
preliminary results. At the request of the respondents, we held a
hearing on March 28, 1994. We received comments and rebuttals from both
respondents and the petitioner, General Housewares Corporation (GHC).
Comment 1: CINSA contends that the Department incorrectly
calculated depreciation on a revalued cost basis. CINSA states that
since the Department only uses revalued depreciation for
hyperinflationary economies, and Mexico was not experiencing
hyperinflation during the review period, the Department should use
depreciation expenses on an historical basis.
Petitioner responds that the Department's use of depreciation
expenses on a revalued basis in cases involving hyperinflationary
economies does not mean that its practice is to limit the use of
depreciation expenses based on a revalued basis to only those cases
involving hyperinflationary economies. Petitioner furthermore argues
that, since CINSA reported its depreciation on a revalued basis, as
required by the Mexican Generally Accepted Accounting Principles
(GAAP), for its audited financial statements, CINSA should also report
cost of production (COP) and constructed value (CV) in this manner.
Department's Position: We disagree with respondent. The Department
followed Mexican GAAP and adjusted CINSA's COP data to reflect the
revalued depreciation. This approach coincided with CINSA's financial
statements which were also prepared in accordance with Mexican GAAP. It
is the Department's policy to adhere to the home market GAAP as long as
the home market GAAP reasonably reflects actual costs. Thus, Commerce
has determined that when a foreign country allows a company to revalue
its assets, as opposed to relying upon historical cost, and when a
company reflects the revalued basis in its financial statements, it is
appropriate to accept the financial statements as reflecting actual
cost. See, Final Determination of Sales at Less Than Fair Value:
Circular Welded Nonalloy Steel Pipe From the Republic of Korea (57 FR
42942; September 17, 1992). See also, POS Cooking Ware From Mexico;
Final Results of Antidumping Administrative Review (58 FR 43327; August
16, 1993) (Mexican Cooking Ware Fourth Review Final Results).
Comment 2: Assuming that the Department should continue to rely on
the revalued depreciation expense as a component of fixed overhead
costs, CINSA claims that the Department incorrectly calculated its
preliminary COP adjustment. CINSA believes that the ``best information
available'' (BIA) methodology used by the Department grossly overstates
the amount of revalued depreciation expense, and is not appropriate
since the Department can derive a suitable fixed overhead expense
factor from available information provided in CINSA's responses of May
18, 1992 and June 18, 1993.
Petitioner, on the other hand, contends that the use of BIA for
CINSA's unreported depreciation is justified and reasonable. The
petitioner asserts that CINSA did not provide the Department with a
complete and accurate response to the COP questionnaire.
Department's Position: The Department has reviewed the information
contained in CINSA's responses and found that adequate data was
available for a more accurate calculation of COP. Therefore, BIA was
not required since the COP questionnaire responses provided the
necessary information for calculating an appropriate fixed overhead
factor. Accordingly, the Department has revised the calculation of
fixed overhead based on information contained in CINSA's responses.
Comment 3: CINSA claims that the Department incorrectly increased
the COP to account for mandatory profit [[Page 2379]] sharing payments
made to its employees. CINSA contends that these payments are not
related to the COP. CINSA explains that these payments are determined
based upon the amount of profit earned by the company and, therefore,
should be treated in the same manner as income taxes and excluded from
COP. CINSA states that the Department's administrative precedent
excludes from COP and CV non-operating expenses unrelated to the
production of the subject merchandise. CINSA cites Television Receivers
from Japan (56 FR 56189 (1991)) where the Department stated that ``[I]n
determining the cost of the subject merchandise, the Act does not
provide us with the authority to include income or expenses that are
unrelated to the product's manufacture.'' CINSA further states that if
the Department does include profit sharing in COP and CV, the
adjustment should be based on information derived from the financial
statement of CINSA's corporate parent rather than information derived
from the financial statement of the operating division.
Petitioner, on the other hand, states that the Department correctly
included the profit sharing payments in its calculated COP. Petitioner
contends the profitability of the company is derived from production
and is directly related to production efficiency. Petitioner also
states that these payments are part of the total compensation paid to
employees and should be treated no differently than salaries and other
employee benefits that are directly related to production.
