[Federal Register Volume 65, Number 203 (Thursday, October 19, 2000)]
[Notices]
[Pages 62700-62705]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-25790]


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DEPARTMENT OF COMMERCE

International Trade Administration

A-588-837


Large Newspaper Printing Presses and Components Thereof, Whether 
Assembled or Unassembled, From Japan: Preliminary Results of 
Antidumping Duty Administrative Review

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

ACTION: Notice of preliminary results of antidumping duty 
administrative review.

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SUMMARY: In response to a request by the petitioner and two producers/
exporters of the subject merchandise, the Department of Commerce is 
conducting an administrative review of the antidumping duty order on 
large newspaper printing presses and components thereof, whether 
assembled or unassembled, from Japan. This review covers two 
manufacturers/exporters of the subject merchandise to the United States 
(Mitsubishi Heavy Industries, Ltd. and Tokyo Kikai Seisakusho, Ltd.). 
The period of review is September 1, 1998 through August 31, 1999.
    We preliminarily determine that sales have been made below the 
normal value for one of the two companies subject to this review. If 
these preliminary results are adopted in our final results of this 
administrative review, we will instruct the Customs Service to assess 
antidumping duties on all appropriate entries.
    We invite interested parties to comment on these preliminary 
results. Parties who wish to submit comments in this proceeding are 
requested to submit with each argument: (1) A statement of the issue; 
and (2) a brief summary of the argument. Parties are also encouraged to 
provide a summary of the arguments not to exceed five pages and a table 
of statutes, regulations, and cases cited.

EFFECTIVE DATE: October 19, 2000.

FOR FURTHER INFORMATION CONTACT: James Nunno or Christopher Priddy, AD/
CVD Enforcement Group I, Office 2, Import Administration, International 
Trade Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-
0783 or (202) 482-1130, respectively.

SUPPLEMENTARY INFORMATION:

Period of Review

    The period of review (POR) is September 1, 1998 through August 31, 
1999.

The Applicable Statute

    Unless otherwise indicated, all citations to the Tariff Act of 
1930, as amended (the Act) are references to the provisions effective 
January 1, 1995, the effective date of the amendments made to the Act 
by the Uruguay Round Agreements Act (URAA). In addition, unless 
otherwise indicated, all citations to the Department's regulations are 
to 19 CFR part 351 (1999).

Background

    During the previous administrative review period, covering sales of 
the subject merchandise for the period September 1, 1997 through August 
31, 1998, Mitsubishi Heavy Industries, Ltd. (MHI) reported a U.S. sale 
to the Bergen Record which was entered into contract during that review 
period. See MHI's section A questionnaire response, dated January 7, 
1999, at Exhibit 1. However, we deferred review of this sale until this 
administrative review period because the entries relating to this sale 
were not fully delivered and installed by the conclusion of that review 
period.
    On September 9, 1999, the Department of Commerce (the Department) 
published in the Federal Register a notice of ``Opportunity to Request 
an Administrative Review'' of the antidumping duty order on large 
newspaper printing presses and components thereof, whether assembled or 
unassembled (LNPP), from Japan covering the period September 1, 1998, 
through August 31, 1999. See Antidumping or Countervailing Duty Order, 
Finding, or Suspended Investigation; Opportunity to Request 
Administrative Review, 64 FR 48980 (Sept. 9, 1999).
    On July 31, 1999, in accordance with 19 CFR 351.213(b), the 
petitioner, Goss Graphic Systems, Inc., requested an administrative 
review of the antidumping duty order for the following producers/
exporters of LNPP: MHI and Tokyo Kikai Seisakusho, Ltd. (TKS). We also 
received requests for a review from MHI and TKS on July 31, 1999. We 
published a notice of initiation of this review on August 30, 1999. See 
Initiation of Antidumping and Countervailing Duty Administrative 
Reviews and Requests for Revocation in Part, 64 FR 60161 (Nov. 4, 
1999).
    On November 24, 1999, we issued antidumping questionnaires to the 
two respondents. We received responses to these questionnaires in 
December 1999 and January 2000.
    On December 14, 1999, TKS requested that it defer reporting a sale 
to Dow Jones & Company (Dow Jones) until the next administrative review 
because, although TKS entered into an LNPP sales contract with Dow 
Jones during the POR, the entries relating to this sale will not be 
fully delivered and installed by the conclusion of the present review. 
On December 21, 1999, we notified TKS that it may report data on the 
Dow Jones sale after it is completed, during the next administrative 
review.
    On March 13, 2000, the Department extended the time limit for the 
preliminary results in this review until September 29, 2000. See Large 
Newspaper Printing Presses from Japan and Germany: Postponement of 
Preliminary Results of Antidumping Duty Administrative Reviews, 65 FR 
13364 (Mar. 13, 2000).
    We issued supplemental questionnaires to MHI in April and May 2000, 
and received responses to these questionnaires in May and June 2000. We 
issued supplemental questionnaires to TKS in March, May, July and 
August 2000, and received responses to these questionnaires in May, 
June, July and September 2000.
    On June 23, 2000, the petitioner submitted a letter stating that 
MHI did not report home market sales that are contemporaneous with the 
date of its

