[Federal Register Volume 63, Number 175 (Thursday, September 10, 1998)]
[Notices]
[Pages 48471-48477]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-24347]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-201-802]
Preliminary Results of Antidumping Duty Administrative Review
Gray Portland Cement and Clinker From Mexico
AGENCY: International Trade Administration/Import Administration/
Department of Commerce.
ACTION: Notice of preliminary results of antidumping duty
administrative review.
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SUMMARY: In response to requests from interested parties, the
Department of Commerce (the Department) is conducting an administrative
review of the antidumping duty order on gray portland cement and
clinker from Mexico. The review covers exports of subject merchandise
to the United States during the period August 1, 1996 through July 31,
1997 and one firm, CEMEX, S.A. de C.V. (CEMEX) and its affiliate
Cementos de Chihuahua, S.A. de C.V. (CDC). See section below entitled
``Collapsing.'' The results of this review indicate the existence of
dumping margins for the period.
We invite interested parties to comment on these preliminary
results. Parties who submit arguments in this proceeding are requested
to submit with the argument (1) a statement of the issue, and (2) a
brief summary of the argument.
EFFECTIVE DATE: September 10, 1998.
FOR FURTHER INFORMATION CONTACT: Steven Presing, Nithya Nagarajan or
John Totaro, Office VII, Import Administration, International Trade
Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, N.W., Washington, DC 20230; telephone (202) 482-
3793.
SUPPLEMENTARY INFORMATION:
Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute are
references to the provisions effective January 1, 1995, the effective
date of the amendments made to the Tariff Act of 1930 (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, published in the Federal Register on
May 19, 1997. 62 FR 27296.
Background
On August 4, 1997, the Department published in the Federal Register
a Notice of Opportunity to Request Administrative Review of the
antidumping duty order on gray portland cement and clinker from Mexico.
61 FR 41925 (August 4, 1997). In accordance with 19 CFR 351.213, CEMEX,
and the petitioner, the Southern Tier Cement Committee (``STCC''),
requested a review of CEMEX and its affiliate, CDC. On September 25,
1997, the Department published a Notice of Initiation of Antidumping
Review. 62 FR 50292 (September 25, 1997). The Department is now
conducting a review of these companies pursuant to section 751 of the
Act.
Scope of Review
The products covered by this review include gray portland cement
and clinker. Gray portland cement is a hydraulic cement and the primary
component of concrete. Clinker, an intermediate material product
produced when manufacturing cement, has no use other than of being
ground into finished cement. Gray portland cement is currently
classifiable under the Harmonized Tariff Schedule (HTS) item number
2523.29 and cement clinker is currently classifiable under number
2523.10. Gray portland cement has also been entered under number
2523.90 as ``other hydraulic cements.'' The HTS subheadings are
provided for convenience and U.S. Customs Service (the Customs Service)
purposes only. Our written description remains dispositive as to the
scope of the product coverage.
Verification
As provided in Section 782(i) of the Act, we verified information
provided by the CEMEX and CDC using standard verification procedures,
including on-site inspection of manufacturing facilities, the
examination of relevant
[[Page 48472]]
sales and financial records, and selection of original documentation
containing relevant information. Our verification results are outlined
in public versions of the verification reports.
Collapsing
Section 351.401(f) of the Department's new regulations, 62 FR at
27410, describes when the Department will treat two or more producers
as a single entity (i.e., ``collapse'' the firms) for purposes of
calculating a dumping margin. See also Gray Portland Cement and Clinker
from Mexico; Final Results of Antidumping Duty Administrative Review,
63 FR 12764, 12773 (March 16, 1998). The regulations provide that the
Department will treat two or more producers as a single entity where
(1) the producers are affiliated; (2) the producers have production
facilities that are sufficiently similar so that a shift in production
would not require substantial retooling; and (3) there is a significant
potential for the manipulation of price or production. For this last
criterion, the Department may consider (a) the level of common
ownership; (b) whether managerial employees or board members of one of
the affiliated producers sit on the board of the other affiliated
producer; and (c) whether operations are intertwined, such as through
the sharing of sales information, involvement in production and pricing
decisions, the sharing of facilities or employees, or significant
transactions between affiliated producers. In the current review,
CEMEX's equity ownership in CDC exceeded 5 percent; therefore, we have
preliminarily found that the two companies are affiliated. In addition,
CDC and CEMEX have production processes and facilities sufficiently
similar so that a shift in production would not require substantial
retooling. Finally in regards to the last criterion, the Department
reviewed levels of common ownership, shared board members, and
intertwined business relations, and found a significant potential for
the manipulation of price or production. As a result, the Department
has preliminarily concluded that these affiliated producers should be
treated as a single entity and that a single, weighted-average margin
should be calculated for these companies. (A complete analysis of this
issue is contained in the Memorandum from Roland L. MacDonald to Joseph
A. Spetrini, (August 31, 1998), located in the official file of this
case (``collapsing memorandum''). Therefore, throughout this notice,
references to ``respondent'' should be read to mean the collapsed
entity.