Petitioner further contends that the Department should base the
profit sharing expenses on CINSA's financial statements and not on
CINSA's parent company, Grupo Industrial Saltillo, S.A. de CV (GIS),
since CINSA's experience more accurately reflects the profit sharing
expenses of the entity producing the products. Furthermore, according
to petitioner, Mexican law requires that certain companies make
payments to employees based on the profit of the company. CINSA
reported these payments in its financial statements, but excluded them
in its COP and CV.
Department's Position: We disagree with respondent. Mexican GAAP
requires that the profit sharing costs be reflected in a company's
financial statement. The profit sharing payments are mandatory
according to Mexican law. The payments represent compensation to
employees involved in the production of the merchandise and
administration of the company. Therefore, these payments are labor
costs related to the product's manufacture and are part of CINSA's COP
for the subject merchandise. We agree with petitioner that the
calculation should be based on CINSA's financial statements and not the
parent company's financial statement in order to capture the profit
sharing costs most closely attributable to the subject merchandise.
See, Final Determination of Sales at Less Than Fair Market Value;
Certain Hot-Rolled Carbon Steel Flat Products and Certain Cut-to-Length
Carbon Steel Plate from Canada (58 FR 37099; July 9, 1993).
Comment 4: CINSA claims that the Department improperly limited
CINSA's short-term interest income that was used to offset interest
expense incurred by its corporate parent. CINSA contends that the
Department's current administrative practice of limiting the net short-
term interest expense does not reflect the economic reality of the
information in the financial statement.
Petitioner argues that the Department correctly excluded net
financial income from CINSA's COP and CV. The petitioner contends that
interest income does not directly relate to the manufacturing cost
associated with the production of the product. Petitioner further
states that using CINSA's methodology results in higher margins for
companies with long term investments than for companies with short-term
investments.
Department's Position: We disagree with respondent. It is the
Department's normal practice to allow short-term interest income to
offset financing costs only up to the amount of such financing costs.
See, Frozen Concentrated Orange Juice from Brazil; Final Results of
Antidumping Administrative Review (55 FR 26721; June 29, 1990); Brass
Sheet and Strip from Canada; Final Results of Antidumping
Administrative Review (55 FR 31414; August 2, 1990); and Final
Determination of Sales at less than Fair Market Value; Sweaters from
Taiwan (55 FR 34585; August 23, 1990). The Department reduces interest
expense by the amount of short-term income to the extent finance costs
are included in COP. Using total short-term interest income in excess
of interest expense to reduce production cost, as suggested by CINSA,
would permit companies with large short-term investment activity to
sell their products below the COP. Accordingly, we limited the amount
of the offset to the amount of the expense from the related activity.
Comment 5: CINSA and APSA argue that the Department's new
methodology of adjusting U.S. price and foreign market value (FMV) for
home market value added tax (IVA) is contrary to law. Respondent
contends that by statute, the Department is directed to add to U.S.
price ``the amount of any taxes imposed in the country of exportation''
which have not been collected by reason of exportation of the
merchandise to the United States. 19 U.S.C. 1677a(d)(1)(C).
Furthermore, the statute expressly sets the additions and subtractions
that are to be made and does not authorize additional adjustment to
those adjustments. Respondents further argue that Court of
International Trade (CIT) has ruled that the Department must ``add the
full amount of VAT [such as IVA] paid on each sale in the home market
FMV without adjustment.'' See, Torrington Co. v. United States, 824 F.
Supp. 1095, 1101 (1993). Respondents also argue that an adjustment to
the amount of IVA charged by CINSA on its home market sales to parallel
the Department's further adjustment to the imputed IVA on the U.S.
price is not a circumstance-of-sale adjustment and, therefore, is
outside the scope of the circumstance-of-sale provision, which,
according to respondents, is strictly limited to differences in selling
terms or conditions. To support their argument, respondents cite Zenith
Electronics Corp. v. United States, 988 F.2d 1573, 1581 (Fed. Cir.
1993) (Zenith), where the CIT held that the circumstances-of-sale
adjustment does not encompass adjustments for commodity taxes
specifically covered by section 1677A (d)(1)(C). Respondents contend
that, although the Department claims to be following Zenith by applying
a methodology that will not create margins where none exist, the
Department's tax adjustment is nothing less than another attempt to
achieve tax neutrality. Respondents suggest that the Department should
not try to achieve tax neutrality and should only add to U.S. price the
amount of the IVA tax rate multiplied by the U.S. price, net of
discounts and rebates.
