[Federal Register Volume 62, Number 91 (Monday, May 12, 1997)]
[Notices]
[Pages 25908-25915]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-12396]
-----------------------------------------------------------------------
DEPARTMENT OF COMMERCE
International Trade Administration
[A-201-504]
Porcelain-on-Steel Cookware From Mexico: Notice of 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 November 24, 1995, the Department of Commerce (the
Department) published the preliminary results of its administrative
review of the antidumping duty order on porcelain-on-steel (POS)
cookware from Mexico. This review covers the period December 1, 1993,
through November 30, 1994.
We gave interested parties an opportunity to comment on the
preliminary results. Based on our analysis of the comments received and
the correction of certain clerical and computer program errors, we have
changed the preliminary results, as described below in the comments
section of this notice.
EFFECTIVE DATE: May 12, 1997.
FOR FURTHER INFORMATION CONTACT: Katherine Johnson or Mary Jenkins,
Import Administration, International Trade Administration, U.S.
Department of Commerce, 14th Street and Constitution Avenue, N.W.,
Washington, D.C. 20230; telephone, (202) 482-4929 or (202) 482-1756,
respectively.
SUPPLEMENTARY INFORMATION:
Background
On November 24, 1995, the Department published in the Federal
Register the Notice of Preliminary Results of Administrative Review:
Porcelain-on-Steel Cookware from Mexico (60 FR 58044) (Preliminary
Results). 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 the Review
The merchandise covered by this review is porcelain-on-steel
cookware, including tea kettles that 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
of the United States (HTSUS) subheading 7323.94.00. Kitchenware
currently entering under HTSUS subheading 7323.94.00.30 is not subject
to the order. Although the HTSUS subheadings are provided for
convenience and Customs purposes, our written description of the scope
of this proceeding is dispositive.
The period of review (POR) is December 1, 1993, to November 30,
1994. The review covers one manufacturer/exporter of Mexican POS
cookware, Cinsa, S.A. de C.V. (Cinsa).
Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute and to the
Department's regulations are in reference to the provisions as they
existed on December 31, 1994.
Product Comparisons
In accordance with the Department's standard methodology, we
calculated transaction-specific U.S. prices for Cinsa based on purchase
price (PP), and compared these U.S. sales to foreign market values
(FMVs) based on either monthly weighted-average home market prices or
constructed value (CV). For price-to-price comparisons, we made
comparisons based on the following product characteristics: gauge
(i.e., whether heavy or light), quality, product configuration/size
(e.g., frying pan, roaster), number of enamel coats, and color.
We have determined that heavy gauge (HG) and light gauge (LG)
cookware are not such or similar merchandise (see Final Analysis
Changes for the 8th Review of Porcelain-on-Steel Cookware from Mexico,
Memorandum from the Team to Louis Apple, Acting Director, Group II, AD/
CVD Enforcement dated February 21, 1997, (Final Analysis Memorandum)).
For this reason, and because Cinsa made no home market sales of HG
merchandise and there were no CV data on the record for Cinsa's sales
of HG merchandise, we assigned these HG sales the weighted average of
all margins calculated for Cinsa's U.S. sales of LG cookware. See
Comments 1-4.
Verification
As provided in section 776(b) of the Tariff Act, we verified
information provided by Cinsa using standard verification procedures,
including onsite inspection of the manufacturers' facilities, the
examination of relevant sales and financial records, and selection of
original documentation containing relevant information. Although
primarily engaged in the production and sale of LG cookware,
[[Page 25909]]
Cinsa also made a few U.S. sales of HG cookware produced by ENASA, a
manufacturer of HG cookware. Cinsa did not make any home market sales
of HG cookware.
United States Price
We calculated PP based on the same methodology used in the
Preliminary Results, except in the following instances: (1) we used a
revised U.S. interest rate to calculate imputed credit expenses; and
(2) we calculated U.S. imputed credit expenses on sales to U.S.
customers who paid by letter of credit. See Comment 9.
Foreign Market Value
We calculated FMV based on the same methodology used in the
Preliminary Results, except in the following instances: (1) We
recalculated home market credit expenses using the revised interest
rate reported in the July 26, 1995, supplemental response; (2) for
sales in the home market with missing payment dates, we applied a
credit expense calculated using the average period between shipment and
payment for those sales where payment date was reported; and (3) we
deducted home market commissions and added U.S. indirect selling
expenses capped by the amount of home market commissions, in accordance
with 19 CFR 353.56.
Cost of Production
As discussed in the Preliminary Results, the Department conducted a
test of home market sales made during the POR to determine if sales
were made at prices below Cinsa's cost of production (COP) within the
meaning of section 773(b) of the Act. For home market models which
would have been the best match for a U.S. model but for which there
were insufficient home market sales at or above the COP, we compared
USP to CV.
A. Calculation of COP
We calculated COP based on the sum of respondent's cost of
materials, fabrication, and general expenses, in accordance with 19 CFR
353.51(c), and as described in the Preliminary Results.
