42496 Federal Register / Vol. 62, No. 152 / Thursday, August 7, 1997 / Notices

Dated: July 31, 1997.

Robert S. LaRussa,

Acting Assistant Secretary for Import

Administration.

[FR Doc. 97–20734 Filed 8–6–97; 8:45 am]

BILLING CODE 3510–DS–P

DEPARTMENT OF COMMERCE

International Trade Administration

[A–201–504]

Certain Porcelain-on-Steel Cookware

From Mexico: Final Results of

Antidumping Duty Administrative

Review

AGENCY: Import Administration,

International Trade Administration,

Department of Commerce.

ACTION: Notice of Final Results of

Antidumping Duty Administrative

Review.

SUMMARY: On January 31, 1997, the

Department of Commerce (the

Department) published the preliminary

results of the administrative review of

the antidumping duty order on certain

porcelain-on-steel cookware from

Mexico (62 FR 4723) (preliminary

results). The review covers two

manufacturers/exporters of the subject

merchandise to the United States and

the period December 1, 1994, through

November 30, 1995.

We gave interested parties an

opportunity to comment on the

preliminary results. Based on our

analysis of the comments received and

the correction of certain clerical and

computer program errors, we have

changed the preliminary results. The

final results are listed below in the

section ‘‘Final Results of Review.’’

EFFECTIVE DATE: August 7, 1997.

FOR FURTHER INFORMATION CONTACT: Kate

Johnson or Dolores Peck, AD/CVD

Enforcement, Group II, Import

Administration, International Trade

Administration, U.S. Department of

Commerce, 14th Street and Constitution

Avenue, NW., Washington, DC 20230,

telephone: (202) 482–4929.

SUPPLEMENTARY INFORMATION:

Background

On January 31, 1997, the Department

published in the Federal Register the

preliminary results of the administrative

review of the antidumping duty order

on certain porcelain-on-steel (POS)

cookware from Mexico (62 FR 4723). On

March 3, 1997, and March 10, 1997,

General Housewares Corp. (petitioner)

and, Cinsa and ENASA submitted case

and rebuttal briefs. The Department

held a hearing on March 27, 1997.

During June 23–27, 1997, the

Department verified respondent’s

submissions concerning the issues of

Cinsa’s and ENASA’s cross

manufacturing capability, alleged duty

reimbursement and frit purchases from

affiliated suppliers. On July 18, 1997,

the Department issued the verification

report and requested comments from

interested parties. The Department has

now completed its administrative

review in accordance with section 751

of the Tariff Act of 1930, as amended

(the Act).

Applicable Statute

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, codified at 19 CFR part 353

(April 1996).

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 entering under HTSUS

subheading 7323.94.00.30 is not subject

to the order. Although the HTSUS

subheadings are provided for

convenience and Customs purposes, our

written description of the scope of this

proceeding is dispositive.

Changes Since the Preliminary Results

We have made the following changes

in these final results:

1. We reclassified ENASA’s U.S. sales

pursuant to a requirements contract as

constructed export price (CEP) sales.

See Comment 5 below.

2. We calculated a return freight

figure for merchandise returned to

Yamaka by its unrelated customer using

adverse facts available. We are assuming

that all unsold merchandise was

returned to the warehouse in Laredo,

Texas. See Comment 7 below.

3. We reclassified Cinsa’s and

ENASA’s home market warehouse

expenses as movement expenses and

have deducted the reported amount on

sales made from remote warehouses in

Mexico City and Guadalajara. See

Comment 8 below.

4. We deducted the reported indirect

selling expenses from USP for CEP sales

made by Cinsa International Corp. (CIC)

for both Cinsa and ENASA. See

Comment 9 below.

5. We have not deducted Cinsa’s and

ENASA’s reported Mexican indirect

selling expenses (i.e., indirect selling

expenses incurred in Mexico on U.S.

sales) from the CEP calculation. See

Comment 10 below.

6. We used the Federal Reserve Bank’s

actual daily exchange rates for currency

conversion purposes. See Comment 12

below.

7. We increased the frit portion of

direct materials costs for Cinsa and

ENASA to reflect only the

undocumented portion of costs savings

attributable to volume discounts on

purchases from an affiliated frit

supplier.

8. Computer Programming Errors

A. We corrected an error in both the

Cinsa and ENASA concordance

programs that incorrectly limited the

number of home market sales included

in the concordance.

B. We corrected an error in both the

Cinsa and ENASA concordance and

margin programs that incorrectly

matched sales within a 90/60 day

window, since during periods of high

inflation, we only use home market

sales in the same month as the U.S. sale

for comparison purposes.

C. We corrected an error in both the

Cinsa and ENASA concordance

programs that incorrectly rounded the

averaged, indexed COP and CV.

D. We corrected errors in the margin

program for ENASA that incorrectly

omitted weighted average commissions

and indirect selling expenses, causing

an incorrect calculation of the

commission offset.

E. We calculated an adjustment for

CEP profit for both Cinsa and ENASA in

the margin program.

F. We made adjustments for

differences in packing expenses for both

Cinsa and ENASA when comparing

non-identical merchandise.

Interested Party Comments

Comment 1: Should Cinsa and

ENASA be collapsed?

Petitioner argues that the Department

should collapse the affiliated parties

Cinsa and ENASA and treat them as a

single entity for purposes of assigning a

dumping margin. Petitioner notes that,

in this review, the two companies are

controlled by the same board of

directors, the same individuals manage

the two companies, and the companies’

plants are situated adjacent to each
Federal Register / Vol. 62, No. 152 / Thursday, August 7, 1997 / Notices 42497

other on the same premises. Therefore,

petitioner claims, the Department

should determine, based on the ‘‘totality

of the circumstances,’’ that Cinsa and

ENASA should be collapsed. In

addition, petitioner contends, citing the

July 18, 1997 verification report, that

Cinsa and ENASA did not satisfy their

burden of showing that substantial

retooling would be necessary to shift

production of medium gauge (MG)

cookware from ENASA to Cinsa or light

gauge (LG) cookware from Cinsa to

ENASA.

Petitioner adds that in considering the

companies’ ability to shift production,

the Department must not discount the

companies’ ability to cooperate with

each other. Petitioner states that the

Department need not focus its

production-shifting analysis on

purchase of new equipment. Instead,

petitioner suggests, Cinsa and ENASA

could shift production by simply

moving the machinery they currently

own from one adjacent plant to another

or sell components produced in one

plant to the other plant, given that they

are managed by the same individuals.

Furthermore, petitioner argues that

collapsing is necessary to prevent

circumvention in this case. Accordingly,

petitioner argues that the Department

should adopt an adverse inference with

respect to Cinsa and ENASA and

conclude that production of LG and MG

cookware could be shifted between the

companies without substantial

retooling.

Cinsa and ENASA maintain that the

Department properly classified them as

two separate companies on the grounds

that their respective production

facilities were separate and distinct, and

that the machinery used by Cinsa to

produce its LG cookware lines and that

used by ENASA to produce its heavy

gauge (HG) and MG cookware lines

could not be used interchangeably

without undergoing fundamental and

expensive retooling. Cinsa and ENASA

argue that petitioner’s claim that they

can shift production is not supported by

the evidence on the record, including

the July 18, 1997 verification report.

DOC Position: The Department has

determined that Cinsa and ENASA

should not be collapsed based on the

facts on the record of this segment of the

proceeding. The evidence on the record

supporting this decision includes the

July 18, 1997 verification report noting

the differences and similarities between

the Cinsa and ENASA production

facilities and the different cookware

lines produced by the two companies.

Due to the proprietary nature of the facts

obtained at verification, a more

complete analysis of this issue appears

in the July 30, 1997 Memorandum to

Louis Apple from The Team.

The Department’s current practice,

recently codified at 19 CFR 351.401(f),

62 FR 27410 (May 19, 1997), is to treat

affiliated producers as a single entity

only when both of two criteria are met:

(1) Those producers have production

facilities for similar or identical

products that would not require

substantial retooling of either facility in

order to restructure manufacturing

priorities and (2) the Secretary

concludes that there is a significant

potential for the manipulation of price

or production.

The facts outlined in the verification

report indicate that, although Cinsa and

ENASA can both press cookware forms

from medium gauge steel sheets, Cinsa

does not have the capability to

manufacture cookware of the quality

and styles produced by ENASA and

ENASA does not have the capability to

produce cookware of the quality and

styles produced by Cinsa.

Furthermore, in the preliminary

results of review, the Department noted

that, although we consider both

ENASA’s HG and Cinsa’s LG cookware

to be subject merchandise, they are not

similar products and therefore cannot be

reasonably compared for the purposes of

determining dumping margins.

(ENASA’s MG cookware, which is

essentially a lighter, less expensive

version of the Euro-style cookware

ENASA also produces in HG steel on

the same production line, may be

comparable to ENASA’s HG Euro-style

cookware with a difference in

merchandise adjustment. Because there

were no sales of ENASA’s MG cookware

to the United States during the POR, we

did not need to reach that comparison

question in this review.) See Comment

4.

Because we determined that the

physical infrastructures of the two firms

are insufficiently similar to meet the

production facility requirement of the

collapsing test, it is not appropriate to

treat these firms as a single entity for the

purpose of assigning an antidumping

margin in this administrative review.

Further, having made this

determination, we do not need to

examine the questions of significant

common ownership and interlocking

directors and managers, because we

need not determine whether a

significant potential for manipulation of

price or production exists.

With respect to petitioner’s argument

that any collapsing decision must be

based on the ‘‘totality of the

circumstances,’’ such that the absence of

overlapping production facilities must

be weighed against the concerns

associated with a substantial degree of

common control, we disagree. It is the

Department’s recent practice (even

under the pre-URAA law) to refrain

from collapsing firms when there are

differences in production facilities that

would require substantial retooling. See

Certain Corrosion-Resistant Carbon

Steel Flat Products and Certain Cut-toLength Carbon Steel Plate From Canada:

Preliminary Results of Antidumping

Duty Administrative Review, 60 FR

42511, 42512 (August 16, 1995) ( stating

that no one factor is ‘‘determinative,’’

but then determining that two ‘‘related

parties’’ should not be collapsed

‘‘because the two companies do not

make comparable products such that a

shift in production could be

accomplished without fundamental and

expensive retooling). In Certain Cold

Rolled Carbon Steel Flat Products From

Korea: Preliminary Results of

Antidumping Duty Administrative

Review, 60 FR 65284, 65285 (December

19, 1995), the Department clarified that

having common production facilities

prong is a necessary but not sufficient

condition for collapsing related firms.