Transactions Reviewed
In accordance with section 751 of the Act, the Department is
required to determine the normal value (NV) and export price (EP) or
constructed export price (CEP) of each entry of subject merchandise.
Because there can be a significant lag between entry date and sale date
for CEP sales, it has been the Department's practice to examine CEP
sales during the period of review (POR). See Gray Portland Cement and
Clinker from Japan; Final Results of Antidumping Duty Administrative
Review, 58 FR 48826 (September 20, 1993) (Department did not consider
ESP (now CEP) entries which were sold after the POR). The Court of
International Trade (CIT) has upheld the Department's practice in this
regard. See The Ad Hoc Committee of Southern California Producers of
Gray Portland Cement v. United States, 914 F. Supp. 535 (CIT 1995.)
Fair Value Comparisons
To determine whether sales of gray portland cement by respondent to
the United States were made at less than fair value, we compared the EP
or CEP to the NV as described in the ``Export Price and Constructed
Export Price'' and ``Normal Value'' sections of this notice. In
accordance with section 777A(d)(2), we calculated monthly weighted-
average prices for NV and compared these to individual U.S.
transactions, during the same month and at the same level of trade.
Export Price and Constructed Export Price
We used EP, in accordance with subsections 772(a) and (c) of the
Act, where the subject merchandise was sold directly or indirectly to
the first unaffiliated purchaser in the United States prior to
importation and CEP was not otherwise warranted based on the facts in
the record. In addition, we used CEP in accordance with subsections
772(b), (c), and (d) of the Act, for those sales to the first
unaffiliated purchaser that took place after importation into the
United States.
We calculated EP based on delivered prices to unaffiliated
customers in the United States. Where appropriate, we made adjustments
from the starting price for early payment discounts, foreign inland
freight, foreign brokerage and handling, international freight, U.S.
inland freight, U.S. brokerage and handling, and U.S. customs duties.
We also adjusted the starting price for billing adjustments to the
invoice price.
We calculated CEP sales based on delivered prices to unaffiliated
customers. Where appropriate, we made adjustments for early payment
discounts, credit expenses, and direct selling expenses. We deducted
those selling expenses, including inventory carrying costs, that were
related to economic activity in the United States. We also made
deductions for foreign brokerage and handling, foreign inland freight,
international freight, U.S. inland freight, U.S. brokerage and
handling, and U.S. duty. We adjusted the starting price for billing
adjustments to the invoice price. Finally, we made an adjustment for
CEP profit in accordance with section 772(d)(3) of the Act.
Further Manufacturing
With respect to subject merchandise to which value was added in the
United States prior to sale to unaffiliated U.S. customers (e.g.,
cement that was imported and further processed into finished concrete
by U.S. affiliates of foreign exporters), we preliminarily determined
that the special rule for merchandise with value added after
importation under section 772(e) of the Act was applicable.
Section 772(e) of the Act provides that, where the subject
merchandise is imported by an affiliated person and the value added in
the United States by the affiliated person is likely to exceed
substantially the value of the subject merchandise, we shall determine
the CEP for such merchandise using the price of identical or other
subject merchandise if there is a sufficient quantity of sales to
provide a reasonable basis for comparison and we determine that the use
of such sales is appropriate. If there is not a sufficient quantity of
such sales or if we determine that using the price of identical or
other subject merchandise is not appropriate, we may use any other
reasonable basis to determine the CEP.
To determine whether the value added is likely to exceed
substantially the value of the subject merchandise, we estimated the
value added based on the difference between the averages of the prices
charged to the first unaffiliated purchaser for the merchandise as sold
in the United States and the averages of the prices paid for subject
merchandise by the affiliated person. Based on this analysis, we
estimate that the value added was at least 65 percent of the price
charged to the first unaffiliated purchaser for the merchandise as sold
in the United States. Therefore, we have preliminarily determined that
the value added is likely to exceed substantially the value of the
subject merchandise. Accordingly, for purposes of
[[Page 48473]]
determining dumping margins for these sales, we have used the weighted-
average CEP calculated on sales of identical or other subject
merchandise sold to unaffiliated persons. No other adjustments to EP or
CEP were claimed or allowed.
Normal Value
In order to determine whether there was a sufficient volume of
sales in the home market to serve as a viable basis for calculating NV,
we compared respondent's volume of home market sales of the foreign
like product to the volume of U.S. sales of the subject merchandise in
accordance with section 773(a)(1)(C) of the Act. Since respondent's
aggregate volume of home market sales of the foreign like product was
greater than five percent of its aggregate volume of U.S. sales for the
subject merchandise, we determined the home market was viable.
Therefore, we have based NV on home market sales.
In particular, we based NV on home market sales of Type I cement by
CEMEX and CDC. The statute expresses a preference for matching U.S.
sales to identical merchandise in the home market. However, in
situations where identical product types cannot be matched, the statute
expresses a preference for basing NV on sales of similar merchandise.
See section 773(a)(1)(B) and 771(16) of the Act. The history of this
order demonstrates that, of the various types of cement subject to the
order on Mexican cement, Type I cement is most similar to Type II and
Type V cement, and pozzolanic cement is the least similar.
During the POR, CDC only sold one type of cement in Mexico subject
to the antidumping order--Type I cement. CEMEX, on the other hand, sold
four basic types of cement in Mexico during the POR--Type I, Type II,
Type V and pozzolanic. However, prior to the commencement of
verification, CEMEX notified the Department that the merchandise
produced at its Hidalgo plant was either Type V or Type I, although all
data from this plant was reported as relating to sales or production of
only Type I cement. See CEMEX's June 3, 1998, submission explaining the
discovery of mis-reported sales at Hidalgo. In other words, a certain
portion of the cement sold as Type I from this plant was actually Type
V. CEMEX filed a submission on June 16, 1998, revising the home market
sales database for sales of Type V cement from Hidalgo. The Department
issued a letter on June 25, 1998, rejecting the filing as an untimely
response to the Department's questionnaire under section 351.201(b)(2).
Section 776(a) of the Act requires that the Department use facts
otherwise available when necessary information is not on the record, or
an interested party withholds requested information, fails to provide
such information in a timely manner, significantly impedes a
proceeding, or provides information that cannot be verified. Section
776(b) of the Act authorizes the Department to use an adverse inference
in determining the facts otherwise available whenever an interested
party has failed to cooperate with the Department by not acting to the
best of its ability to comply with requests for information.
Since the Department was notified that the information on the
record regarding sales of cement produced at Hidalgo is inaccurate, we
determined that these sales do not provide an appropriate basis for
calculating NV. In short, our sales and cost database for cement
produced at Hidalgo is extremely flawed. Therefore, in accordance with
section 776(b) of the statute, the Department, as facts available, is
substituting the highest calculated NV in this review for all sales of
cement produced at Hidalgo.
As for CEMEX's home market sales of Type II and Type V cement, and
certain home market sales of Type I cement, during the POR, the
Department has preliminarily determined that they are outside the
ordinary course of trade. As more fully described in the ``Ordinary
Course of Trade'' section of this notice, these sales are not
representative of CEMEX's home market sales. See also Memorandum from
Roland L. MacDonald to Joseph A. Spetrini (August 31, 1998).
Where appropriate, we adjusted home market sales of Type I cement
for discounts, credit expenses, inland freight, and inland insurance.
We also adjusted the starting price for billing adjustments to the
invoice price. In addition, in accordance with section 773(a)(6), we
deducted home market packing costs and added U.S. packing costs.
We made adjustments, where appropriate, for physical differences in
merchandise (DIFMER) in accordance with section 773(a)(6)(C)(ii) of the
Act. For CDC's sales, we calculated a DIFMER adjustment using plant-
specific cost data reported by CDC. For sales made by CEMEX, we
preliminarily determine, in accordance with section 776 of the Act,
that the use of partial facts available for a DIFMER adjustment is
appropriate. For the reasons discussed below we have preliminarily
determined that the most appropriate basis for a facts available DIFMER
is the actual cost differences in producing Type I cement sold in the
home market and Type V cement sold in the U.S. market. As facts
available, and in order to minimize the effect of varying plant
efficiencies, the Department has compared CEMEX's variable costs of
manufacturing (VCOM) to produce cement at the Hermosillo plants (sold
as Types I, II, and V) with the lowest VCOM reported by a CEMEX Type I
facility. This calculation is based upon the same methodology used to
calculate a DIFMER adjustment for CEMEX in the sixth review (see Final
Results of Administrative Review: Gray Portland Cement and Clinker from
Mexico, 63 FR 12764, 12778 (March 16, 1998)), and results in an upward
adjustment to home market prices.
As stated above, section 776(a) of the Act authorizes the
Department to use facts otherwise available when necessary information
is not on the record, or an interested party withholds requested
information, fails to provide such information in a timely manner,
significantly impedes a proceeding, or provides information that cannot
be verified. In the instant review, the Department first requested
DIFMER information from CEMEX on September 25, 1997. CEMEX was asked to
base its DIFMER calculations on differences in physical characteristics
between Type I cement sold in Mexico and the type of cement being
exported to the United States. CEMEX did not supply DIFMER information
in response to this request. On February 17, 1998, in a supplemental
questionnaire, the Department requested for the second time that CEMEX
submit DIFMER information. On March 20, 1998, CEMEX reported the
variable cost information for Type I cement at 11 plants, and
information for Type V cement for the Campana and Yaqui facilities. On
April 4, 1998, the Department requested interested parties to submit
information to assist the Department in determining the most
appropriate basis for a DIFMER adjustment in the instant review. In
response, CEMEX stated that there were no physical differences between
Types I and V cement produced in the home market; therefore, it
withdrew its request for a DIFMER adjustment in the instant review. In
addition, the Department did not receive any additional information
from interested parties demonstrating the most appropriate basis for a
DIFMER adjustment.
The Department has determined that the DIFMER information filed by
CEMEX on April 20, 1998, and April 27, 1998, (withdrawing its request
for a DIFMER adjustment) is contrary to the
[[Page 48474]]
data reported by CEMEX in its December 8, 1997, and March 20, 1998,
submissions in the reported VCOMH and VCOMU fields. The existing data
and product information on the record indicates that there are
differences in the physical characteristics of Type I cement and Type V
cement. These physical differences were originally made apparent in
CEMEX's reported variable manufacturing costs of producing Type I and
Type V cement in the home market. In addition, CEMEX's statement on
April 20, 1998, is contrary to the facts placed on the record of prior
reviews (currently on the record of the instant review), wherein CEMEX
states that there are differences in the physical characteristics of
Type I and V cement which contribute to a difference in the production
costs of the two types of cement. Based on the fact that record
evidence indicates that there are physical differences between Type I
and Type V cement and the fact that interested parties did not submit
viable bases for a DIFMER adjustment, the Department has calculated a
DIFMER adjustment based upon facts otherwise available.
The Department preliminarily determines that CEMEX's reported
DIFMER information, which is flawed and inconsistent with other facts
on the record of this case, is unusable. Furthermore, it is not
appropriate to use other information on the record as a basis for a
DIFMER adjustment. We determined in the fifth administrative review
that it is not appropriate to use the weighted-average VCOM of all
plants producing Type I and the VCOM of the U.S. merchandise due to
efficiency differences between plants. Thus, we relied in that review
on the purported VCOM differences for merchandise produced at Yaqui,
under the assumption that Yaqui produced both physically Type I and
physically Type II cement. In the final results of the sixth
administrative review, we determined that Yaqui and Campana only
produced a physically Type V cement and not other types of cement.
Therefore, we calculated a DIFMER utilizing the most efficient plant
producing Type I cement as compared to the plants producing solely Type
V. However, in the current review the evidence on the record indicates
that any differences in the variable cost of manufacturing cement is
attributable, at least in a large part, to differences in plant
efficiencies. See Home Market Sales Verification Report dated August
21, 1998. In addition, the record evidence indicates, and CEMEX has
argued in various submissions, that differences in costs due to plant
efficiencies cannot be isolated from other variable costs to calculate
a DIFMER consistent with section 773(a)(6) of the statute. Because of
different plant efficiencies, the Department is unable to compare the
variable costs at the Yaqui and Campana facilities with the average
variable costs at CEMEX's numerous facilities producing Type I cement.
Therefore, as facts available, and in order to minimize the effect of
varying plant efficiencies, the Department has compared CEMEX's VCOM to
produce cement at the Hermosillo plants (sold as Types I, II, and V but
are physically Type V) with the lowest variable costs reported by a
CEMEX Type I facility. This calculation is based upon the same
methodology used to calculate a DIFMER adjustment for CEMEX in the
sixth review and results in an upward adjustment to home market prices.
Additionally, consistent with our prior practice, we have applied to
CDC's home market sales a calculated DIFMER based upon plant-specific
reported data.
A. Arm's-Length Sales
Sales to affiliated customers in the home market not made at arm's
length were excluded from our analysis. To test whether these sales
were made at arm's length, we compared the starting prices of sales to
affiliated and unaffiliated customers, net of all movement charges,
direct selling expenses, discounts and packing. Where the price to the
affiliated party was on average 99.5 percent or more of the price to
the unaffiliated parties, we determined that the sales made to the
affiliated party were at arm's length.
B. Cost of Production Analysis
Petitioner alleged, on January 9, 1998, that CEMEX and its
affiliate, CDC, sold gray portland cement and clinker in the home
market at prices below their cost of production (COP.) Based on these
allegations, the Department determined, on February 3, 1998, that it
had reasonable grounds to believe or suspect that CEMEX had sold the
subject merchandise in the home market at prices below the COP.
Therefore, pursuant to section 773(b)(1) of the Act, we initiated a COP
investigation in order to determine whether CEMEX and CDC made home
market sales during the POR at prices below their COP.
