[Federal Register Volume 62, Number 152 (Thursday, August 7, 1997)]
[Notices]
[Pages 42496-42508]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-20735]


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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.

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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

[[Page 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-
to-Length 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 cross-manufacture, 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 Euro-style cookware, respectively. Because the 
technical requirements of these two cookware types are different, the

[[Page 42498]]

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 ``Euro-style'' 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

[[Page 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 Medium-gauge 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

[[Page 42500]]

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

[[Page 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 transaction-specific 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-by-sale 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 non-subject merchandise, we found the per-
unit 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

[[Page 42502]]

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 retail-unsold 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 non-subject 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 
pre-sale 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

[[Page 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

[[Page 42504]]

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

[[Page 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-in-merchandise 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

[[Page 42506]]

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 
<SUP>1</SUP> 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, Sec. 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

[[Page 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.
---------------------------------------------------------------------------

    \1\ Antidumping Duties; Countervailing Duties; Final Rule, 
(``May 1997 Final Rule'') 62 FR 27292, 27 355 (May 19, 1997).
---------------------------------------------------------------------------

    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

[[Page 42508]]

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:

------------------------------------------------------------------------
                                                                 Margin 
                    Manufacturer/exporter                      (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