B. Test of Home Market Sales Prices
As stated in the Preliminary Results, we used Cinsa's adjusted cost
data. We compared the weighted average product specific COP figures to
home market sales of the foreign like product as required under section
773(b) of the Act. We tested whether a substantial quantity of
respondent's home market sales of subject merchandise were made at
prices below COP over an extended period of time. On a product-specific
basis, we compared the COP to the reported home market prices, less any
applicable movement charges and rebates. We made the following changes
to the COP calculation used in the Preliminary Results: (a) as COP was
calculated exclusive of packing expenses, we deducted these expenses
from the net home market sales price used to determine whether sales
were below the COP; and (b) we corrected the COP calculation to
eliminate double counting of commission expenses in the COP selling
expenses.
To satisfy the requirement of section 773(b)(1) of the Act that
below-cost sales be disregarded only if made in substantial quantities,
we applied the following methodology. If, by quantity, over 90 percent
of the respondent's sales of a given product were at prices equal to or
greater 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. If between 10 and 90 percent of the
respondent's sales of a given product were at prices equal to or
greater than the COP, and sales of that product were also found to be
made over an extended period of time, we disregarded only the below-
cost sales. Where we found that more than 90 percent of the
respondent's sales of a product were at prices below the COP, and the
sales were made over an extended period of time, we disregarded all
sales of that product, and calculated FMV based on CV, in accordance
with section 773(b) of the Act.
In accordance with section 773(b)(1) of the Act, in order to
determine whether below-cost sales had been made over an extended
period of time, we compared the number of months in which below-cost
sales occurred for each product to the number of months in the POR in
which that product was sold. If a product was sold in three or more
months of the POR, we do not exclude below-cost sales unless there were
below-cost sales in at least three months during the POR. When we found
that sales of a product only occurred in one or two months, the number
of months in which the sales occurred constituted the extended period
of time, i.e., where sales of a product were made in only two months,
the extended period of time was two months; where sales of a product
were made in only one month, the extended period of time was one month.
See Final Determination of Sales at Less Than Fair Value: Certain
Carbon Steel Butt-Weld Pipe Fittings from the United Kingdom, 60 FR
10558, 10560 (February 27, 1995).
C. Results of COP Test
We found that for certain products, between 10 and 90 percent of
Cinsa's home market sales were sold at below-COP prices over an
extended period of time. Because Cinsa provided no indication that the
disregarded sales were at prices that would permit recovery of all
costs within a reasonable period of time in the normal course of trade,
in accordance with section 773(b) of the Act, we based FMV on CV for
all U.S. sales left without a home market sales match as a result of
our application of the COP test.
D. Calculation of CV
In accordance with section 773(e)(1) of the Act, we calculated CV
based on the sum of respondent's cost of materials, fabrication,
general expenses, packing costs, and profit. In accordance with section
773(e)(1)(B)(i) and (ii), we used: (1) The actual amount of general
expenses because those amounts were greater than the statutory minimum
of ten percent and (2) the actual amount of profit where it exceeded
the statutory minimum of eight percent on above-cost sales.
Price-to-CV Comparisons
Where we made CV to PP comparisons, we made a circumstance-of-sale
(COS) adjustment, where appropriate, for differences in credit expenses
and bank fees between the two markets. We deducted home market
commissions and added U.S. indirect selling expenses capped by the
amount of home market commissions, in accordance with 19 CFR 353.56.
Interested Party Comments
Comment 1: Whether or not Cinsa and ENASA Should be Collapsed
Petitioner argues that the Department's determination in the
Preliminary Results not to collapse Cinsa and ENASA, a related
manufacturer of HG cookware, is contrary to its long-standing practice
with respect to collapsing related parties. Petitioner claims that, in
the instant review, Cinsa and ENASA are so closely intertwined that
there is a strong possibility of manipulation of prices and/or
production decisions. Petitioner further argues that the Department
must use a ``totality of the circumstances'' test in its collapsing
analysis as opposed to determining that the ability to shift production
between related parties without retooling is the determinative factor.
Cinsa states that it would not contest a finding by the Department
that the two companies should be collapsed and
[[Page 25910]]
treated as a single entity given their common ownership, and shared
board members and managerial employees. However, Cinsa also maintains
that sufficient evidence exists on the administrative record in this
case to support the Department's determination in the preliminary
results not to collapse the two companies. Cinsa argues that the
administrative record, including the Department's verification of the
physical differences between HG and LG merchandise, the separate
production facilities, and the different production processes provide
sufficient evidence to support the substantial evidence standard for
determining that the two companies should not be collapsed and treated
as a single entity.
DOC Position: The Department will collapse two producers if each of
three requirements are met: (1) the producers must be ``affiliated'';
(2) they must have manufacturing facilities sufficiently similar that
no substantial retooling would be needed to restructure manufacturing
priorities with respect to the subject merchandise (i.e., that the
physical infrastructure exists for the two firms to act as one in
producing the merchandise), and (3) the Department concludes, based on
a series of listed factors, that there is a significant potential for
manipulation of price or production (i.e., that the control
infrastructure exists which would enable the firms to realize any
ability to shift production or price made possible by the overlapping
production facilities referred under the second requirement). See
Antidumping Duties: Countervailing Duties: Notice of Proposed Rule
Making and Request for Public Comments, 61 FR 7308, 7330 and 7381
(February 27, 1996), at section 351.401. This proposed regulation
represents the Department's current practice. The principles underlying
these criteria have been cited with approval in court decisions. See,
e.g., FAG Kugelfischer Georg Schafer KGaA v. United States, 932 F.