In accordance with section 773(b)(3) of the Act, we calculated an
average monthly COP based on the sum of the costs of materials and
fabrication employed in producing the foreign like product plus
selling, general and administrative (SG&A) expenses and all costs and
expenses incidental to placing the foreign like product in condition
ready for shipment. In our COP analysis, we used the home market sales
and COP information provided by the respondent in its questionnaire
responses.
After calculating an average monthly COP, we tested whether home
market sales of cement were made at prices below COP within an extended
period of time in substantial quantities and whether such prices permit
recovery of all costs within a reasonable period of time. We compared
model-specific average monthly COPs to the reported home market prices
less any applicable movement charges, discounts and rebates. In
determining whether to disregard home market sales made at prices below
the average COP, we examined (1) whether, within an extended period of
time, such sales were made in substantial quantities, and (2) whether
such sales were made at prices which permitted the recovery of all
costs within a reasonable period of time in the normal course of trade.
Pursuant to section 773(b)(2)(C) of the Act, because less than 20
percent of the respondent's sales of the foreign like product under
consideration for the determination of NV were at prices less than COP,
we did not disregard any below-cost sales of the product.
C. Inflation
Mexico experienced significant inflation during the POR, as
measured by the consumer price index published in International
Financial Statistics and the consumer price index from the Bank of
Mexico. This data indicated that the annual inflation rate in Mexico
during the POR exceeded 40 percent. In accordance with our practice, to
avoid the distortions caused by the effects of this level of inflation
in prices, we limited our comparisons to sales in the same month. See
Notice of Final Determination of Sales at Less Than Fair Value: Certain
Steel Concrete Reinforcing Bars from Turkey 62 FR 9738 (March 4, 1997).
When the rate of home market inflation is significant, as it is in this
case, it is important that we use as a basis for NV home market prices
that are as contemporaneous as possible with the date of the U.S. sale.
This is to minimize the extent to which calculated dumping margins are
overstated or understated solely due to price inflation that occurred
in the intervening time period between the U.S. and home market sales.
We have also used monthly cost of production data for this reason.
[[Page 48475]]
D. Currency Conversion
The Department's preferred source for daily exchange rates is the
Federal Reserve Bank. For purposes of the preliminary results, we made
currency conversions based on the official exchange rates in effect on
the dates of the U.S. sales as certified by the Federal Reserve Bank of
New York pursuant to section 773(a) of the Act.
Section 773A(a) directs the Department to use a daily exchange rate
in order to convert foreign currencies into U.S. dollars, ignoring any
``fluctuations.'' We determine that a fluctuation exists when the daily
exchange rate differs from a bench mark rate by 2.25 percent or more.
The benchmark rate is defined as the rolling average of the rates for
the past 40 business days as reported by the Federal Reserve Bank of
New York. When we determine that a fluctuation existed, we substitute
the benchmark rate for the daily rate. For a complete discussion of the
Department's exchange rate methodology, see Change in Policy Regarding
Currency Conversions, 61 FR 9434 (March 8, 1996).
E. Produced As vs. Sold As
Section 771(16)(A) of the Act expresses a clear preference for
matching sales in the United States with sales in the home market of
merchandise that is ``identical in physical characteristics.'' See
CEMEX, S.A. v. United States, 133 F.3d 897 (Fed. Cir. 1998). When
circumstances require the Department to compare non-identical
merchandise, the statute, at section 773(a)(6)(C)(ii) of the Act,
provides for an adjustment for price differences attributable to
differences in physical characteristics.
Since the inception of this proceeding, we have seen that all
cement generally conforms to the standards established by the ASTM.
These standards tend to classify cement according to its physical
characteristics, dimensional characteristics, and/or performance
properties. Also from the outset, interested parties and the Department
have used ASTM standards to identify merchandise subject to this
antidumping order and to inform how, and on what basis, we match sales
of identical or similar merchandise. Specifically, the Department has
sought, wherever possible, to match sales of ASTM standard Type II to
Type II, ASTM standard Type V to Type V, and so forth.
During the period covered by the original investigation, the
Department discovered one or more instances where Mexican producers
sold cement meeting one ASTM standard as if it were cement meeting a
lower (included) ASTM standard. However, in the final determination,
the Department described these sales as a mistake and not ``the
ordinary practice in the industry.'' Final Determination of Sales at
Less Than Fair Value, Gray Portland Cement and Clinker from Mexico, 55
FR 29244, 29248 (1990). Therefore, based on the fact that it was the
normal industry practice to produce and sell on the same basis, the
Department accepted that ``matching by ASTM standard was the most
reasonable basis for making equitable identical merchandise
comparisons.'' Id. at 29248.
Devising a methodology for matching sales is often a difficult task
and the courts have recognized that the Department has broad discretion
``to choose the manner in which * * * merchandise shall be selected.''
Koyo Seiko Co. v. United States, 66 F.3d 1204, 1209 (Fed. Cir. 1995).
We have sought, throughout each of the past seven reviews, including
the present one, to (i) match based on physical characteristics, (ii)
rely on ASTM standards to distinguish one type of cement from another,
and (iii) rely on sales documentation as a convenient surrogate for
more direct evidence (e.g., mill test certificates) of cement type.
In the instant review, the Department requested CEMEX to report
home market and U.S. sales data on both an ``as produced'' basis (i.e.,
reporting the physical properties of each product sold), and on an ``as
sold'' basis. CEMEX reported that it produced cement meeting the
physical specifications of Type V cement, and sold this cement in the
home market as Types I, II, and V cement. This Type V cement was
produced by CEMEX's Yaqui and Campana plants, which are located in the
Hermosillo region. CEMEX noted, and the record reflects, that Yaqui and
Campana are the only two CEMEX plants which, on a consistent basis,
produce cement meeting the physical requirements of one type of cement
and sell that cement as another type of cement.
Under these circumstances, we believe it would be unreasonable to
match merchandise on a ``sold as'' basis. First, it would make any cost
of production or DIFMER calculations more difficult, if not impossible.
Moreover, such an approach would not address any sales that were merely
labeled ``gray portland cement'' or ``cement.'' Finally, a ``sold as''
approach would lend itself to the type of product manipulation about
which petitioner has so often expressed concern. Therefore, for
purposes of the instant review, the Department has matched based on the
products as produced.
F. Ordinary Course of Trade
Section 773(a)(1)(B) of the Act requires the Department to base NV
on ``the price at which the foreign like product is first sold (or in
the absence of sales, offered for sale) for consumption in the
exporting country, in the usual commercial quantities and in the
ordinary course of trade.'' Ordinary course of trade is defined as
``the conditions and practices which, for a reasonable time prior to
the exportation of the subject merchandise, have been normal in the
trade under consideration with respect to merchandise of the same class
or kind.''
The purpose of the ordinary course of trade provision ``is to
prevent dumping margins from being based on sales which are not
representative'' of the home market. Monsanto Co. v. United States, 698
F. Supp. 275, 278 (CIT 1988). By basing the determination of NV upon
representative sales, the provision helps to ensure that the comparison
between NV and U.S. sales is done on an ``apples to apples'' basis.
Apart from identifying certain sales that are below cost (section
773(b)(1)) or between affiliated persons (section 773(f)(2)), Congress
has not specified any criteria that the Department should use in
determining the appropriate ``conditions and practices'' which are
``normal in the trade under consideration.'' Therefore, ``Commerce, in
its discretion, chooses how best to analyze the many factors involved
in a determination of whether sales are made within the ordinary course
of trade.'' Thai Pineapple Public Co. v. United States, 946 F. Supp.
11, 14-17 (CIT 1996).
The Department's ordinary course of trade inquiry is far-reaching.
It evaluates not just `` `one factor taken in isolation but rather * *
* all the circumstances particular to the sales in question.' '' Murata
Mfg. Co. v. United States, 820 F. Supp. 603, 607 (CIT 1993). In short,
we examine the totality of the facts in each case to determine if sales
are being made for ``unusual reasons'' or under ``unusual
circumstances.'' Electrolytic Manganese Dioxide from Japan; Final
Results of Antidumping Duty Administrative Review, 58 FR 28551, 28552
(1993).
In the second administrative review of this order, the Department
determined that CEMEX's sales of Type II and Type V cement were outside
the ordinary course of trade and, therefore, could not be used in the
calculation of NV (then referred to as ``foreign market value''). See
Gray Portland Cement and Clinker
[[Page 48476]]
from Mexico: Final Results of Antidumping Duty Administrative Review,
58 FR 47253, 27254 (Sept. 8, 1993). In making this determination, the
Department considered, inter alia, shipping distances and costs, sales
volume, profit levels, sales history, home market demand and the
promotional aspect of sales. See Decision Memorandum to Joseph A.
Spetrini, August 31, 1994; see also Memorandum from Holly A. Kuga to
Joseph A. Spetrini, August 31, 1993 (public versions of these memoranda
are on file in Room B-099 of the Department's main building). Based
upon similar facts and using a similar analysis, the Department reached
the same conclusion in the final results of the fifth and sixth
administrative reviews for certain sales of Type II and Type V cement
by CEMEX in Mexico. Gray Portland Cement and Clinker from Mexico: Final
Results of Antidumping Duty Administrative Review, 62 FR 17148, 17151
(April 9 1997); Gray Portland Cement and Clinker from Mexico: Final
Results of Antidumping Duty Administrative Review 63 FR 12764, 12768
(March 16, 1998).
In the instant review, the petitioner alleged, as it did in the
second, fifth, and sixth reviews, that CEMEX's sales of Type II and V
(produced solely as Type V from the Hermosillo region) cement in Mexico
were outside the ordinary course of trade. Pursuant to section
773(a)(1)(B) of the Act, the Department has examined the totality of
the circumstances surrounding CEMEX's sales of cement in Mexico that
are produced as Type V cement and marketed as Types I, II, and V (which
are identical in physical characteristics to the cement that CEMEX
sells in the United States). Therefore, based on petitioner's
allegation and the relevant findings in the prior review, the
Department determined that it had reasonable grounds to believe or
suspect that CEMEX's home market sales of cement meeting the physical
specifications of Type V cement were outside the ordinary course of
trade.
A full discussion of our preliminary conclusions, requiring
reference to proprietary information, is contained in a Departmental
memorandum in the official file for this case (a public version of this
memorandum is on file in room B-099 of the Department's main building).
Generally, however, we have found: (i) the volume of Type V home market
sales is extremely small compared to sales of other cement types, (ii)
the number and type of customers purchasing Type V cement is
substantially different from other cement types, (iii) shipping
distances and freight costs for Type V home market sales tends to be
significantly greater than for sales of other cement types, and (iv)
CEMEX's profit on Type V sales tends to be small in comparison to its
profits on other cement types.
There are two other factors, historical sales trends and the
``promotional quality'' of Type V cement sales, which were considered
by the Department in the second administrative review. On September 25,
1997, the Department issued a questionnaire requesting CEMEX to support
its position that home market sales of Type V cement were in the
ordinary course of trade by addressing, among other things,
``historical sales trends'' and ``marketing reasons for sales other
than profit.'' CEMEX's response (copies of its submission from the
fifth and sixth administrative reviews) failed to address these two
items. Thus, as facts available, the Department finds that the facts
regarding these items have not changed since the second review and
that: (i) CEMEX did not sell Type V cement until it began production
for export in the mid-eighties, despite the fact that a small domestic
demand for such existed prior to that time; and (ii) sales of Type V
cement continue to exhibit a promotional quality that is not evidenced
in CEMEX's ordinary sales of cement (see memorandum from Holy A. Kuga
to Joseph A. Spetrini, dated August 31, 1993). A public version of this
memorandum is on file in room B-099 of the Department's main building.
For the reasons stated above, the Department has preliminarily
determined that CEMEX's home market sales of Type V cement during the
review period were outside the ordinary course of trade. We note that
the facts established in the record of this review are very similar to
the facts which led the Department to determine in the second, fifth
and sixth reviews that home market sales of Type V cement were outside
the ordinary course of trade. The determination involving the second
review, as noted above, was affirmed by the CIT in the CEMEX case. Slip
Op. 95-72 at 14.
In conclusion, the decision to exclude sales of Type V cement from
the calculation of NV centers around the unusual nature and
characteristics of these sales compared to the vast majority of CEMEX's
other home market sales. Based upon these differences, the Department
has preliminarily determined that they are not representative of
CEMEX's home market sales. Stated differently, these sales were not
within CEMEX's ordinary course of trade.
F. Fictitious Market
Petitioner has also claimed that CEMEX established a fictitious
market in Mexico for its sales of ``Type II'' cement. Since the sales
in question have preliminarily been found to be outside the ordinary
course of trade and, accordingly, will not be used in the calculation
of NV, it is not necessary for us to address this issue for these
preliminary results.
G. Level of Trade/CEP Offset
In accordance with section 773(a)(1)(B) of the Act, to the extent
practicable, we determine NV based on sales in the comparison market at
the same level of trade as the EP or CEP. The NV level of trade is that
of the starting-price sales in the comparison market, or, when NV is
based on constructed value (CV), that of sales from which we derive
selling, general and administrative (SG&A) expenses and profit. For EP,
the U.S. level of trade is also the level of the starting-price sale,
which is usually from exporter to importer. For CEP, it is the level of
the constructed sales from the exporter to the importer.
To determine whether NV sales are at a different level of trade
than EP or CEP, we examine stages in the marketing process and selling
functions along the chain of distribution between the producer and the
unaffiliated customer. If the comparison-market sales are at a
different level of trade, and the difference affects price
comparability, as manifested in a pattern of consistent price
differences between the sales on which NV is based and comparison-
market sales at the level of trade of the export transaction, we make a
level of trade adjustment under section 773(a)(7)(A) of the Act.
Finally, for CEP sales, if the NV level is more remote from the factory
than the CEP level and there is no basis for determining whether the
difference in the levels between NV and CEP affects price
comparability, we adjust NV under section 773(a)(7)(B) of the Act (the
CEP offset provision). See Notice of Final Determination of Sales at
Less Than Fair Value: Certain Cut-to-Length Carbon Steel Plate from
South Africa, 62 FR 61971 (November 19, 1997).
First, based upon a review of the selling functions performed by
CEMEX and CDC along the chain of distribution, we have determined that
CEMEX's and CDC's Type I home market sales are at different levels of
trade. Second, we determined that CEMEX's and CDC's Type I home market
sales are also at different levels of trade from CEMEX's CEP sales and
CDC's CEP and EP sales.
[[Page 48477]]
For a complete discussion of the Department's LOT analysis, see
Memorandum to the File regarding Level of Trade, dated August 31, 1998.
In summary, we found that: (1) there are quantitative and qualitative
differences in the selling functions performed by CEMEX in the home
market as compared to CEMEX's CEP sales, CDC's CEP sales, and CDC's EP
sales; (2) there are also quantitative and qualitative differences in
the selling functions performed by CDC in the home market as compared
to CEMEX's CEP sales, CDC's CEP sales, and CDC's EP sales; (3) each of
the above-mentioned levels of trade are separate and distinct levels;
(4) we do not have information which would allow us to examine pricing
patterns based on CEMEX's or CDC's sales of other products at the same
level as the U.S. CEP sales (CEMEX and CDC) or U.S. EP sales (CDC) to
make a level of trade adjustment; and (5) we have determined that
CEMEX's NV and CDC's NV are at more advanced levels of trade than
CEMEX's CEP and CDC's CEP level of trade. Therefore, in accordance with
section 773(a)(7)(B) of the Act, we granted a CEP offset for CEP sales
made by CEMEX and CDC. As stated above in point (2) we determined that
CDC's EP sales are at a different level of trade as compared to CEMEX's
home market and CDC's home market sales, however we made no similar
offset, since neither the Act nor the regulations envision this type of
adjustment for EP sales. Finally, record evidence indicates that CEMEX
and CDC sell physically different products in the U.S. market. In other
words, CEMEX sells physically Type V cement in the U.S., whereas CDC
sells physically Type II cement. Therefore, for purposes of this
administrative review, we have determined that the most accurate means
of comparison would be on a company-specific basis. For purposes of our
margin calculation, we compared CEMEX's home market sales to CEMEX's
CEP sales, and we compared CDC's home market sales to CDC's CEP and EP
sales. This approach allows us to calculate the most accurate DIFMER
adjustment. See DIFMER section of notice above.
Preliminary Results of Review
As a result of our review, we preliminarily determine the dumping
margin for CEMEX for the period August 1, 1996, through July 31, 1997,
to be 56.89 percent. Interested parties may request disclosure within
five days of the date of publication of this notice. Any interested
party may request a hearing within 30 days of publication. Any hearing,
if requested, will be held 44 days after the date of publication or the
first business day thereafter. Case briefs and/or other written
comments from interested parties may be submitted not later than 30
days after the date of publication. Rebuttal briefs and rebuttals to
written comments, limited to issues raised in those comments, may be
filed not later than 37 days after the date of publication of this
notice. The Department will publish its final results of this
administrative review, including its analysis of issues raised in any
written comments or at a hearing, not later than 180 days after the
date of publication of this notice.
Upon completion of this review, the Department shall determine, and
the Customs Service shall assess, antidumping duties on all appropriate
entries. The Department will issue appropriate appraisement
instructions directly to the Customs Service upon completion of this
review. The final results of this review shall be the basis for the
assessment of antidumping duties on entries of merchandise covered by
the determination and for future deposits of estimated duties. We will
base the assessment of antidumping duties on the entered value of the
covered merchandise.
Furthermore, the following deposit requirements will be effective
for all shipments of the subject merchandise entered, or withdrawn from
warehouse, for consumption on or after the publication date of the
final results of review, as provided by section 751(a)(1) of the Act:
(1) The cash deposit rate for the reviewed company will be the rate
determined in the final results of review; (2) for previously reviewed
or investigated companies not mentioned above, the cash deposit rate
will continue to be the company-specific rate published for the most
recent period; (3) if the exporter is not a firm covered in this
review, a prior review, or in the original LTFV investigation, but the
manufacturer is, the cash deposit rate will be the rate established for
the most recent period for the manufacture of the merchandise; and (4)
the cash deposit rate for all other manufacturers or exporters will be
61.85 percent, the all others rate from the LTFV investigation.
These deposit requirements, when imposed, shall remain in effect
until publication of the final results of the next administrative
review. This notice also serves as a preliminary reminder to importers
of their responsibility under 19 CFR 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 dumping duties.
This administrative review and notice are in accordance with
sections 751(a)(1) and 777(i)(1) of the Act.
Dated: August 31, 1998.
Joseph A. Spetrini,
Acting Assistant Secretary for Import Administration.
[FR Doc. 98-24347 Filed 9-9-98; 8:45 am]
BILLING CODE 3510-DS-P