[[Page 62701]]

U.S. sale. In June and July 2000, we asked both MHI and TKS to report 
additional home market sales to the Department. MHI and TKS reported 
this additional sales and cost information in July and August 2000. See 
the ``Home Market Sales Used to Calculate Constructed Value Profit and 
Selling Expenses'' section of the notice below for further discussion.
    Pursuant to section 782(i)(3) of the Act, we conducted verification 
of MHI's sales and cost responses in Japan in July and August 2000. In 
addition, we conducted verification of MHI's U.S. sales responses in 
September 2000.

Scope of the Review

    The products covered by this review are large newspaper printing 
presses, including press systems, press additions, and press 
components, whether assembled or unassembled, whether complete or 
incomplete, that are capable of printing or otherwise manipulating a 
roll of paper more than two pages across. A page is defined as a 
newspaper broadsheet page in which the lines of type are printed 
perpendicular to the running of the direction of the paper or a 
newspaper tabloid page with lines of type parallel to the running of 
the direction of the paper.
    In addition to press systems, the scope of this review includes the 
five press system components. They are: (1) A printing unit, which is 
any component that prints in monocolor, spot color, and/or process 
(full) color; (2) a reel tension paster, which is any component that 
feeds a roll of paper more than two newspaper broadsheet pages in width 
into a subject printing unit; (3) a folder, which is a module or 
combination of modules capable of cutting, folding, and/or delivering 
the paper from a roll or rolls of newspaper broadsheet paper more than 
two pages in width into a newspaper format; (4) conveyance and access 
apparatus capable of manipulating a roll of paper more than two 
newspaper broadsheet pages across through the production process and 
which provides structural support and access; and (5) a computerized 
control system, which is any computer equipment and/or software 
designed specifically to control, monitor, adjust, and coordinate the 
functions and operations of large newspaper printing presses or press 
components.
    A press addition is comprised of a union of one or more of the 
press components defined above and the equipment necessary to integrate 
such components into an existing press system.
    Because of their size, large newspaper printing press systems, 
press additions, and press components are typically shipped either 
partially assembled or unassembled, complete or incomplete, and are 
assembled and/or completed prior to and/or during the installation 
process in the United States. Any of the five components, or collection 
of components, the use of which is to fulfill a contract for large 
newspaper printing press systems, press additions, or press components, 
regardless of degree of assembly and/or degree of combination with non-
subject elements before or after importation, is included in the scope 
of this review. Also included in the scope are elements of a LNPP 
system, addition, or component, which taken altogether, constitute at 
least 50 percent of the cost of manufacture of any of the five major 
LNPP components of which they are a part.
    For purposes of this review, the following definitions apply 
irrespective of any different definition that may be found in Customs 
rulings, U.S. Customs law or the Harmonized Tariff Schedule of the 
United States (HTSUS): the term ``unassembled'' means fully or 
partially unassembled or disassembled; and (2) the term ``incomplete'' 
means lacking one or more elements with which the LNPP is intended to 
be equipped in order to fulfill a contract for a LNPP system, addition 
or component.
    This scope does not cover spare or replacement parts. Spare or 
replacement parts imported pursuant to a LNPP contract, which are not 
integral to the original start-up and operation of the LNPP, and are 
separately identified and valued in a LNPP contract, whether or not 
shipped in combination with covered merchandise, are excluded from the 
scope of this review. Used presses are also not subject to this scope. 
Used presses are those that have been previously sold in an arm's-
length transaction to a purchaser that used them to produce newspapers 
in the ordinary course of business.
    Also excluded from the scope, in accordance with the Department's 
determination in a changed-circumstances antidumping duty 
administrative review of this order with respect to MHI which resulted 
in the partial revocation of the order with respect to certain 
merchandise, are elements and components of LNPP systems, and additions 
thereto, which feature a 22 inch cut-off, 50 inch web width and a rated 
speed no greater than 75,000 copies per hour. See Large Newspaper 
Printing Presses Components Thereof, Whether Assembled or Unassembled, 
from Japan: Final Results of Changed Circumstances Antidumping Duty 
Administrative Review and Intent to Revoke Antidumping Duty Order, In 
Part, 64 FR 72315 (Dec. 27, 1999). In addition to the specifications 
set out in this paragraph, all of which must be met in order for the 
product to be excluded from the scope of the order, the product must 
also meet all of the specifications detailed in the five numbered 
sections following this paragraph. If one or more of these criteria is 
not fulfilled, the product is not excluded from the scope of the order.
    1. Printing Unit: A printing unit which is a color keyless blanket-
to-blanket tower unit with a fixed gain infeed and fixed gain outfeed, 
with a rated speed no greater than 75,000 copies per hour, which 
includes the following features:
    <bullet> Each tower consisting of four levels, one or more of which 
must be populated.
    <bullet> Plate cylinders which contain slot lock-ups and blanket 
cylinders which contain reel rod lock-ups both of which are of solid 
carbon steel with nickel plating and with bearers at both ends which 
are configured in-line with bearers of other cylinders.
    <bullet> Keyless inking system which consists of a passive feed ink 
delivery system, an eight roller ink train, and a non-anilox and non-
porous metering roller.
    <bullet> The dampener system which consists of a two nozzle per 
page spraybar and two roller dampener with one chrome drum and one form 
roller.
    <bullet> The equipment contained in the color keyless ink delivery 
system is designed to achieve a constant, uniform feed of ink film 
across the cylinder without ink keys. This system requires use of 
keyless ink which accepts greater water content.
    2. Folder: A module which is a double 3:2 rotary folder with 160 
pages collect capability and double (over and under) delivery, with a 
cut-off length of 22 inches. The upper section consists of three-high 
double formers (total of 6) with six sets of nipping rollers.
    3. RTP: A component which is of the two-arm design with core drives 
and core brakes, designed for 50 inch diameter rolls; and arranged in 
the press line in the back-to-back configuration (left and right hand 
load pairs).
    4. Conveyance and Access Apparatus: Conveyance and access apparatus 
capable of manipulating a roll of paper more than two newspaper 
broadsheets across through the production process, and a drive system 
which is of conventional shafted design.