Supp. 315, 323 (CIT 1996).
The verification report states that Cinsa makes only LG cookware
and ENASA makes only HG cookware, and that extensive and expensive
retooling appeared to be necessary for Cinsa to produce HG products or
for ENASA to produce LG products (see November 27, 1995, Verification
Report at .4). Accordingly, we have determined that the physical
infrastructures of the two firms are insufficiently similar to meet the
second requirement of the collapsing test. Further, having made this
determination, we do not need to examine the questions of significant
common ownership and interlocking directors and managers. Therefore, it
is not appropriate to treat these firms as a single entity for the
purpose of assigning an antidumping margin. However, should changes in
production occur in the future, we may reexamine this issue in the
context of subsequent reviews.
Comment 2: Inclusion of HG Cookware Sales to the United States in the
Review
Petitioner argues that Cinsa's sales of ENASA-produced HG cookware
to the United States were made during the POR and therefore should be
included in the margin calculation. Petitioner contends that the facts
concerning the appropriate date of sale for these U.S. sales are not in
dispute, and that Cinsa's contention that the date of sale should be
the date of ultimate reconciliation contradicts the fact that the sales
contract was signed during the POR. Petitioner states that almost all
shipments to the United States, pursuant to the contract, occurred
during the POR, the subject merchandise was resold to end users during
the POR, and end users were actually cooking with the merchandise
during the POR. Petitioner also claims that, because the questionnaire
states that there can be no new dates of sale after shipment, the date
of sale for these U.S. sales must be either the date of the contract or
the dates of shipment to the United States.
Cinsa contends that the sales in question were not made during the
POR. Cinsa argues that the Department's definition of date of sale
expressly contemplates situations where a date ``subsequent to the date
of shipment * * * may be the appropriate date of sale,'' particularly
when the quantity terms change subsequent to the date of contract or
the date of shipment. Cinsa cites Toho Titanium Co., Ltd. v. United
States (``Toho''), 14 CIT 500, 501 (1990), for the proposition that the
sale is complete when the essential terms of the transaction are set.
Cinsa does not dispute that the contract was signed and shipments were
made during the POR. However, in this particular instance, the quantity
of HG cookware to be purchased by the customer was to be based solely
upon the amount of merchandise used by the customer in a promotional
program that ended outside the POR. Cinsa argues that because the final
reconciliation of the contract occurred outside the POR, the date of
sale for all sales of HG cookware was also outside the POR.
DOC Position: We agree with petitioner. We consider the date of the
contract between Cinsa's related sales entity, Yamaka China Co., Inc.
(``Yamaka''), and its unrelated customer to be the date of sale for
Yamaka's U.S. sales of HG cookware manufactured by ENASA during the
POR. Thus we have included these sales in our analysis for this review.
Cinsa has argued that Yamaka's customer had the ability to affect
the quantity ultimately sold, based on its management of the logistics
of the promotion. The contract between Yamaka and its unrelated
customer established the terms on which the quantity to be sold would
be set: the amount of goods sold through the promotion. Under the
contract, the customer did not have the discretion to alter or
renegotiate those terms. In the end, the quantity of goods which is
sold and not returned will be decided by how much cookware the public
buys during the promotion. Although the precise amount to be sold was
not known at the time of the contract, the contract clearly spelled out
the basis on which it would be determined; hence the contract is
consummated and the sale made as of June 1994. The situation in this
review can be distinguished from the situation underlying the CIT's
decision in Toho. In that case, the contract at issue required a
minimum purchase and gave the buyer the option of purchasing additional
product at the same price. The CIT upheld Commerce's decision that the
quantity in the contract became ``set'' only when the customer issued
delivery instructions on each optional shipment, since it could have,
had it chosen, renegotiated the contract price based on its total
discretion to order beyond the minimum amount. In the instant case,
there was no minimum purchase requirement in the contract, and the
customer had no explicit discretion to set quantity that could serve as
the basis of a future negotiation. Thus, whereas the seller in Toho
contracted for a minimum amount and made a binding offer as to further
sales, Yamaka entered into a binding contract for whatever business the
promotion would generate.
The fact that Yamaka at the same time contracted to, and later did,
``repurchase'' cookware which its customer was unable to resell during
the promotion does not mean that the sales of the cookware eventually
repurchased were not made. The very fact that the contract refers to
``repurchase'' rather than to return prior to invoicing, together with
the fact that partial payment was received on these goods, indicates
that this was a sale-and-refund arrangement, rather than a sale only of
those items which were never returned.