‘‘With respect to the third factor

(common production facilities), the

Department has recently clarified that,

although not necessarily determinative,

this factor is essential.’’ Id.

Finally, petitioner’s arguments

concerning the alleged ease with which

respondents could physically shift

machinery from one plant to the other

are misplaced. The Department’s

current test examines, rather than

assumes, the current ability of the

affiliated firms to shift production. In

order to evaluate the ability of two

affiliated companies to crossmanufacture, the Department takes as a

point of departure the existence of

separate corporate entities with

separately-owned physical plants. From

that point of departure, it analyzes the

expense and difficulty involved in

physically shifting production between

the plant owned by one company and

the plant owned by another, affiliated,

company. The verification report

examines the cost of retooling Cinsa’s

plant to produce one model, conical

frying pans, from ENASA’s entire line of

medium gauge, Euro-style cookware,

despite the fact that, during the POR,

ENASA sold only sets (which would

require even more retooling in order to

shift production) in the home market.

The verification report describes the

different production processes at Cinsa

and ENASA as processes developed to

accommodate the ranch-style and Eurostyle cookware, respectively. Because

the technical requirements of these two

cookware types are different, the
42498 Federal Register / Vol. 62, No. 152 / Thursday, August 7, 1997 / Notices

retooling-potential exercise at

verification involved retooling each of

Cinsa’s production operations to the

corresponding operation necessary to

produce ENASA’s Euro-style cookware,

and vice versa. Based on the close

examination of this issue at verification,

the Department has concluded that it

would require extensive and expensive

infrastructure changes for Cinsa and

ENASA to shift production between

them.

Finally, Petitioner now suggests that,

in view of the high degree to which

Cinsa and ENASA are affiliated and

cooperate with each other, the

Department should also consider

Cinsa’s physical assets to be ENASA’s

physical assets, and vice versa, such

that one firm could simply take, without

compensation, the other firm’s assets,

thus permitting production of the

cookware that required such machines

without the cost of purchasing new

machines. Adding an entire production

line of large expensive multistage

integrated production equipment would

inherently constitute ‘‘substantial

retooling.’’ Petitioner’s suggestion that

Cinsa and ENASA could simply move

the machinery from one plant to another

is, in effect, an admission that different

machinery, not merely retooling, would

be needed to produce ranch-style

cookware at ENASA or Euro-style

cookware at Cinsa. The suggestion that

the affiliated firms could avoid the need

for retooling by purchasing components

from each other likewise fails to

recognize the fundamental

incompatibility of the two production

lines.

With regard to petitioner’s concerns

about circumvention, the Department

has determined that Cinsa and ENASA

are affiliated firms. Thus, sales between

them (unless shown to be at arm’s

length) would be disregarded and future

antidumping margins for each company

calculated based on the sale to the first

unaffiliated parties in both the United

States and Mexico. Dumping margins on

any sales to the United States would

therefore be based on the extent of price

discrimination found to exist for those

U.S. sales.

Comment 2: Reporting of production

capabilities.

Petitioner asserts that the Department

should use total, adverse facts available

in calculating a margin for Cinsa and

ENASA because, they claim, Cinsa and

ENASA significantly impeded the

review by misleading the Department

with regard to each affiliate’s cross

production capability. Specifically,

petitioner states that, for example, the

Department has now confirmed that

Cinsa and ENASA can each stamp and

form medium-gauge cookware;

furthermore, petitioner notes that the

estimated cost to shift production from

ENASA to Cinsa provided at verification

was far less than that provided in Cinsa

and ENASA’s June 16, 1997 submission.

Therefore, petitioner urges that the

Department should find that Cinsa and

ENASA did not act to the best of their

ability in reporting production

capability information, and that failure

to do so justifies the use of an adverse

inference with respect to the collapsing

determination, i.e., the Department

should determine that Cinsa and

ENASA should be collapsed.

Cinsa and ENASA state that

petitioner’s allegations are misleading in

that they fail to reflect the fact that in

their June 16, 1997, supplemental

questionnaire response Cinsa and

ENASA were responding to the

Department’s questionnaire regarding

Cinsa’s ability to stamp the steel forms

for the entire range of ENASA ‘‘Eurostyle’’ products. Citing to petitioner’s

June 10, 1997, Affidavit of Dean

Samford, respondents note that

petitioner’s own expert admitted that

Cinsa’s presses did not have enough

power to stamp the thickest gauges of

steel used by ENASA to manufacture its

HG ‘‘Euro-style’’ cookware. Moreover,

respondents argue that Cinsa’s ability to

produce ‘‘Euro-style’’ cookware was not

limited to the inability of stamping

thicker gauges of metal, but was also

based on the necessity of employing

different tooling and machinery, which

Cinsa does not currently possess.

Finally, respondents maintain that the

apparent discrepancy between

respondents’ June 16, 1997, cost

estimate for shifting production and the

amount of the production-shifting

estimate in the verification report

represents the differences between the

Department’s supplemental

questionnaire request to provide costs to

retool Cinsa to produce the entire

ENASA line of medium and heavy

gauge ‘‘Euro-Style cookware’’ and the

Department’s more conservative request

at verification to estimate the cost to

retool Cinsa to produce one item, an

ENASA medium gauge conical frying

pan, so as to arrive at the lowest

possible estimate of conversion costs.

Accordingly, Cinsa and ENASA argue

that because they complied with all

information requests with regard to

production capabilities, there is no legal

or factual basis to resort to total adverse

facts available.

DOC Position: We agree with the

respondents. The facts on the record of

this segment of the proceeding show

that the respondents answered to the

best of their ability the Department’s

supplemental questions regarding

production capabilities. In addition, the

production-shifting estimate in the

verification report responds to the

Department’s new request, at

verification, that respondents calculate

only the cost of retooling Cinsa to

produce one article from the range of

ENASA products. This further inquiry

was pursued as a means of determining,

in response to petitioner’s concerns

regarding this issue, whether

production-shifting might be possible

for less than an entire line of cookware.

At verification, it became apparent that

although parties had previously referred

to the cookware types in terms of gauge,

many other, interrelated, factors were

intrinsic to the issue of whether

production could be shifted. Thus,

earlier references to Cinsa’s inability to

produce medium gauge cookware

referred not to an inability to stamp and

form the thinnest gauge of medium

sheet but to Cinsa’s inability to stamp

and form the full range of gauges used

by ENASA and its inability to continue

the process so as to produce the type of

medium gauge cookware produced by

ENASA (i.e., Euro-style cookware). See

Memorandum to Louis Apple from Eric

Warga, dated July 30, 1997.

Comment 3. Class or kind of

merchandise.

Cinsa and ENASA argue that the

Department should determine that LG

and HG cookware are distinct classes or

kinds of merchandise. Moreover, Cinsa

and ENASA claim that, for purposes of

the preliminary results, the Department

did not consider all of the relevant

criteria set forth in Diversified Products

v. United States, 572 F. Supp 883 (CIT

1983) (Diversified Products), and failed

to take into account all relevant

information in the administrative

record. Cinsa and ENASA contend that

the Department should analyze the class

or kind issue with the same amount of

detail that was provided in other areas

of the Department’s preliminary results.

Petitioner supports the Department’s

preliminary determination that LG and

HG cookware are the same class or kind

of merchandise and should be assigned

the same dumping margin. However

petitioner disagrees that it is appropriate

to conduct a Diversified Products

analysis since the Department does not

have the authority under the statute to

change the scope of the antidumping

duty order.

DOC Position: We agree with

petitioner that LG and HG merchandise

are within the class or kind of

merchandise subject to the order. The

order on POS cookware from Mexico (51

FR 43415, December 2, 1986) is not

limited to cookware of a particular
Federal Register / Vol. 62, No. 152 / Thursday, August 7, 1997 / Notices 42499

gauge, and Cinsa has not requested a

scope inquiry to determine whether HG

cookware is outside the scope of this

order. Indeed, by asking for a separate

margin for HG cookware, Cinsa

concedes that such merchandise is

within the scope. There are a few cases

in which the Department has assigned

separate margins to subclasses of

products under the same antidumping

order (e.g., Antifriction Bearings (Other

Than Tapered Roller Bearings) and

Parts Thereof from France, Germany,

Italy, Japan, and the United Kingdom,

54 FR 20900 (May 15, 1989))—but such

exceptions occur only under very

special circumstances. In the instant

review, the record does not reflect any

of the extraordinary circumstances that

call for creation of a sub-class.

Furthermore, the Diversified Products

criteria cited by Cinsa are usually used

to clarify whether or not a product is in

scope when this is unclear from the

language of the ITA and ITC final

determinations and the order. In this

case, it is undisputed that HG is within

the scope of the order. Based on our

findings at verification and on the

rationale provided in our December 16,

1996 Issues Memorandum, pursuant to

771(16)(C)(iii) we determine that

although the LG cookware produced by

Cinsa and the HG cookware produced

by ENASA fall within the same class or

kind of merchandise, these product

types (see verification report for details

as to these product lines, which are not

limited to gauge differences) cannot

reasonably be compared for purposes of

determining antidumping margins. In

sum, the scope of the order is not

limited in terms of cookware gauge or

limited to the cookware type produced

in LG steel by Cinsa, and because the

Cinsa and ENASA products at issue all

belong to the same class/kind (POS

cookware), sales of all cookware, of

whatever gauge, will be assigned a

single, company-specific margin.

However, because HG Euro-style

cookware and LG ranch-style do not

constitute the same ‘‘foreign like

product,’’ as defined in 19 U.S.C.

1677(16), the Department will not

compare sales of LG ranch-style

cookware to sales of HG Euro-style

cookware for purposes of calculating the

weighted average margin.

Comment 4: Reporting of Mediumgauge cookware production data.

Petitioner asserts that the Department

should use total, adverse facts available

in calculating a margin for Cinsa and

ENASA because, it claims, Cinsa and

ENASA significantly impeded the

review by: (1) Not reporting the

production of MG cookware until eight

months after initiation of the review,

and (2) not reporting the cost of

production (COP) for MG cookware.

