[Federal Register Volume 63, Number 28 (Wednesday, February 11, 1998)]
[Notices]
[Pages 6891-6899]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-3482]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-588-823]
Professional Electric Cutting Tools From Japan; 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.
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SUMMARY: On August 8, 1997, the Department of Commerce (the Department)
published the preliminary results of its administrative review of the
antidumping duty order on professional electric cutting tools (PECTs)
from Japan. This review covers the period of July 1, 1995 through June
30, 1996.
We gave interested parties an opportunity to comment on our
preliminary results. Based on our analysis of the comments received, we
have changed the results from those presented in the preliminary
results of review.
EFFECTIVE DATE: February 11, 1998.
FOR FURTHER INFORMATION CONTACT: Stephen Jacques, AD/CVD Enforcement
Group III, Office 9, Import Administration, International Trade
Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, N.W., Washington, DC 20230; telephone: (202) 482-
1391.
SUPPLEMENTARY INFORMATION:
The Applicable Statute
Unless otherwise indicated, all citations to the Tariff Act of
1930, as
[[Page 6892]]
amended (the Act) are references to the provisions effective January 1,
1995, the effective date of the amendments made by the Uruguay Rounds
Agreements Act (URAA). In addition, unless otherwise indicated, all
references to the Department's regulations as codified at 19 CFR part
353, as they existed on April 1, 1996. Since the new regulations do not
apply in these final results, we should note that whenever the new
regulations are cited, they operate as a restatement of the
Department's interpretation of the Act. See, 62 FR 27296, 27378 (May
19, 1997).
Background
On August 8, 1997, we published in the Federal Register (62 FR
42750) the preliminary results of administrative review of the
antidumping duty order on PECTs from Japan (58 FR 37461); July 12,
1993. We received case briefs from the respondent, Makita Corporation
and Makita U.S.A., Inc. (Makita) and the petitioner, Black and Decker
(U.S.), Inc. (Black & Decker) on September 22, 1997. Petitioner and
respondent submitted rebuttal briefs on September 29, 1997. We held a
public hearing on October 29, 1996. The Department extended the final
results of this review until February 4, 1998. We are conducting this
administrative review in accordance with section 751 of the Act.
Scope of the Review
Imports covered by this review are shipments of PECTs from Japan.
PECTs may be assembled or unassembled, and corded or cordless.
The term ``electric'' encompasses electromechanical devices,
including tools with electronic variable speed features. The term
``assembled'' includes unfinished or incomplete articles, which have
the essential characteristics of the finished or complete tool. The
term ``unassembled'' means components which, when taken as a whole, can
be converted into the finished or unfinished or incomplete tool through
simple assembly operations (e.g., kits).
PECTs have blades or other cutting devices used for cutting wood,
metal, and other materials. PECTs include chop saws, circular saws, jig
saws, reciprocating saws, miter saws, portable bank saws, cut-off
machines, shears, nibblers, planers, routers, joiners, jointers, metal
cutting saws, and similar cutting tools.
The products subject to this order include all hand-held PECTs and
certain bench-top, hand-operated PECTs. Hand-operated tools are
designed so that only the functional or moving part is held and moved
by hand while in use, the whole being designed to rest on a table top,
bench, or other surface. Bench-top tools are small stationary tools
that can be mounted or placed on a table or bench. They are generally
distinguishable from other stationary tools by size and ease of
movement.
The scope of the PECT order includes only the following bench-top,
hand-operated tools: cut-off saws; PVC saws; chop saws; cut-off
machines, currently classifiable under subheading 8461 of the
Harmonized Tariff Schedule of the United States (HTSUS); all types of
miter saws, including slide compound miter saws and compound miter
saws, currently classifiable under subheading 8465 of the HTSUS; and
portable band saws with detachable bases, also currently classifiable
under subheading 8465 of the HTSUS.
This order does not include: professional sanding/grinding tools;
professional electric drilling/fastening tools; lawn and garden tools;
heat guns; paint and wallpaper strippers; and chain saws, currently
classifiable under subheading 8508 of the HTSUS.
Parts or components of PECTs when they are imported as kits, or as
accessories imported together with covered tools, are included within
the scope of this order.
``Corded'' and ``cordless'' PECTs are included within the scope of
this order. ``Corded'' PECTs, which are driven by electric current
passed through a power cord, are, for purposes of this order, defined
as power tools which have at least five of the following seven
characteristics:
1. The predominate use of ball, needle, or roller bearings (i.e., a
majority or greater number of the bearings in the tool are ball,
needle, or roller bearings;
2. Helical, spiral bevel, or worm gearing;
3. Rubber (or some equivalent material which meets UL's
specifications S or SJ) jacketed power supply cord with a length of 8
feet or more;
4. Power supply cord with a separate cord protector;
5. Externally accessible motor brushes;
6. The predominate use of heat treated transmission parts (i.e., a
majority or greater number of the transmission parts in the tool are
heat treated); and
7. The presence of more than one coil per slot armature.
If only six of the above seven characteristics are applicable to a
particular ``corded'' tool, then that tool must have at least four of
the six characteristics to be considered a ``corded'' PECT.
``Cordless'' PECTs, for the purposes of this order, consist of
those cordless electric power tools having a voltage greater than 7.2
volts and a battery recharge time of one hour or less.