Because the June 1994 contract constitutes a binding agreement in
the nature of a requirements contract, whereby Yamaka and its customer
[[Page 25911]]
agreed upon the price and quantity (whatever was sold in connection
with the promotion, with a guarantee of repurchase for items not sold
at retail), the date of this contract is the appropriate date of sale
for all cookware sold to the United States in connection with the
promotion.
Comment 3: Reporting of ENASA's Home Market Sales of HG Cookware Sets
Petitioner states that during this review the Department sent a
letter to Cinsa requiring it to report ``all sales of such or similar
merchandise sold by ENASA in the home market during the 90/60 day
period surrounding the date of each of ENASA's sales to the United
States.'' Petitioner maintains that Cinsa did not comply with this
request because it only submitted ENASA's home market sales of HG open
stock (i.e., single piece) cookware and did not submit ENASA's home
market sales of HG cookware sets. The issue, according to petitioner,
is whether the Department should compare the individual pieces in the
sets sold in the home market to open stock items sold in the United
States.
Cinsa states that, even if the Department concludes that its sales
of ENASA-produced HG open stock cookware to the United States were made
during the POR, the Department should decide that reporting was
properly limited to home market sales of HG cookware that ENASA sold as
open stock.
Cinsa further contends that there is no basis to require reporting
of sales of HG cookware sets since no HG sets were sold to the United
States. Further, Cinsa argues that the cost of manufacture of a set of
HG cookware would exceed that of a single piece by more than the
Department's twenty percent limit on adjustments for differences in
merchandise when comparing non-identical products.
DOC Position: Because we decided not to collapse Cinsa and ENASA,
we compared the prices of sales by Cinsa only to prices of other sales
by Cinsa. The only HG cookware sold by Cinsa during the POR was open
stock U.S. sales of cookware manufactured by ENASA. Because Cinsa made
no home market sales of HG cookware sets during the POR, and only
Cinsa's sales are being reviewed for this POR, we need not address the
issue of whether sales of open stock cookware manufactured by ENASA and
sold by Cinsa should be compared to individual components of HG
cookware sets (which were sold only by ENASA). Furthermore, because we
have determined that HG cookware is not properly compared to LG
cookware (see Product Comparison section of this notice), we need not
address the issue of whether Cinsa's U.S. sales of HG open stock
cookware should be compared to Cinsa's sales of LG sets in the home
market. (For a full discussion of set-splitting see Final Analysis
Memorandum, page 9).
Comment 4: Cinsa's Failure To Submit COP and CV Data for HG Cookware
Petitioner contends that Cinsa failed to report cost data with
respect to sales of (ENASA-manufactured) HG cookware despite being
required to do so by the questionnaire. Petitioner believes that the
Department must resort to BIA (suggesting the highest margin calculated
for any U.S. sale of LG cookware made during the POR) to calculate the
dumping margin for each HG sale made to the United States.
Alternatively, petitioner believes that the Department should reopen
the record, collect cost data for all HG products sold in both the home
market and the United States, and incorporate these data into the model
matching, sales-below-cost, and CV analyses used in the final results.
Cinsa contests petitioner's argument that the Department should use
BIA in the absence of ENASA's cost information with respect to HG
cookware. Cinsa states that the statute, at 19 U.S.C. 1677e(b),
``requires noncompliance with an information request before resorting
to the best information rule is justified.''
Cinsa also states that 19 CFR 353.31(c)(i)(ii) specifically
requires that allegations of below-cost sales must be made in a timely
manner, in any event prior to the Department's verification and the
issuance of the preliminary results. Therefore, Cinsa argues that,
given that the Department never requested cost information for ENASA
merchandise, and that prior to the preliminary results petitioner
neither objected to the Department's limited information request nor
alleged in a timely manner that ENASA's home market sales were made
below cost, application of BIA would be inappropriate.
DOC Position: We disagree with petitioner. In its June 5, 1995,
supplemental questionnaire to Cinsa, the Department requested that
Cinsa provide ENASA's home market and U.S. sales data as well as start
up costs for ENASA's production of HG cookware. In response, Cinsa
argued that reporting home market sales, cost and CV data was
unnecessary because Cinsa's only sales of ENASA-produced HG cookware
were made outside the POR. Because the date of sale issue remained
unresolved for some time and because a review had not been initiated
for ENASA, we did not pursue our request for ENASA's cost information.
However, we subsequently determined that these U.S. sales of HG
cookware were made within the POR (see Comment 2). Rather than unduly
delay the review at this point to seek cost information for these
sales, and because the sales of HG cookware constituted only a small
part of Cinsa's total sales to the United States during the POR, we
based the margin for these sales of HG cookware on the weighted average
of all margins calculated for Cinsa's sales of LG cookware to the
United States.
Comment 5: Inclusion of Home Market Sales of Second-Quality Merchandise
in the Cost Test
Petitioner asserts that the exclusion of sales of second-quality
merchandise from the preliminary cost test is inconsistent with
standard practice, including the Department's previous practice in
reviews of imports subject to this order. Accordingly, petitioner
claims that the Department should revise its preliminary results and
include Cinsa's home market sales of second-quality merchandise in the
sales-below-cost test for purposes of the final results.