According to petitioner, in other cases

in which a respondent has attempted to

manipulate an administrative review by

misleading the Department, the

Department found that the respondent

impeded the review and used total

adverse facts available or best

information available. See, e.g., Final

Results of Antidumping Duty

Administrative Review: Fresh Cut

Flowers from Mexico, 60 FR 49569

(September 26, 1995).

Furthermore, petitioner argues that

ENASA’s reported costs of production

for HG cookware are unreliable and

unusable because ENASA failed to

isolate and quantify the costs of

producing MG cookware from the

reported costs of producing HG

cookware. Petitioner contends that if

costs associated with MG cookware

were not captured in a separate cost

center, it is unclear how costs common

to MG and HG cookware were allocated.

Furthermore, according to petitioner,

there is no evidence of how the

differences in production efficiencies

were allocated between the unreported

MG cookware and the reported HG

cookware. Lastly, petitioner asserts that

because Cinsa and ENASA failed to

include MG cookware in the calculation

of variable overhead, ENASA’s variable

overhead costs are understated and

unusable.

Cinsa and ENASA state that ENASA

provided the COP of MG cookware in its

April 22, 1996, response. Cinsa and

ENASA state that neither company sold

MG cookware to the United States

during the POR, and further claim that

the Department never required ENASA

to provide complete sales and cost

information for MG POS cookware.

Moreover, Cinsa and ENASA contend

that MG cookware is not relevant to this

administrative review because the

statute would not permit the

Department to use home market sales of

MG cookware to compare to either LG

or HG cookware since they are not

considered similar merchandise.

Accordingly, Cinsa and ENASA argue

that because they complied with all

information requests with regard to MG

cookware, there is no legal or factual

basis to resort to total adverse facts

available.

DOC Position: The facts on the record

of this proceeding show that all sales by

Cinsa and ENASA to the United States

during the relevant period of review

were of first quality HG or LG open

stock cookware. Identical and similar

first and second quality HG and LG

cookware products were sold in the

home market. All sales of open stock

MG cookware in the home market were

of second quality merchandise. The

Department did not require ENASA to

report sales and cost data for MG

cookware because there were no

corresponding sales of MG cookware in

the U. S. during the POR and because

the Department had an adequate pool of

identical and similar home market sales

and cost data for first and second

quality LG and HG open stock cookware

with which to compare first quality LG

and HG open stock cookware products

sold in the United States. Contrary to

Cinsa’s and ENASA’s contention, the

Department’s decision not to require

Cinsa and ENASA to report home

market sales and costs for MG cookware

was not because MG cookware could

not be compared to LG and HG

cookware. It did not request this

information because it was not

necessary for the margin calculation in

this review. The Department did not

need to request home market sales of

open stock MG cookware because

second quality merchandise would not

be considered an appropriate basis for

calculating normal value (NV) until the

Department had exhausted its supply of

comparable first quality open stock

cookware. Therefore, the Department

did not need to determine, for purposes

of this review, whether it would be

appropriate to match sales of MG open

stock cookware to sales of LG or HG

open stock cookware.

Furthermore, because we did not need

MG sales reported, Cinsa’s and

ENASA’s failure in their original

questionnaire response to report MG

sales did not significantly impede the

review. Therefore, the use of total

adverse facts available is not warranted.

Finally, with respect to petitioner’s

claim that ENASA’s failure to identify

and justify a cost breakdown between

HG and MG products makes the cost

portion of the response unusable, we

note that Cinsa and ENASA indicated in

their October 1, 1996, Section D

supplemental response that their

standard cost system distinguishes

between different grades of steel in the

normal course of business. Because

ENASA relied on this cost system in

preparing its submission, the cost values

for HG and MG products should reflect

the cost difference for different grades.

The Department made a similar

determination in the Final Results of

Antidumping Duty Administrative

Review: Certain Corrosion-Resistant

Carbon Steel Flat Products from Korea,

61 FR, 18547, 18560 (April 26, 1996)

where we accepted a respondent’s

model specific costs and found that the

cost data were allocated to a sufficient
42500 Federal Register / Vol. 62, No. 152 / Thursday, August 7, 1997 / Notices

level of product detail following the

Department’s model match instructions.

Comment 5: Cinsa’s and ENASA’s

classification of certain U.S. sales as

Export Price (EP) rather than

Constructed Export Price (CEP).

Petitioner argues that the Department

should reclassify all of Cinsa’s and

ENASA’s EP sales as CEP. Petitioner

contends that Cinsa’s and ENASA’s

primary U.S. affiliate, CIC, incurred

selling expenses in connection with

U.S. sales of subject merchandise during

the POR, and that CIC’s level of activity

is far beyond what would be undertaken

by a mere ‘‘processor of sales

documentation.’’ Furthermore,

petitioner contends that the volume and

value of sales out of inventory in the

United States is too high for the

‘‘indirect’’ EP sales channel to be

considered ‘‘customary.’’

In addition, petitioner argues that

sales to the United States pursuant to

the requirements contract between

ENASA’s affiliated reseller Yamaka

China Co., Inc. (‘‘Yamaka’’) and

Yamaka’s U.S. customer should be

classified as CEP sales. Petitioner claims

that the record evidence indicates that

Yamaka’s role was central, and the sales

could not have been made without

Yamaka’s involvement.

Cinsa and ENASA argue that

petitioner’s suggestion that all of Cinsa’s

and ENASA’s sales should be classified

as CEP sales is incorrect because it

ignores prior determinations made by

the Department on this issue in the

original investigation and in all

previous administrative reviews of this

proceeding. Cinsa and ENASA make the

following arguments: (1) Petitioner

overestimates the amount of selling

expenses CIC incurred during the POR;

(2) petitioner’s claim that CIC set the

price for EP sales is incorrect; and (3)

petitioner incorrectly assumes that

certain repackaging was done in the

United States and that sales reported as

EP sales were made from CIC inventory;

and (4) Cinsa provided information

regarding the expenses of its export

sales department which demonstrate

that Cinsa contacted U.S. customers

from Mexico in executing the reported

EP sales. Cinsa and ENASA maintain

that for the foregoing reasons,

petitioner’s attempt to show that, with

respect to the sales they have designated

as EP sales, CIC did more than process

documentation and communicate with

the unrelated buyer is misplaced.

For its part, ENASA argues that all of

its U.S. sales were made prior to the

date of importation, and the

merchandise was shipped directly from

ENASA to the U.S. customer without

entering Yamaka’s inventory.

Accordingly, ENASA believes that the

Department correctly classified

ENASA’s sales as EP sales.

DOC Position: We agree with the

petitioner with regard to ENASA’s sales

and have reclassified these sales as CEP

sales. We agree with the respondents

with regard to the classification of

Cinsa’s sales.

Cinsa and ENASA both state that sales

to the U.S. are made on both an EP and

a CEP basis. With respect to Cinsa, the

facts on the record of this review do not

contradict the reported classifications.

Pursuant to section 772(b) of the Act, an

EP sale is a sale of merchandise for

export to the United States made prior

to importation. A CEP sale is a sale

made in the United States prior to or

after importation. Because Cinsa and

ENASA sold the merchandise to related

parties who resold it in the United

States, these sales will be considered

CEP sales unless the Department

determines that the sole role of the

related parties was sufficiently limited

that they can be considered ‘‘mere

processors of sales documentation.’’

In its March 11, 1996, Section A

questionnaire response Cinsa states that

affiliated parties Global Imports, Inc.

(Global) and CIC purchase LG and HG

cookware from Cinsa and ENASA and

resell it in the United States. Although

the date of sale reported by Cinsa and

ENASA for all such sales is the date of

the Global or CIC invoice, not the Cinsa

or ENASA invoice, the record in this

review indicates that both invoices are

issued within a short time of each other.

Cinsa notes in its response that the price

for EP sales is agreed upon at the time

the U.S. customer places a purchase

order with the Cinsa export sales

department in Mexico. Cinsa’s response

states that the precise quantity of

product is not determined until the

packing list is prepared for the shipment

from Mexico, and CIC or Global issues

the invoice to the U.S. customer. Thus,

Cinsa and ENASA consider the date of

sale to be the date of the Global or CIC

invoice. Cinsa indicates that the sales

categorized as EP sales are not

warehoused by Global or CIC after they

cross the border, and the sales data

corresponding to these sales show that

these sales are made on FOB Laredo

terms. According to Cinsa, the duties

performed by CIC and Global with

respect to the FOB Laredo sales relate

primarily to sales processing: issuing

payment invoices, accepting payment

and forwarding it to Mexico, posting

antidumping duty deposits, and clearing

products through customs for sales to

unrelated customers in the United

States. Therefore, for the purposes of

this review we will continue to consider

sales made through Global and Cinsa as

EP sales when the products do not enter

the inventory of Global or CIC.

However, the Department has

reclassified as CEP sales the sales

ENASA claims as EP sales. We have

reviewed evidence on the record of this

review with regard to Yamaka’s sales in

the United States, pursuant to a

requirements contract, of merchandise

produced by and purchased from

ENASA. Contrary to the Department’s

position in the preliminary results of

review, we have now determined that

these sales to the United States through

Yamaka are more appropriately

categorized as CEP sales. The facts on

the record in this review show that

Yamaka had a high degree of

involvement with regard to

requirements contract sales to its U.S.

customer. The record shows that

Yamaka negotiated the contract, signed

the contract, established an advertising

allowance, arranged for re-packing and

re-shipment of unsold merchandise,

retained returned merchandise in its

warehouse and authorized payment of a

refund to the customer for unsold

products. Because the sale to the first

unaffiliated customer was made by

Yamaka in the United States and

because Yamaka’s role in the transaction

chain cannot be characterized as that of

‘‘mere processor of sales related

documentation’’ we have reclassified

the sales made pursuant to this

requirements contract as CEP sales.

Comment 6: Movement expenses.

Petitioner contends that the

Department should deny any claim for

home market inland freight adjustments

since Cinsa and ENASA did not

adequately demonstrate the accuracy of

their allocations of home market

movement expenses to the subject

merchandise. Petitioner claims that

Cinsa and ENASA allocated the same

amount of freight expense to in-scope

and out-of-scope products of the same

weight, regardless of the amount of

freight expenses actually incurred to

ship the merchandise. In addition,

petitioner argues that Cinsa’s and

ENASA’s freight calculation does not

account for distance shipped, although

Cinsa and ENASA reported that

unaffiliated carriers charge different

freight rates depending on the

destination of the merchandise.