PECTs are currently classifiable under the following subheadings of
the HTSUS: 8508.20.00.20, 8508.20.00.70, 8508.20.00.90, 8461.50.00.20,
8465.91.00.35, 85.80.00.55, 8508.80.00.65 and 8508.80.00.90. Although
the HTSUS subheading is provided for convenience and customs purposes,
the written description of the merchandise under review is dispositive.
This review covers one company, Makita Corporation (``Makita''),
and the period July 1, 1995 through June 30, 1996.
Analysis of the Comments Received
Comment 1
Makita argues that in the preliminary results of this review, the
Department erroneously granted Makita a level of trade adjustment
rather than a Constructed Export Price (``CEP'') offset. Makita
disagrees with the Department's decision to find that the CEP level of
trade is comparable to the home market indirect (``wholesale'') level
of trade. Makita argues that the CEP level of trade is less advanced
than the home market levels of trade and therefore there is no
equivalent level of trade. Makita made the following arguments
concerning the level of trade/CEP offset issue:
(A) Differences in Selling Functions.
First, Makita asserts that there are significant differences in
selling functions and activities in the two home market levels of trade
and the CEP (U.S.) level of trade. Makita notes that it submitted a
chart detailing these differences in Appendix 20 of its questionnaire
response. In addition, Makita argues that the evidence on the record
requires the conclusion that the CEP and HM wholesale levels of trade
are at different levels of trade and involve different functions and
activities. Makita argues that the two home market levels of trade are
much more similar to each other than either is to the CEP level of
trade. While Makita agrees with the Department's decision to find two
home market levels of trade, it notes that the Department found that,
in comparing the two home market levels of trade to each other, there
were six instances where the selling functions were identical in both
function and intensity, and eight instances where the selling functions
differed only in the level of intensity. However, Makita compares the
Department's analysis of
[[Page 6893]]
the home market levels of trade with the Department's position in the
preliminary results that the home market wholesale level of trade
should be compared to the CEP level of trade. Makita notes that the
latter comparison indicates that there are only six instances where the
selling functions are identical in both function and intensity and only
four instances where the selling functions differ only in their level
of intensity. Most importantly, argues Makita, there are five instances
where the selling functions are entirely different between the
wholesale level of trade and the CEP level of trade (compared to
Makita's assertion that there are no instances where the functions are
entirely different between the two home market levels of trade).
Consequently, Makita argues that the Department's finding that the CEP
level of trade should be compared to the home market wholesale level of
trade is internally inconsistent and at odds with evidence on the
record.
In addition, Makita argues that the Department's own precedents
acknowledge a difference in levels of trade similar to the difference
in this review. See, Preliminary Results of Antidumping Duty
Administrative Review: Antifriction Bearings (Other than Tapered Roller
Bearings) and Parts Thereof from France et al., 62 FR 31566 (June 10,
1997); Preliminary Results of Antidumping Duty Administrative Review:
Certain Welded Carbon Steel Standard Pipes and Tubes from India, 62 FR
23760, 23762; Final Results of Antidumping Duty Administrative Review:
Certain Corrosion-Resistant Carbon Steel Flat Products and Certain Cut-
to-Length Carbon Steel Plate from Canada, 61 FR 51891 (October 4,
1996); Preliminary Results of Antidumping Duty Administrative Review:
Dynamic Random Access Memory Semiconductors of One Megabyte or Above
from the Republic of Korea, 62 FR 12794, 12798 (March 18, 1997);
Preliminary Results of Antidumping Duty Administrative Review:
Stainless Steel Plate from Sweden, 62 FR 36495, 36497 (July 8, 1997);
and Preliminary Results of Antidumping Duty Administrative Review:
Granular Polytertrafluoroethylene Resin from Italy, 62 FR 26283, 26285
(May 13, 1997).
(B) Comparison of Home Market and CEP Prices
Second, Makita argues that significant differences in selling
functions and activities between the two home market and CEP levels can
be established by comparing the home market starting price with the CEP
price. Makita asserts that by comparing the elements that are included
in the CEP transactions to the elements that are included in the home
market transactions clearly indicates that the home market transactions
are at a different level of trade, a level that Makita asserts is more
developed than the CEP level of trade. Makita contends that the home
market levels of trade have expense categories (i.e., selling
functions) such as discounts and rebates that have no meaningful
equivalent at the CEP level of trade. Consequently, Makita argues that
the home market levels of trade are thus significantly different from,
and more advanced than, the CEP level.
(C) Comparison of Indirect Selling Expenses
Third, Makita asserts that the differences in selling functions can
be observed in the substantial differences in the amount of indirect
selling expenses between the two home market levels of trade and the
CEP level of trade. Makita argues that the data regarding indirect
selling expenses clearly supports Makita's claim that the CEP level of
trade is (1) substantially different from the home market levels of
trade and (2) not as far developed or advanced as either home market
level of trade.
(D) Differences in Volumes
Fourth, Makita argues that differences in selling functions and
activities can also be seen in differences of volumes of subject
merchandise supplied at each level. Makita contends that the average
volume of tools shipped per invoice indicates that the selling
functions performed for the CEP sales are materially different from the
selling functions performed for the home market sales.