Cinsa contends that the Department has determined in this and all
prior administrative reviews in this case that second-quality articles
sold in the home market are not comparable to the first-quality
articles sold to the United States. Thus, according to Cinsa, the
Department has always excluded second-quality articles from the FMV
calculation without regard to the results of the Department's cost
test, which only serves to eliminate first quality home market sales
sold below cost from consideration in the FMV calculation. Cinsa
further adds that, since the second-quality articles are never used for
comparison with any U.S. sales, there is no practical reason for the
Department to use them to perform the cost test.
DOC Position: We agree with petitioner and have included in the
cost test all home market sales of both first and second quality
merchandise. There are no production cost differences between first and
second quality merchandise that is otherwise identical. See IPSCO, Inc.
v. United States, 965 F.2d 1056, 1060-61 (Fed. Cir. 1992). Although in
certain circumstances Commerce may choose to reduce its own
administrative burden and simplify reporting by not requiring parties
to report home market sales of types of merchandise unlikely to be
matched to
[[Page 25912]]
any U.S. sales, data for second quality merchandise is already on the
record of this review. Second quality merchandise can be compared to
first quality merchandise if there are insufficient matches of first
quality merchandise, and therefore second quality merchandise on the
record is properly included in the cost test, just as similar
merchandise is included in the cost test even when there are ample
identical matches.
As we did in the fourth review (See Porcelain-on-Steel Cooking Ware
From Mexico: Final Results of Antidumping Duty Administrative Review,
58 FR 43327 (August 16, 1993)), we compared only first quality
merchandise sold in the U.S. market with first quality merchandise sold
in the home market. We did not in calculating FMV use sales of second
quality merchandise in the instant review because there were no sales
of second quality merchandise in the United States--unlike in the
fourth review where second quality merchandise sold in the United
States was compared with second quality merchandise sold in the home
market-- nor were there any instances where available first quality
home market sales were not adequate for matching purposes.
Comment 6: Calculation of General and Administrative Expenses
Petitioner argues that, consistent with its practice, the
Department should have based Cinsa's G&A expenses on the consolidated
G&A expenses of Grupo Industrial Saltillo, S.A. de C.V. (GIS), not
Cinsa-specific G&A expenses. Accordingly, petitioner argues that the
Department should modify its COP/CV calculations and use the ratio of
GIS's 1993 consolidated G&A expenses to GIS's 1993 consolidated cost of
goods sold, instead of the Cinsa-specific rate allocable to each
product sold.
Cinsa states that the statute requires that the COP and CV of
merchandise subject to review be calculated in a manner that reflects
the expenses attributable to the class or kind of merchandise, citing
19 U.S.C. 1677b(e)(1)(B). In this instance, Cinsa maintains that it is
the manufacturer, seller, shipper, and exporter of the subject
merchandise, and that only the G&A expenses borne directly by Cinsa
itself may be used to calculate COP and CV. Therefore, since GIS is not
directly involved in any of Cinsa's production or sales activities
concerning the subject merchandise, attributing all of GIS's G&A
expenses to the subject merchandise would be inappropriate. Cinsa notes
that the financial statements of GIS state that the entire household
division of GIS, which includes Cinsa as well as other producers, only
accounts for approximately one-third of the consolidated sales value of
GIS. Cinsa further states that comparison of the total G&A expenses of
Cinsa to the G&A expense of GIS establishes that the vast majority of
the G&A expenses recorded in the consolidated GIS financial statement
is attributable to activities other than Cinsa's production and sales
of the subject merchandise.
Cinsa maintains that, in the event the Department uses GIS's G&A
expenses, the Department should base that calculation on GIS's 1993 and
1994 financial statements, which were submitted as Appendix 24 to
Cinsa's July 10, 1995, supplemental response.
DOC Position: We disagree with petitioner. The petitioner's
suggestion that the Department modify the COP/CV calculations and use
the ratio of GIS's 1993 consolidated G&A expenses to GIS's 1993
consolidated cost of goods sold, is contrary to Department practice. We
only include a portion of these expenses if the parent performs
services for the affiliated company (See Final Determination of Sales
at Less Than Fair Value: Welded Stainless Steel Pipe from Malaysia, 59
FR 4023, 4027 (January 28, 1994)). Based on the information on the
record of this review, we used Cinsa's reported G&A factor for the
final results. The record evidence does not indicate the value of
services provided by GIS.
Comment 7: The ``Extended Period of Time'' Used in the Cost Test
Petitioner states that Import Administration Policy Bulletin No.
94.3 (March 25, 1994) states that the Department will consider below-
cost sales to have been made over an extended period of time only if:
(a) the respondent sold a model in only one month of the POR and
certain or all of those sales of the model in that month were below
cost;
(b) the respondent sold a model in two months of the POR and
certain or all of those sales of that model in each of the two
months were below cost; or
(c) the respondent sold a model during three or more months of
the POR and certain or all of those sales of that model in at least
three of those months were below cost.
