[Federal Register Volume 64, Number 95 (Tuesday, May 18, 1999)]
[Notices]
[Pages 26934-26944]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-12504]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-201-504]
Porcelain-on-Steel Cookware from Mexico: Final Results of
Antidumping Duty Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
[[Page 26935]]
ACTION: Notice of Final Results of Antidumping Duty Administrative
Review.
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SUMMARY: On January 11, 1999, the Department of Commerce published the
preliminary results of the administrative review of the antidumping
duty order on certain porcelain-on-steel cookware from Mexico (64 FR
1592). This review, the eleventh review of this order, covers Cinsa,
S.A. de C.V. and Esmaltaciones de Norte America, S.A. de C.V.,
manufacturers/exporters of the subject merchandise to the United States
and the period December 1, 1996, through November 30, 1997. 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 errors, the final results differ from
the preliminary results. The final results are listed below in the
``Final Results of Review'' section of this notice.
EFFECTIVE DATE: May 18, 1999.
FOR FURTHER INFORMATION CONTACT: Kate Johnson or David J. Goldberger,
Office 5, AD/CVD Enforcement Group II, 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) 482-4136, respectively.
SUPPLEMENTARY INFORMATION:
Background
On January 11, 1999, the Department of Commerce (the Department)
published in the Federal Register the preliminary results of the 1996-
97 administrative review of the antidumping duty order on certain
porcelain-on-steel (POS) cookware from Mexico (64 FR 1592) (preliminary
results). On February 1, 1999, Cinsa, S.A. de C.V. (Cinsa) and
Esmaltaciones de Norte America, S.A. de C.V. (ENASA) filed comments in
an attempt to rebut the presumption of reimbursement of antidumping
duties with respect to eleventh review entries, pursuant to the
opportunity afforded respondents by the Department in its preliminary
results Federal Register notice. On February 16, 1999, petitioner filed
comments on the information submitted by respondents. On March 12,
1999, and March 19, 1999, Columbian Home Products, LLC (CHP) (the
petitioner), Cinsa and ENASA submitted case and rebuttal briefs,
respectively. The Department held a hearing on March 26, 1999. The
Department has now completed its administrative review in accordance
with section 751 of the Tariff Act of 1930, as amended.
Applicable Statute
Unless otherwise indicated, all citations to the Tariff Act of
1930, as amended (the Act), are references to the provisions effective
January 1, 1995, the effective date of the amendments made to the Act
by the Uruguay Round Agreements Act (URAA). In addition, unless
otherwise indicated, all citations to the Department's regulations are
to the regulations at 19 CFR Part 351 (1998).
Scope of the Review
Imports covered by this review are shipments of porcelain-on-steel
cookware, including tea kettles, which do not have self-contained
electric heating elements. All of the foregoing are constructed of
steel and are enameled or glazed with vitreous glasses. This
merchandise is currently classifiable under Harmonized Tariff Schedule
of the United States (HTSUS) subheading 7323.94.00. Kitchenware
currently classifiable 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.
Changes Since the Preliminary Results
We have made the following changes in these final results for both
Cinsa and ENASA, unless otherwise noted:
1. We revised the preliminary results frit calculation. See Comment
2, below.
2. We recalculated Cinsa International Corporation's (CIC's)
indirect selling expenses. See Comment 4, below.
3. We corrected a misplaced decimal point in the BILLADJU (billing
adjustment) variable in the sales listing.
4. For Cinsa, we included the startup costs associated with the
acquisition of Acero Porcelanizado, S.A. (APSA) in cost of
manufacturing (COM) as opposed to general and administrative (G&A)
expenses.
5. We deducted repacking expenses incurred in the United States by
CIC as a direct selling expense. See Comment 5, below.
6. For sales reported without cost of production (COP) data, we
assigned the average COP reported for other sales in the database.
Interested Party Comments
Comment 1: Alleged Reimbursement of U.S. Affiliate CIC for
Antidumping Duties. Respondents argue that the Department erred in
finding that the April 1997 capital contribution by Grupo Industrial
Saltillo (GIS), Cinsa's and ENASA's affiliated holding company, to CIC,
respondents' affiliated importer, constituted reimbursement within the
meaning of the Department's regulations. The respondents claim that (1)
there was no direct payment of CIC's antidumping duty liability by
Cinsa or ENASA; (2) there was no direct reimbursement of antidumping
duties paid by Cinsa or ENASA; and (3) there was no indirect
reimbursement of CIC's antidumping duty liability by Cinsa or ENASA.
In addition, respondents contend that 19 CFR Sec. 351.402(f)(1)
specifically states that ``reimbursement'' occurs only when the
reimbursement is made to the importer by the exporter or producer, and
that the Department has always applied the plain language of this
regulation strictly and literally. Respondents further argue that the
Courts and the Department have uniformly limited application of the
reimbursement regulation to payments by exporters or producers.
Respondents assert that, as the Department has previously stated, it
could have written a reimbursement regulation explicitly covering
payments ``on behalf of'' or ``attributable to'' a producer or
exporter. Moreover, according to respondents, it is the Department's
well-established policy to recognize separate corporate identities, and
the Court of International Trade, in Outokumpu Copper Rolled Products
AB v. United States (``Outokumpu''), 829 F. Supp. 1371 (1993), rejected
the theory that it should ``collapse'' the related parties involved to
find reimbursement. Respondents state that the Department itself, in
the context of the ninth review litigation, recognized the
administrative burden that would be created for the Department if the
regulation covered reimbursement by all entities within a corporate
family. Respondents note that, in the context of the same litigation,
The Department recognized that Congress had specifically rejected the
``duty as a cost'' theory. As a result, respondents claim, the
Department cannot argue that payments made ``on behalf of'' or payments
``attributable to'' an exporter or producer can constitute
reimbursement within the meaning of the regulation.
Respondents also claim that the Department's new interpretation of
the reimbursement regulation is not simply a ``policy change,'' but
rather the promulgation of a new substantive rule without satisfying
the notice and comment requirements of the Administrative Procedures
Act (APA). Moreover, according to respondents, this reinterpretation
also violates the
[[Page 26936]]
APA because, they claim, the Department has applied its new policy to
Cinsa and ENASA retroactively.
Finally, respondents argue that the Department lacked authority to
impose a rebuttable presumption that eleventh review duties will be
reimbursed, and that, even if the Department's application of its
rebuttable presumption were proper, Cinsa and ENASA have submitted
sufficient factual information to rebut any such presumption.
Specifically, Cinsa and ENASA state that they have provided
documentation establishing that: (1) CIC has refunded the April 1997
capital contribution using monies not supplied by any corporate
affiliate; (2) CIC and its corporate affiliates have taken steps to
ensure that it will not receive any future reimbursement within the
terms of the Department's new interpretation of the regulation; and (3)
CIC will be able to fund its future antidumping duty obligations
through its own financial resources. Cinsa and ENASA state that, in
prior administrative cases involving reimbursement, the Department has
found lesser factual showings to constitute a rebuttal of a presumption
of future reimbursement of antidumping duties.
Petitioner agrees with the Department's preliminary finding that
Cinsa and ENASA reimbursed their affiliated U.S. importer for
antidumping duties and argues that this finding should be affirmed for
purposes of the final results. According to petitioner, Cinsa and ENASA
concede that: (1) the payment to CIC was made; (2) the payment to CIC
was made on behalf of the producers under review; and (3) CIC used the
funds to pay antidumping duty assessments.