Petitioner does not oppose the Department's new methodology.
Department's Position: We disagree with respondents. Respondents'
suggested methodology would lead to margin creation where none would
otherwise exist. Recent case law makes it clear that there should be no
margin creation where no margin would exist but for the imposition of a
value added tax in the home market. See, Federal-Mogul Corporation v.
United States, 813 F. Supp 856, 864-5 (1993). While the new methodology
may not be specifically authorized by the Act, the Department has
determined that it is neither contrary to the spirit of the case law,
nor prohibited by the language of the Act. As such, the methodology is
within the Department's discretion. [[Page 2380]]
The Department disagrees with respondents' assertion that this
methodology is contrary to Zenith. We have acted reasonably in adopting
the methodology set forth in Federal-Mogul, which was found by the CIT
in Federal-Mogul to be consistent with Zenith, the higher court
holding. (See also, The Torrington Co. v. United States Slip Op. 94-51
(CIT March 31, 1994), wherein the CIT upheld the new methodology for
the value added tax adjustment without comment). See also, Avesta
Sheffield, et al, v. United States, Slip Op. 94-53 (CIT March 31,
1994).
Comment 6: CINSA states that the Department failed to properly
calculate the amount of IVA in COP. CINSA claims that the Department
added the IVA collected by CINSA on HM sales to cost rather than the
IVA incurred by CINSA on the purchase of direct raw materials, variable
overhead and packaging materials and reported in its COP response.
Petitioner does not oppose the Department's methodology but
suggests that it would achieve the same objectives by comparing the
home market sales with COP, exclusive of IVA, as used in the prior
administrative review of this case. In the event the Department adjusts
the amount of tax included in COP, petitioner notes that the difference
in the tax treatment would yield a corresponding increase in CINSA's
profit on home market sales. Therefore, if the Department makes the COP
change requested by CINSA, the Department must also increase profit for
CV to reflect CINSA's reduced COP.
Department's Position: Value added taxes are paid on inputs and,
therefore, are costs incurred in production. Upon the sale of the
product, value added taxes are reimbursed to CINSA by the ultimate
consumer. Any amount of tax which is in excess of the amount reimbursed
is payable to the Mexican government. The Department's calculations
must reflect the economic reality that CINSA does not receive a benefit
from collecting and paying IVA. Therefore, because COP is compared to
home market price which includes the entire IVA paid, to be neutral,
our calculations of COP must take into account the entire IVA paid (a
portion of which is paid on the inputs, and the remainder of which is
due to the government). The amount of tax is based upon information
reported in the home market sales tape which includes both components.
See, Mexican Cooking Ware Fourth Review Final Results.
Comment 7: CINSA argues that, in its price-to-price comparison, the
Department incorrectly adjusted the U.S. price to account for the
assessed countervailing duties. CINSA states that, pursuant to 19
U.S.C. 1677a(d)(1)(D), the Department must add to U.S. price any
countervailing duties imposed on the subject product to offset an
export subsidy. CINSA points out that for all U.S. sales made between
January 1, 1991 and June 5, 1991 the applicable rate is 2.18 percent.
Thus, for all U.S. sales made between those dates, the Department
should add 2.18 percent to U.S. price. Instead, the Department limited
the period in which that amount was assessed from January 1, 1991 to
January 5, 1991.
Petitioner contends that the Department is only required to add to
the U.S. price the amount of any countervailing duty ``imposed'' to
offset an export subsidy. Petitioner states that there has been no
countervailing duty imposed, because upon liquidation of the entries at
issue, CINSA will be returned the ``assessed amount.''
Department's Position: We agree with respondent and will make the
correction.
Comment 8: CINSA alleges that the Department failed to make the
several corrections to information contained in CINSA's July 15, 1992,
supplemental submission, which was provided in a timely fashion:
A. In its COP/CV computer file, CINSA overstated the COP of certain
items by failing to divide the cost of these items by four to reflect
that four items were contained in one package. CINSA states that the
Department should make this division.
B. CINSA also overstated the weight of article 1065910 by a factor
of four. To derive the per unit weight, CINSA asserts that the
Department must divide the weight by the number of items contained in
the package.