Furthermore, petitioner claims that

Cinsa and ENASA failed to report U.S.

inland freight for LG cookware sales

made by CIC from its San Antonio

warehouse and thus, as facts available,

the Department should use the cost of

freight reported for HG cookware from

Laredo to the U.S. customer, which is

the only U.S. inland freight expense
Federal Register / Vol. 62, No. 152 / Thursday, August 7, 1997 / Notices 42501

factor on the record in this review. In

addition, petitioner claims that the

denominator in Cinsa’s factor

calculation of post-sale freight expenses

for LG CEP sales understates that

expense. Petitioner requests that the

Department recalculate the factor using

the weight reported on the sales tape for

Cinsa’s CEP sales as the denominator.

Cinsa and ENASA argue that it was

not feasible for them to report

transaction-specific movement expenses

because Cinsa was not billed for freight

(for both Cinsa and ENASA) on a

transaction-specific or invoice-specific

basis, but rather on a monthly basis for

amounts shipped the previous month.

In addition, Cinsa argues that in the

original investigation and in each

subsequent review the Department has

not required Cinsa to report transactionspecific freight expenses. Also, Cinsa

and ENASA argue that: (1) They used a

weight-based freight allocation

methodology that accurately attributed

total freight expenses to the subject

merchandise; (2) the allocation was

calculated using the most specific level

permitted by company records; and (3)

the calculated freight factors were only

applied to those sales that were subject

to freight charges.

Furthermore, Cinsa argues that there

is nothing contradictory about the fact

that it reported its freight expenses from

two different warehouses during the

POR, because it used two warehouses at

different times during the POR.

Moreover, contrary to petitioner’s

assertion, Cinsa and ENASA contend

that pre-sale freight expenses on CIC’s

U.S. sales were reported, although in

different fields from other movement

expenses.

Finally, with regard to petitioner’s

argument that U.S. freight expenses are

under reported, Cinsa asserts that both

the expenses and the sales values used

in the CIC freight factor include all LG

POS products, some of which were not

on the sales tape (i.e., POS tableware

and POS kitchenware).

DOC Position: We have accepted

respondents’ methodology for the

calculation of freight expenses. The

Department’s preference is that,

wherever possible, freight adjustments

should be reported on a sale-by-sale

basis rather than allocated over all sales.

See Final Results of Antidumping Duty

Administrative Review: Replacement

Parts for Self-Propelled Bituminous

Paving Equipment from Canada, 56 FR

47451 (September 19, 1991). If the

respondent does not maintain freight

records on a sale-by-sale basis, then our

preference is to apply an allocation

methodology at the most specific level

permitted by the respondent’s records

kept in the normal course of business.

Cinsa states in its April 22, 1996,

questionnaire response that it does not

maintain freight records on a sale-bysale basis, but rather was billed on a

monthly basis by unaffiliated trucking

companies according to the weight

shipped per truckload. Although Cinsa’s

sales department handles the freight for

ENASA’s home market sales, it bills

ENASA for this service on the basis of

the weight of all ENASA merchandise

shipped. Furthermore, Cinsa stated that

only sales made to the Monterrey region

incurred post-sale freight expenses.

Our analysis of the questionnaire

responses confirms that freight charges

are based on weight, and that the

shipping company factors in distance in

calculating the weight-based rate which

varies by destination. Although Cinsa

and ENASA allocated freight expenses

based on shipments of subject and nonsubject merchandise, we found the perunit expense to be virtually the same

when we re-allocated the expense based

solely on subject merchandise.

Accordingly, we accepted Cinsa’s and

ENASA’s freight calculations as

submitted in their sales database as

reasonable and non-distortive.

In addition, we do not agree with

petitioner’s claims that Cinsa and

ENASA failed to report U.S. inland

freight costs for LG cookware incurred

by CIC on products shipped from its San

Antonio warehouse. This information is

included in the April 22, 1996,

questionnaire response.

Comment 7: Returned merchandise.

Petitioner argues that the Department

should adjust all of ENASA’s movement

expenses (namely, pre-sale warehouse

expenses, foreign inland freight,

Mexican brokerage, U.S. brokerage, and

U.S. duty), to reflect the freight

expenses from the unaffiliated customer

to the U.S. warehouse on returned

merchandise, and that these adjusted

movement expense should be deducted

from gross unit price. In addition,

petitioner contends that Cinsa and

ENASA did not adequately explain

what happened to the merchandise that

one U.S. customer did not sell to retail

buyers and that Yamaka agreed to

repurchase. Accordingly, petitioner

argues that the Department should

adopt an inference adverse to ENASA

and conclude, as the facts otherwise

available, that the merchandise was

returned to ENASA’s warehouse in

Mexico.

Alternatively, petitioner argues that

the Department should determine that

Yamaka’s return movement expenses

are direct selling expenses, because the

amount of expense varied with the

quantity sold and the expenses were

directly related to sales under the same

contract. See Final Determination of

Sales at Less Than Fair Value: Bicycles

from the People’s Republic of China, 61

FR 19026, 19043–44 (April 30, 1996),

and Final Determination of Sales at Less

Than Fair Value: Foam Extruded PVC

and Polystyrene Framing Stock from the

United Kingdom, 61 FR 51411, 51416–

17 (October 2, 1996).

A third option, according to

petitioner, would be to treat the

outbound and return freight expenses at

issue in this review as sales promotion

expenses, which are treated as a direct

selling expense when they are directed

at the customer’s customer.

ENASA argues that, for purposes of its

EP calculation, the Department

improperly deducted movement

expenses attributable to returned

merchandise not sold during the POR.

ENASA argues that when the

merchandise is resold in a future

review, the Department will be required

to account for all movement expenses in

that future review. Moreover, ENASA

contends that the Department’s action is

contrary to the statute because the

return charges incurred by Yamaka are

charges beyond the place of delivery

attributable to merchandise not

purchased by ‘‘the customer’’ and

therefore outside the scope of review.

In addition, ENASA argues that in the

cases cited by petitioner, the returned

merchandise was actually purchased by

the customer and the customer was

returning previously purchased

merchandise. In the instant case,

according to ENASA, the merchandise

re-shipped to Yamaka was never

purchased by ‘‘the customer’’ and was

not being returned pursuant to a

warranty or guarantee provision.

Finally, ENASA disagrees that all

movement expenses should be adjusted

by an amount greater than that used in

the preliminary results. It argues that

change would overstate the movement

expenses attributable to HG cookware.

ENASA argues that no deduction

should be made to account for

transportation expenses incurred by

Yamaka attributable to merchandise

which was returned in connection with

the promotion program.

DOC Position: We agree with the

petitioner. The merchandise at issue is

sold to Yamaka’s customer under a

contract that calls for Yamaka to

‘‘repurchase’’ cookware that Yamaka’s

customer does not sell to its own retail

customers during a promotion. Thus, it

is clear that the merchandise is

purchased by Yamaka’s customer. The

return freight expenses are direct selling

expenses incurred by Yamaka because
42502 Federal Register / Vol. 62, No. 152 / Thursday, August 7, 1997 / Notices

the contract governing all sales in

connection with the promotion

explicitly states that Yamaka will incur

freight expenses to return the

merchandise that Yamaka’s customer

was unable to sell. Because Yamaka

incurs the return freight expenses

pursuant to the single contract made in

connection with the promotion, we have

associated an amount for total return

freight to that contract and allocated the

return freight expenses across the total

sales made pursuant to that contract.

On September 10, 1996, the

Department requested information on

the return freight destination or

destinations associated with these

returns. In its October 1, 1996,

supplemental response, ENASA simply

stated that returned merchandise was

often resold to the same customer for

another store. Because ENASA failed to

respond fully to our question, we do not

know to what location or locations

cookware not sold in the promotion was

returned. Therefore, because ENASA

did not adequately explain the

disposition of the returned merchandise

and because Yamaka is the party

assuming the contractual responsibility

for the returned merchandise, as adverse

facts available, we are assuming that all

unsold merchandise was returned to the

Yamaka warehouse in Laredo, Texas.

We calculated return freight as a

percentage of the original freight from

Laredo to Yamaka, based on the

percentage of original items returned.

There is nothing on the record of this

case which supports petitioner’s

argument that we assume the

merchandise was returned to ENASA’s

warehouse in Mexico. For example, the

record contains no comparable contract

calling for ENASA to repurchase

returned merchandise from Yamaka.

ENASA’s claims that these expenses

are related to goods not purchased by

‘‘the customer’’ are misleading. While

the merchandise in question was not

purchased by the ultimate retail

customers, it was all purchased by

Yamaka’s wholesale customer. Finally,

with respect to ENASA’s argument that

the return freight should be associated

with future sales of the returned

merchandise, we note that, whereas the

record reflects the amount of retailunsold goods that were repurchased and

returned to Yamaka in connection with

the post-promotion reconciliation called

for in the promotion-sale contract, it

would be very difficult to trace the

earlier history of various lots of

merchandise resold in subsequent lots.

Indeed, if the merchandise re-enters

Yamaka’s inventory, it would become

indistinguishable from merchandise

shipped directly from ENASA’s factory.

Further, pursuant to section 772(c)(2)(A)

of the Act, freight charges for later sales

would begin at the point of shipment

associated with the later sale. Although

the statute refers to inclusion of costs

back to the original point of shipment in

the exporting country, it also only

includes costs actually incurred and

included in the cost of the merchandise.

If, pursuant to a later re-sale by Yamaka,

merchandise returned pursuant to the

promotion sale covered in this review is

shipped from some point other than the

factory, only freight from the actual

shipping point will be included in cost;

thus, only freight from the actual

shipping point (e.g., Yamaka’s

warehouse) will be removed.

Comment 8: Home market warehouse

expenses.

Petitioner argues that Cinsa’s and

ENASA’s home market warehouse

expense allocation are distortive

because total warehouse expenses are

allocated to both subject and nonsubject merchandise. Accordingly,

petitioner believes that the Department

should deny Cinsa’s and ENASA’s

claims for this adjustment.