[[Page 62702]]

    5. Computerized Control System: A computerized control system, 
which is any computer equipment and/or software designed specifically 
to control, monitor, adjust, and coordinate the functions and 
operations of large newspaper printing presses or press components.
    Further, this review covers all current and future printing 
technologies capable of printing newspapers, including, but not limited 
to, lithographic (offset or direct), flexographic, and letterpress 
systems. The products covered by this review are imported into the 
United States under subheadings 8443.11.10, 8443.11.50, 8443.30.00, 
8443.59.50, 8443.60.00, and 8443.90.50 of the HTSUS. Large newspaper 
printing presses may also enter under HTSUS subheadings 8443.21.00 and 
8443.40.00. Large newspaper printing press computerized control systems 
may enter under HTSUS subheadings 8471.49.10, 8471.49.21, 8471.49.26, 
8471.50.40, 8471.50.80, and 8537.10.90. Although the HTSUS subheadings 
are provided for convenience and customs purposes, our written 
description of the scope of this review is dispositive.

Home Market Sales To Calculate Constructed Value Profit and Selling 
Expenses

    On June 23, 2000, Goss Graphic Systems, Inc., the petitioner in 
this proceeding, submitted a letter stating that MHI did not report 
home market sales that are contemporaneous with the date of its U.S. 
sale. On June 30, 2000, we asked MHI to report additional home market 
sales to the Department. Because this issue is not limited to MHI 
alone, we also requested additional sales from TKS.
    Upon analysis of the home market sales on the record for both MHI 
and TKS in this administrative review, we determined that the 
appropriate universe of home market sales used to calculate constructed 
value (CV) profit and selling expenses should comprise all sales made 
during the period beginning with three months prior to the respondent's 
U.S. sale,\1\ and then the nine subsequent months, including the month 
of sale. See the September 29, 2000, memorandum from the team to 
Richard W. Moreland entitled ``Universe of Home Market Sales Used to 
Calculate Profit and Selling Expenses for Constructed Value'' for 
further discussion.
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    \1\ Both of the respondents in this administrative review 
shipped/entered only one LNPP into the United States during the POR 
that was completely assembled and installed.
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Normal Value Comparisons

    To determine whether MHI's and TKS's sales of LNPPs to the United 
States were made at less than normal value (NV), we compared 
constructed export price (CEP) to the NV, as described in the 
``Constructed Export Price'' and ``Normal Value'' sections of this 
notice.
    Although the home market was viable for both respondents, in 
accordance with section 773 of the Act, we based NV on CV because we 
determined that the unique, custom-built nature of each LNPP sold does 
not permit proper price-to-price comparisons. See Large Newspaper 
Printing Presses and Components Thereof, Whether Assembled or 
Unassembled, From Japan: Preliminary Results of Antidumping Duty 
Administrative Reviews, 64 FR 55243, 55245 (Oct. 12, 1999) (LNPP 
Preliminary 1997-1998) followed in Large Newspaper Printing Presses and 
Components Thereof, Whether Assembled or Unassembled, From Japan: Final 
Results of Antidumping Duty Administrative Review and Partial 
Rescission of Administrative Reviews, 65 FR 7492, 7495 (Feb. 15, 2000) 
(LNPP Final 1997-1998).

Constructed Export Price