C. Further, CINSA omitted the weights in certain items reported in
its home market and U.S. sales tapes. CINSA asserts that the Department
should include these corrected weights in the computer tape, since the
weights are necessary to calculate the freight charges attributable to
both home market and U.S. sales of these items.
D. CINSA reported the incorrect number of units sold and the unit
price for one home market sale of item number 1018001, and for one home
market sale of item number 1061701, CINSA reported the incorrect unit
price. CINSA asserts that the Department should make these corrections.
Department's Position: We agree with respondent. Since the above
corrections were submitted in a timely manner, we will make those
corrections where appropriate.
Comment 9: CINSA asserts that the COP data reported for item
numbers 10158 and 19177 in its COP sales tape submission were based on
the cost of producing two units and not based on a single cost.
Therefore, CINSA stated that the Department should use the cost
information included in the submission to derive the single unit COP
for these items.
Petitioner argues that there is no evidence of this fact on the
record to support CINSA's claim.
Department's Position: We agree with petitioner. There is no
evidence in the administrative record satisfactorily demonstrating that
these two items were not based on single unit costs.
Comment 10: Petitioner contends that CINSA incorrectly weight-
averaged factory overhead included in the COP and CV. Petitioner states
that the respondent weight-averaged using 13 months rather than the 12-
month review period.
CINSA replies that the methodology employed for weight-averaging
cost of certain production factors is reasonable, since any adjustment
to this calculation would have a de minimis impact on CINSA's COP and
any final antidumping margin.
Department's Position: The methodology used by the respondent is
inappropriate because the review period covers 12 months, not 13.
However, the required adjustments to correct cost of manufacturing
would have an insignificant impact on COP and no impact on the margin.
Therefore, the Department did not adjust for the miscalculation.
Comment 11: APSA claims the antidumping duty margin reported in the
preliminary results published in the Federal Register does not
accurately reflect the weighted-average margin calculation released to
counsel by the Department in its disclosure documents.
Department's Position: We agree and have made the correction.
Comment 12: Petitioner contends CINSA's reported inland freight
expenses should be disallowed, since it includes its factory-to-
warehouse pre-sale inland freight expenses. Petitioner argues that
factory-to-warehouse freight charges incurred on home market sales
cannot be deducted as direct sales expenses in purchase price
comparisons because those charges were incurred prior to the date of
sale. Petitioner cites The Ad Hoc Committee of AZ-NM-TX-FL Producers of
Gray Portland Cement v. United States, CAFC Opinion 93-1239 (Jan 5,
1994) and Gray Portland Cement and Clinker From Japan (59 FR 6614;
February 11, 1994). The Court of Appeals for the Federal Circuit (CAFC)
[[Page 2381]] held that the FMV value provision of the antidumping
statute does not authorize a deduction from FMV for pre-sale
transportation costs within the exporting country. According to
petitioner, if the Department cannot separate home market direct
movement expenses from the home market indirect expenses, then it must
treat the entire reported amount as home market indirect expenses.
CINSA argues that petitioner misinterprets the CAFC decision in Ad
Hoc Committee, claiming that the CAFC's decision was based solely upon
the Department's stated rationale for its decision, i.e.; the
Department's inherent authority to fill gaps in the statutory framework
and to make ex-factory comparisons in order to achieve an ``apples to
apples'' comparison. Thus, the CAFC's decision did not decide if any
alternative authority existed under which the Department could have
adjusted FMV for the pre-sale transportation expense, including the
circumstance-of sale adjustment, which is specifically authorized by
statute and regulation. Therefore, the Department should not simply
exclude pre-sale transportation expenses from the FMV calculation as
suggested by petitioner, but should be deducted from FMV because such
expenses are directly related to the sale of the subject merchandise in
the home market.
According to CINSA, petitioner also misstates the Department's
current treatment of pre-sale selling expenses. By assuming that
CINSA's pre-sale transportation expenses to the warehouses are indirect
selling expenses, petitioner asserts that the entire transportation
expense should be disallowed because CINSA's combined indirect and
direct transportation expenses cannot be separated. According to CINSA,
its reported pre-sale and post-sale transportation expenses are both
directly related selling expenses and both equally qualify as a
circumstance-of-sales adjustment.