Furthermore, petitioner asserts that

Cinsa and ENASA did not report presale warehouse expenses incurred in the

United States on CEP sales of both LG

and HG cookware and did not report

pre-sale warehouse expenses incurred

in Mexico on CEP sales of both LG and

HG cookware. Accordingly, as facts

available for the U.S.-incurred expenses,

petitioner argues that the Department

should make a deduction from CEP in

the amount of the highest per-sale

warehouse expense reported by Cinsa

and ENASA on any home market sale of

LG cookware. With regard to the

expenses incurred in Mexico, petitioner

argues that the Department should

apply the same factor reported for EP

sales of LG cookware to CEP sales of

both LG and HG cookware.

Cinsa and ENASA argue that, as with

freight expenses, because in scope and

out of scope merchandise received

similar warehouse treatment, a weight

based allocation was not distortive. In

addition, Cinsa and ENASA assert that

the Department’s preliminary results

improperly classified both companies’

home market pre-sale warehousing

expenses as indirect selling expenses

rather than movement expenses. Cinsa

and ENASA argue that movement

expenses necessarily include

warehousing expenses since

warehousing is integrated within the

process of moving merchandise from the

place of production to the place of

delivery.

Cinsa and ENASA also argue that,

contrary to petitioner’s assertion, U.S.

pre-sale warehousing expenses were

included in CIC’s reported indirect

selling expenses. Cinsa and ENASA

argue that, because CIC established that

it had reported all its indirect selling

expenses, including its pre-sale

warehousing expenses, the Department

should continue to use the information

provided by CIC in the final results.

Finally, Cinsa and ENASA state that

with regard to LG cookware, the subject

merchandise did not enter the finished

goods warehouse in Saltillo prior to

shipment to the United States, contrary

to petitioner’s claim. Moreover, with

regard to HG cookware, ENASA claims

that it is made to order, and is loaded

directly onto trucks without entering the

finished goods warehouse.

DOC Position: We agree with Cinsa

and ENASA that the use of a weight

based factor is a reasonable allocation

methodology for the calculation of home

market warehouse expenses. See

Comment 5 above. With regard to

Cinsa’s and ENASA’s argument that we

improperly classified home market

warehouse expenses as indirect selling

expenses, we agree that warehouse

expenses for sales made from the remote

warehouses in Mexico City and

Guadalajara should be considered

movement expenses in accordance with

section 773(a)(6) of the Act. However,

with respect to the warehouse expenses

for direct sales to customers from the

Saltillo plant, we have continued to

treat these expenses as indirect selling

expenses because they are not incurred

at the plant immediately after

production and are associated with the

movement process.

In addition, we have continued to use

Cinsa’s and ENASA’s U.S. pre-sale

warehousing expenses as reported. We

are satisfied that these expenses were

included under the category ‘‘leases’’, as

Cinsa and ENASA claim, as the reported

indirect selling expenses tie directly

into CIC’s internal income statement.

Finally, with respect to Mexican export

warehousing, we disagree with

petitioner that the use of facts available

is appropriate. With regard to LG

cookware, Cinsa reported these

expenses for both EP and CEP sales in

the April 22, 1996, submission. With

regard to HG cookware, ENASA’s

merchandise is made to order, upon

completion it is sent immediately to the

customer, without entering the finished

goods warehouse. Accordingly, we have

accepted Cinsa’s and ENASA’s home

market warehouse expense calculations.

Comment 9: Calculation of indirect

selling expenses.

Petitioner contends that the

Department should recalculate Cinsa’s

indirect selling expenses for CEP sales
Federal Register / Vol. 62, No. 152 / Thursday, August 7, 1997 / Notices 42503

of LG cookware to include all selling,

general and administrative (SG&A)

expenses as reported in the U.S. affiliate

CIC’s financial statement. Petitioner

argues that a comparison of Cinsa and

ENASA’s supplemental response and

CIC’s financial statement demonstrates

that only a fraction of the SG&A

overhead expenses incurred by CIC was

reported and included in the

Department’s results. Furthermore,

petitioner believes that if the

Department reclassifies Yamaka’s sales

of HG cookware as CEP sales, it should

reject ENASA’s argument that U.S.

affiliate Yamaka’s selling expenses are

irrelevant, and deduct indirect selling

expenses from CEP sales of HG

cookware made by Yamaka.

Cinsa disagrees with petitioner’s

claim that it understated CIC indirect

selling expenses by not including

‘‘variable selling expenses’’ in CIC’s

reported indirect selling expenses. Cinsa

argues that indirect selling expenses

should only include fixed selling

expenses as reported by Cinsa and that

it properly reported all direct (or

variable) selling expenses incurred by

CIC in its CEP sales data set.

Furthermore, Cinsa states that

petitioner’s figure for indirect selling

expenses already includes CIC’s direct

selling expenses which have been

deducted from CEP. Thus, use of the

suggested figure would improperly

include direct expense amounts in the

expense pool. Accordingly, Cinsa argues

that for CEP sales made by CIC, the

Department should deduct the reported

indirect selling expenses from USP.

DOC Position: We agree with Cinsa

and ENASA that the Department should

deduct the reported indirect selling

expenses from USP for CEP sales made

by CIC. We further agree with Cinsa and

ENASA that petitioner misread the

exhibit pertaining to indirect selling

expenses. There was no revision of

CIC’s reported indirect selling expenses.

Both pages of the exhibit are required to

obtain the POR selling expenses.

With regard to Yamaka’s selling

expenses, we agree with petitioner that,

because we are considering Yamaka’s

HG cookware sales as CEP sales, these

expenses are appropriately deducted

from CEP.

Comment 10: Deduction of reported

U.S. indirect selling expenses incurred

in Mexico from CEP.

Cinsa argues that the Department

improperly deducted indirect selling

expenses from CEP that were incurred

by Cinsa’s export department in Mexico.

According to Cinsa and ENASA, these

expenses are not expenses 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. Respondents contend that

the preamble to the Department’s

proposed and interim regulations

establishes that only indirect selling

expenses incurred in Mexico on behalf

of the unaffiliated purchaser in the

United States may be deducted from the

CEP calculation and that indirect selling

expenses incurred in Mexico on the sale

to the affiliated purchaser would not be

deducted from the CEP calculation.

Accordingly, respondents argue that the

final results should not include a

deduction of these indirect selling

expenses from CEP because they are not

in any way associated with U.S. selling

activity.

Petitioner argues that Cinsa’s and

ENASA’s reported U.S. indirect selling

expenses incurred in Mexico should be

deducted from CEP because they are

associated with economic activities

occurring in the United States.

Petitioner further argues that the statute

does not restrict the covered expenses to

those incurred in the United States.

DOC Position: We agree with Cinsa.

The Department’s current practice, as

indicated by the preamble to the

Department’s regulations recently

published at 62 FR 27296–27424 (May

19, 1997), is to deduct only indirect

selling expenses incurred in Mexico in

connection with the sales to the

unaffiliated purchaser in the United

States from the CEP calculation, and not

to deduct indirect selling expenses

incurred in Mexico on the sale to the

affiliated purchaser from the CEP

calculation. 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 related affiliated party,

CIC, we have not deducted Mexican

indirect selling expenses (i.e., indirect

selling expenses incurred in Mexico on

U.S. sales) from the CEP calculation.

Comment 11: CEP offset adjustment.

Although Cinsa does not contest the

Department’s determination in the

preliminary results of review that, on

the basis of selling functions performed

in both markets, all sales in the home

market and the U.S. were made at the

same level of trade, it nonetheless

claims it was improper for the

Department to deny its claimed CEP

offset on the basis that it was not

entitled to a level of trade adjustment.

Cinsa asserts that the statute authorizes

the Department to deduct from NV a

CEP offset equal to the amount of

indirect selling expenses incurred in the

home country but not to exceed the

amount of indirect selling expenses

deducted from USP.

Petitioner contends that Cinsa has not

established entitlement to a CEP offset

adjustment because it did not show that

its home market and CEP sales are at

different levels of trade. Accordingly,

petitioner argues that the Department

correctly denied Cinsa’s claim for a CEP

offset adjustment and should continue

to do so in the final results.

DOC Position: We agree with

petitioner. Section 773(a)(1)(B) of the

Act requires that Commerce establish

NV based on home market sales at the

same level of trade as the CEP or the EP

sale. The SAA notes that if the

Department is able to compare sales at

the same level of trade, it will not make

any level of trade adjustment or CEP

offset in lieu of a level of trade

adjustment. Further, section 773(a)(7)

expressly requires a difference in level

of trade between the U.S. and home

market sales as a prerequisite to a CEP

offset. Specifically, sales in the home

market must be at a more advanced

stage of distribution.

As we stated in the preliminary

results, in their questionnaire responses,

Cinsa and ENASA stated that there are

no differences in selling activities by

customer categories within each market.

We reviewed Cinsa and ENASA’s

questionnaire responses in order to

confirm that the marketing stages and

selling functions did not differ

significantly in the United States and

home market. Cinsa and ENASA sold to

multiple customers both in the United

States and home markets. In their April

22, 1996, questionnaire responses, both

Cinsa and ENASA indicated that they

do not differentiate pricing, sales terms

or delivery terms by type of customer.

They also stated in their request for a

CEP offset adjustment that sales support

activities for both markets were

generally the same. Thus, our analysis

of the questionnaire responses leads us

to conclude that sales within each

market and between markets are not

made at different levels of trade. In their

case brief, Cinsa and ENASA have

agreed with our preliminary

determination that home market and

U.S. sales are made at the same level of

trade. Accordingly, we can compare

sales in the home market and the U.S.

market at the same level of trade.

Therefore, a CEP offset is not warranted.

Comment 12: Use of daily exchange

rates.

Cinsa and ENASA claim that, for

purposes of the preliminary results, the

Department applied the 40-day rolling

average benchmark rate in all instances,

regardless of whether any daily
42504 Federal Register / Vol. 62, No. 152 / Thursday, August 7, 1997 / Notices

fluctuation in exchange rates existed.

Cinsa and ENASA submit that, because

the Department determined that the

Mexican economy experienced high

inflation during the POR, the

Department’s exchange rate model

should not have been used.

Accordingly, Cinsa and ENASA contend

that the Federal Reserve certified daily

exchange rates should be used in all

instances.