Petitioner also argues that the Department is entitled to
reinterpret its reimbursement regulation in a manner that better
effectuates the regulatory purpose. Petitioner contends that the
Department has a special interest in being able to apply its
reimbursement regulation flexibly so that it can address the many
different factual situations that arise.
In addition, petitioner argues that, contrary to respondents'
claim, the Department has not ``collapsed'' the respondents in this
case. The Department's preliminary finding, according to petitioner, is
that GIS made the reimbursement payment on behalf of Cinsa and ENASA,
as opposed to a collapsed entity making the reimbursement payment.
Furthermore, petitioner notes, the Department's new interpretation does
not constitute the adoption of the ``duty as a cost'' theory because
this case involves an undisputed link between the payment of
antidumping duties by the U.S. subsidiary and an intracorporate payment
providing funds for this purpose.
With regard to the alleged violation of the APA, petitioner claims
that the Department's preliminary results merely interpret the
regulation; therefore, it involves a general statement of policy or an
interpretive rule, neither of which is subject to the notice and
comment requirements of the APA.
In addition, petitioner argues that the Department is permitted to
apply its new interpretation of the reimbursement rule to the facts of
this review. Petitioner believes that the Department's reinterpretation
of the regulation in this review is an attempt to further develop an
evolving policy with respect to reimbursement of antidumping duties
between affiliated parties. According to petitioner, all the law
requires is that the Department's change of position be in accordance
with the statute and be based on a reasonable interpretation of the
regulation. Furthermore, petitioner adds, Cinsa and ENASA could not
have relied upon any prior interpretation of the regulation in making
the April 1997 transaction, because the transaction itself occurred
prior to the final determinations in the ninth and tenth reviews of the
underlying order.
Finally, petitioner argues that, contrary to Cinsa's and ENASA's
assertions, respondents have failed to rebut the presumption that CIC
will continue to rely on reimbursements in order to meet its
obligations to pay antidumping duties with respect to entries made
during the eleventh period of review (POR). Petitioner claims that the
new information submitted by Cinsa and ENASA does not establish ``by
clear and convincing evidence'' (the standard set forth in the
preliminary results) that CIC will not need to rely on reimbursements
from its Mexican affiliates to satisfy its antidumping obligations.
Specifically, petitioner states that: (1) both the repayment of the
April 1997 transfer and the restructuring undertaken by CIC in 1998
have weakened CIC financially; (2) the corporate non-reimbursement
resolutions are meaningless and should be disregarded; and (3) the
evidence submitted in support of the contention that CIC will be able
to fund its future antidumping obligations through its own financial
resources amounts to little more than ``overly-optimistic, self-serving
projections.'' Petitioner also states that prior cases in which the
Department determined that a party had rebutted the presumption of
reimbursement involved (1) more substantial changed circumstances and
(2) only an agreement to reimburse, not the actual reimbursement
characterizing this case.
DOC Position: We agree with petitioner that, for purposes of this
review, the Department properly determined that the April 1997 capital
contribution to CIC for purposes that included payment of antidumping
duties on fifth and seventh review entries constituted reimbursement of
antidumping duties within the meaning of 19 CFR Sec. 351.402. We also
agree with petitioner that, based on this history of actual
reimbursement, the Department reasonably presumed that antidumping
duties payable on the entries for this eleventh review likewise have
been or will be reimbursed. Finally, we also agree with petitioner that
Cinsa and ENASA have failed to adequately rebut the presumption that
reimbursement has occurred or will occur with respect to eleventh
review entries.
Interpretation of the Regulation
The reviews of this order have presented an issue of first
impression. In the few other cases in which reimbursement has been
addressed, the issue has most often been factual, i.e., whether there
was evidence that reimbursement occurred. See, e.g., Brass Sheet and
Strip from the Netherlands: Final Results of Antidumping Duty
Administrative Reviews, 54 FR 9534, 9537 (March 19, 1992); Color
Television Receivers from the Republic of Korea: Final Results of
Antidumping Duty Administrative Reviews (``Korean TVs''), 61 FR 4408,
4410-11 ( February 6, 1996). Outside the POS cookware reviews, the
Department has interpreted the general scope of the regulation, i.e.
what constitutes reimbursement, in only two situations: (1) we
interpreted the regulation to cover reimbursement by an exporter that
is affiliated with the importer (e.g., Korean TVs, 61 FR at 4410-11,
Certain Cold-Rolled Carbon Steel Flat Products from the Netherlands:
Final Results of Antidumping Duty Administrative Review, 61 FR 48465,
48470 (September 13, 1996)), and (2) we interpreted the regulation as
not applying when the exporter is also the importer ( e.g., Circular
Welded Non-Alloy Steel Pipe and Tube from Mexico: Final Results of
Antidumping Duty Administrative Review, 63 FR 33041, 33044 (June 17,
1998)). This is the first case in which we have addressed the issue of
whether reimbursement by a party acting on behalf of the exporter
constituted reimbursement within the meaning of the regulation.
[[Page 26937]]
In the ninth and tenth reviews of this order, the Department found
that funds provided to CIC by its ultimate parent, GIS, for the payment
of antidumping duties on entries during the fifth and seventh review
periods did not constitute reimbursement within the meaning of the
regulation because neither GIS nor GIS/US is an exporter or producer.
Specifically, we found that the facts merely established that there was
an infusion into CIC by its parent and there was no evidence that the
source of the funds was a producer or exporter of the subject
merchandise. Porcelain-on-Steel Cookware from Mexico; Final Results of
Antidumping Duty Administrative Review, 62 FR 42496, 42504 (August 7,
1997). While that decision is based on a permissible interpretation of
the regulation, upon further reflection, as a matter of policy, the
Department finds that interpretation too restrictive.
The Department may depart from its prior interpretation, provided
it ``articulates a reasoned basis'' for doing so. Hoogovens Staal, BV
v. United States, 4 F. Supp. 2d 1213, 1217, 1219 (1998) (upholding the
Department's decision to apply the reimbursement regulation to related
parties). We have a reasoned basis in this instance. The remedial
effect of the antidumping law is defeated if importers are reimbursed
for antidumping duties. Thus, the reimbursement regulation is designed
to preserve the statute's remedial purpose. Hoogovens, 4 F. Supp. 2d at
1217. In this review, the Department for the first time considered
whether the reimbursement regulation encompasses reimbursement by
parties acting on behalf of the exporter or producer. We are departing
from our prior interpretation of the reimbursement regulation in favor
of an interpretation that takes into account situations in which
reimbursement occurs indirectly, i.e., through someone acting on behalf
of the exporter, because such an interpretation more effectively
accomplishes the purposes of the regulation. A more literal and
restrictive interpretation could seriously undermine the effectiveness
of the regulation by making it possible to avoid its application merely
by acting through third parties. Therefore, the Department interprets
the reimbursement regulation to include reimbursement by parties acting
on behalf of the exporter or producer.