    For both MHI and TKS, we based the U.S. price on CEP, in accordance 
with sections 772(b), (c), and (d) of the Act, because: (1) the sales 
contracts were executed by the respondents' affiliated U.S. sales 
agents; and (2) the respondents' affiliated U.S. sales agents engaged 
in a broad range of activities including coordination of installation, 
testing, and technical service expenses, which we have classified as 
further manufacturing. For MHI, we revised the reported data based on 
our findings at verification.

A. MHI

    We calculated CEP based on the packed, installed price to an 
unaffiliated customer in the United States. We made deductions from the 
starting price, where appropriate, for foreign inland freight charges, 
foreign brokerage and handling charges, Japanese export insurance, 
international freight expenses, marine insurance, U.S. Customs duty, 
U.S. brokerage and handling charges, U.S. inland freight, and U.S. 
inland insurance, in accordance with section 772(c)(2)(A) of the Act.
    We made additional deductions from CEP, where appropriate, for 
warranty, imputed credit, direct training expenses, and U.S. indirect 
selling expenses, including indirect warranty expenses and other 
indirect selling expenses incurred by MHI and its U.S. affiliate 
associated with economic activity occurring in the United States, in 
accordance with section 772(d)(1) of the Act.
    As in prior segments of this proceeding, we calculated an imputed 
credit expense by multiplying an interest rate by the net balance of 
production costs incurred, and progress payments made, during the 
construction period. MHI reported this expense using a U.S.-dollar-
denominated, short-term interest rate for the entire balance, 
consistent with our imputed credit expense methodology that relies on 
the interest rate applicable to the currency in which the sale is made. 
MHI used interest rates obtained from the Federal Reserve in their 
credit calculation. However, we recalculated MHI's imputed credit 
expense calculation using the U.S. interest rate based on MLP U.S.A. 
Inc.'s actual borrowing experience rather than interest rates obtained 
from the Federal Reserve. For a detailed explanation of this analysis, 
see the calculation memorandum issued for the preliminary results of 
this review, dated September 29, 2000.
    In addition, we deducted the cost of further manufacturing or 
assembly, including installation expenses, in accordance with section 
772(d)(2) of the Act. We classified installation charges as part of 
further manufacturing, because the U.S. installation process involves 
extensive technical activities on the part of engineers and 
installation supervisors. See Mitsubishi Heavy Industries v. United 
States, 15 F. Supp. 2d 807, 815-16 (CIT 1998) (Mitsubishi). We relied 
on MHI's reported amount for further manufacturing except that we 
revised the calculation of the further manufacturing general and 
administrative (G&A) expense rate by using weighted-averages of MLP 
U.S.A. Inc.'s company wide G&A expenses and costs of goods sold based 
on its December 31, 1998 and December 31, 1999 financial statements.
    Pursuant to section 772(d)(3) of the Act, we further reduced the 
starting price by an amount for profit, to arrive at CEP. In accordance 
with section 772(f) of the Act, we calculated the CEP profit rate using 
the expenses incurred by MHI and its affiliate on their sales of the 
subject merchandise in the United States and the foreign like product 
in the home market and the profit associated with those sales.