Department's Position: We have concluded that, in light of the
CAFC's decision in Ad Hoc Committee, the Department no longer can
deduct home market movement charges from foreign market pursuant to its
inherent power to fill in gaps in the antidumping statute. We instead
will adjust for those expenses under the circumstance-of-sale provision
of 19 CFR 353.56 and the exporter's selling price (ESP) offset
provision of 19 CFR 353.56(b)(1) and (2), as appropriate, in the
following manner.
When U.S. price is based on purchase price, we only adjust for home
market movement charges through the circumstance-of-sale provision of
19 CFR 353.56. Under this adjustment, we capture only direct selling
expenses, which include post-sale movement expenses. We will treat pre-
sale movement expenses as direct expenses if those expenses are
directly related to the home market sales of the merchandise under
consideration. In order to determine whether pre-sale movement expenses
are direct in this case, the Department will examine the respondent's
pre-sale warehousing expenses, since the pre-sale movement charges
incurred in positioning the merchandise at the warehouse are, for
analytical purposes, inextricably linked to pre-sale warehousing
expenses. If pre-sale warehousing constitutes an indirect expense, the
expense involved in getting the merchandise to the warehouse also must
be indirect. Conversely, a direct pre-sale warehousing expense
necessarily implies a direct pre-sale movement expense. We note that
although pre-sale warehousing expenses in most cases have been found to
be indirect expenses, these expenses may be deducted from FMV as a
circumstance-of-sale adjustment in a particular case if the respondent
is able to demonstrate that the expenses are directly related to the
sales under consideration.
When U.S. price is based on ESP, the Department uses the
circumstance-of-sale adjustment in the same manner as in purchase price
situations. Additionally, under the ESP offset provision set forth in
19 CFR 353.56(b)(1) and (2), we will adjust for any pre-sale movement
charges which are treated as indirect selling expenses.
Therefore, we requested that respondent provide separate factory-
to-warehouse transportation expenses. Based on the information
provided, in the final results, we deducted only the post-sale
transportation expenses in the home market from FMV, since the pre-sale
warehousing and, thus, pre-sale inland freight were not shown to be
directly related to the sales in question.
Final Results of the Review
As a result of our review, we determine the margins to be:
------------------------------------------------------------------------
Margin
Manufacturer/exporter Time period (percent)
------------------------------------------------------------------------
APSA......................... 12/01/90- 4.66
11/30/91
CINSA........................ 12/01/90- 27.96
11/30/91
------------------------------------------------------------------------
The Department will instruct the Customs Service to assess
antidumping duties on all appropriate entries. Individual differences
between U.S. price and FMV may vary from the percentages stated above.
The Department will issue appraisement instructions directly to the
Customs Service.
Furthermore, the following deposit requirements will be effective
upon publication of this notice of final results of administrative
review for all shipments of the subject merchandise, entered, or
withdrawn from warehouse, for consumption on or after the publication
date, as provided by section 751(a)(1) of the Act: (1) The cash deposit
rate for the reviewed companies will be as outlined above; (2) for
previously reviewed or 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 less-than-fair-
value (LTFV), 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 will be 29.52 percent,
the ``all others'' rate established in the LTFV investigation. See,
Floral Trade Council v. United States, Slip Op. 93-79, and Federal
Mogul Corp. v. United States, Slip Op. 93-83.
These deposit requirements, when imposed, shall remain in effect
until publication of the final results of the next administrative
review.
This notice also serves as a final reminder to importers of their
responsibility under 19 CFR 353.26 to file a certificate regarding the
reimbursement of antidumping duties prior to liquidation of the
relevant entries during the review period. Failure to comply with this
requirement could result in the Secretary's presumption that
reimbursement of antidumping duties occurred and the subsequent
assessment of double antidumping duties. This notice serves as the only
reminder to parties subject to administrative protective order (APO) of
their responsibilities concerning the return or destruction of
proprietary information disclosed under APO in accordance with 19 CFR
353.34(d). Failure to comply is a violation of the APO.
This administrative review and notice are in accordance with
section 751(a)(1) of the Act, as amended (19 U.S.C. 1675(a)(1)) and 19
CFR 353.22.
[[Page 2382]] Dated: December 21, 1994.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 95-450 Filed 1-6-95; 8:45 am]
BILLING CODE 3510-DS-P