As explained in the preliminary determination, GIS regularly
manages funds on behalf of its various subsidiaries, including Cinsa
and ENASA. In making the transfer in question, GIS acted for the
benefit of Cinsa and ENASA and their U.S. importation arm, CIC. CIC
markets only products manufactured by Cinsa and ENASA; it does not
market products for other members of the corporate family. Thus, only
Cinsa and ENASA have a direct interest in assisting CIC in paying
antidumping duties on POS cookware products. Based on these facts,
taken as a whole, we find that when GIS transferred funds to CIC for
the payment of antidumping duties, it was acting on behalf of Cinsa and
ENASA. Therefore, consistent with the interpretation articulated in
this review, the April 1997 payment to CIC constitutes reimbursement
within the meaning of the regulation.
We disagree with respondents that finding that GIS acted ``on
behalf of'' Cinsa and ENASA is tantamount to considering the entire GIS
family of corporations to be a single ``collapsed'' entity. We have not
collapsed the corporations involved, and it is not necessary to do so
in order to find that one company acted on behalf of another. We also
disagree with respondent's argument that our decision in this case is
inconsistent with rejecting the concept of duty as a cost. A ``duty as
a cost'' approach treats antidumping duties paid by the importer as an
expense that should be automatically deducted from the U.S. price. In
contrast, the reimbursement regulation does not require the deduction
of antidumping duties paid by the importer. It only requires the
deduction of antidumping duties paid by the exporter or producer on
behalf of the importer or any amount the exporter or producer pays to
the importer as reimbursement for antidumping duties. Moreover, our
interpretation of the regulation does not rely on the principle of the
fungibility of money or the so-called ``holding company rule'' Cf. In
the Matter of Porcelain-on-Steel Cookware From Mexico: Final Results of
the Ninth Antidumping Duty Administrative Review, Secretariat File. No.
USA-97-1904-07. at 7 (April 30, 1999)(agreeing with the Department that
authorities relied upon for fungibility and holding company arguments
for reimbursement did not relate to these concepts as applied in the
context of reimbursement).
We also disagree with respondents' claim that the Department's
broader interpretation of the regulation constitutes the promulgation
of a new substantive rule, which requires compliance with the notice
and comment requirements of the APA. There is an existing rule
governing reimbursement by exporters and producers. We are not amending
that rule, we are merely interpreting it to cover reimbursement by
parties acting on behalf of the exporter or producer. Such an
``interpretive rule'', i.e., a clarification or explanation of an
existing regulation, may evolve over time, without the need for formal
notice and comment, provided the Department explains the reasons for
changes in its policies or practices, which we have done in this case.
Furthermore, we note that respondents have availed themselves of the
opportunity provided to comment on this interpretation following the
preliminary determination.
The Department also disagrees with respondents' claim that
application of the new policy in this review constitutes
``retroactive'' application in violation of the APA. ``[T]he general
principle is that when as an incident of its adjudicatory function, an
agency interprets a statute, it may apply that new interpretation in
the proceeding before it.'' Clark-Cowlitz Joint Operating Agency v.
Federal Energy Regulatory Commission, 826 F.2d 1074, 1081 (D.C. Cir.
1987), cert. denied, 485 U.S. 913 (1988). The same is true of applying
a new interpretation of a regulation. Thus, application of the new
policy in this review is permissible. The finding of prior
reimbursement in this review does not alter the results of prior
reviews in any respect. Therefore, we have not given the new policy
retroactive effect. The finding of prior reimbursement is being
addressed only to determine whether the reimbursement regulation should
be applied in the current review. Furthermore, application of the
regulation in this review does not create a ``manifest injustice'' as
to respondents. See Id. First, the Department has no long-standing
practice regarding reimbursement of antidumping duties by parties
acting on behalf of the producer or exporter. Second, although the
Department determined not to apply the reimbursement regulation in the
final determinations of the ninth and tenth reviews of this order, the
actions at issue here are not ones taken in reliance on the agency's
decisions in those reviews. The reimbursement at issue here is the same
as it was in the ninth and tenth reviews, i.e., the April 1997 transfer
to CIC. Because the decisions in the ninth and tenth reviews were made
after the April 1997 transfer, the parties could not have relied upon
those findings when that transfer was made.
Use of a Rebuttable Presumption
The Department has previously stated that ``where the Department
determines in the final results of an administrative
[[Page 26938]]
review that an exporter or producer has engaged in the practice of
reimbursing the importer, the Department will presume that the company
has continued to engage in such activity in subsequent reviews, absent
a demonstration to the contrary.'' Dutch Steel 3rd Review, 63 FR at
13213-14. ``The establishment of a rebuttable presumption allows the
Department to administer the law fairly and effectively.'' 63 FR at
13214. ``The Department's policy is crafted to address the instances in
which there has been a finding of reimbursement and the importer is
financially unable to pay the duty on its own. In that circumstance,
the Department will determine that the importer must continue to rely
on reimbursements, such as intracorporate transfers, from the producer
or exporter in order to meet its obligations to pay the duties.'' Id.
Accordingly, based on our finding that GIS, acting on behalf of Cinsa
and ENASA, reimbursed CIC for antidumping duties assessed on entries
during the fifth and seventh review periods, the Department reasonably
presumed that, absent evidence to the contrary, antidumping duties to
be assessed on entries during the current review period would be
reimbursed as well.
Respondents argue that such a rebuttable presumption is improper
and unjustified because there is no such language in the regulation.
However, no express grant of authority is required for the Department
to employ a rebuttable presumption when implementing one of its
regulations. Indeed, the Department has considerable discretion in
interpreting and applying its own regulations.
Whether circumstances warrant reversing the presumption of
reimbursement must be decided on a case-by-case basis. Id. In the
preliminary determination for this eleventh review, the Department
stated that, to rebut the presumption that reimbursement will continue
to take place when current entries are liquidated, a respondent must
normally demonstrate that, during the POR in question (in this case the
eleventh POR), antidumping duties were assessed against the affiliated
importer and the affiliated importer did in fact pay all antidumping
duties assessed during that POR, without reimbursement, directly or
indirectly, by the exporter/producer. In such a case, the importer's
financial ability to pay antidumping duties during the current POR is
sufficient evidence of the importer's ability, without reimbursement,
to pay the antidumping duties to be assessed on entries during the
current review. Alternatively, respondents may rebut the presumption by
demonstrating that there are changed circumstances (e.g., completed
corporate restructuring) sufficient to obviate the need for
reimbursement of antidumping duties to be assessed on the entries under
review. We stated in the preliminary determination that this
alternative means of rebuttal required ``clear and convincing''
evidence. However, because this alternative test is by nature
speculative, we have concluded that a ``clear and convincing'' standard
is inappropriate. Rather, the alternative is the test applied in the
Dutch Steel 3rd Review; specifically, there must be evidence sufficient
to satisfy the Department that the importer can be expected to pay
antidumping duties to be assessed in the future without reimbursement.
See 63 FR at 13213.
Because we determined in the current review that the April 1997
transfer constitutes reimbursement and because that transfer occurred
during the current POR, Cinsa and ENASA cannot rebut the presumption of
continuing reimbursement under the first alternative. Therefore, the
Department opened the record for respondents to provide evidence
sufficient to satisfy the Department that they can be expected to pay
antidumping duties to be assessed in the future without reimbursement.