B. TKS

    We calculated CEP based on the packed price to an unaffiliated 
customer

[[Page 62703]]

in the United States. We made deductions from the starting price, where 
appropriate, for foreign inland freight to port in Japan, foreign 
brokerage and handling, Japanese export insurance, international 
freight expenses, marine insurance, U.S. Customs duty, U.S. brokerage 
and handling, and unloading expenses, in accordance with section 
772(c)(2)(A) of the Act.
    We made additional deductions from CEP, where appropriate, for 
warranty, imputed credit, direct training expenses, and U.S. indirect 
selling expenses, including other indirect selling expenses incurred by 
TKS and its U.S. affiliate associated with economic activity occurring 
in the United States, in accordance with section 772(d)(1) of the Act. 
We calculated an imputed credit expense using the same methodology as 
discussed above for MHI.
    In addition, we deducted the cost of any further manufacturing or 
assembly, including testing and technical service expenses in 
accordance with section 772(d)(2) of the Act. We classified testing and 
technical service expenses as part of further manufacturing, because 
the U.S. installation process involves extensive technical activities 
on the part of engineers and installation supervisors (see Mitsubishi).
    Pursuant to section 772(d)(3) of the Act, we further reduced the 
starting price by an amount for profit, to arrive at CEP. In accordance 
with section 772(f) of the Act, we calculated the CEP profit rate using 
the expenses incurred by TKS and its affiliate on their sales of the 
subject merchandise in the United States and the foreign like product 
in the home market and the profit associated with those sales.

Normal Value

    As noted above under the ``Normal Value Comparisons'' section of 
this notice, we based NV on CV in accordance with section 773 of the 
Act because we determined that the unique, custom-built nature of each 
LNPP sold does not permit proper price-to-price comparisons, even 
though the home market was viable for both respondents.

Cost of Production Analysis and Constructed Value

    Pursuant to section 773(b)(2)(A)(ii) of the Act, there are 
reasonable grounds to believe or suspect MHI and TKS made sales in the 
home market at prices below their cost of production (COP) in this 
review because the Department disregarded certain sales made by MHI and 
TKS during the less-than-fair-value (LTFV) investigation and during the 
previous administrative reviews pursuant to a finding that sales were 
made below cost. See Notice of Final Determination of Sales at Less 
Than Fair Value: Large Newspaper Printing Presses and Components 
Thereof, Whether Assembled or Unassembled, From Japan, 61 FR 38139, 
38145 (July 23, 1996); and LNPP Preliminary 1997-1998, 64 FR at 55246 
followed in LNPP Final 1997-1998. As a result, the Department initiated 
investigations to determine whether the respondents made home market 
sales during the POR at prices below their COP within the meaning of 
section 773(b) of the Act.
    We calculated the COP based on the sum of each respondent's cost of 
materials and fabrication for the foreign like product, plus amounts 
for G&A and financial expenses, in accordance with section 773(b)(3) of 
the Act.
    We compared the COP figures to home market prices of the foreign 
like product, as required under section 773(b) of the Act, in order to 
determine whether these sales had been made at prices below the COP. On 
a contract-specific basis, we compared the COP to home market prices, 
less any applicable movement charges, direct and indirect selling 
expenses, and packing expenses.
    In determining whether to disregard home market sales made at 
prices below the COP, we examined whether such sales were made: (1) in 
substantial quantities within an extended period of time; and (2) at 
prices which permitted the recovery of all costs within a reasonable 
period of time in the normal course of trade. See section 773(b)(1) of 
the Act.
    The results of our cost tests for both MHI and TKS indicated that 
certain home market sales were at prices below COP within an extended 
period of time, were made in substantial quantities, and would not 
permit the full recovery of all costs within a reasonable period of 
time. In accordance with section 773(b)(1) of the Act, we therefore 
excluded the below-cost sales from our analysis and used the remaining 
above-cost sales as the basis for determining selling expenses and 
profit.
    In accordance with section 773(e) of the Act, we calculated CV 
based on the sum of each respondent's cost of materials, fabrication, 
selling, general and administrative (SG&A) expenses and U.S. packing 
costs. In accordance with section 773(e)(2)(A), we based SG&A expenses 
and profit on the amounts incurred and realized by each respondent in 
connection with the production and sale of the foreign like product in 
the ordinary course of trade, for consumption in the foreign country.
    Company-specific calculations are discussed below.

A. MHI

    We relied on MHI's reported COP and CV amounts, except in the 
following instances in which the costs were not appropriately 
quantified or valued:
    1. We revised the calculation of the G&A expense rate by including 
pension expenses and past service costs in the numerator of the 
calculation.
    2. We further revised the calculation of the G&A expense rate by 
dividing the weighted-average of unconsolidated G&A expenses by the 
unconsolidated cost of goods sold from MHI's financial statements for 
the fiscal years ended March 31, 1999, and March 31, 2000.
    3. We revised the calculation of the financial expense rate to 
exclude offsets from short-term interest income earned on accounts 
receivable.
    4. We recalculated the financial expense rate (revised as noted 
above) using the weighted-average expenses and cost of sales from MHI's 
consolidated financial statements for the fiscal years ended March 31, 
1999, and March 31, 2000.
    5. We recalculated the calculation of the sundry expense rate using 
the weighted-average expenses and cost of sales from MHI's 
unconsolidated financial statements for the fiscal years ended March 
31, 1999, and March 31, 2000.
    6. We added the cost for spare parts to CV.
    See the September 29, 2000, memorandum from Michael P. Harrison to 
Neal Halper entitled ``Constructed value calculation adjustments for 
the preliminary determination'' for further discussion.
    For CEP to CV comparisons, where appropriate, we deducted imputed 
credit, in accordance with sections 773(a)(6)(C)(iii) and 773(a)(8) of 
the Act. We calculated imputed credit for CV purposes in accordance 
with the methodology explained in the ``Constructed Export Price'' 
section of this notice. We imputed credit expenses for CV using the 
weighted-average, yen-based, short-term interest rate reported for the 
POR, since home market sales were denominated in yen.
    We made a CEP offset adjustment to NV, as explained below, in 
accordance with section 773(a)(7)(B) of the Act, by deducting the home 
market indirect selling expenses, including indirect training, 
warranty, and technical service expenses, up to the amount of indirect 
selling expenses incurred on U.S. sales. Where applicable, we offset 
any home market commission using the amount of indirect selling 
expenses incurred on

[[Page 62704]]

the U.S. sale remaining after the deduction for the CEP offset, up to 
the amount of the home market commission, in accordance with 19 CFR 
351.410(e).

B. TKS

    We relied on TKS's reported COP and CV amounts except that we 
revised the total cost of manufacturing to reflect the fixed overhead 
costs recorded in the company's normal books and records for the fiscal 
period when manufacturing took place. See the September 29, 2000, 
memorandum from LaVonne Jackson to Neal Halper entitled ``Cost of 
Production and Constructed Value Calculation Adjustments for the 
Preliminary Determination'' for further discussion.
    For CEP to CV comparisons, where appropriate, we deducted imputed 
credit, in accordance with sections 773(a)(6)(C)(iii) and 773(a)(8) of 
the Act. We calculated imputed credit for CV purposes in accordance 
with the methodology explained in the ``Constructed Export Price'' 
section of this notice. We imputed credit expenses for CV using the 
weighted-average, yen-based, short-term interest rate reported for the 
POR, since home market sales were denominated in yen.
    We also made a CEP offset adjustment to NV, as explained below, in 
accordance with section 773(a)(7)(B) of the Act, by deducting the home 
market indirect selling expenses, up to the amount of indirect selling 
expenses incurred on U.S. sales.

Level of Trade and CEP Offset

    In accordance with section 773(a)(1)(B) of the Act, to the extent 
practicable, we determine NV based on sales in the comparison market at 
the same level of trade as the export price (EP) or CEP transaction. 
The NV level of trade is that of the starting-price sales in the 
comparison market or, when NV is based on CV, that of the sales from 
which we derive SG&A expenses and profit. For EP, the level of trade is 
also that of the starting-price sale, which is usually from exporter to 
importer. For CEP, it is the level of the constructed sale from the 
exporter to the importer, after the deductions required under section 
772(d) of the Act.
    To determine whether NV sales are at a different level of trade 
than EP or CEP sales, we examine stages in the marketing process and 
selling functions along the chain of distribution between the producer 
and the unaffiliated customer in the comparison market. If the 
comparison-market sales are at a different level of trade and the 
difference affects price comparability, as manifested in a pattern of 
consistent price differences between the sales on which NV is based and 
comparison-market sales at the level of trade of the export 
transaction, we make a level of trade adjustment under section 
773(a)(7)(A) of the Act. Finally, for CEP sales, if the NV level is 
more remote from the factory than the CEP level and there is no basis 
for determining whether the difference in the levels between NV and CEP 
affects price comparability, we adjust NV under section 773(a)(7)(B) of 
the Act (the CEP-offset provision). See Notice of Final Determination 
of Sales at Less Than Fair Value: Certain Cut-to-Length Carbon Steel 
Plate from South Africa, 62 FR 61731 (Nov. 19, 1997).
    We note that the U.S. Court of International Trade (CIT) has held 
that the Department's practice of determining levels of trade for CEP 
transactions after CEP deductions is an impermissible interpretation of 
section 772(d) of the Act. See Borden, Inc. v. United States, 4 F. 
Supp. 2d 1221, 1241-42 (CIT 1998) (Borden.) The Department believes, 
however, that its practice is in full compliance with the statute. On 
June 4, 1999, the CIT entered final judgement in Borden on the level of 
trade issue. See Borden Inc. v. United States, Court No. 96-08-01970, 
Slip Op. 99-50 (CIT June 4, 1999). The government has filed an appeal 
of Borden which is pending before the U.S. Court of Appeals for the 
Federal Circuit. Consequently, the Department has continued to follow 
its normal practice of adjusting CEP under section 772(d) prior to 
starting a level of trade analysis, as articulated by the Department's 
regulations at section 351.412.
    Both MHI and TKS claimed that they made home market sales at only 
one level of trade (i.e., direct sales to end users), which is more 
advanced than the level of trade in the U.S. market (i.e., CEP sales to 
the U.S. affiliate). According to MHI and TKS, the level of trade in 
the home market is not comparable to the CEP level of trade because the 
majority of the selling functions with respect to their U.S. sales were 
performed by their U.S. affiliates at a more remote level of trade than 
those selling functions relating to their home market sales. The 
respondents also claimed that the selling functions between the two 
markets differ even further once the applicable selling expenses are 
deducted from the CEP starting price. Therefore, both MHI and TKS 
requested that the Department grant them a CEP offset under section 
773(a)(7)(B) of the Act.
    In order to determine whether NV was established at a different LOT 
than CEP sales, we examined stages in the marketing process and selling 
functions along the chains of distribution between the respondents and 
their home market customers. We compared the selling functions 
performed for home market sales with those performed with respect to 
the CEP transaction, exclusive of economic activities occurring in the 
United States, pursuant to section 772(d) of the Act, to determine if 
the home market level of trade constituted a different and more 
advanced stage of distribution than the CEP level of trade.
    Both respondents reported that they sold through one channel of 
distribution in the home market, and through a different channel in the 
United States. In Japan, MHI and TKS sold subject merchandise directly 
to unaffiliated customers, while in the United States, they both sold 
the subject merchandise through their affiliates, MLP U.S.A., Inc. and 
TKS (U.S.A.), respectively, who then sold the subject merchandise 
directly to unaffiliated purchasers.
    We compared the selling functions and the level of activity in each 
distribution channel for each respondent, and found that several of the 
functions performed in the comparison market either were not performed 
in connection with the U.S. sale at the export level of trade, or were 
performed at a significantly lower level of activity on the part of MHI 
or TKS.
    Moreover, as we have determined that installation expenses incurred 
on the U.S. sales should be treated as further manufacturing expenses, 
the CEP after deduction for all expenses under section 772(d) of the 
Act reflects an uninstalled LNPP. Supporting this contention is the 
fact that many of the same selling functions that are performed at the 
comparison market level of trade are performed not at the export level 
of trade, but by the respondents' U.S. affiliates. Based on this 
analysis, we conclude that the comparison market and U.S. channels of 
distribution and the sales functions associated with each are 
sufficiently different so as to constitute two different levels of 
trade, and we find that the comparison market sales are made at a more 
advanced level of trade than are CEP sales. Because MHI and TKS made 
sales in the home market at only one level of trade, the difference in 
the level of trade cannot be quantified. Further, we do not have 
information which would allow us to examine pricing patterns based on 
the respondents' sales of other products, and there are no other 
respondents or other record information on which such an analysis could 
be based. Accordingly, because the data available do not form an 
appropriate basis for

[[Page 62705]]

making a level of trade adjustment, but the level of trade in the home 
market is at a more advanced stage of distribution than the level of 
trade of the CEP, we have made a CEP offset to NV in accordance with 
section 773(a)(7)(B) of the Act.

Currency Conversion

    We made currency conversions, in accordance with section 773(A)(a) 
of the Act, based on the official exchange rates in effect on the dates 
of the U.S. sales as certified by the Federal Reserve Bank of New York.

Preliminary Results of Review

    As a result of our review, we preliminarily determine that the 
following margins exist for the period September 1, 1998, through 
August 31, 1999:

------------------------------------------------------------------------
                                                                Percent
                    Manufacturer/exporter                        margin
------------------------------------------------------------------------
Mitsubishi Heavy Industries, Ltd.............................       3.88
Tokyo Kikai Seisakusho, Ltd..................................       0.00
------------------------------------------------------------------------

    The Department will disclose to parties the calculations performed 
in connection with these preliminary results within five days of the 
date of publication of this notice. Interested parties may request a 
hearing within 30 days of the publication. Any hearing, if requested, 
will be held 44 days after the publication of this notice, or the first 
workday thereafter. Interested parties may submit case briefs not later 
than 30 days after the date of publication of this notice. Rebuttal 
briefs, limited to issues raised in the case briefs, may be filed not 
later than 35 days after the date of publication of this notice. The 
Department will publish a notice of the final results of this 
administrative review, which will include the results of its analysis 
of issues raised in any such case briefs, within 120 days of the 
publication of these preliminary results.

Assessment Rates

    Upon completion of this administrative review, the Department shall 
determine, and the Customs Service shall assess, antidumping duties on 
all appropriate entries. For assessment purposes, we calculated an 
importer-specific assessment rate for the subject merchandise by 
dividing the dumping margin calculated for the U.S. sale examined by 
the total entered value of the sale examined. Pursuant to 19 CFR 
351.106(c)(2), we will instruct the Customs Service to liquidate 
without regard to antidumping duties all entries for any importer for 
whom the assessment rate is de minimis (i.e., less than 0.50 percent). 
The Department will issue appraisement instructions directly to the 
Customs Service.

Cash Deposit Instructions

    The following cash deposit requirements will be effective for all 
shipments of the subject merchandise entered, or withdrawn from 
warehouse, for consumption on or after the publication date of the 
final results of this administrative review, as provided by section 
751(a)(1) of the Act: (1) the cash deposit rates for MHI and TKS will 
be those established in the final results of this review, except if the 
rate is less than 0.50 percent, and therefore, de minimis within the 
meaning of 19 CFR 351.106(c)(1), in which case the cash deposit rate 
will be zero; (2) for previously reviewed or 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, a prior review, or the original 
LTFV 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 will continue to be 58.69 percent, the ``All 
Others'' rate made effective by the LTFV investigation. These 
requirements, when imposed, shall remain in effect until publication of 
the final results of the next administrative review.
    This notice also serves as a preliminary reminder to importers of 
their responsibility under 19 CFR 351.402(f) to file a certificate 
regarding the reimbursement of antidumping duties prior to liquidation 
of the relevant entries during these review periods. 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.
    We are issuing and publishing this determination in accordance with 
sections 751(a)(1) and 777(i)(1) of the Act.

    Dated: September 29, 2000.
Troy H. Cribb,
Acting Assistant Secretary for Import Administration.
[FR Doc. 00-25790 Filed 10-18-00; 8:45 am]
BILLING CODE 3510-DS-P