DOC Position: We agree with the

respondents. In this review, we have

determined that 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. Therefore, we

believe that it is more appropriate in

this case to use the Federal Reserve

Bank’s actual daily exchange rates for

currency conversion purposes. As noted

in Policy Bulletin 96–1: Currency

Conversions, 61 FR 9434 (March 8,

1996), the Department is continuing to

examine the appropriateness of the

currency conversion policy in situations

where the foreign currency depreciates

substantially against the dollar over the

POR. In those situations, it may be

appropriate to rely on daily exchange

rates. When the rate of domestic price

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

methodology serves to minimize the

extent to which calculated dumping

margins are overstated or understated

due solely to price inflation that

incurred in the intervening time period

between the U.S. and home market

sales. See Notice of Final Determination

of Sales at less Than Fair Value: Certain

Pasta from Turkey, 61 FR 30309 (June

14, 1996). For this reason, as noted in

the Fair Value Comparisons section of

the preliminary results of this review,

we calculated EPs and NVs on a

monthly average basis. This need for a

high degree of contemporaneity applies

not only to home market sales, but to

the exchange rate as well, since the

dollar value of cookware that Cinsa and

ENASA sell in their home market—

upon which the calculated margins

ultimately rest—depends on the peso

price of the product, and the dollar

price of the peso. Since the dollar value

of the peso tends to fall over time—

when the rate of domestic price

inflation is significant—it is just as

important to use contemporaneous

exchange rates as it is to use

contemporaneous (peso-denominated)

home market prices. For this reason, we

have used the daily exchange rates for

currency conversion purposes.

Accordingly, to avoid the distortions

caused by the effects of this level of

inflation on prices, for this review we

have used price to price and price to CV

comparisons that are as

contemporaneous as possible, and we

have also used contemporaneous

exchange rates.

Comment 13: Possible reimbursement

of U.S. affiliates for antidumping duties.

Petitioner claims that the fact that

Cinsa’s itemized list of selling expenses

includes an amount for ‘‘dumping

expenses’’ incurred in Mexico

constitutes direct evidence that it

reimbursed its U.S. affiliates for

antidumping duties. Furthermore,

petitioner claims that Cinsa and ENASA

pay antidumping duty deposits for their

U.S. affiliates and that the respondents

have not supported their assertion that

funds provided to U.S. affiliates for

payment of antidumping duty deposits

are ‘‘loans’’ which must be repaid with

interest based on an arm’s-length

interest rate. Petitioner argues that there

is no evidence that these payments are

anything but grants to enable the U.S.

affiliates to pay antidumping duties, and

the U.S. affiliates themselves did not

account for these intra-company

transfers as loans. Finally, petitioner

placed on the record of this review, the

9th POR, a copy of respondents’ public

supplemental comments from a

subsequent review, the 10th POR, in

which respondents state that GISSA,

importer CIC’s corporate parent, made a

capital infusion to allow CIC to post

antidumping duty deposits and pay

antidumping duty liquidation

assessments. Petitioner contends that

based on this evidence, the Department

should determine that Cinsa and

ENASA are reimbursing the U.S.

affiliates for antidumping duties and

instruct Customs to assess double the

calculated rate of duties upon

liquidation of the entries.

Cinsa and ENASA assert that there is

no evidence on the record to support

petitioner’s claim that they are

reimbursing the affiliated U.S. parties

for antidumping duties. Furthermore,

Cinsa and ENASA claim that

petitioner’s arguments are speculative,

since the Customs Service has not

assessed dumping duties on any entries

made by CIC, and to date CIC has made

only deposits on entries for the 9th POR.

Moreover, Cinsa argues that, although

it has an agreement with CIC whereby

Cinsa loans CIC funds to pay the

antidumping duty deposits, once the

final amount of dumping duties is

determined and assessed, CIC is

required to repay Cinsa for such loans,

with penalty interest accruing for late

payment. Finally, Cinsa contends that

the Department has consistently held

that the existence of intra-company

transfers of funds or loans between

affiliated parties does not require the

Department to initiate a reimbursement

inquiry.

DOC Position: We agree with the

respondent. Petitioner has two bases for

its reimbursement claim: (1) That the

loans made by Cinsa to its affiliated

importer constitute reimbursement, and

(2) that the GISSA capital contribution

in the 10th POR provides sufficient

cause for finding a ‘‘pattern or practice

of reimbursement.’’

Pursuant to its regulations, the

Department will deduct from export

price ‘‘the amount of any antidumping

duty which the producer or reseller: (1)

Paid directly on behalf of the importer;

or (2) reimbursed to the importer.’’ 19

CFR 353.26(a).

With respect to the loans, we

observed at verification that Cinsa did

make loans to CIC and its predecessor

Global to cover antidumping duty

deposits. However, we also noted that

these loans were interest-bearing loans

supported by promissory notes, with

penalty provisions for late payment, that

the financial records of both CIC and

Cinsa properly accounted for these

loans, and that there was a history of

repayment of such loans. Thus,

petitioner’s claim that these transfers

should be considered reimbursement,

rather than bona fide loans, is

contradicted by the findings on the

record. See Memorandum dated July 30,

1997, regarding reimbursement

(‘‘Reimbursement Memo’’) for

additional analysis regarding the

reimbursement issue.

With respect to capital contributions,

we noted at verification that since its

founding in March of 1995, affiliated

importer CIC has received two cash

transfers in the form of capital

contributions. The first transfer

constituted start-up funds and was not

explicitly tied to antidumping duty

deposits or assessments. In a public

submission to the record of the 10th

review, which petitioner has added to

the record to this 9th review,

respondents Cinsa and ENASA

specifically stated that a second capital

contribution made in April 1997, by

CIC’s affiliate GISSA Holding USA, was

provided to ensure that CIC would have

enough funds to cover anticipated

dumping duties and assessment liability

subsequent to the liquidation of 5th and

7th POR entries during the 10th POR.

These facts are not tantamount to the

‘‘producer or reseller’’ reimbursing the

affiliated importer for antidumping
Federal Register / Vol. 62, No. 152 / Thursday, August 7, 1997 / Notices 42505

duties. See 19 CFR 353.26(a). Although

CIC, Cinsa, ENASA and GISSA share a

common ultimate parent, GIS, there is

no evidence that the source of this

capital contribution was either a

producer or reseller of POS cookware.

All that is shown by these facts is that

the importer’s parent made a cash

infusion to cover antidumping

liabilities, which is not in itself

inconsistent with the reimbursement

regulation. Because the record in this

review does not support a finding that

either producer (i.e., Cinsa or ENASA)

was in fact the ultimate source of these

funds, we do not find reimbursement

within the meaning of 19 CFR 353.26(a)

in this review. However, we will

examine this possibility further in the

context of future reviews of POS

cookware from Mexico. Because many

of the details associated with this issue

are proprietary, refer to the

Reimbursement Memo.

Comment 14: Revocation of order

with respect to tea kettles.

Cinsa and ENASA argue that the order

on POS cookware from Mexico should

be revoked as to tea kettles either in the

final results of this administrative

review or in a separate changed

circumstances review, if the order

against POS cookware from Taiwan is

revoked as to tea kettles. Cinsa and

ENASA contend that it would be

inappropriate for the Department to

alter the scope of only one of these

antidumping orders, since the orders

against POS cookware from Taiwan and

Mexico were initiated on the basis of a

single petition, and were issued

pursuant to a single injury

determination made on a cumulated

basis. Cinsa and ENASA further argue

that because petitioner has no

production of tea kettles, it is

incongruous that it has no interest in an

order covering tea kettles from Taiwan,

yet allegedly continues to have an

interest in having companion case

orders cover tea kettles from Mexico and

the People’s Republic of China. In the

alternative, Cinsa and ENASA submit

that the Department should investigate

whether tea kettles constitute a distinct

class or kind of merchandise from the

POS cookware covered by the order

underlying this case.

Petitioner argues that the Department

should deny Cinsa’s and ENASA’s

request to revoke the order, in part, as

to tea kettles, in the final results.

Petitioner contends that if Cinsa and

ENASA wish to have the order revoked

as to tea kettles, they are entitled to

request a changed circumstances

review, in accordance with the

Department’s regulations.

DOC Position: We agree with

petitioner. The orders on POS cookware

from Mexico, Taiwan, and the People’s

Republic of China are separate and

distinct even though the proceedings

were initiated pursuant to a single

petition. Petitioner has not indicated

that it has no further interest in

maintaining the Mexican order with

regard to tea kettles. Further, there is no

requirement that petitioner must

produce every model of the subject

merchandise covered by a given order.

Thus, it would not be appropriate to

grant Cinsa’s and ENASA’s request for

partial revocation of the order in the

context of this administrative review

pursuant to section 751(a) of the Act.

Similarly, there is no evidence on the

record of this case supporting Cinsa’s

and ENASA’s claim that tea kettles

constitute a distinct class or kind of

merchandise within POS cookware.

Comment 15: Reporting of cost data

for Cinsa and ENASA.

Petitioner contends that the

magnitude of Cinsa’s and ENASA’s

production cost variances, which are

based on system-wide costs as opposed

to model-specific costs, means that

these costs are in reality only average

costs, the use of which would be

contrary to the Department’s standard

practice. Without usable cost data,

petitioner argues that the Department

cannot use Cinsa’s and ENASA’s home

market sales data because it cannot

determine whether home market sales

were at prices above the COP, and it

cannot determine the appropriate

amount of any difference-inmerchandise adjustment. Therefore,

petitioner argues that the Department

should determine that Cinsa and

ENASA were uncooperative and should

base Cinsa’s and ENASA’s margin on

total adverse facts available, using the

highest rate calculated for any

respondent in the original investigation

(58.73 percent), due to their refusal to

report replacement costs. Alternatively,

petitioner believes that the Department

should, at a minimum, increase all

material costs by the average increase in

inflation between the time Cinsa and

ENASA purchased raw materials and

the time it consumed such materials in

production.

In addition, petitioner argues that,

because Cinsa and ENASA refused to

comply with the Department’s requests

for certain cost information in this

review, there are fundamental problems

with the COP data. First, petitioner

argues that despite an annualized

inflation rate of greater than 50 percent

during the POR (based on the producer

price index or ‘‘PPI’’), the Department

apparently concluded that the Mexican

economy was not hyperinflationary

during the POR, and thus preliminarily

accepted Cinsa’s and ENASA’s reported

costs, notwithstanding what they term

respondents’ refusal to report

replacement costs.