(E) Differences in Intensity of Selling Functions
Fifth, Makita argues that differences in the level of intensity
(i.e., the quantity of the function) should be considered in
determining whether there are different levels of trade. Respondent
contends that since performing quantitatively different functions
characterizes sales at different levels of trade, it would be erroneous
for the Department to have suggested in the preliminary results that
the differences in intensity indicated by Makita for certain selling
functions are somehow not important in the level of trade analysis.
(F) Quantification of Price Differences in Selling Functions
Sixth, Makita contends that the differences in selling functions
and activities can not be quantified (i.e., that price differences due
to differences in levels of trade cannot be determined). Makita argues
that since neither home market level of trade is equivalent to the CEP
level of trade, no benchmark for comparison of the home market and CEP
levels exists, and, accordingly, the price differences between the CEP
level and either home market level of trade cannot be quantified.
(G) Results of Previous Administrative Review
Seventh, Makita argues that the Department incorrectly relied on
the results of the previous administrative review in determining that
the wholesale level of trade in Japan is equivalent to the CEP level in
the United States. Makita argues that it would be erroneous and highly
prejudicial if the Department takes the position that its previous
denial of the CEP offset in the second administrative review is
dispositive of this review because: (1) the Department's current
inquiry is materially different from that of the previous review, (2)
most of the Department's current criteria for granting the CEP offset
did not even exist during the information gathering period of the
previous review, (3) the Department is not bound as a matter of law by
what it did (or did not) find in the previous review, and (4)
guidelines for administering the CEP offset are still in the process of
being refined, making reliance on the results of the previous review
inappropriate.
Petitioner argues that the Department's decision in the preliminary
results concerning the level of trade was correct. Petitioner agrees
with the Department finding in the preliminary results that the CEP
level of trade is comparable to the home market wholesale level of
trade and that a CEP offset is not appropriate as a matter of fact and
law. Petitioner made the following rebuttal arguments on the level of
trade/CEP offset issue:
(A) Differences in Selling Functions
Petitioner contends that Makita's request for a CEP offset should
be denied because Makita has not established that sales to wholesalers
in Japan are made at a different stage of marketing compared to its one
wholesale level of trade in the United States. Petitioner notes that
Makita merely discusses selling expense and sales activities, which are
a necessary
[[Page 6894]]
but not sufficient condition for determining that there is a difference
in the stage of marketing. Petitioner argues that Makita has failed to
provide persuasive evidence that sales to the United States and home
market sales are at different marketing stages (or their equivalent) as
required by the regulations. See 19 CFR 351.412(c)(2) (1997).
Petitioner argues that the law requires the Department to find
different customer categories and different marketing stages, not
differences in selling functions and expenses alone.
Petitioner also argues that granting Makita's request for a CEP
offset would distort the margin calculations by reducing the normal
value by an amount that is disparate from the amount needed to adjust
the prices at the retail level to make then comparable to the wholesale
level in Japan under the level of trade adjustment analysis.
Petitioner argues that the statute requires differences in the
stages of marketing because the adjustments for levels of trade have to
do with prices, not costs or selling expenses. Petitioner asserts that
the Department examined Makita's response and concluded that Makita's
sales to its one wholesaler in the United States could be compared to
its sales at the wholesale level in Japan. Petitioner adds that the
Department's determination is legally correct and is supported by
substantial evidence on the record.
Petitioner argues that the Department has refused to grant CEP
offsets in recent cases. Petitioner argues that the facts in this
review are analogous to cases cited and distinguished by respondents as
being inappropriate. The petitioner argues that the Department's
determination in Notice of Preliminary Results and Partial Rescission
of Antidumping Duty Administrative Review: Roller Chain, Other Than
Bicycle, from Japan (``Roller Chain''), 62 FR 25165, 26169 (May 8,
1997); Canned Pineapple Fruit from Thailand; Preliminary Results of
Partial Termination of Antidumping Duty Administrative Review (``Canned
Pineapple''), 62 FR 42487 (August 7, 1997) and Notice of Preliminary
Determination of Sales at Less Than Fair Value and Postponement of
Final Determination; Collated Roofing Nails from Korea (``Collated
Roofing Nails'') 62 FR 25895 (May 12, 1997) support their position that
Makita is not entitled to a CEP offset.
(B) Comparison of Home Market and CEP Prices
Petitioner asserts that Makita's argument does nothing more than
reiterate in a different form the fact that different selling functions
exist. Petitioner asserts that Makita's questionnaire response clearly
indicates that while there are two distinct and separate levels of
trade in the home market, the selling expenses are quite similar.
Consequently, petitioner argues that selling expenses are not a
reliable indicator of level of trade differences.
(C) Comparison of Indirect Selling Expenses
Petitioner argues that differences in the amount of indirect
selling expenses do not measure the differences in levels of trade.
Petitioner contends that the fact that selling expenses in the home
market are similar does not mean that the levels of trade are the same.
(D) Differences in Volumes
Petitioner asserts that Makita's comparison of units per invoice is
of little evidentiary value as distributors normally purchase in larger
quantities than retailers. Petitioner contends that this is
insufficient to show a difference in marketing stages.
(E) Differences in Intensity of Selling Functions
Petitioner alleges that the Department considered differences in
intensity but decided that such differences were not sufficient to
constitute a difference in the level of trade. Petitioner claims that
the Department considered all of the arguments advanced by Makita,
including its arguments concerning the different intensities and the
different selling functions performed. Petitioner contends that the
Department did not ignore the intensity of the selling functions but
found that it was insufficient. Furthermore, petitioner claims that the
Department has previously rejected claims that mere differences in
intensity of selling efforts create differences in levels of trade.
See, Certain Cut-to-Length Carbon Steel Plate from Finland, 62 FR
37866, 37867 (July 15, 1997).
(F) Quantification of Price Differences in Selling Functions
Petitioner argues that the fact that differences in selling
functions and activities between CEP sales and home market sales cannot
be quantified is irrelevant in qualifying for a CEP offset. Petitioner
claims that section 351.412(d) of the Department's new regulations
describes the manner in which the Department must determine whether a
difference in levels of trade has an effect on price comparability.
Petitioner argues that Makita failed to provide any of the broad
category of information under section 351.412(d) that could be useful
for the Department in making the determination in granting the CEP
offset. Rather, petitioner argues Makita has provided reams of
insufficient information regarding selling expenses. Therefore,
petitioner argues that the Department should reject the Makita's
request for the CEP offset.
(G) Results of Previous Administrative Review
Petitioner argues that the results of the previous administrative
review clearly have a bearing on the present administrative review with
respect to granting the CEP offset. Petitioner contends that the
Department has previously found in both the LTFV investigation and the
1994-5 administrative review, based on verified information, that the
wholesale level of trade in Japan should be compared to the CEP level
in the United States and that Makita has not alleged any change in
circumstances. In addition, petitioner asserts that none of the
information in this review has been verified, despite repeated requests
by petitioner that verification is not only necessary but essential.
Consequently, they contend that the Department should not reverse the
decisions from these earlier determinations based on unverified
information.
Department's Position
We agree with Makita in part. We have reexamined our position in
the preliminary results and determined, based on the record evidence,
that granting Makita a CEP offset is appropriate in this review. The
Department determines for the final results that (1) significant
differences exist in the selling functions associated with each of the
two home market levels of trade and the CEP level of trade, (2) the CEP
level of trade is at a less advanced stage of distribution than either
home market level of trade; and (3) the data available do not provide
an appropriate basis for a level-of-trade adjustment for any
comparisons to CEP. Consequently, we have granted a CEP offset for the
final results.
Makita listed selling functions associated with the CEP and two
home market levels of trade in Exhibit B-20 of its November 26, 1996
questionnaire response. Our analysis and comparison of the selling
functions indicates that the differences between the home market
wholesale level of trade and the CEP level of trade are as significant
as, if not more significant than, the differences between the home
market wholesale level of trade and the home market retail level of
trade. Moreover, the chain of distribution within the
[[Page 6895]]
United States (beyond the affiliated importer) is similar to that in
the home market. Consequently, we determine that there are significant
differences in selling functions between each of the two home market
levels of trade and the CEP level of trade and that these differences
are sufficient to determine that the CEP level of trade is not
equivalent to either home market level of trade.
In comparing the two home market levels of trade to each other, we
note the following selling functions are identical in both function and
intensity: market research, after-sales service and warranties,
technical advice, advertising, R & D/product development, procurement/
sourcing, and pricing/discounts/rebates. The remaining functions (e.g,
inventory maintenance, freight/delivery arrangements, arranging freight
to customer, collection expenses, losses, credit risk, collection
activities, payment processing/accounts receivable maintenance that
differ only in intensity. There are no functions that are entirely
different between the two home market levels of trade.
When we compare the home market wholesale level of trade and the
CEP level, we note that there are only several selling functions that
are identical in both function and intensity (e.g., R&D/product
development, collection activities and payment processing/accounts
receivable maintenance). The following selling functions differ only in
intensity: inventory maintenance, technical advice and procurement/
sourcing. However, there are certain selling functions performed at the
wholesale level of trade but not at all at the CEP level of trade.
These functions include market research, after-sales service and
warranties, advertising, freight delivery arrangements and pricing/
discounts/rebates.
Based on the analysis of the selling functions, we determine that
the home market retail (direct) level of trade was at a more advanced
stage of marketing, and hence a different level of trade, than the
wholesale home market level of trade. Similarly, we find that both home
market levels of trade are at a more advanced stage of distribution
than the CEP.
With respect to Makita's arguments concerning the differences in
the amount of indirect selling expenses, we note that the record
evidence indicates that the amount of indirect expenses for CEP sales
is significantly less than the amount of expenses for sales in either
home market level of trade. While differences in selling expenses are
not necessarily a sufficient basis for determining levels of trade, the
differences in Makita's indirect selling expenses along with the
differences in selling functions support Makita's contention that the
CEP level of trade is substantially different from the home market
levels of trade and not as far developed or advanced as either home
market level of trade.
We agree with Makita's assertion that the differences in selling
functions (i.e., price differences between levels of trade) can not be
quantified. We determine in these final results that the differences
between the CEP level of trade and the home market wholesale and retail
levels of trade are sufficient to constitute different levels of trade.
We found that Makita cooperated to the best of its ability but the data
on the record did not allow the Department to determine whether the
differences in levels of trade affects price comparability. Since there
is no home market level of trade equivalent to the CEP level of trade,
price differences between the relevant levels of trade can not be
quantified as there is no home market level of trade equivalent to the
CEP level of trade.
We disagree with petitioners' assertion that three recent cases
where the Department rejected respondents' request for a CEP offset are
analogous to this review. Unlike this review, in Roller Chain,
respondents' did not state that there were differences in selling
functions. In Canned Pineapple, the selling functions in both market
were essentially the same. In Collated Roofing Nails, respondents did
not request a CEP offset.
With respect to Makita's assertion that we relied on the results of
the previous administrative review in making our determination in this
review, these comments are not applicable as we have changed our
determination with respect to Makita's request for a CEP offset.
Comment 2
Makita argues that under the U.S. antidumping law pursuant to the
World Trade Organization's Agreement on Implementation of Article VI of
the General Agreement on Tariffs and Trade (``WTO Antidumping
Agreement'') and the Department's own practice, the Department has used
average-to-average price comparisons in investigations. Makita contends
that although the new law does not specifically provide for the use of
average-to-average price comparisons in calculating a margin in
administrative reviews, the Department is also authorized to average-
to-average price comparisons in reviews. See 19 U.S.C. 1677f-1(d)(2).
Although the new law does not specifically except administrative
reviews from the requirement of using average-to-average price
comparisons during administrative reviews, Makita argues that the
Department is required to use this methodology in reviews for the
following reasons: (1) administrative reviews and investigations are
identical proceedings, different in name only; (2) there is no legal or
other justification for the application of different standards to
investigations and reviews and (3) logic, common sense and
considerations of government convenience and efficiency mandate that a
consistent and uniform methodology be applied across the board to all
``investigations'' and to all ``administrative reviews'' arising out
these ``investigations.''
Makita notes that the Department requested the same type of price
and cost data in this administrative review as it did in the LTFV
investigation. Furthermore, Makita asserts that the Department to this
day uses the same ``investigation'' number (i.e., A-588-823) that it
uses in the current administrative review. Makita argues that the use
of the same ``investigation'' number suggests that (1) the Department
considers this review to be exactly what the original investigation was
(i.e., an investigation) and (2) the Department ascribes no particular
significance to the term ``review.''
Respondent argues that it would be highly prejudicial to Makita if
the Department justified the existing antidumping order based solely on
amount of positive margins calculated using an average-to-transaction
methodology. When no margins would be found in an investigation using
an average-to-average price comparison methodology.
Makita further states that it has a right to rely on the consistent
and fair application of methodologies from one proceeding to the next.
Makita notes that under the new law, the Department regularly uses
average-to-average price comparison in investigations. Makita argues
that it has every reason to expect that the Department should also use
the same methodology in administrative reviews after the new law came
into effect.
Lastly, Makita argues that the current weighted average margin in
the preliminary results of 0.5 percent is so close to being de minimus
that it is statistically as likely to be indicative of an absence of
LTFV sales as it is likely to be indicative of the existence of LTFV
sales. Makita argues that this is precisely the type of situation where
the rigid application of the average-to-transaction methodology is
[[Page 6896]]
inappropriate, and application of the average-to-average price
comparison methodology is proper because it would produce less biased
and more representative and fair results.
Consequently, Makita argues that the Department should use the
average-to-average price comparison methodology in the calculation of
the margin for these final results.
Petitioner contend that Makita made the same argument in the second
administrative review and that this issue was fully briefed and
rejected by the Department. Petitioner contends the Department should
summarily dismiss this argument for the same reasons it was rejected
before.
First, petitioner contends that the URAA contains different
provisions for investigations and reviews: section 771(A)(d)(1) deals
with investigations, and requires the Department to compare weighted
average normal values (NVs) to weighted-average export prices, with the
alternative of comparing transaction-by-transaction prices on both
sides of the equation, while section 771(A)(d)(2) deals with reviews,
and requires the Department to compare weighted average NVs to
individual export prices, as the Department did in this case.
Second, petitioner argues that the circumstances of this case do
not warrant the application of the average-to-average price comparison
methodology for the following reasons: (1) Congress clearly intended
export prices of individual transactions to be compared to the weighted
average prices in the home market; (2) administrative reviews and
investigations are different and the Department has a long-standing
practice of treating them differently and (3) that respondents should
be held to higher, stricter standards in reviews, since by the time of
the administrative review, they are on notice that further dumping will
be penalized. Petitioner argues that Makita's case confirms this
proposition, since Makita should have monitored its sales and taken
steps to correct the past dumping practices.
Department's Position
We agree with petitioner. As we stated in the final results of the
second administrative review of this antidumping order, the Act, as
amended by the URAA, distinguishes between price comparison
methodologies in investigations and reviews. Section 777A(d)(1) states
that in investigations, generally the Department will make price
comparisons on an average-to-average or transaction-to-transaction-
specific basis. See also SAA at 842-43; Proposed Regulations at 7348-49
and Proposed Rule 351.414.
However, the language of 777A(d)(2) reflects Congress'
understanding that the Department would continue to use a monthly
average NV to a transaction-specific EP or CEP methodology during
reviews, in keeping with the Department's past practice. Both the SAA
and the Department's proposed regulations expressly state that the
monthly average-to-individual transaction comparison is the preferred
methodology in reviews. See SAA at 843; Proposed Regulations at 7348-
49. Hence, the Department is under no legal obligation to apply an
average-to-average approach in a review merely because 777A(d)(1)
permits such a comparison in investigations. However, in appropriate
circumstances, such as in the case of highly perishable products, for
example, average-to-average price comparisons may be used. See Floral
Trade Council of Davis v. United States, 606 F. Supp. 695, 703 (Ct.
Int'l Trade 1991). Makita has not demonstrated that similar
circumstances exist with respect to the sale of PECTs that would
warrant a departure from our stated preference of making monthly
average-to-transaction-specific price comparisons in reviews.
In addition, contrary to Makita's assertion, an LTFV investigation
and an administrative review are not ``identical proceedings,'' but are
two distinct segments of a single antidumping proceeding. The Act
expressly distinguishes between investigations and reviews. See
Sec. 733; 735; 751 of the Act; 19 CFR 353.2(l). They differ in several
respects, such as initiation requirements and outcome--an investigation
may or may not end upon the issuance of an antidumping duty order,
while only a review will result in the actual assessment of duties.
Further, investigations and reviews are based on different sets of
sales, and both are subject to separate judicial review.
The WTO Antidumping Agreement also distinguishes between
investigations and reviews in antidumping matters. Article 2.4.2 of the
WTO Antidumping Agreement explicitly requires that an average-to-
average price comparison be used in the ``investigation phase'' of an
antidumping proceeding. The SAA elucidates the intent of the WTO
Antidumping Agreement that the Department continue to treat
investigations and reviews differently with respect to price
comparisons. As the SAA states:
The Agreement reflects the express intent of the negotiators
that the preference for the use of an average-to-average or
transaction-to-transaction comparison be limited to the
``investigation phase'' of an antidumping proceeding. Therefore, as
permitted by Article 2.4.2, the preferred methodology in reviews
will be to compare average to individual export prices.
SAA at 843.
Finally, Makita claims that it has a right to rely on the
consistent and fair application of methodologies from one segment of a
proceeding to the next. Makita argues that by not applying an average-
to-average comparison in this review, the Department is not consistent
with what it is required to do under the new law for investigations--
make average-to-average price comparisons. Hence, following Makita's
logic, the Department must now apply an average-to-average methodology
in this review to be consistent with the new methodology used in
investigations. Makita is incorrect in two respects. The law now
requires the Department to apply an average-to-average price comparison
in investigations only. Secondly, by comparing monthly average NVs to
individual U.S. prices in this review, we are being consistent with our
longstanding practice, which was not changed by the passage of the
URAA, as discussed above. Moreover, during the investigation of this
order, which occurred under the old law, we did compare average foreign
market values (FMVs) to transaction-specific U.S. prices. Thus, we are
applying this consistent methodology from one segment of the proceeding
to another.
Comment 3
Makita argues that, if the Department had used average-to-average
price comparisons in the preliminary results, Makita's margin would
have been de minimis pursuant to the two percent de minimis standard
mandated by Article 5.8 of the WTO Antidumping Agreement (see 19 U.S.C.
Secs. 1673b(b)(3) and 1673(a)(4)). Since the WTO Antidumping Agreement
makes no distinction between investigations and administrative reviews,
Makita argues, the 2 percent de minimis standard should also apply to
reviews, for the same reasons Makita discussed with respect to using
average-to-average price comparisons in reviews.
Makita argues that no basis can be found in either the WTO
Antidumping Agreement, or in U.S. law or policy, for using the
Department's earlier adopted regulatory number of 0.5 percent as the de
minimis standard for reviews, since there is no mention of this
particular figure in any of the relevant documents. Makita asserts in a
footnote that using a stricter standard for reviews than for
[[Page 6897]]
investigations is illogical if the underlying purpose is to punish
exporters who are caught dumping, since it would make more sense to
apply a stricter standard in the investigation phase. Moreover, not to
appear contradictory to its prior comments, Makita asserts that the
inconsistency of applying the two percent margin rule in this review
with the application of the 0.5 percent margin standard in the
investigation is irrelevant. Finally, Makita claims that this practice
could by itself result in increased dumping liability for exporters,
and is a possible violation of the WTO by the United States.
Petitioner argues that Makita misreads the law, which requires that
the new de minimis level of two percent be applied in investigations
only. Petitioner disagrees with Makita's assertion that the margin in
the preliminary results is so close to de minimis that it would be
unfair for the Department to use average-to-price methodology.
Petitioner notes that the rationale behind this argument would require
the Department to change its methodology every time a determination was
close to the de minimis level.
Lastly, petitioner argues that the Department has no authority to
apply the new two percent de minimis standard in a review. Petitioner
asserts that the law is clear that the two percent de minimis standard
applies to investigations only. See, 19 U.S.C. 1673b(b)(3) and 19
U.S.C. 1673(d)(a)(4). Petitioner contends that the Department must
continue to apply the de minimis standard of 0.5 percent in review
proceedings.
Department's Position
We disagree with respondent that the 0.5 percent de minimis
standard set forth in 19 CFR 353.6 should not continue to apply to
reviews. Article 5.8 of the WTO Antidumping Agreement explicitly only
requires signatories to apply the two percent de minimis standard in
antidumping investigations. See Article 5.8. There is no such
requirement regarding reviews. Moreover, Makita is incorrect in
claiming that the WTO Antidumping Agreement makes no distinction
between investigations and administrative reviews. See e.g., Article 5;
Article 11 of the WTO Antidumping Agreement.
In conformity with Article 5.8 of the WTO Antidumping Agreement,
sections 733(b) and 735(a) of the Act were amended by the URAA to
require that, in investigations, the Department treat the weighted-
average dumping margin of any producer or exporter which is below two
percent ad valorem as de minimis. Hence, pursuant to this change, the
Department is now required to apply a two percent de minimis standard
during investigations initiated after January 1, 1995, the effective
date of the URAA (see sections 733(b)(3) and 735(a)(4)). However, the
Act does not mandate a change to the Department's regulatory practice
of using a 0.5 percent de minimis standard during administrative
reviews. As discussed above, the WTO Antidumping Agreement, the Act,
the SAA and the Department's regulations recognize investigations and
reviews to be two distinct segments of an antidumping proceeding.
The SAA also clarifies that ``[t]he requirements of Article 5.8
apply only to investigations, not to reviews of antidumping duty orders
or suspended investigations.'' See SAA at 845. The SAA further states
``in antidumping investigations, Commerce [shall] treat the weighted-
average dumping margin of any producer or exporter which is below two
percent ad valorem as de minimis.'' SAA at 844. Likewise, ``[t]he
Administration intends that Commerce will continue its present practice
in reviews of waiving the collection of estimated cash deposits if the
deposit rate is below 0.5 percent ad valorem, the existing regulatory
standard for de minimis.'' SAA at 845 (emphasis added). See Proposed
Regulations at 7355, Proposed Rule 351.106; see also High-Tenacity
Rayon Filament Yarn from Germany; Final Results of Antidumping Duty
Administrative Review, 61 FR 51421 (October 2, 1996).
Comment 4
Makita alleges that the Department's preliminary margin calculation
program incorrectly assigns constructed value (CV) matches to certain
U.S. sales that have contemporaneous home market matches. Respondent
contends that the incorrect use of CV-based normal values is the result
of a clerical error in the model match program that results in
incorrect month indicators being assigned to both the home market and
U.S. transactions. Makita alleges that the error in the model match
program results in the program finding no sales matches for any 1996
U.S. sales transactions. Makita urges the Department to correct the
error for the final results.
Petitioner had no comment on this issue.
Department's Position
We agree with Makita and have corrected the model match program for
the final results. We also note that on January 8, 1998, the Court of
Appeals of the Federal Circuit issued a decision in Cimex v. United
States, 1998 WL 3626 (Fed. Cir.). In that case, based on the pre-URA
version of the Tariff Act of 1930 (the Act), the Court discussed the
appropriateness of using constructed value (CV) as the basis for
foreign market value when the Department finds home market sales to be
outside the ordinary course of trade. This issue was not raised by any
party in this proceeding. However, the Uruguay Round Agreements Act
(URA) amended the definition of sales outside the ``ordinary course of
trade'' to include sales below cost. See Section 771(15) of the Act.
Because the Court's decision was issued so close to the deadline for
completing this administrative review, we have not had sufficient time
to evaluate and apply (if appropriate and if there are adequate facts
on the record) the decision to the facts of this ``post-URA'' case. For
these reasons, we have determined to continue to apply our policy
regarding the use of CV when we have disregarded below-cost sales from
the calculation of normal value.
Comment 5
Makita notes that the Department stated in its preliminary results
that it intended to first match the U.S. CEP sales with home market
sales to wholesalers. Only if no sales to wholesalers are available
will the CEP sales be matched with home market sales to retailers.
However, Makita contends that due to an error in the Department's
margin calculation computer program, U.S. CEP sales were not first
matched to the wholesale level of trade. Makita urges that the error be
corrected for the final results.
Petitioner had no comment on this issue.
Department's Position
For the final results, we have determined that the CEP level of
trade is not equivalent to either home market level of trade (see
Comment 1). Furthermore, both home market levels of trade are at a more
advanced stage of distribution than the level of trade of the CEP.
Consequently, we could not match to sales at the same level of trade in
the home market. Nor do we have appropriate information to provide a
basis for a level of trade adjustment. Therefore, to the extent
possible, we determined normal value based on sales at the same level
of trade as the U.S. sales to the unaffiliated customer and made a CEP
offset adjustment in accordance 773(a)(7)(B) of the Act.
[[Page 6898]]
Comment 6
Makita contends that the Department incorrectly deducted indirect
selling expenses incurred in Japan from U.S. price. Makita notes that
it is the Department's practice not to deduct these expenses in the
calculation of the CEP net price.
Petitioner had no comment on this issue.
Department's Position
We agree with respondents and have corrected the error for the
final determination.
Comment 7
Makita argues that the Department incorrectly calculated the
product liability expense in the preliminary results by applying the
expense percentage to the gross unit price instead of the net price,
which was the basis derived by Makita. As a result, Makita alleges that
the amount calculated by the Department overstates the actual product
liability expenses and overstates the margin.
Petitioner had no comment on this issue.
Department's Position
We agree with Makita and have corrected the calculation for product
liability expenses for the final results.
Comment 8
Makita contends that the Department failed to add to the U.S. price
certain charges billed to the customer by Makita. Specifically, Makita
argues that it reported certain miscellaneous charges and drop ship
fees for a small number customers. Makita asserts that failure to
include these charges results in an understatement of the revenues
generated by these sales, and an overstatement of the margin. Makita
urges the Department to correct the error for the final results.
Petitioner argue that these charges are applicable to accessories,
not tools. Furthermore, petitioner assert that these charges are for
repairs and, as such, these charges have nothing to do with the selling
prices of the tools, and Makita has not demonstrated that these charges
can be directly related to specific tool sales. Consequently,
petitioner argues that these charges should not be added to the U.S.
price.
Department's Position
We agree with Makita. As these are revenues generated by sales (and
subsequent repairs) of the subject merchandise and are separate from
Makita's warranty expenses, we have added miscellaneous charges and
drop ship charges to U.S. price for the final results. We note that the
drop ship charge represents Makita's fee for billing a customer at one
location but delivering the tools to a different location according to
the customer's direction. We disagree with petitioner's contention that
we should disallow these charges since Makita reported these charges on
a customer-specific basis and the revenues for drop ship charges and
repairs are applicable to the sales.
Comment 9
Petitioner asserts that the Department's computer program
calculated the difference in merchandise adjustment (``DIFMER'') as the
difference between the variable manufacturing cost of the home market
tool (``VCOMH'') and the variable manufacturing cost of the U.S. tool
(``VCOMU''). Petitioner further notes that the Department's computer
program adjusts for the differences in merchandise by adding the DIFMER
value to normal value.
Consequently, petitioner argues that the computer program requires
the Department to reduce the normal value when the DIFMER value is
negative (U.S. variable costs higher than home market cost), and
increase the normal value when the DIFMER is positive (U.S. variable
costs lower than home market costs). Petitioner asserts that this is
backwards and inconsistent with the Department's antidumping manual.
See, Department of Commerce, International Trade Administration,
Antidumping Manual, Import Administration, Revised 07/93, Chapter 8,
page 44. Petitioner requests that the Department correct the error by
subtracting the DIFMER value from normal value for the final results.
Makita had no comment on this issue.
Department's Position
We agree with petitioner and have corrected the error for the
final results.
Comment 10
Petitioner alleges that the Department should correct its cost test
to determine sales below the cost of production by deducting selling
expenses from the gross unit price and make no adjustment for selling
expenses to the total cost of production. Petitioner contends that the
computer program in the preliminary results indicated that selling
expenses (variable SELLCOP) were added to COP instead of deducting
these expenses from the gross unit prices. Petitioner argues that this
correction will result in the gross unit prices and the COP will be net
of selling expenses as required by Import Administration Policy
Bulletin, No. 94.6.
Makita argues that the Department's cost test is correct and the
methodology has been used by the Department in its most recent margin
calculations, in spite of the 1994 policy memorandum cited by
petitioner. Consequently, Makita contends that the cost test as applied
by the Department in the preliminary results is consistent with the
Department's current practice, and no change is necessary.
Department's Position
We agree with Makita. The cost test applied by the Department in
the preliminary results is consistent with the Department's current
practice. As part of the cost test, we calculate COP (variable TOTCOP)
where we add selling expenses (variable SELLCOP) to derive the COP
which is compared to adjusted price for selling expenses of the home
market product.
Final Results of Review
As a result of our review, we have determined that the following
margins exist:
------------------------------------------------------------------------
Margin
Manfacturer/exporter Time period (percent)
------------------------------------------------------------------------
Makita Corporation....................... 7/1/95-6/30/96 0.03
------------------------------------------------------------------------
The Department shall determine, and the Customs service shall
assess, antidumping duties on all appropriate entries. Individual
differences between United States price and NV may vary from the
percentage 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 review for all
shipments of PECTs from Japan 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
company
[[Page 6899]]
will be that established in these final results of this administrative
review; (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 or a previous review or the LTFV
investigation, but the manufacturer is, the cash deposit rate will be
the most recent rate established for the manufacturer of the
merchandise; and (4) the cash deposit rate for all other manufacturers
or exporters will be the ``all others'' rate of 54.52 percent, the all
others rate established in the LTFV investigation.
These deposit requirements, when imposed, shall remain in effect
until publication of the final results of the next administrative
review.
This notice also serves as a 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 this 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 also serves as a reminder to parties subject to
administrative protective order (APO) of their responsibility
concerning the disposition of proprietary information disclosed under
APO in accordance with 19 CFR 353.34(d). Timely written notification of
return/destruction of APO materials or conversion to judicial
protective order is hereby requested. Failure to comply with the
regulations and the terms of an APO is a sanctionable violation.
This administrative review and notice are in accordance with
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and section 353.22
of the Department's regulations.
Dated: February 4, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-3482 Filed 2-10-98; 8:45 am]
BILLING CODE 3510-DS-P