Petitioner argues that the Department's policy is arbitrary, unfair to
petitioner and internally inconsistent. Petitioner believes that a more
reasonable approach would be to consider below-cost sales made in at
least 25 percent of the months in which a model was sold to have been
made ``over an extended period of time.''
Cinsa points out that the Department's three month test is an
established Department administrative practice, adopted over two years
ago and used consistently since that time. Cinsa cites numerous recent
administrative and court proceedings to support its argument. Cinsa
contends that petitioner's arguments have been considered repeatedly by
the Department and the reviewing courts and have been consistently
rejected. Therefore, Cinsa argues that, for purposes of the final
results, the Department should continue to apply its standard test to
determine whether below cost sales have been made over an extended
period of time.
DOC Position: We agree with Cinsa. The Department's three month
test is an established administrative practice which has been affirmed
by the U.S. Court of International Trade. See, e.g., NTN Bearing Corp.
v. United States (``NTN Bearing Corp.''), 881 F. Supp. 595, 602 (1995).
Accordingly, for purposes of the final results, we have applied our
standard cost test to determine whether below cost sales have been made
over an extended period of time.
Comment 8: Cinsa's October 3, 1995, Correction to its Home Market Sales
Listing
Cinsa argues that the Department's preliminary results incorrectly
did not reflect the October 3, 1995, revision to the quantity and unit
price for one transaction in its home market sales listing. Cinsa
argues that because it notified the Department of the revision,
including documentary support, approximately seven weeks prior to the
issuance of the preliminary results, the preliminary results should
have incorporated this correction.
Cinsa further argues that petitioner's assertion that Cinsa's
revision was untimely filed should be disregarded given the decision in
NTN Bearing Corporation v. United States (``NTN Bearing Corp''), 74
F.3d 1204 (December 11, 1995). Cinsa argues that the Court of Appeals
for the Federal Circuit held that the Department has the authority to
correct inadvertent data input errors made by, and then later
discovered by a respondent, when such errors were brought to the
attention of the Department in a timely manner during the comment
period subsequent to the preliminary results. Cinsa also notes that the
general 180-day time limit applies to new factual information being
placed in the administrative record. Cinsa contends that the revision
to its home market sales listing did not add additional sales or new
information to
[[Page 25913]]
the record. Moreover, Cinsa claims that the revision is properly part
of the administrative record and should be taken into account in the
final results because the Department did not reject the submission
despite a specific request for rejection by the petitioner. Finally,
Cinsa argues that under similar circumstances in the fifth
administrative review, when Cinsa brought corrections to the
Department's attention prior to the preliminary results, and such
corrections were not incorporated into the preliminary results, the
Department agreed with Cinsa over the objection of the petitioner and
incorporated the necessary corrections into the final results.
Accordingly, Cinsa argues that since it notified the Department of this
error prior to the issuance of the preliminary results, the final
results should incorporate this correction.
Petitioner argues that the opinion of the Federal Circuit in NTN
Bearing Corp. simply does not apply in this situation. Petitioner
states that NTN Bearing Corp. involved an antidumping administrative
review in which there was no verification. Thus, all information
submitted in that review was unverified, and the Department was not
required by the statute to have verified all information relied upon in
the final results. Petitioner contends that in contrast, the Department
has no such discretion in this review. Petitioner argues that in this
review the alleged clerical error represents new, untimely, unsolicited
information that the Department has not verified; thus, under 19 U.S.C.
1677e(b), the Department may not use this information, because it would
be unlawful to rely upon unverified information in the final results of
this review. Petitioner also believes that even if the Department could
change this data, Cinsa has not established that any error was made
because the invoice for this sale, which is the best evidence of the
transaction, reflects that the unit price used in the preliminary
results was correct.
DOC Position: Cinsa's submission of October 3, 1995, does not
adequately demonstrate why the reported information is incorrect, or
that its post-verification revision is correct. In fact, the
documentary evidence submitted in support of the proposed revision
appears to support the reported information. Without clear documentary
evidence that the response information is incorrect, and given that
verification had already occurred at the time of the submission, the
Department has no means to confirm Cinsa's claim. This situation is
distinguishable from NTN Bearings Corp., in which supporting
documentation in NTN's post-disclosure submission clearly indicated
that an error had, in fact, been made. Merely deciding not to reject a
submission does not constitute acceptance of the arguments put forth in
the document. Because Cinsa is not able to establish that the reported
quantity and unit price are actually erroneous, no revision is
appropriate.
Comment 9: Inclusion of U.S. Imputed Credit Expenses on Sales to U.S.
Customers Who Paid by Letter of Credit
Cinsa argues that the Department's preliminary results improperly
adjusted for U.S. imputed credit expenses on sales to U.S. customers
who paid by letter of credit. Cinsa states that its revised U.S. sales
listing mistakenly failed to list this expense as zero for the sales in
question. According to Cinsa, the Department verified that two U.S.
customers paid by letter of credit and did not incur imputed credit
expenses. Cinsa argues that the final results should incorporate the
verified information even though Cinsa failed to report it properly.
Petitioner argues that it is too late in this instance for further
correction of data when the failure to correct the data is the result
of Cinsa's own negligence. Petitioner contends that permitting such
requests would be a disincentive to respondents to respond accurately
and a burden to administer for the Department.
DOC Position: We verified that two U.S. customers paid by letter of
credit and have included the associated bank fees for these letters of
credit as a COS adjustment. However, Cinsa did not receive payment for
these sales from its bank immediately upon shipment, but rather some
time later. In accordance with our standard practice, we have also
imputed credit expenses for these letter of credit sales for the days
payment was outstanding between shipment and payment.
Comment 10: Revalued Versus Historical Depreciation
Cinsa argues that the use of revalued rather than historical
depreciation distorts Cinsa's COP and is contrary to law because it
distorts Cinsa's actual fixed overhead cost incurred in producing the
subject merchandise. Cinsa further states that, in this review, the
Department verified that revalued depreciation was used for financial
purposes only, and that historical depreciation is used in company
records for income tax purposes. Consequently, according to Cinsa, the
use of revalued depreciation in this case would overstate the actual
depreciation expenses incurred in producing the subject merchandise,
since Cinsa's cost and accounting records are maintained using
historical, not revalued, depreciation.
Petitioner maintains that the Department uses revalued depreciation
in its calculation of COP/CV because use of historical acquisition
costs, unadjusted for high inflation, would distort the measure of
Cinsa's current depreciation cost. Petitioner cites numerous court
proceedings to support its argument. Petitioner further states that,
contrary to Cinsa's argument, the Department's use of revalued
depreciation costs actually prevents distortion, by ensuring that
Cinsa's depreciation costs are not understated due to currency
devaluation resulting from inflation.
DOC Position: We agree with petitioner and have included Cinsa's
revalued depreciation expense in the company's COP and CV. We disagree
with Cinsa's assertion that this methodology distorts the actual
production costs of subject merchandise. See Results of Redetermination
Pursuant to Court Remand in Aimcor, Alabama Silicon, Inc. v. United
States, Ct. No. 93-07-00428 (May 15, 1995) (upheld by Order of the CIT,
September 15, 1995), and Fresh Cut Roses from Ecuador, 60 FR 7019, 7029
(February 6, 1995). It is the Department's policy to adhere to the home
market Generally Accepted Accounting Principles (GAAP) as long as they
reflect actual costs. Mexican GAAP require Cinsa to use revalued
depreciation in its financial statements. In this case, we find the use
of revalued depreciation reasonably reflects Cinsa's actual costs.
Thus, Mexican GAAP recognize the effect of inflation upon the value of
assets and require companies to revalue assets to compensate for the
change. Depreciation enables companies to spread large expenditures on
purchases of machinery and equipment over the expected useful lives of
these assets. Not adjusting for the deflation of currency due to
inflation results in the depreciation deferred to future years being
understated in constant currency terms and, therefore, distorts the
Department's COP and CV calculations. Thus, in light of the rate of
inflation in Mexico during the POR, it would be distortive to use
historical depreciation in this case.
The Department's determination to use revalued rather than
historical depreciation in accordance with home market GAAP was upheld
by the Court of International Trade in Laclede Steel Co. v. United
States, 18 CIT 965 (October 12, 1994). In Laclede Steel, the
[[Page 25914]]
Court found that depreciation expense based on the historical method
rather than depreciation expense based on the revalued method would
distort the production costs of the company because such a methodology
would overlook the significant impact that revaluing the assets had on
the company. We find the Court's analysis in Laclede Steel instructive
with respect to the instant review. Due to the revaluation of assets as
reflected on Cinsa's financial statements, Cinsa would enjoy an
increase to its equity values reflected on the Company's balance sheet,
a potentially enhanced stock value resulting from greater equity, and
an improved ability to borrow or acquire capital. Therefore, the
Department followed Mexican GAAP and adjusted CINSA's COP data to
reflect the revalued depreciation. We note, although it is not binding
precedent, that a NAFTA Panel has affirmed the Department's use of
revalued depreciation for Cinsa in the fifth administrative review. In
the Matter of Porcelain-on-Steel Cookware From Mexico (``POS Cookware
NAFTA decision''), USA-95-1904-01 (April 30, 1996), at 31.
Comment 11: Inclusion of Profit Sharing Payments in COP and CV
Cinsa argues that the inclusion of profit sharing payments as a
component expense of Cinsa's COP and CV is contrary to law. Cinsa
asserts that although the statutory definition of CV includes profit,
the inclusion of an amount for profit, plus an additional amount
(derived from Cinsa's profit) to account for profit sharing, results in
the double counting of profits earned. Cinsa argues that in this
review, profit sharing was inextricably linked to the amount of profit
earned by Cinsa and was not dependent upon production of the subject
merchandise. In addition, according to Cinsa, because both profit and
profit sharing payments are determined at the close of the fiscal
period, profit sharing payments were not incurred upon the production
of the subject merchandise and were not incurred prior to exportation
of the subject merchandise, as required by the statute if included as a
cost. Finally, Cinsa claims that this payment is similar to dividend
distributions or income tax payments, which are not included in COP and
CV.
Petitioner argues that, consistent with the Department's practice
in previous administrative reviews of this order, the Department should
continue to include profit sharing expenses in its calculation of
Cinsa's COP and CV. Petitioner states that such payments are treated
like bonuses for accounting purposes, and the Department's practice is
to treat bonuses as labor costs. See, e.g., Certain Hot-Rolled Carbon
Steel Flat Products, Certain Corrosion-Resistant Carbon Steel Flat
Products, and Certain Cut-To-Length Carbon Steel from Canada, 58 FR
37099, 37113-14 (July 9, 1993).
Petitioner maintains that Cinsa's argument that profit sharing
expenses are analogous to income taxes and are ``unrelated to the
production of the subject merchandise'' is incorrect. Petitioner states
that profit sharing expenses are more related to production than some
other forms of compensation, such as health or pension benefits,
because they are a function of gross revenue and profit, which
generally vary according to production.
Petitioner also refutes Cinsa's argument that the inclusion of both
profit sharing expenses and profit in the CV calculation results in the
double-counting of profits. Petitioner states that profit sharing
expenses are not profit, but expenses, i.e., a reduction to profit.
Petitioner states that the profit that is included in Cinsa's CV is the
profit that remains after profit sharing expenses have been deducted.
Therefore, the Department's inclusion of profit sharing expenses in the
calculation of CV does not double-count profit.
DOC Position: We disagree with the respondent and have included
Cinsa's profit sharing expense in COP and CV because it relates to the
compensation of direct labor, a factor of production. We treat profit-
sharing distributions to employees in a manner similar to bonuses.
Further, we disagree with Cinsa's argument that the profit-sharing
expense is similar to profit, dividends, and income tax.
Profit-sharing is not profit because it is an expense which is a
reduction to profit. Therefore, profit-sharing is not explicitly
excluded from COP calculations under 19 CFR 353.51(c). As for Cinsa's
concern that we double counted profit in its CV, we note that profit-
sharing expense is not part of the Company's ``profit'' included in CV.
The ``profit'' that is included in Cinsa's CV represents the amount
that remains after reductions to income, such as the profit-sharing
expense.
Cinsa's profit-sharing expense is distinct from dividends in two
key respects. First, Cinsa's profit-sharing payments represent a legal
obligation to a productive factor in the manufacturing process and not
a distribution of profits to the owners of Cinsa. Second, the right to
participate in profit-sharing conveys no ownership rights in Cinsa.
Cinsa's profit-sharing expense is unlike an income tax because it
is paid to labor. Thus, unlike income taxes paid to the government,
profit sharing payments flow directly to a factor of production. Also,
Cinsa's income tax is based on taxable income that is net of Cinsa's
profit-sharing expense.
We note that, although it is not binding precedent, a NAFTA Panel
has affirmed the Department's inclusion of Cinsa's profit-sharing in
COP and CV in the fifth administrative review. See POS Cookware NAFTA
Decision, at 37-39.
Final Results of Review
As a result of our review, we determine that the following margin
exists for the period December 1, 1993, through November 30, 1994:
------------------------------------------------------------------------
Margin
Manufacturer/exporter Review period (percent)
------------------------------------------------------------------------
Cinsa 1................................. 12/1/93-11/30/94 6.55
------------------------------------------------------------------------
1 Includes sales by Cinsa of HG merchandise manufactured by ENASA. No
review was requested of any sales which ENASA may have had to the
United States for this POR.
The Department shall determine, and the Customs Service shall
assess, antidumping duties on all appropriate entries. Individual
differences between USP and FMV may vary from the percentages stated
above. The Department will issue appraisement instructions directly to
the Customs Service.
Further, the following deposit requirement will be effective for
all shipments of subject merchandise from Mexico entered, or withdrawn
from warehouse, for consumption on or after the publication date of the
final results of this administrative review, as provided by section
751(a)(1) of the Tariff Act: (1) The cash deposit rate for the reviewed
company will be as outlined above; (2) for merchandise exported by
manufacturers or exporters not covered in this review but covered in
previous reviews or the original less-than-fair-value (LTFV)
investigation, the cash deposit rate will continue to be the rate
published in the most recent final results or determination for which
the manufacturer or exporter received a company-specific rate; (3) if
the exporter is not a firm covered in this review, an earlier review,
or the LTFV investigation, but the manufacturer is, the cash deposit
rate will be that established for the manufacturer of the merchandise
in the final results of this review, earlier reviews, or the LTFV
investigation, whichever is the most recent; (4) the cash deposit rate
for all other manufacturers or exporters, including ENASA, will be
29.52 percent, the ``all others'' rate established
[[Page 25915]]
in the original LTFV investigation by the Department.
These cash 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 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 the only 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 terms of the APO is a sanctionable violation.
This administrative review and notice are in accordance with
section 751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1)) and 19 CFR
353.22.
Dated: May 5, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-12396 Filed 5-9-97; 8:45 am]
BILLING CODE 3510-DS-P