Cinsa and ENASA argue that the

November 19, 1996, supplemental

response provided COP and CV data

using monthly revaluation of costs to

current price levels, which conforms

precisely to the monthly valuation of

inputs required under the Department’s

inflation methodology. Furthermore,

Cinsa and ENASA argue that the

Mexican producer price index that

petitioner used to calculate inflation

rates is not appropriate because the

generally accepted benchmark for use in

price adjustments by the Mexican

accounting profession and for financial

analysis in Mexico is the National

Consumer Price Index, which has also

been used by the Department for

inflation index adjustments in previous

Mexican cases.

In addition, Cinsa and ENASA state

that the costs reported to the

Department reflect product specific

costs. Cinsa and ENASA claim that in

the normal course of business, the

amounts of all production variances are

calculated each month, but are not

applied to specific products. For the

purposes of reporting monthly unit

costs to the Department, these variances

were converted into ratios and applied

to the standard cost of inputs for

individual products. Moreover, Cinsa

and ENASA state that the size of

variance ratios in this instance is a clear

reflection of the fact that, although

standard costs are fixed once per year,

price levels for production inputs

increase throughout the year. Cinsa and

ENASA explain that, because monthly

costs of production inputs are based on

the replacement unit costs of the

respective inputs consumed, and the

prices of those inputs underwent a rapid

increase during 1995 due to the

presence of high inflation, it is natural

for variance ratios to be larger than

observed in previous POS cookware

reviews for periods that were not subject

to high inflation. Finally, according to

Cinsa and ENASA, regardless of

whether variances are large or small, the

relative standard costs of individual

products provide the means of

distributing actual shared costs among

the products manufactured.

Accordingly, Cinsa and ENASA believe

that they properly reported cost of

manufacturing (‘‘COM’’).

DOC Position: We disagree with

petitioner that Cinsa’s and ENASA’s

submitted production costs do not

reflect current costs (i.e., replacement
42506 Federal Register / Vol. 62, No. 152 / Thursday, August 7, 1997 / Notices

1Antidumping Duties; Countervailing Duties;

Final Rule, (‘‘May 1997 Final Rule’’) 62 FR 27292,

27 355 (May 19, 1997).

costs). In the instant review, we

determined that the Mexican economy

was undergoing a high rate of inflation

in 1995 and therefore we calculated

monthly COP and CV for Cinsa and

ENASA. For the Department to calculate

COP and CV, Cinsa and ENASA

computed a monthly COM for each

product based on the merchandise’s

specific standard costs of manufacturing

adjusted by its monthly variance. We

reviewed Cinsa’s and ENASA’s method

of calculating submitted COM along

with other assertions made on the

record by these companies. The

information on the record we reviewed

(i.e., Section D narrative and

worksheets) indicates that Cinsa’s and

ENASA’s COP and CV data reflect the

current costs as requested by the

Department. We also note that Cinsa

and ENASA submitted timely responses

to all our Section D questionnaires.

Therefore, we relied on Cinsa’s and

ENASA’s submitted COMs as the basis

of deriving COP and CV for the final

results.

As for petitioner’s concern that the

Department should use facts available

because of the magnitude of Cinsa’s

reported variances, we again disagree.

Cinsa’s and ENASA’s standard cost

accounting systems record traditional

purchase price variances (i.e., standard

price adjusted to reflect current

purchase price) and consumption

variances (i.e., standard usage adjusted

to actual usage) monthly. We reviewed

Cinsa’s and ENASA’s submitted

worksheets that demonstrate the

company’s calculation of monthly

variances. These worksheets indicate

that Cinsa and ENASA had relatively

stable consumption variances and

escalating price variances. Given that

Cinsa and ENASA establish a standard

price at the beginning of a calendar year

for materials, one would expect an

escalating price variance in a high

inflation economy because a standard

value is always being compared with a

value that is constantly increasing.

Furthermore, we determined that

Cinsa’s and ENASA’s reported variances

related only to POS cookware

production and, accordingly, were

allocated to a sufficient level of product

specific detail in accordance with the

Department’s questionnaire

instructions.

With regard to calculating the

inflation index, our normal practice is to

generally adhere to the financial

reporting requirements prescribed by

the accounting and auditing regulatory

bodies of the respondent’s home market.

See, Final Determination of Sales at

Less Than Fair Value: Certain Steel

Concrete Reinforcing Bars From Turkey,

62 FR 9737, 9743 (March 4, 1997). In

this instance, the Mexican Accounting

Principle Commission (‘‘CPC’’) requires

that the financial statements and

accounting records of Mexican

companies be restated to account for the

effects of inflation using the Consumer

Price Index (CPI) published by the Bank

of Mexico. As noted in their audited

financial statements, Cinsa and ENASA

complied with this regulation and

restated their financial statements using

the CPI. Because the respondent and all

other enterprises that report in the

currency of Mexico adhere to the same

index in the normal course of business

and the reliance on this index does not

distort the cost of producing POS

merchandise, we have accepted the use

of the CPI.

Comment 16: Enamel frit cost.

Petitioner maintains that, in the

preliminary determination, the

Department correctly adjusted Cinsa’s

and ENASA’s reported cost of enamel

frit upward to reflect market value

because the reported transfer prices for

frit paid by Cinsa and ENASA to its

affiliated supplier, ESVIMEX, S.A. de

C.V. (‘‘ESVIMEX’’), were lower than

prices paid for the identical

merchandise by the supplier’s

unaffiliated customers and thus not

arm’s length prices. Petitioner also

contends that the verification report

indicates that ESVIMEX’s discount to

Cinsa and ENASA is not justified by any

alleged cost savings.

Cinsa and ENASA claim that the

evidence in the record of this review

establishes that Cinsa’s and ENASA’s

purchases from ESVIMEX were made at

a level above ESVIMEX’s COP. In

addition, Cinsa and ENASA claim that

the transfer prices represent fair market

value because (1) Cinsa, ENASA and

ESVIMEX’s unrelated customers

purchased enamel frit from the same

price list (although unrelated customers

received smaller discounts from list

price than Cinsa and ENASA, or no

discounts at all), and because (2) the

lower prices paid by Cinsa and ENASA

were attributable to larger volume sales

and savings in transportation, storage,

packing, warehousing and selling

expenses. Cinsa also claims that the

record does not reflect changes in the

circumstances surrounding Cinsa’s

purchases from ESVIMEX during the

first three reviews of this order (ENASA

was not then a respondent), in which

the Department accepted the transfer

prices as being at arm’s length. Finally,

Cinsa states that the verification report

shows that the quantified cost savings

relating to the sale of the frit have

nothing to do with additional

production cost savings attributable to

volume purchases of enamel frit by

affiliated parties. Accordingly, Cinsa

and ENASA argue that the Department

should rely on the reported enamel frit

costs, which are the actual production

costs of ESVIMEX.

DOC Position: We agree with the

respondents and the petitioner in part.

In its November 19, 1996, second

supplemental responses Cinsa and

ENASA provided a schedule of the

monthly COPs, transfer prices, and ‘‘fair

value’’ (i.e. prices to unrelated buyers)

of all frit purchased from ESVIMEX

during the POR. In the preliminary

results of review, we did not accept

respondent’s unsupported claimed cost

savings and increased the frit portion of

the reported direct materials cost to

reflect the fact that frit purchased from

an affiliated supplier did not reflect fair

market value. We have examined

respondent’s claimed costs savings at

verification, and as a result, in the final

determination we have accepted all cost

savings claimed by respondents and

supported by documentation in the

verification report. We have, however,

increased the frit portion of the direct

materials cost in respondent’s reported

cost database to account for the

undocumented portion of the reported

cost savings as discussed in the

verification report dated July 18, 1997.

See also Memorandum dated July 30,

1997, regarding recalculation of the

increase to materials cost (Frit Memo).

Although provisions of the

Department’s new regulations 1 do not,

as petitioner implies, apply to this case,

we agree with petitioners that they are

relevant as statements of the

Department’s current practice in areas,

such as evaluation of whether affiliated

party transactions constitute arm’s

length transactions, in which there are

no explicit provisions in the regulations

applicable to this review. The ‘‘99.5%’’

arm’s length test cited by petitioner is

currently used in determining whether

sales of subject merchandise to an

affiliated party are an appropriate basis

for use as prices for purposes of

determining normal value. The portion

of the preamble to the Department’s new

regulations cited by petitioner

commenting on the use of this test refers

to 19 CFR 351.403. However, the

portion of the preamble that deals with

transactions involving the sale of inputs

between affiliated parties, § 351.407,

explicitly states that ‘‘instead of

implementing a single arm’s length test

applicable to all situations involving

affiliated party inputs, we think it is
Federal Register / Vol. 62, No. 152 / Thursday, August 7, 1997 / Notices 42507

important that the Department consider

the facts of each case in order to

determine the appropriate level of

scrutiny it will give to affiliated party

transactions.’’ May 1997 Final Rule, 62

FR at 27362. Although petitioner seeks

to imply that the ‘‘99.5%’’ test is a

‘‘standard arm’s length test’’ referred to

at 62 FR 27362, this is not the case.

While the preamble at 62 FR 27362

states that the Department intends to

continue ‘‘its normal practice of

comparing actual affiliated party prices

with prices to or from unaffiliated

parties,’’ the above citation clarifies that,

when dealing with inputs, there is no

set percentage within which these must

agree, and that the Department’s

decisions must take into account the

facts of each case.

In this case, respondents have placed

on the record indications that there are

a number of market factors that are

responsible for at least some portion of

the price differences between affiliated

and unaffiliated purchasers of frit from

ESVIMEX. The Court of International

Trade, commenting on determination of

the acceptability of frit transfer prices in

the 4th review of this order, has recently

stated that ‘‘providing Commerce with

third party sales information is not the

only means by which to prove arm’s

length transfer prices.’’ Cinsa, S.A. de

C.V. v. United States, Slip Op. 97–41

(April 4, 1997). Because Cinsa and

ENASA have provided adequate

evidentiary support for their claims

regarding the market factors specified

on the cost analysis provided to the

Department, the Department must

consider those factors in evaluating the

extent to which the reported transfer

prices can be considered representative

of market values.