Respondents' Rebuttal Evidence
In order to establish that CIC is no longer being reimbursed for
antidumping duties and that changed circumstances exist sufficient to
obviate the need for reimbursement as to eleventh review entries when
these entries are liquidated, respondents submitted documentation
intended to establish the following:
CIC has refunded to GIS/US the April 1997 capital
contribution, using monies obtained based on its own resources, without
reliance on monies or guarantees from its affiliates.
CIC's Board of Directors has passed a resolution to the
effect it will not accept from any company within the GIS group any
monies, directly or indirectly, in any form, as reimbursement for any
antidumping duties or duty deposits for which CIC may be liable. In
addition, the Boards of Directors of the GIS companies have each
resolved that they will not provide any such reimbursement. Respondents
note that, under Article 157 of the Mexican corporate law, such
resolutions have the authority to legally bind the company to a future
course of action.
CIC is expected to be able to fund its future antidumping
duty obligations through its own financial resources. In support of
this argument, respondents submitted documentation detailing certain
changes in the structure of CIC and an income statement and cash flow
projection for the period 1999-2002 (when the eleventh review entries
can reasonably be expected to be liquidated). Respondents also provided
documentation as to the rationales supporting their income and expense
projections.
CIC's return of the monies received as reimbursement and
expressions of intent not to reimburse in the future, while supportive
of a rebuttal argument, are not alone sufficient to provide the
Department with adequate assurance to rebut the presumption that CIC
will again require, and therefore again receive, reimbursement from its
affiliates for the eleventh review entries. We agree with petitioner
that the Board resolutions in question, even though they may currently
be legally binding, could easily be reversed by different resolutions
at some future date, and therefore provide little evidence that
reimbursement will not recur at some future date. Therefore, the
principal focus of our analysis of whether there are changed
circumstances sufficient to allay our concerns with respect to
reimbursement of the eleventh review entries must be on respondents'
attempt to show that CIC will be financially able to pay these duties
when they become due. After careful analysis, we must agree with the
petitioner that CIC's projections of its financial future are unduly
optimistic, and cannot be relied upon.
Respondents' claims that CIC's financial health will have improved
sufficiently by 2002 to pay the duties on these entries have two
primary bases. First, respondents claim that the June 1998 closure of
CIC's San Antonio warehouse operation will allow it to achieve cost
savings as compared to the time of the April 1997 transfer. These cost
savings, however, could well be offset by sales losses due to the
inability of CIC to fill orders from inventory quickly. Thus, it is not
clear that the closing of the warehouse will be a net financial gain.
Second, respondents claim that their projected sales for 1998 and
beyond will enable them to pay antidumping expenses in the foreseeable
future. We agree with petitioner that the evidence supporting
respondent's projections of CIC's future financial health is
insufficient for the Department to conclude that CIC will be able to
pay, independently, its antidumping expenses with respect to the
eleventh review entries. Because much of this information is
proprietary, it is discussed more fully in the May 11,
[[Page 26939]]
1999, Analysis Memorandum for the Final Results (Analysis Memorandum).
We disagree, however, with petitioner's argument that a higher
standard of proof should be required in this case than in the Dutch
Steel cases on the grounds that this case involved an actual
reimbursement, whereas in those cases the triggering element was only
an agreement to reimburse. Both cases involve a finding of
reimbursement. The same consequences flow from those findings: a
deduction from U.S. price and a presumption that, absent evidence to
the contrary, duties assessed on future entries will also be
reimbursed. We do not believe it is useful or appropriate to establish
what could potentially be numerous different standards based on the
nature of the reimbursement at issue.
We note, however, that, even when the same standard is applied,
Hoogovens, the respondent in the Dutch Steel cases, provided much more
convincing evidence that its importer would be financially able to pay
future antidumping duties. For example, the Hoogovens case involved
acquisition by the importing subsidiary of new profit centers and
income streams. See Certain Cold-rolled Carbon Steel Flat Products from
the Netherlands: Final Results of Antidumping Duty Administrative
Review, 64 FR 11825, 11832 (March 10, 1999) (Hoogovens has entered into
a joint venture with a U.S. firm to build a galvanizing plant in
Indiana; this was a major element of Hoogovens' restructuring, which
also included the transfer to the U.S. importer of ``the Rafferty-Brown
companies''). This type of restructuring provides a much firmer basis
for predicting stronger financial health than does the closing of a
warehouse and vague expectations with respect to future sales trends.
Furthermore, the evidence respondents provide in support of their
claim that they will be financially able to pay the eleventh review
duties without assistance is intrinsically weak. Based on the foregoing
analysis and that provided in our Analysis Memorandum, we find that
respondents have failed to rebut the presumption in this case, and
therefore determine that reimbursement within the meaning of 19 CFR
402(f) exists as to the eleventh POR entries. Therefore, in calculating
the export price (or the constructed export price) in this review, the
Department deducted the amount of the antidumping duty found to exist
for Cinsa and ENASA in this review prior to calculating the final
duties to be assessed.
We will continue to evaluate in future reviews whether CIC will
have the financial capacity to meet independently its antidumping duty
obligations.
Comment 2: Enamel Frit Cost. Respondents Cinsa and ENASA disagree
with the Department's finding in the preliminary results that
affiliated supplier ESVIMEX's prices to Cinsa and ENASA did not reflect
fair market prices. For the final results, respondents contend that the
Department should use the enamel frit costs as reported. In the
alternative, respondents assert that, if the Department continues to
find that the reported enamel frit prices do not fully reflect fair
market prices, the Department's preliminary results adjustment of
reported enamel frit prices by a factor calculated to approximate fair
market prices was fully consistent with the statute and should be used
in the final results as well.
Respondents claim that, although the transfer prices for enamel
frit charged by ESVIMEX to Cinsa and ENASA were less than prices
charged to ESVIMEX's unaffiliated customers, the transfer prices
represented fair market prices due to cost savings (in the areas of
freight, insurance, commissions, packing, credit, bad debt and
inventory costs) accruing to ESVIMEX on its sales to Cinsa and ENASA.
In addition, Cinsa and ENASA asserted in their questionnaire response
that any portion of the affiliated party discount not substantiated by
cost savings and unaffiliated purchaser discounts, corresponded to a
quantity discount, thereby making the affiliated party price equal to
the fair market price.
According to respondents, the record provides substantial evidence
that ESVIMEX's transfer prices for frit sold to Cinsa and ENASA were
well above ESVIMEX's COP and similar to the prices for the same enamel
frit types purchased from unaffiliated frit producers. In addition,
respondents argue that, as in previous reviews, the Department
improperly focused solely on the price difference between ESVIMEX's
prices to Cinsa and ENASA, and ESVIMEX's prices to other unaffiliated
customers. Respondents claim that the Department should have focused on
the price paid by Cinsa for ESVIMEX's frit and the prices paid by Cinsa
for the enamel frit of the unaffiliated producer. In addition,
respondents assert that ESVIMEX's profit and loss statement for 1997
confirms that ESVIMEX was operating profitably during the POR, which
would not be possible it if did not charge arm's length prices on a
majority of its sales.
Finally, respondents contend that petitioner's alternate
calculation is mathematically incorrect because the adjustment is based
upon the percentage of the documented cost savings as opposed to the
percentage of undocumented costs savings necessary to increase transfer
prices to approximate fair market value.
Petitioner also disagrees with the Department's finding in the
preliminary results. Petitioner maintains that, because frit is a major
input in the production of POS cookware, and because the record clearly
reflects that the highest value for frit on the record is market value,
the statute and the Department's practice require that enamel frit
purchased from ESVIMEX be valued on the basis of market value.
Accordingly, for purposes of the final results, petitioner argues that
the Department should use the market price information on the record.
In the alternative, petitioner states that if the Department adjusts
rather than disregards the reported transfer prices, the methodology
used in the tenth review is appropriate for that purpose.
Petitioner claims that the Court of International Trade held in
Cinsa, S.A. de C.V. v. United States, 976 F. Supp. 1034, 1035 (1997)
that the Department must consider alternative evidence only if there
are no third-party prices available. In addition, petitioner contends
that, by adjusting respondents' reported frit costs instead of
disregarding such costs, the Department failed to follow the statute.
Petitioner argues that the Department does not have the discretion to
adjust below-market prices if actual market prices are available.
Furthermore, petitioner argues that it would be unreasonable and
unsupported by the record for the Department to determine that a
difference between prices reflects a discount when the existence of a
discount has not been established. Petitioner claims that respondents
concede that there was no such discount offered, but nevertheless argue
that recognizing such a discount would not be ``unreasonable.''
Petitioner contends that the Department correctly determined in the
preliminary results, as well as in both the ninth and tenth reviews,
that respondents failed to account for the entire difference between
the affiliated and unaffiliated party frit prices.
Finally, petitioner argues that the Department cannot conclude that
respondent's reported frit costs reflect market value based on Cinsa's
purchases from an unaffiliated supplier, because the record is unclear
as to exactly how much frit Cinsa actually purchased from an
unaffiliated supplier during the POR. According to petitioner, Cinsa
and ENASA have not even
[[Page 26940]]
alleged, let alone established, that the frit purchased from an
unaffiliated supplier is comparable to the frit purchased from ESVIMEX.
DOC Position: As noted in the ``Changes Since the Preliminary
Results'' section of this notice above, we have revised our preliminary
frit calculation in order to increase more accurately the reported
transfer price by the amount of the unverified discount. See
Calculation Memo for the Final Results dated May 11, 1999 (Calculation
Memo).
To ensure that enamel frit costs reflected fair market prices, we
increased the reported costs of frit (based upon actual transfer
prices) by a calculated factor to cover fully the differential in
prices (inclusive of all documented cost savings) between sales to
affiliated and unaffiliated parties. By increasing the reported
affiliated party prices (i.e., transfer prices) by the percentage of
the cost savings that was not verified, we accounted for the extent to
which the verified cost savings failed to account for the difference
between prices to affiliates and prices to unaffiliated parties.
We do not agree with Cinsa's and ENASA's argument that the
Department must accept ESVIMEX's frit transfer prices as reported on
the theory that the transfer price sales were made at a fair market
value. Pursuant to section 773(f)(2) of the Act, a transaction between
affiliated parties is considered an appropriate source of ascertaining
the value of an input if it fairly represents the amount usually
reflected in sales of subject merchandise in the relevant market. We
have determined that the respondents adequately supported their claim
during this review with respect to all cost efficiencies listed on the
schedule. The Department has previously verified (e.g., in the context
of the tenth review), that certain quantified differences between
ESVIMEX's prices to affiliated parties and its prices to unaffiliated
parties are accounted for by market-based factors, such as differences
in transportation and packaging costs. However, these cost efficiencies
did not account for the full extent of the discount afforded only to
affiliated parties. Although Cinsa and ENASA claim that the
unaccounted-for portion of the affiliated party discount should be
attributed to a volume discount, they were unable to quantify and
support how the volume of their purchases resulted in market-based
savings equivalent to that unaccounted-for portion of the discount.
Therefore, in accordance with the Department's longstanding policy of
considering that transactions between affiliated parties are not at
arm's length in the absence of sufficient evidence to the contrary, the
Department determined that this standard had not been met with respect
to ESVIMEX's frit transfer prices to Cinsa and ENASA, and based its
cost calculations instead upon the ``adjusted transfer price,'' the
computation of which is described in the Calculation Memo. Similarly,
based on the information provided by Cinsa, we decline to find that the
prices for Cinsa's purchases of enamel frit from an unaffiliated
producer are an appropriate basis for determining whether their
purchases from ESVIMEX reflect fair market prices. See Calculation Memo
for further explanation. In addition, we disagree with respondents'
contention that ESVIMEX's profit and loss statement for 1997 proves
that it charges arm's-length prices on its sales of frit. Sales can
produce some profit and still not be fully responsive to market
conditions. Thus, we do not agree with the respondents that it is
sufficient to show that ESVIMEX's frit prices to affiliates are above
ESVIMEX's COP. The respondents' argument to this effect ignores the
provisions of section 773(f)(2) of the Act, which also requires a
comparison of transfer prices and market prices when the latter are
available, and permits the use of the higher of those prices.
Accordingly, we compared the transfer prices Cinsa and ENASA paid to
prices charged to unaffiliated customers. We noted that the prices
charged to unaffiliated customers were greater than both the affiliated
transfer prices and the actual costs incurred to produce the frit
supplied to Cinsa and ENASA. Because the prices charged to unaffiliated
customers did not reflect certain market-based savings unique to
ESVIMEX's affiliates, however, we constructed an ``adjusted transfer
price'' which did reflect these elements. Because this price was higher
than both ESVIMEX's COP and the transfer price, in conformity with
section 773(f)(2) and (3) of the Act, we based Cinsa's and ENASA's frit
cost on the ``adjusted transfer price.''
Comment 3: Inclusion of Costs Associated with the Acquisition of
APSA in Cinsa's COP. Petitioner believes that the Department erred by
failing to include any of the costs associated with the acquisition of
fixed assets in Cinsa's COP. Petitioner argues that the Department's
longstanding practice is to recognize gains or losses associated with
the disposition of fixed assets as manufacturing costs, if the
equipment was used in the production of the subject merchandise. See
Tapered Roller Bearings and Parts Thereof, Finished and Unfinished,
from the People's Republic of China, 62 FR 6173, 6184 (February 11,
1997). Petitioner argues that, based on Cinsa's claim that it is
currently using only a portion of the fixed assets purchased as part of
the APSA acquisition, the Department should (1) determine that Cinsa
incurred losses through the disposition of fixed assets purchased as
part of the acquisition of APSA, (2) classify those losses as overhead
costs, and (3) allocate the overhead costs to production of the subject
merchandise during the POR. In the alternative, petitioner suggests
that the Department should, at a minimum, include in Cinsa's COP the
cost of depreciation with respect to both the machinery in use and the
machinery in storage.
Respondents argue that the Department properly did not include the
costs associated with the acquisition of fixed assets in Cinsa's COP.
Cinsa argues that there is no record evidence to indicate that these
fixed assets will be ``written off,'' as claimed by petitioner.
Furthermore, according to respondents, the Department's practice is to
consider disposition of fixed assets as part of G&A expense and not as
overhead expense.
DOC Position: We agree with both petitioner and respondents, in
part. We agree with respondents that there is no record evidence to
indicate that the fixed assets in question will be ``written off.''
Cinsa reported that the remaining fixed assets ``are stored for later
use or sale.'' In fact, contrary to petitioner's argument, it is
possible that if these fixed assets are sold, they could result in a
gain, rather than a loss. Therefore, we have not determined that Cinsa
incurred losses with respect to the disposition of fixed assets
purchased as part of the acquisition of APSA. With regard to
petitioner's argument that the cost of depreciation of the fixed assets
purchased from APSA should be included in Cinsa's costs, we agree with
petitioner in principle. However, based on our review of Cinsa's
financial statements on the record, we cannot conclude that
depreciation of the APSA assets has not already been accounted for in
the depreciation costs reported by Cinsa. Accordingly, we have made no
adjustment for the cost of depreciation of fixed assets.
Comment 4: Reclassification of All U.S. Sales as Constructed Export
Price (CEP) Sales. Petitioner argues that respondents have failed to
establish that the role of their U.S. affiliate, CIC, was merely
ancillary with respect to the sales classified as EP. Specifically,
petitioner claims that, despite the
[[Page 26941]]
Department's direct request for documentation supporting the
classification of EP sales (such as telephone logs or bills showing
that Cinsa's export department communicated by telephone directly with
U.S. customers), respondents failed to provide any evidence that
Cinsa's export department, and not CIC, made the sales reported as EP
sales. Therefore, for purposes of the final results, petitioner argues
that the Department should reclassify the reported EP sales as CEP
sales.
In the alternative, petitioner argues that the Department should
correct the understatement of ``CEP only'' indirect selling expenses.
Petitioner claims that, in addition to the expenses already determined
by the Department to be ``CEP only,'' the Department should also
include the following expense categories: warehouse expenses (using as
a ``reasonable proxy'' the annual expenses reported in the February 1,
1999, reimbursement submission); salesmen's salary expenses;
professional fee expenses; travel expenses; and United Parcel Service
(UPS) expenses. Respondents argue that the Department's classification
of U.S. sales in the preliminary results is consistent with its
determinations in all prior administrative reviews, including the final
results of the ninth and tenth administrative reviews. Respondents
argue that, in response to a Department request, they did in fact
provide information on CIC's involvement in the sales process, stating
on the record, for example, that ``for EP transactions the transfer
price from Cinsa to CIC and the sales price to the unaffiliated U.S.
customers are established by Cinsa's export sales department.''
With respect to the calculation of CIC's indirect selling expenses,
respondents concede that warehousing expenses could be classified as
``CEP only'' expenses, but they argue that salaries and wages,
professional fee expenses, travel expenses and UPS (package delivery)
expenses are administrative expenses rather than selling expenses.
Therefore, respondents submit that the Department's preliminary results
correctly calculated the CEP-exclusive expenses and allocated the
remaining joint CEP/EP expenses among EP and CEP sales. Finally,
according to respondents, because warehouse rental expenses were
included within total rental expenses (which are part of the reported
indirect selling expenses), it is not necessary to revise the
calculation. However, if the Department decides to refine this
calculation, respondents provide for this purpose a revised CIC
indirect selling expenses calculation as part of their rebuttal brief.
DOC Position: We agree with the respondents that the facts on the
record of this review show that the sales reported as EP sales should
continue to be classified as EP sales. Pursuant to section 772(a) and
(b) of the Act, an EP sale is a sale of merchandise by a producer or
exporter outside the United States for export to the United States that
is made prior to importation. A CEP sale is a sale made in the United
States, before or after importation, by or for the account of the
producer or exporter or by an affiliate of the producer or exporter. In
determining whether sales involving a U.S. subsidiary should be
characterized a EP sales, the Department has examined the following
criteria: (1) whether the merchandise was shipped directly from the
manufacturer to the unaffiliated U.S. customer, (2) whether this was
the customary commercial channel between the parties involved, and (3)
whether the function of the U.S. affiliate is limited to that of a
``processor of sales-related documentation'' and a ``communication
link'' with the unrelated U.S. buyer. See, e.g., Final Results of
Antidumping Duty Administrative Review: Certain Corrosion-Resistant
Carbon Steel Flat Products and Certain Cut-to-Length Carbon Steel Plate
From Canada (Canadian Steel) 63 FR 12725, 12738 (March 16, 1998). In
the Canadian Steel case, the Department clarified its interpretation of
the third prong of this test, as follows. ``Where the factors indicate
that the activities of the U.S. affiliate are ancillary to the sale
(e.g., arranging transportation or customs clearance, invoicing), we
treat the transactions as EP sales. Where the U.S. affiliate has more
than an incidental involvement in making sales (e.g., solicits sales,
negotiates contracts or prices, or provides customer support), we treat
the transactions as CEP sales.''
With respect to the first prong of the test, it is undisputed that
the merchandise associated with the sales at issue was shipped directly
to the unaffiliated customer without passing through the U.S.
affiliate.
With respect to the second prong of the test, this is the customary
commercial channel between the parties involved. We note that it is not
necessary for EP sales to be the predominant channel of trade in a
given review for it to be the customary channel between the parties
involved. EP sales have been made with the participation of a U.S.
affiliate in the investigation and in all subsequent reviews. Thus,
this is clearly a customary channel of trade.
With respect to the third prong of the test, the Department
verified in the tenth administrative review (the most recent
verification of this order) that, for the sales classified as EP,
prices are set by the Cinsa export office in Saltillo, Mexico. The
record of this eleventh review demonstrates that participation of
affiliate CIC in these sales relates primarily to: issuing payment
invoices, accepting payment and forwarding it to Mexico, posting
antidumping duty deposits, and clearing products through U.S. Customs.
These services are clearly among those the Department considers as
being ``ancillary'' to the sale. CIC does not solicit or negotiate
these sales, does not set the price for these sales, and does not
provide customer support in connection with these sales.
With regard to petitioner's argument that respondents did not
completely respond to the Department's request for evidence supporting
the classification of certain U.S. sales as EP, Cinsa and ENASA
provided, as part of their June 15, 1998, submission, a phone bill
listing calls to Laredo, Texas, where the majority of calls from Mexico
are connected to the U.S. telephone network, as well as a listing of
calls to various U.S. locations.
Therefore, for the purposes of this review, we will continue to
treat as EP those sales which Cinsa and ENASA reported as EP sales.
With regard to petitioner's argument that the Department should
correct the alleged understatement of ``CEP only'' indirect selling
expenses, we agree in part and have included an amount for warehouse
expenses in ``CEP only'' expenses. For this purpose, we used the annual
warehouse expenses reported in the February 1,1999, reimbursement
submission, as a reasonable proxy. However, we agree with respondents
that salaries and wages, professional fee expenses, travel expenses and
UPS expenses are not related exclusively to CEP sales. For example,
salaries and wages may also be paid to CIC personnel responsible for
accounting, logistics, and administration. There is no evidence on the
record indicating that these salaries and wages are paid only to
salesmen involved with CEP sales. Similarly, professional fee expenses,
travel expenses and UPS expenses relate to all CIC sales, not just CEP
sales. Therefore we have continued to allocate these expenses among EP
and CEP sales.
Comment 5: CIC Packing Expenses. Petitioner argues that the
Department should deduct packing expenses incurred in the United States
by CIC as a direct selling expense. Petitioner claims that respondents
originally stated
[[Page 26942]]
in their April 9, 1998, response that no repacking occurred in the
United States. However, according to petitioner, an amount for packing
expenses incurred by CIC in the United States was reported in the
November 25, 1998, response. Because it is unclear which sales (EP or
CEP) were repacked by CIC, petitioner asserts that these repacking
expenses should be allocated between EP and CEP sales, and deducted
from the starting prices of all U.S. sales.
DOC Position: We agree, in part, with petitioner and have deducted
these repacking expenses incurred in the United States by CIC as a
direct selling expense. See Antifriction Bearings (Other Than Tapered
Roller Bearings) and Parts Thereof from France, Germany, Italy, Japan,
Romania, Singapore, Sweden, and the United Kingdom: Final Results of
Antidumping Duty Administrative Review, 63 FR 33338 (June 18, 1998).
However, we have allocated the repacking expenses over CEP sales only
because the vast majority of sales on which repacking is incurred at
CIC are CEP sales. None of the sales classified as EP sales pass
through CIC's warehouse en route to the customer for breakdown into
smaller lots. Although it is possible that some EP sales may be
repacked at CIC if they are being returned to Mexico, this would be the
exception because EP sales do not normally physically pass through CIC.
Accordingly, we have allocated these expenses over CEP sales only. See
Calculation Memo
Comment 6: U.S. Inland Freight Expenses. Petitioner contends that,
for purposes of the final results, the Department should reject
respondents' calculation of U.S. inland freight expenses, and assign an
amount based on the facts otherwise available. Petitioner argues that
respondents' three attempts to explain their reported U.S. inland
freight expenses are contradictory and not credible. As the facts
otherwise available, petitioner advocates the use of the highest per-
unit amount reported on Cinsa's and ENASA's U.S. sales tape for each
CEP sales observation.
Respondents argue that, because they reported their U.S. inland
freight expense using the same methodology that was reviewed and
accepted by the Department in prior administrative reviews, there is no
basis to resort to the use of facts available. Cinsa and ENASA argue
that they do not record inland freight expenses in a manner that would
permit reporting any other way. Accordingly, respondents argue that the
Department should continue to use the preliminary results methodology
for purposes of the final results.
DOC Position: We disagree with petitioner's claim that respondents'
inland freight expenses are contradictory and not credible. Cinsa and
ENASA calculated their U.S. inland freight expense by dividing the
total freight cost incurred by CIC by the total weight of all products
shipped by CIC. Because all products shipped by CIC were charged
freight expense on the basis of the weight shipped, Cinsa's and ENASA's
allocation methodology fairly reported the incurred freight cost for
light and heavy gauge products during the POR. Moreover, Cinsa and
ENASA used the same reporting methodology in the instant review as in
prior reviews, and we have previously found this methodology acceptable
in light of the respondents' inability to report the expenses at issue
on a shipment-specific basis. See, Porcelain-on-Steel Cookware from
Mexico: Final Results of Antidumping Duty Administrative Review, 63 FR
38373 (July 16, 1998) (POS Cookware Tenth Review Final). See also
Certain Circular Welded Carbon Steel Pipes and Tubes from Thailand:
Final Results of Antidumping Duty Administrative Review, 61 FR 1328,
1333 (January 19, 1996). Accordingly, we have accepted respondents'
methodology for U.S. inland freight expenses.
Comment 7: Indirect Selling Expenses Incurred in Mexico. Petitioner
argues that the failure by the Department to deduct indirect selling
expenses incurred in Mexico in calculating CEP is contrary to both the
plain language of the statute and the congressional intent as set forth
in the legislative history. Petitioner believes that, by specifically
using the word ``any'' in section 772(d)(1)(D) of the Act, Congress
expressly required the Department to deduct from the CEP starting price
all expenses incurred by the exporter that are reasonably attributable
to CEP sales, regardless of where the expenses were incurred, or
whether the expenses related to the sale to the affiliated U.S.
importer or the sale to the first unaffiliated customer in the United
States. Petitioner cites to cases interpreting the Fair Labor Standards
Act and the Americans with Disabilities Act and Rehabilitation Act of
1973 in support of its position. In addition, the petitioner asserts
that nothing in the House or Senate reports discussing the URAA
amendments to section 772(d) indicates any intent to limit the
deduction of indirect selling expenses to expenses incurred in the
United States or to expenses relating to sales by affiliated importers
to unaffiliated purchasers. Furthermore, according to petitioner, the
legislative history confirms that Congress specifically intended no
change in the types of expenses that the Department deducted from
exporter's sale price under the prior law, including indirect selling
expenses related to U.S. sales but incurred in the exporting country.
Accordingly, for purposes of the final results, petitioner claims that
the Department should recalculate the dumping margin after deducting
indirect selling expenses and inventory carrying costs incurred in
Mexico in the calculation of CEP.
Respondents argue that the Department's own regulations explicitly
state that ``[t]he Secretary will not make an adjustment for any
[additional CEP] expense that is related solely to the sale to an
affiliated importer in the United States.'' Respondents further contend
that petitioner's argument that the Department should deduct all
expenses incurred by the exporter, regardless of whether they can
reasonably be attributed to ``economic activities occurring in the
United States'' in calculating CEP is based on an incorrect reading of
section 772(d)(1) of the Act and ignores the rest of the provision.
Respondents contend that petitioner gives undue emphasis to the word
``any'' and cites judicial precedents involving statutory
interpretations of unrelated statutes. Finally, Cinsa and ENASA note
that petitioner raised this precise issue in the context of the ninth
and tenth administrative reviews of this proceeding and the Department
rejected petitioner's argument in both instances.
DOC Position: With regard to indirect selling expenses incurred in
Mexico in support of sales to the United States, we agree with the
respondents that such expenses do not relate to economic activity in
the United States. The Department's current practice, as indicated by
the preamble to the Department's new regulations, is to deduct indirect
selling expenses incurred in the home market from the CEP calculation
only if they relate to sales to the unaffiliated purchaser in the
United States. We do not deduct from the CEP calculation indirect
selling expenses incurred in the home market relating to the sale to
the affiliated purchaser.
Although the statute does not expressly state whether or not its
terms apply to indirect selling expenses associated both with sales to
the U.S. affiliates and with the subsequent sales by the U.S.
affiliates, the overall statutory scheme and the legislative history of
the URAA, including the Statement of Administrative Action (SAA), guide
the interpretation of this
[[Page 26943]]
provision as applying only to the sale in the United States.
After the URAA was implemented, the Department no longer deducted
selling expenses associated with the foreign producer's sale to the
affiliate from the U.S. price and the home market price when it
calculated the margin based on CEP. The SAA describes how the
Department is to treat these expenses under the post-URAA statute. The
SAA clearly states that, in calculating the CEP, the Department would
now deduct from the starting price only expenses ``associated with
economic activities occurring in the United States.'' See SAA at 823.
The remedy sought by petitioner would eliminate the equilibrium
embodied in the post-URAA statute by reducing the U.S. price without a
comparable reduction to the home market price. See Antidumping Duties:
Countervailing Duties: Final Rule, 62 FR 27296, 27351-27352 (preamble
to 19 CFR Sec. 351.402). See also POS Cookware Tenth Review Final at
38381. Accordingly, because Cinsa and ENASA reported that certain
indirect selling expenses incurred in Mexico are not associated with
selling activity occurring in the United States, but are limited to
selling activities associated with the sale of merchandise in Mexico to
the affiliated party, CIC, we have not deducted these Mexican indirect
selling expenses from the CEP calculation.
Comment 8: Calculation of CEP Profit. Petitioner argues that
because the Department erred in its calculation of CEP by failing to
deduct all selling expenses as required by the statute, the Department
also failed to include all selling expenses in ``total United States
expenses'' and, therefore, incorrectly calculated CEP profit.
Petitioner contends that the statute explicitly requires the Department
to include in ``total United States expenses'' all expenses referred to
in subsections (d)(1) and (2) of section 772.
Petitioner further argues that the Department improperly included
movement expenses in ``total expenses'' for purposes of the CEP profit
calculation, citing U.S. Steel Group v. United States, 15 F. Supp.2d
892 (CIT 1998) (U.S. Steel Group). According to petitioner, in U.S.
Steel Group the Court found that the limitation of ``total expenses''
to expenses relating to ``production and sale'' of the merchandise was
intended to include the same types of expenses that are included in the
calculation of total U.S. expenses, all of which relate either to
production or sale of the merchandise, excluding movement expenses.
Accordingly, petitioner contends that the Department should include
indirect selling expenses and inventory carrying costs incurred in
Mexico and exclude movement expenses in determining ``total U. S.
expenses'' for purposes of the CEP profit calculation.
Respondents argue that, because the indirect selling expenses
incurred in Mexico that are ``associated with economic activities in
the United States'' do not include those expenses incurred by Cinsa and
ENASA in making the sale to CIC, these expenses are also properly
omitted from the CEP profit calculation. Respondents assert that, in
calculating the amount of profit to deduct from the starting price in
the CEP calculation, the Department properly focused on the amount of
profit associated with the CEP sales made by CIC to its unaffiliated
U.S. customers.
With regard to movement expenses, respondents contend that
inclusion of these expenses in ``total expenses'' for purposes of
calculating CEP profit is consistent with the Department's prior
practice and with the policy bulletin entitled ``Calculation of Profit
for Constructed Export Price Transactions.'' Moreover, respondents
argue that, contrary to petitioner's assertions, the CEP profit
provision of the statute is ambiguous as to whether movement expenses
should be included in ``total expenses.'' Therefore, according to
respondents, it is well within the Department's discretion to interpret
section 772 of the Act to include movement expenses as part of ``total
expenses.''
DOC Position: We agree with respondents. In calculating the amount
of profit to deduct from the starting price in performing the CEP
calculation, we properly deducted the amount of profit allocated to the
CEP sales made by CIC to its unaffiliated U.S. customers. Since the
purpose of the CEP adjustments is to construct the arm's length
equivalent of a sale from the exporter to the U.S. affiliate by
subtracting expenses associated with the downstream sale by the
affiliate to the first unaffiliated customer and profit allocated to
those expenses, there is no reason to include in this calculation
expenses associated with the upstream sale by Cinsa's export office.
As explained in Comment 7, above, the indirect selling expenses
referred to in section 772(d)(1)(D) of the Act do not include those
expenses incurred by the foreign producer in making the sale to the
U.S. affiliate. Moreover, the SAA clarifies that, whether incurred by
the foreign producer or the U.S. affiliate, the selling expenses to be
used in the CEP profit calculation are those associated with the sale
made in the United States. Accordingly, the Mexican indirect selling
expenses at issue are properly excluded from the CEP profit
calculation.
With regard to movement expenses, such expenses are included in
``total expenses'' pursuant to the Department's policy as embodied in
Policy Bulletin 97.1 ``Calculation of Profit for Constructed Export
Price Transactions.'' This policy, in recognizing that total profits
are based upon expenses that include movement expenses, comes the
closest to meeting the statutory purpose of the CEP profit calculation.
With regard to U.S. Steel Group, cited by petitioner, we disagree
with the Court's holding with respect to this issue, and are seeking
appeal. Congress has expressly clarified in the SAA, at 824, that
section 772(d)(3) refers to profit allocable to ``selling,
distribution, and further manufacturing'' activities in connection with
the affiliate's U.S. sale. Excluding movement from ``total expenses''
would incorrectly discount the proportionality that must logically
exist between the ``total expenses'' calculated and the profits
attributable to those expenses, when those profits are based on
expenses that include movement. Moreover, such an exclusion fails to
achieve the statutory purpose of removing the profits associated with
all aspects of the affiliate's sale in the United States. Accordingly,
for purposes of the final results, we have included movement expenses
in ``total expenses'' for the CEP profit calculation.
Comment 9: Ministerial Error in the Concordance Section of the
Margin Program. Respondents claim that the preliminary margin programs
cause the concordance to ``loop to end'' before matching to all sales.
The respondents contend that this programming error results in a number
of products matching to constructed value (CV) instead of to their
proper sales price matches. Accordingly, respondents argue that the
Department should correct the current product concordance sections in
the margin programs and have provided suggested programming language to
achieve this result.
DOC Position: We disagree with respondents. After an analysis and
testing of the computer programs, we have determined that the use of
respondents' suggested programming language does not yield a different
result with regard to product matches. Both the Department's and
respondents' programming language are equally valid for this step of
programming. The number of products matching to CV (or to sales price
matches) does not change
[[Page 26944]]
between the two programs. Accordingly, we have not revised the
concordance portions of the margin programs as suggested by
respondents.
Final Results of Review
As a result of this review, we have determined that the following
margins exist for the period December 1, 1996 through November 30,
1997:
------------------------------------------------------------------------
Margin
Manufacturer/Exporter (percent)
------------------------------------------------------------------------
Cinsa....................................................... 25.34
ENASA....................................................... 65.23
------------------------------------------------------------------------
The Department shall determine, and the U.S. Customs Service shall
assess, antidumping duties on all appropriate entries. We have
calculated an importer-specific assessment rate based on the ratio of
the total amount of antidumping duties calculated for the examined
sales to the total entered value of those same sales. This rate will be
assessed uniformly on all entries of that particular importer made
during the POR. The Department will issue appraisement instructions
directly to the Customs Service.
Further, the following deposit requirements shall be effective for
all shipments of the subject merchandise from Mexico that are entered,
or withdrawn from warehouse, for consumption on or after the
publication date of the final results of this administrative review, as
provided for by section 751(a)(1) of the Act: (1) the cash deposit
rates for Cinsa and ENASA will be the rates established above in the
``Final Results of Review'' section; (2) for previously investigated
companies not listed above, the cash deposit rate will continue to be
the company-specific rate published for the most recent period; (3) if
the exporter is not a firm covered in this review, or the original
investigation, but the manufacturer is, the cash deposit rate will be
the rate established for the most recent period for the manufacturer of
the merchandise; and (4) the cash deposit rate for all other
manufacturers or exporters of this merchandise will continue to be
29.52 percent, the all others rate established in the final
determination of the less-than-fair-value investigation (51 FR 36435,
October 10, 1986).
The deposit requirements, when imposed, shall remain in effect
until publication of the final results of the next administrative
review.
This notice serves as a final reminder to importers of their
responsibility under 19 CFR Sec. 351.402(f) 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 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 Sec. 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 regulation and the terms of an APO is a sanctionable violation.
This administrative review and notice are in accordance with
sections 751(a)(1) and 777(i)(1) of the Act and 19 CFR Sec. 351.221.
Dated: May 11, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-12504 Filed 5-17-99; 8:45 am]
BILLING CODE 3510-DS-P