Our evaluation of the facts in this case

show that we should continue to adjust

Cinsa’s and ENASA’s reported cost of

enamel frit to reflect market value. 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. Cf.

19 CFR 353.45(a), which requires that

sales of subject merchandise to certain

related parties be disregarded for

purposes of calculating foreign market

value unless the Secretary is satisfied

that the transfer price is comparable to

the price at which the producer or

reseller sold [the merchandise] to a

person not related to the seller. In their

April 22, 1996, questionnaire response,

Cinsa and ENASA provided information

to the Department showing that

ESVIMEX sells frit to Cinsa and ENASA

at substantially less than the purchase

price offered to unaffiliated purchasers

of enamel frit, which they claim reflects

cost savings to ESVIMEX attributable to

transportation, storage, packing and

selling costs. See Frit memo. However,

neither their submissions nor the

exhibits provided at verification

supports the extent of the cost savings

associated with the alleged ‘‘volume

discount.’’ In this case, we specifically

requested that Cinsa and ENASA submit

a schedule comparing the transfer price

and fair market value for frit purchases

from the affiliated supplier with the

supplier’s COP and the supplier’s prices

to unaffiliated customers. In addition,

we asked Cinsa and ENASA to submit

supporting documentation for the fair

market value amounts reported for frit

(see question 4 of the supplemental

section D questionnaire dated October

25, 1996).

At verification, we again examined

this issue. Specifically, we requested

that Cinsa and ENASA support their

claim that the differences between the

discounts accorded affiliated parties and

the discounts accorded unrelated parties

were fully accounted for by the cost

efficiencies listed in their submission.

Respondents provided data supporting

the cost differential underlying part of

the difference, stating that the balance

could be attributed to ‘‘volume

discounts.’’ Based on the documents

examined at verification, we have

determined that respondents adequately

supported their claim with respect to

the all cost efficiencies listed on the

schedule submitted at verification,

except for a portion that respondents’

claimed as savings due to volume

discounts. We noted that no empirical

support was provided for the differences

attributable to volume discounts. See

Verification Report dated July 18, 1997

page 4, and 23–26, and Verification

Exhibit 6. Furthermore, the savings

attributable to making sales in large

volumes would appear to already be

embodied in the cost savings in ‘‘selling

expenses,’’ which we have already taken

into account.

The Department, in accordance with

its 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 reasonably

determined that this standard had not

been met with respect to ESVIMEX’s frit

prices to Cinsa and ENASA. Cf.

Outokumpu Copper Rolled Products AB

v. United States, 850 F. Supp. 16 (CIT

1994) (Department operates under the

assumption that commission payments

to related parties are not made at arm’s

length). Because no support was

provided for the portion of the

difference attributed to ‘‘volume

discounts,’’ we have increased the frit

portion of the cost of direct materials

(since respondents adjusted their actual

enamel frit costs to reflect the affiliated

supplier’s COP) by that undocumented

amount to approximate an actual market

price under the circumstances

associated with ESVIMEX’s sales to its

affiliates in this POR. See the July 18,

1997, Verification Report, pages 23–26,

and the Memorandum dated July 30,

1997, regarding Collapsing of Affiliated

Parties (Collapsing memo).

Furthermore, we do not agree with the

respondents that it is sufficient to show

that ESVIMEX’s frit prices to affiliates

are above COP. Because Cinsa and

ESVIMEX are affiliated within the

definition of section 771(33) of the Act,

we have determined that the treatment

of the enamel frit transactions is

governed by sections 773(f)(2) and (3) of

the Act. In accordance with sections

773(f)(2) and (3) of the Act, respectively,

the Department compared ESVIMEX’s

transfer price first to comparison market

prices for sales of frit between

unaffiliated parties and then to

ESVIMEX’s COP. The Department made

a similar determination in the Final

Results of Antidumping Administrative

Review: Antifriction Bearings (Other

Than Tapered Roller Bearings) and

Parts Thereof from France, Germany,

Italy, Japan, Singapore, and the United

Kingdom, 62 FR 2081, 2115 (January 15,

1997). In that review, the Department

found that in the case of a transaction

between affiliated persons involving a

major input, we will use the highest of

the transfer price between the affiliated

parties, the market price between

unaffiliated parties, or the affiliated

supplier’s cost of producing the major

input. Cinsa’s and ENASA’s argument

that it is sufficient to show that

ESVIMEX’s transfer price is above cost

ignores the provisions of section

773(f)(2) of the Act, which requires a

comparison of transfer price and market

price when the latter is available. Thus,

we used ESVIMEX’s actual cost to

produce the frit and compared it to

prices charged to unaffiliated customers

in order to determine fair market value.

We noted that the prices charged to

unaffiliated customers were greater than

both the affiliated transfer price and the

actual costs incurred to produce the frit

supplied to Cinsa and ENASA.

Finally, we note that, although the

Department determined at verification
42508 Federal Register / Vol. 62, No. 152 / Thursday, August 7, 1997 / Notices

of the first review of this order that the

transfer prices at issue were at arm’s

length, and continued to accept the

transfer prices in the second and third

reviews, we have scrutinized these

prices more closely in more recent

reviews. Thus, in the fourth review, we

rejected the transfer prices because

Cinsa had not documented its claims

that these were arm’s length prices.

(Although the CIT has recently held, in

Cinsa S.A. de C.V. v. United States,

Slip. Op. 97–41 (April 4, 1997), that our

determination in that respect was

insufficiently supported, the results of

remand in that review did indicate that

even at the time of the 4th review, it was

no longer the Department’s policy to

accept Cinsa’s unsupported assertion

that the full extent of the discounts it

received beyond those given to

unrelated customers was accounted for

by any cost efficiencies involved in

differences in the terms of sale.)

Therefore, Cinsa cannot claim that

precedent requires the Department to

accept their unmodified transfer prices,

in this ninth review, as being at arm’s

length. The Department must make its

determination in each review based on

the facts on the record of that segment

of the proceeding. Therefore, in this

review, we have accepted Cinsa and

ENASA’s submitted frit values only to

the degree that they are supported as

embodying market based elements.

Comment 17. Petitioner argues that

certain pages of Verification Exhibit 6,

(the nature of which is proprietary), are

untimely and should be stricken from

the record. Petitioner states that

moreover, the documents are irrelevant,

because they reflect transactions that

occurred outside the period of review.

Respondents maintain that although

the documents involve assertions that

were made outside the 9th POR, these

documents establish the validity of

Clause 12 of the Agreement between the

joint venture partners of ESVIMEX

(governing the conditions for purchases

by affiliated parties of non-ESVIMEX

frit).

DOC Position: We agree with the

respondent. At verification, we

requested the documentation to which

petitioners refer, in order to verify an

issue relating to a frit-purchase

agreement in effect during the POR.

Because any supporting documentation

which the Department requests at

verification is properly part of the

record, there is no reason to strike this

document from the record. Because the

same agreement was in effect at the time

of the affected frit purchases from the

unrelated party, the documentation in

question is relevant to the interpretation

of the terms of that agreement, as is

clear from the proprietary version of the

July 18, 1997, verification report.

Final Results of Review

As a result of this review, we have

determined that the following margins

exist for the period December 1, 1994

through November 30, 1995:

Manufacturer/exporter

Margin

(percent)

Cinsa ............................................... 6.90

ENASA ............................................ 2.74

The Department shall determine, and

the U.S. Customs Service shall assess,

antidumping duties on all appropriate

entries. The Department shall issue

appraisement instructions directly to

the Customs Service.

Furthermore, the following deposit

requirements shall be effective, upon

publication of this notice of final results

of administrative review, for all

shipments of the subject merchandise

from Mexico that are entered, or

withdrawn from warehouse, for

consumption on or after the publication

date, as provided for by section

751(a)(1) of the Tariff Act: (1) The cash

deposit rates for Cinsa and ENASA will

be the rates established above; (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 results 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 353.26 to file a certificate

regarding the reimbursement of

antidumping duties prior to liquidation

of the relevant entries during this

review period. Failure to comply with

this requirement could result in the

Secretary’s presumption that

reimbursement of antidumping duties

occurred and the subsequent assessment

of double antidumping duties.

This notice serves as the only

reminder to parties subject to

administrative protective order (APO) of

their responsibility concerning the

disposition of proprietary information

disclosed under APO in accordance

with 19 CFR 353.34(d). Timely written

notification of return/destruction of

APO materials or conversion to judicial

protective order is hereby requested.

Failure to comply with the regulation

and the terms of an APO is a

sanctionable violation.

This administrative review and notice

are in accordance with section 751(a)(1)

of the Act and 19 CFR 353.22.

Dated: July 30, 1997.

Robert S. LaRussa,

Acting Assistant Secretary for Import

Administration.

[FR Doc. 97–20735 Filed 8–6–97; 8:45 am]

BILLING CODE 3510–DS–P

DEPARTMENT OF COMMERCE

National Oceanic and Atmospheric

Administration

[I.D. 072897A]

Endangered and Threatened Species;

Draft Recovery Plan for Winter-run

Chinook Salmon

AGENCY: National Marine Fisheries

Service (NMFS), National Oceanic and

Atmospheric Administration (NOAA),

Commerce.

ACTION: Notice of Availability of a Draft

Recovery Plan; request for comments.

SUMMARY: NMFS is announcing the

availability of a draft recovery plan for

the Sacramento River winter-run

chinook salmon (Oncorhynchus

tshawytscha). NMFS is seeking review

and public comments on the recovery

plan. Copies are available on request.

DATES: Comments on the draft recovery

plan must be received by December 5,

1997, if they are to be considered during

preparation of a final recovery plan.

ADDRESSES: Requests for a copy of the

draft plan should be addressed to

National Marine Fisheries Service, 777

Sonoma Avenue, Room 325, Santa Rosa,

CA 95405; telephone: 707–575–6050.

Copies of the draft plan can also be

obtained from the NMFS Southwest

Region World Wide Web site at http://

swr.ucsd.edu. Written comments and

materials regarding the draft plan

should be directed to the same address.

FOR FURTHER INFORMATION CONTACT:

Craig Wingert, National Marine

Fisheries Service, Southwest Region,

501 W. Ocean Blvd., Suite 4200, Long

Beach, CA, 90802–4213; telephone:

562–980–4021.

SUPPLEMENTARY INFORMATION: