Federal Register / Vol. 63, No. 136 /Thursday, July 16, 1998 / Notices 38373

stating the per-unit costs on the same

basis as the variable manufacturing

costs of the Australian sales (see Case

Brief on behalf of Petitioner Air

Products and Chemicals, Inc. at page

19). DuPont did not object to the

petitioner’s comment.

Because further manufactured PVA

comprises only a percentage of subject

merchandise, we agreed with the

petitioner that the prices, costs and

expenses involved in the further

manufactured product should be based

on the same percentage of subject

merchandise incorporated in the further

manufactured sales at issue.

Accordingly, in the final results, we

adjusted the reported amounts of

variable and total manufacturing costs,

gross unit price, and CEP selling

expenses for further manufactured PVA

by a conversion factor (i.e., the valueadded ratios reported in DuPont’s

Section E submission) in order to state

the prices, costs, and expenses of further

manufactured PVA on a per-unit basis

(USD/lb) of imported PVA (see

Calculation Memorandum for the Final

Results for E.I. duPont de Nemours &

Co., dated June 9, 1998).

While DuPont agrees that the

Department was correct in altering its

preliminary calculation of the CEP sales

at issue, DuPont claims that because the

further manufactured PVA comprises

only a percentage of subject

merchandise, the quantity involved in

the further manufactured product

should also have been adjusted to reflect

the same percentage of subject

merchandise incorporated in the further

manufactured sales at issue. Instead,

DuPont asserts that for the final results,

rather than adjust the quantity to reflect

the actual amount of PVA used, the

Department converted prices from units

of dollars per kilogram of further

manufactured PVA to dollars per

kilogram of imported PVA by dividing

the unit prices of further manufactured

PVA by the above-mentioned valueadded ratios (see Polyethylene

Terephthalate Film, Sheet, and Strip

from the Republic of Korea; Final

Results of Antidumping Duty

Administrative Review, 60 FR 42835,

42845 (August 17, 1995)(where the

Department made the same type of

adjustment to CEP calculation for sales

of further manufactured merchandise).

Thus, DuPont contends, the effect of

multiplying these converted prices (in

dollars per kilogram of the imported

PVA) by the total quantity of further

manufactured PVA was a significant

overstatement of the quantity of

merchandise subject to antidumping

duties (i.e., subject merchandise) and,

therefore, the amount of dumping. Thus,

DuPont claims that the Department

should make this adjustment to the

reported quantity for its sales of further

manufactured products.

We agree that a ministerial error was

made in our margin calculation as

alleged by DuPont. Without adjusting

the reported quantity for DuPont’s sales

of further manufactured PVA to reflect

the amount of subject merchandise

actually used in the further

manufactured sales, we incorrectly

multiplied the value of imported PVA

by the quantity of further manufactured

PVA when we should have used the

percentage of subject merchandise

incorporated in the further

manufactured PVA. For a detailed

discussion, see Memorandum to Louis

Apple, Office Director, from Team,

dated July 6, 1998. See also, Circular

Welded Non-Alloy Steel Pipe from the

Republic of Korea: Amendment of Final

Results of Antidumping Duty

Administrative Review, 63 FR 2200

(January 14, 1998), in which the

Department amended its final results

due to a ministerial error in calculating

interest expense, which resulted in an

overstatement of the interest expense

factor and, consequently, of the

dumping margin.

Accordingly, we are amending our

final results. We hereby determine the

following weighted-average margin

existed for the period May 15, 1996,

through April 30, 1997:

Manufacturer/producer/exporter

Original

margin

(percent)

Revised

margin

(percent)

E.I. duPont de Nemours & Co. .......... 9.46 4.20

Assessment Rates

The Department shall determine, and

the Customs Service shall assess,

antidumping duties on all appropriate

entries. We have calculated an importerspecific duty assessment rate based on

the ratio of the total amount of AD

duties calculated for the examined

transactions in the POR to the total

entered value of the same transactions.

This rate will be assessed uniformly on

all entries of that particular importer

made during the POR. The Department

will issue appraisement instructions

concerning the respondent directly to

the U.S. Customs Service.

The amended cash deposit

requirement will be effective upon

publication of this notice of amended

final results of this administrative

review for all shipments of the subject

merchandise entered, or withdrawn

from warehouse, for consumption on or

after the publication date, as provided

for by section 751(a)(1) of the Act, at the

cash deposit rate for DuPont indicated

above.

This deposit requirement shall remain

in effect until publication of the final

results of the next administrative

review.

The amended final results of this

administrative review are in accordance

with section 751(h) of the Act and 19

CFR 353.28. This amendment to the

final results is published in accordance

with 19 CFR 353.28(c).

Dated: July 9, 1998.

Richard W. Moreland,

Acting Assistant Secretary for Import

Administration.

[FR Doc. 98–18886 Filed 7–15–98; 8:45 am]

BILLING CODE 3510–DS–P

DEPARTMENT OF COMMERCE

International Trade Administration

[A–201–504]

Porcelain-on-Steel Cookware From

Mexico: Final Results of Antidumping

Duty Administrative Review

AGENCY: Import Administration,

International Trade Administration,

Department of Commerce.

ACTION: Notice of Final Results of

Antidumping Duty Administrative

Review.

SUMMARY: On January 9, 1998, the

Department of Commerce published the

preliminary results of the administrative

review of the antidumping duty order

on certain porcelain-on-steel cookware

from Mexico (63 FR 1430). The review,

the tenth review of the underlying

order, covers Cinsa, S.A. de C.V. and

Esmaltaciones de Norte America, S.A.

de C.V., manufacturers/exporters of the

subject merchandise to the United

States and the period December 1, 1995,

through November 30, 1996. 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: July 16, 1998.

FOR FURTHER INFORMATION CONTACT:

Kate Johnson or David J. Goldberger,

Office 5, AD/CVD Enforcement Group II,

Import Administration, International

Trade Administration, U.S. Department

of Commerce, 14th Street and

Constitution Avenue, N.W.,

Washington, D.C. 20230, telephone:
38374 Federal Register / Vol. 63, No. 136 /Thursday, July 16, 1998 / Notices

(202) 482–4929 or (202) 482–4136,

respectively.

SUPPLEMENTARY INFORMATION:

Background

On January 9, 1998, the Department of

Commerce (the Department) published

in the Federal Register the preliminary

results of the 1995–96 administrative

review of the antidumping duty order

on certain porcelain-on-steel (POS)

cookware from Mexico (63 FR 1430)

(preliminary results). During February

3–4, 1998, the Department verified the

respondents’ submissions concerning

the allegation of duty reimbursement.

On February 25, 1998, and March 4,

1998, General Housewares Corp. (GHC)

(the petitioner) and, Cinsa, S.A. de C.V.

(Cinsa) and Esmaltaciones de Norte

America, S.A. de C.V. (ENASA)

submitted case and rebuttal briefs. The

Department held a hearing on March 11,

1998. On April 9, 1998, Columbian

Home Products, LLC (CHP) informed

the Department that it is the legal

successor-in-interest to GHC pursuant to

the March 31, 1998, sale of all of GHC’s

porcelain-on-steel cookware production

assets, product lines, inventory, real

estate, and brand names to CHP. 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 Act by the Uruguay Round

Agreements Act (URAA). In addition,

unless otherwise indicated, all citations

to the Department’s regulations are to

the provisions codified at 19 CFR Part

353 (April 1997). Where we cite the

Department’s new regulations (19 CFR

Part 351, 62 FR 27926 (May 19, 1997)

(New Regulations)) as an indication of

current Department practice, we have so

stated.

Scope of the Review

Imports covered by this review are

shipments of porcelain-on-steel

cookware, including tea kettles, which

do not have self-contained electric

heating elements. All of the foregoing

are constructed of steel and are

enameled or glazed with vitreous

glasses. This merchandise is currently

classifiable under Harmonized Tariff

Schedule of the United States (HTSUS)

subheading 7323.94.00. Kitchenware

currently classifiable under HTSUS

subheading 7323.94.00.30 is not subject

to the order. Although the HTSUS

subheadings are provided for

convenience and Customs purposes, our

written description of the scope of this

proceeding is dispositive.

Changes Since the Preliminary Results

We have made the following changes

in these final results for both Cinsa and

ENASA:

1. We deducted commissions from

constructed export price (CEP) sales.

The adjustment for commission

expenses was inadvertently omitted

from the preliminary margin

calculations.

2. We converted Mexican pesodenominated brokerage and inland

freight expenses to U.S. dollars.

3. We corrected the U.S. price

calculation for export price (EP) sales by

not deducting CEP profit and selling

expenses, which were inadvertently

deducted in the preliminary results.

4. We increased direct materials costs

to reflect adjustments to reported frit

costs based on verification findings. See

Comment 2, below.

5. We used the Federal Reserve Bank’s

actual daily exchange rates for currency

conversion purposes because Mexico

experienced significant inflation during

the period of review.

6. We recalculated CIC’s indirect

selling expenses. See Comments 4 and

9, below.

7. We tested home market sales for

below-cost prices before determining

the most appropriate match for each

U.S. model sold (we continued to match

on a monthly basis). See Comment 6,

below.

8. We corrected a clerical error in

calculating U.S. inland freight expenses.

See Comment 8, below.

9. We corrected a computer

programming error associated with the

cost test because some data were

incorrectly replaced from the computer

sales file when the summary cost file

was merged back into the home market

database.

10. We applied the cost test on a

period-wide as opposed to a monthly

basis.

Interested Party Comments

Comment 1: Alleged Reimbursement of

U.S. Affiliate CIC for Antidumping

Duties

The petitioner argues that the record

of this review clearly demonstrates that

Cinsa and ENASA are reimbursing

Cinsa’s and ENASA’s U.S. affiliate,

Cinsa International Corporation (CIC),

for antidumping duties. The petitioner

states that Cinsa and ENASA admit on

the record that their affiliated holding

company, Grupo Industrial Saltillo

(GIS), which functions as corporate

treasurer, transferred funds to CIC

expressly to pay antidumping duties. In

addition, the petitioner states that the

Department confirmed that the holding

company’s payment to CIC was a grant

and not a loan because CIC was not

required to repay these funds.

The petitioner further argues that the

Department’s preliminary results ignore

long-standing principles that (1) money

is fungible within a corporate family,

and (2) expenses incurred by holding

companies without operations are for

the benefit of their affiliates with

operations. Moreover, the petitioner

states that the Department verified that

the funds transferred to CIC contained

monies to which Cinsa and ENASA

contributed. Accordingly, the petitioner

argues that the Department should find

reimbursement of antidumping duties

based on these facts and assess double

the calculated antidumping margin

upon liquidation of the entries subject

to this review, pursuant to 19 CFR

353.26(a).

The respondents argue that, for

purposes of the final results, the

Department should continue to reject

the proposition that a capital

contribution to the importer of record by

a corporate entity that is not the

producer or exporter of the subject

merchandise constitutes a

reimbursement of antidumping duties

within the meaning of the Department’s

regulations. Cinsa and ENASA contend

that the Department’s regulations

require that, in order to trigger the

reimbursement provision, the producer

or reseller must have either (1) directly

paid antidumping duties or deposits on

behalf of the importer, or (2) reimbursed

the importer for the payment of

antidumping duties or deposits. In

addition, Cinsa and ENASA argue that

the Department verified that neither

respondent reimbursed CIC for its

payment of antidumping duty deposits

or assessments to the U.S. Customs

Service. Moreover, the respondents

argue that the Department also verified

that no written agreement exists for the

reimbursement of antidumping duties

between CIC and Cinsa or ENASA and

that the funds transferred to CIC from

GIS and GISSA Holding USA did not

originate from Cinsa and ENASA.

Furthermore, the respondents contend

that the Department has consistently

held that the mere existence of

intercompany transfers of funds among

affiliated parties does not constitute

reimbursement of antidumping duties.

Lastly, Cinsa and ENASA submit that

the cases cited by the petitioner with

regard to the principle of the

‘‘fungibility of money’’ relate to the

calculation of cost of production (COP)
Federal Register / Vol. 63, No. 136 /Thursday, July 16, 1998 / Notices 38375

and are not relevant to the issue of

reimbursement.

DOC Position

We do not believe that it is

appropriate to apply the reimbursement

regulation for purposes of this

administrative review. 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).

The Department verified during the

instant review and previous

administrative review periods that CIC

or its predecessor company, Global

Imports, Inc. (Global), paid all

antidumping duty deposits and

antidumping duty assessments. The

petitioner’s claim for a deduction rests

on the April 1997 capital contribution

by GISSA Holding USA to CIC. The

monies at issue were paid by GIS (the

ultimate parent company of Cinsa,

ENASA, and several other producing

entities, as well as of the importer, CIC)

to GISSA Holding USA (which is a

holding company for CIC but not for

Cinsa or ENASA). GISSA Holding USA

then provided these funds to CIC for

purposes that included payment of

antidumping duties assessed on entries

imported by Global during the 5th and

7th review periods, which were

liquidated during 1996.

The Department preliminarily

determined not to apply the

reimbursement regulation based on a

literal construction of that regulation

and the fact that the transfer in question

was not provided directly by a producer

or exporter. Therefore, it took no

position on whether a finding of

reimbursement as to the 5th and 7th

review entries could serve as the basis

for application of the reimbursement

regulation as to 10th review entries. As

a result, the parties have not had an

opportunity to comment on and provide

evidence in connection with any new

policy that might involve a finding of

reimbursement as to either the 5th and

7th review entries or as to subsequent

entries. Even if the Department were to

agree with petitioners that Cinsa and

ENASA reimbursed CIC for

antidumping duties paid on 5th and 7th

review entries, it could not apply the

reimbursement regulation to these 10th

review entries. To do so would be

equivalent to imposing an irrebuttable

(in this review) presumption that a

pattern of reimbursement of duties paid

on entries from earlier periods would be

continued as to entries in later periods.

This issue was not raised during the

10th review. It is well established that

potentially affected parties must be

given an opportunity to submit evidence

specifically to rebut a presumption

established by the Department,

especially when, as in this case, the

Department took a position in the

preliminary results that made the

submission of such evidence

unnecessary during the administrative

proceeding. See, e.g., British Steel plc v.

United States, 879 F. Supp. 1254, 1316–

17 (CIT 1995), Sigma Corp. v. United

States, 841 F. Supp. 1255, 1267 (CIT

1993). The facts underlying this issue

have not changed from the 9th review

final results in which we determined

that the reimbursement regulation did

not apply. Therefore, the Department

will maintain, for purposes of this

review, the position taken in the 9th

review and in the 10th review

preliminary results based on the

rationale given therein.

The Department has concerns about

the nature of the cash transfer at issue

in this case and intends to reconsider,

in future reviews, whether

reimbursement by Cinsa’s and ENASA’s

corporate parent would constitute

reimbursement under the Department’s

regulations. In the future, the

Department may find it appropriate to

apply the reimbursement regulation in

instances in which a parent or other

affiliate of a producer or exporter

provided funds specifically for the

payment of antidumping duties. Thus,

the Department will examine closely

transfers of funds between the producer/

exporter, its affiliates, and the importer,

made for the purpose of paying

antidumping duties and cash deposits.

Further, we disagree with petitioner’s

arguments that we should find

reimbursement based on (1) the

principle of the fungibility of money

and (2) the idea that expenses incurred

by holding companies without

operations are for the benefit of their

subsidiaries with operations. See

‘‘Issues Memo for the Final Results’’

dated July 8, 1998, for additional

information. In antidumping cases, the

Department uses both of these concepts

to deal with allocation of expenses

associated with a parent company to the

COP and constructed value (CV) of the

company producing subject

merchandise. In antidumping cases, the

so-called ‘‘fungibility principle’’ is an

aspect of the Department’s methodology

for calculating financial costs incurred

in producing and selling subject

merchandise based on an interest

expense ratio reflecting the overall

corporate borrowing experience. E.g.,

Final Determination of Sales at Less

than Fair Value: New Minivans from

Japan, 57 FR 21937, 21946 (Comment

18) (May 26, 1992). Just as the

‘‘fungibility principle’’ is used in

dealing with interest expense, the

holding company rule relates to the

allocation of a portion of the general and

administrative (G&A) expenses incurred

by a non-producing parent company to

the cost calculations for a firm

producing subject merchandise that

benefits from the activities/services

generating such expenses. In the Final

Determination of Sales at Less Than

Fair Value: Certain Hot-Rolled Carbon

Steel Flat Products * * * From Canada,

58 FR 37099, 37114 (Comment 47) (July

9, 1993), the Department expressed this

principle as follows: ‘‘The general

expenses incurred by a parent company,

without operations, relate to all of its

subsidiaries with operations.’’ This

simply allows the Department to

allocate a portion of general costs to the

cost of producing subject merchandise.

Comment 2: Enamel Frit Cost

For purposes of the final results,

respondents Cinsa and ENASA argue

that the Department should use the

transfer prices reported for enamel frit

obtained from their affiliated supplier,

ESVIMEX, without adjustment.

However, the respondents state that, if

the Department decides to adjust

materials costs to reflect an ‘‘adjusted

market price,’’ both the respondents and

the petitioner agree that the Department

erred in calculating the amount of the

differential between market price and

adjusted market price. The respondents

believe that the Department improperly

focused solely on the price difference

between ESVIMEX’s prices to Cinsa and

ENASA, and ESVIMEX’s prices to

unaffiliated customers, rather than

comparing the price paid by Cinsa and

ENASA for ESVIMEX’s frit, and the

price paid by those producers for the

enamel frit purchased from an

unaffiliated producer, in order to

determine whether ESVIMEX’s prices to

Cinsa and ENASA reflect fair market

prices.

The respondents argue that the

Department improperly concluded that

the difference between ESVIMEX’s

prices to affiliated parties and those to

unaffiliated parties was not attributable

entirely to cost savings to ESVIMEX on

its sales to affiliated parties, because the

preliminary results failed to take into

account prompt payment discounts, the

existence of which was verified by the

Department. Furthermore, the

respondents argue that, even if prompt

payment discounts are not taken into

consideration, any remaining portion of

the price differential not accounted for

by verified cost savings represented a

quantity discount granted to affiliated
38376 Federal Register / Vol. 63, No. 136 /Thursday, July 16, 1998 / Notices

purchasers because such purchasers

accounted for a large majority of

ESVIMEX’s sales of enamel frit.

Therefore, the transfer prices paid by

Cinsa and ENASA to ESVIMEX would

be fair market prices, according to the

respondents.

Finally, Cinsa and ENASA contend

that, even if it were appropriate for the

Department to adjust Cinsa’s and

ENASA’s reported raw material costs,

the preliminary results overstated the

adjustment. The respondents argue that,

rather than corresponding to the percent

of list price that is not documented by

cost savings, the Department’s

adjustment incorrectly corresponds to

the percent of list price that is

documented by verified cost savings.

The petitioner maintains that Cinsa’s

and ENASA’s cost of enamel frit

purchased from its affiliate, ESVIMEX,

should be based on unadjusted market

prices, defined as the prices that

unrelated parties paid ESVIMEX for frit,

which is equivalent to the list prices

less only the general discount given to

all unrelated parties. The petitioner

contends that the Department cannot

conclude that Cinsa’s and ENASA’s

transfer prices reflect market value, as

claimed by the respondents, because the

record demonstrates that ESVIMEX’s

prices for frit to Cinsa and ENASA were

lower than the prices charged to

unaffiliated customers. Moreover, the

petitioner claims that the respondents

base their claim on a comparison with

a de minimis volume purchased from an

unaffiliated supplier.

Alternatively, the petitioner argues

that the Department should correct its

preliminary calculation for purposes of

the final results so that it adjusts Cinsa’s

and ENASA’s material costs upward by

what it terms the full difference between

the market prices for frit and the

adjusted market prices for frit, and

provides a calculation which it claims

will have this effect.

Furthermore, the petitioner asserts

that regarding discounts (1) the

Department should disregard the

prompt payment discount because the

respondents did not even allege the

existence of such a discount prior to

verification and provided no evidence

indicating how often ESVIMEX granted

this discount, and (2) there is no

evidence to support the respondents’

claimed quantity discount.

Finally, the petitioner contends that

the Department should reject Cinsa’s

and ENASA’s alternate calculation of

the adjustment to materials costs

because it calculates the percentage

difference between market prices and

theoretical transfer prices, not actual

transfer prices, and therefore

understates the appropriate percentage

increase to Cinsa’s and ENASA’s

materials costs.

DOC Position

For purposes of the preliminary

results, we intended to increase the frit

portion of the direct materials cost to

account for difference between market

prices and reported transfer prices that

is not accounted for by documented cost

savings. However, we agree with the

respondents that we inadvertently

overstated the amount necessary to

increase the transfer price to equal an

‘‘adjusted market price’’ corresponding

to the situation in which ESVIMEX sells

to Cinsa and ENASA. Accordingly, for

purposes of the final results, we have

used in our calculation the percent of

list price that is not documented by cost

savings, as opposed to the percent of list

price that is documented by verified

cost savings, which we incorrectly used

in our preliminary calculations.

We disagree with the petitioner’s

suggestion that the Department should

make an adjustment to material costs

based on the difference between the

market prices for frit and the

Department’s calculation of an

‘‘adjusted market price’’ (i.e., a price

that the Department believes Cinsa and

ENASA would have paid had they been

unaffiliated purchasers). The adjustment

made by the Department is intended to

increase Cinsa’s and ENASA’s

submitted frit costs (i.e., transfer prices)

so that they include the portion of the

‘‘affiliates’’ discount off list price which

was not supported at verification as

being attributable to cost savings.

Therefore, the appropriate calculation

measures the difference between the

reported transfer price and the

Department’s adjusted market price.

With regard to the petitioner’s

argument that the reported prices are

‘‘theoretical’’ prices as opposed to

‘‘actual prices,’’ we verified invoices

showing that the reported transfer prices

(prices from ESVIMEX to Cinsa and

ENASA) correspond to list prices minus

the standard discount to affiliated

parties.

In addition, 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. Based on the

documents examined at verification, we

have determined that, although the

respondents adequately supported their

claim with respect to all cost

efficiencies listed on the schedule

submitted at verification, these costs

efficiencies did not account for the full

extent of the discount accorded only to

affiliated parties. Although Cinsa and

ENASA then claimed that the

unaccounted for portion of the affiliated

party discount should be attributed to a

volume discount, they were unable to

quantify and support how the volume of

their purchases resulted in market-based

savings equivalent to that unaccounted

for portion. Therefore, in accordance

with the Department’s longstanding

policy of considering that transactions

between affiliated parties are not at

arm’s length in the absence of sufficient

evidence to the contrary, the

Department reasonably determined that

this standard had not been met with

respect to ESVIMEX’s frit transfer prices

to Cinsa and ENASA, and based its cost

calculations instead upon the ‘‘adjusted

market price’’ described above.

We have also rejected Cinsa’s and

ENASA’s suggestion that, in measuring

the extent to which market forces do not

account for the difference between the

discount off list price given to affiliates

and the discount off list price given to

unaffiliated parties, we should take into

account prompt payment discounts.

Although the Department verified that

such discounts are offered, Cinsa and

ENASA have not provided any

information on the frequency with

which such discounts are actually

given. In addition, such discounts

constitute a recognition that a limited

number of customers will require a

lesser extension of credit by Cinsa and

ENASA, not a general adjustment to

price. Thus, the Department reasonably

did not assume the existence of such a

discount in calculating the normal

market price for unaffiliated purchasers

of frit.

Similarly, we decline to find that the

prices for Cinsa’s minimal purchases of

enamel frit from an unaffiliated

producer are an appropriate basis for

determining whether their purchases

from ESVIMEX reflect fair market

prices. Because certain information

regarding these transactions is business

proprietary, see the Issues Memo.

Moreover, we do not agree with the

respondents that it is sufficient to show

that ESVIMEX’s frit prices to affiliates

are above ESVIMEX’s COP. The

respondents’ argument to this effect

ignores the provisions of section

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

comparison of transfer prices and

market prices when the latter are

available, and permits the use of the
Federal Register / Vol. 63, No. 136 /Thursday, July 16, 1998 / Notices 38377

higher of those prices. Thus, we

compared the transfer prices Cinsa and

ENASA paid to prices charged to

unaffiliated customers. We noted that

the prices charged to unaffiliated

customers were greater than both the

affiliated transfer prices and the actual

costs incurred to produce the frit

supplied to Cinsa and ENASA. Because

the prices charged to unaffiliated

customers did not reflect certain marketbased savings unique to ESVIMEX’s

affiliates, however, we constructed an

‘‘adjusted market price’’ which did

reflect these elements. Because this

price was higher than both ESVIMEX’s

COP and the transfer price, in

conformity with section 773(f)(2) and (3)

of the Act, we based Cinsa’s and

ENASA’s frit cost on the ‘‘adjusted

market price.’’

Comment 3: Cinsa’s and ENASA’s

Classification of Certain U.S. Sales as

EP Rather Than CEP

The petitioner argues that Cinsa’s and

ENASA’s classification of certain sales

as EP is incorrect because, it claims, this

classification is based only on the first

of the three factors used by the

Department for determining the

classification of sales made through

affiliated importers, i.e., the fact that the

merchandise in question was shipped

directly from the manufacturer to the

unrelated buyer, without being

introduced into the physical inventory

of the related selling agent. The

petitioner claims that, in order to

classify U.S. sales through an affiliated

importer as EP sales, the respondent

must also provide evidence that EP was

the customary commercial channel for

sales of this merchandise between the

parties involved, and that the affiliated

importer acted only as a processor of

documentation and a communication

link with the unaffiliated U.S. buyer.

With regard to the second criterion,

the petitioner argues that the relative

volumes and values of sales direct from

Mexico are not high enough for EP sales

channel to be considered customary.

With regard to the third criterion, the

petitioner asserts that CIC’s level of

activity with respect to all U.S. sales,

including those sales classified as EP

sales, was far beyond what would be

undertaken by a mere ‘‘processor of

sales documentation.’’ Accordingly, the

petitioner believes that the Department

should reclassify as CEP sales all sales

reported as EP sales.

Cinsa and ENASA argue that all three

factors the Department uses to classify

certain sales as EP were present with

respect to the sales they classified as EP,

claiming that the EP channel of trade

with the participation of its U.S. affiliate

is customary because it has been present

since the initial investigation and in all

subsequent reviews and that, although

perhaps significant, the affiliate’s

activities consist of ministerial

functions, such as the processing of

purchase orders, collection of payment,

arrangement of transportation, etc., as

opposed to setting sales terms and

prices and negotiating sales contracts.

DOC Position

We agree with the respondents that

the facts on the record of this review

shows that the sales reported as EP sales

in this review should continue to be

classified as EP sales. Pursuant to

section 772(a) and (b) of the Act, an EP

sale is a sale of merchandise by a

producer or exporter outside the United

States for export to the United States

that is made prior to importation. A CEP

sale is a sale made in the United States,

before or after importation, by or for the

account of the producer or exporter or

by an affiliate of the producer or

exporter. In determining whether the

sales activity in the United States

warrants using the CEP methodology,

the Department has examined the

following criteria: (1) Whether the

merchandise was shipped directly from

the manufacturer to the unaffiliated U.S.

customer, (2) whether this was the

customary commercial channel between

the parties involved, and (3) whether

the function of the U.S. affiliate is

limited to that of a ‘‘processor of salesrelated documentation’’ and a

‘‘communication link’’ with the

unrelated U.S. buyer. See e.g., Final

Results of Antidumping Duty

Administrative Review: Certain

Corrosion-Resistant Carbon Steel Flat

Products and Certain Cut-to-Length

Carbon Steel Plate From Canada

(Canadian Steel) 63 FR 12725, 12738

(March 16, 1998). In the Canadian Steel

case, the Department clarified its

interpretation of the third prong of this

test, as follows. ‘‘Where the factors

indicate that the activities of the U.S.

affiliate are ancillary to the sale (e.g.,

arranging transportation or customs

clearance, invoicing), we treat the

transactions as EP sales. Where the U.S.

affiliate has more than an incidental

involvement in making sales (e.g.,

solicits sales, negotiates contracts or

prices) or providing customer support,

we treat the transactions as CEP sales.’’

With respect to the first prong, it is

undisputed that the merchandise

associated with these sales was shipped

directly to the unaffiliated customer,

without passing through the U.S.

affiliate.

With respect to the second prong, this

is the customary commercial channel

between the parties involved. We agree

with the respondents that it is not

necessary for EP sales to be the

predominant channel of trade in a given

review for it to be the customary

channel between the parties involved.

EP sales have been made, with the

participation of a U.S. affiliate, in the

investigation and in all subsequent

reviews. Thus, this is clearly a

customary channel of trade.

With respect to the third prong, the

verification report confirms that, for the

sales classified as EP, prices are set by

the Cinsa export office in Saltillo,

Mexico. The participation of affiliate

CIC in these sales relates primarily to:

issuing payment invoices, accepting

payment and forwarding it to Mexico,

posting antidumping duty deposits, and

clearing products through Customs.

These services are clearly among those

the Department considers ‘‘ancillary’’ to

the sale. CIC does not solicit or negotiate

these sales, does not set the price for

these sales, and does not provide

customer support in connection with

these sales.

Therefore, for the purposes of this

review, we will continue to treat as EP

those sales which Cinsa and ENASA

reported as EP sales. For further details

see the Issues Memo.

Comment 4: Reallocation of Indirect

Selling Expenses

The petitioner argues that, if the

Department accepts Cinsa’s and

ENASA’s designation of certain of their

U.S. sales as EP sales, the Department

should revise the indirect selling

expense calculations and allocate CIC’s

total expenses over a sales value that

excludes sales designated as EP based

on the respondents’ claim that CIC had

no role in making EP sales. Otherwise,

at a minimum, the petitioner maintains

that the Department should not allocate

to EP sales any of the indirect selling

expenses incurred by CIC related to

salesmen’s salaries and benefits, travel

expenses, warehouse lease, office rental,

advertising, and any other expenses

relating to functions that the

respondents claim were not performed

by CIC in support of EP sales.

The respondents argue that they

properly allocated these expenses to all

U.S. sales because indirect selling

expenses are incurred on overall

operations, which necessarily include

both EP and CEP sales.

DOC Position

We agree with the petitioner that, for

purposes of calculating indirect selling

expenses, CIC expenses are more

properly allocated over a U.S. sales

value that excludes the EP sales. We
38378 Federal Register / Vol. 63, No. 136 /Thursday, July 16, 1998 / Notices

1This approach was recently challenged in

Borden, Inc. v. United States (Borden) Slip Op. 98–

36 (March 26, 1998), at 55–59 (rejecting the

Department’s practice of making 1677a(d)

adjustments prior to making the level of trade

comparisons). The Department intends to appeal

this decision, and thus will continue to apply the

methodology set forth in the New Regulations. We

note, however, that, because the sales made by

Cinsa and ENASA in the home market are not at

a more advanced stage in the chain of distribution

than either those made to CIC or those made by CIC

(both are at a wholesale/distributor level of trade),

implementation of the Borden decision would not

affect the outcome in this case.

verified Cinsa’s and ENASA’s claim that

CIC performed very limited sales-related

functions with respect to these EP sales,

and equal allocation of all CIC expenses

across all U.S. sales in which CIC is

involved would disproportionately shift

these costs from CEP to EP sales.

However, we disagree with the

petitioner’s suggested allocation because

it would allocate all EP expenses to CEP

sales. The numerator proposed by the

petitioner would include all of CIC’s

expenses, i.e., expenses for both EP and

CEP sales, whereas the denominator

would include the sales value of only

CEP sales. We interpret the petitioner’s

alternative allocation methodology to

mean we should, to the extent possible,

allocate only to CEP sales (the only sales

from which indirect selling expenses are

deducted) the expenses that are only

incurred on CEP sales. Accordingly, we

have reallocated CIC’s indirect selling

expenses by including in the numerator

the indirect selling expenses pertaining

only to CEP sales (warehouse lease,

advertising, forklift rental, salesmen’s

salaries and salesmen training) and a

portion of the joint CEP and EP

expenses (based on the percentage that

CEP sales represent, by value, of total

CIC sales). The new denominator is the

value of only CEP sales. See also Final

Results Calculation Memorandum.

(Calculation Memo). Thus, we have

excluded EP indirect selling expenses

from the numerator and have excluded

the value of EP sales from the

denominator.

We disagree with the respondents that

(all) indirect selling expenses are

incurred on ‘‘overall operations.’’

Certain of CIC’s indirect selling

expenses (see list above) are not

incurred on EP sales.

Comment 5: CEP Offset Adjustment

Cinsa and ENASA state they are

entitled to a CEP offset because a

comparison of the normal value (NV)

level of trade to the CEP level of trade

demonstrates that the NV level of trade

is more advanced as well as at a

different point in the chain of

distribution because it includes a greater

number of selling functions than the

CEP level of trade. Cinsa and ENASA

state that the Department’s regulations

require that when the CEP level of trade

is determined, all economic activities in

the United States and the indirect

selling expenses attributable thereto are

to be excluded. In contrast, when the

normal value level of trade is

determined it is inclusive of substantive

selling functions and the indirect selling

expenses necessary to execute a sale to

unaffiliated customers. Accordingly, for

purposes of comparison to the NV level

of trade, Cinsa and ENASA argue that

the selling functions and the indirect

selling expenses of the CEP level of

trade are limited to the initial sale by

Cinsa’s and ENASA’s export department

to CIC. Cinsa and ENASA further state

that they are entitled to the CEP offset

under the terms of the statute, 19 U.S.C.

1677b(a)(7)(B), because only one level of

trade has been determined to exist in

the home market, and Cinsa and ENASA

are unable to quantify any pricing

differential between the home market

level of trade and the nonexistent CEP

level of trade in the home market.

The petitioner argues that the

Department should reject the

respondents’ claim for a CEP offset

adjustment in the final results, based on

the respondents’ failure to establish that

home market and CEP sales are at

different levels of trade. The petitioner

states that the record shows that the

respondents sold to wholesalers and

distributors in both markets and that

these customers are not at a more

remote point in the chain of distribution

than CIC. In addition, the petitioner

concludes that the selling functions are

the same in both markets.

DOC Position

We agree with the petitioner. Section

773(a)(1)(B) of the Act requires that the

Department establish NV, to the extent

possible, 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. SAA at 829. 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.

In the home market, Cinsa and

ENASA sell directly to wholesalers,

distributors, large retailers and

supermarkets. Cinsa and ENASA did

not identify which of their home market

customers fell into which of these

categories and did not claim that there

were differences in selling functions

with respect to these designations. In

short, the respondents treated these

customers as being similarly situated for

purposes of the LOT analysis. CIC is

also a wholesaler/distributor of POS

cookware. With regard to selling

functions, Cinsa and ENASA reported in

their April 28, 1997, questionnaire

response that they performed the

following selling functions for home

market sales: freight and delivery

services, inventory maintenance, and

order processing and billing services.

For sales to CIC, Cinsa’s export

department arranged freight and

delivery services, incurred inventory

maintenance, and provided sales

support services such as invoice

processing and billing. Therefore, Cinsa

and ENASA have not demonstrated that

their home market purchasers are at a

different point in the chain of

distribution than CIC and that the

selling functions associated with Cinsa’s

and ENASA’s sales to CIC were different

from those associated with sales to

customers in the home market. Thus,

our analyses leads us to conclude that

sales within each market and between

markets are not made at different levels

of trade.

Finally, we disagree with Cinsa’s and

ENASA’s argument that the preliminary

results failed to account for the fact that

home market indirect selling expenses

are included in the price associated

with the ‘‘NV level of trade’’, whereas

CIC’s indirect selling expenses are

excluded from the price associated with

the ‘‘CEP level of trade.’’ First, the

indirect selling expenses incurred in the

United States by CIC’s sales

departments are, pursuant to section

772(d)(1)(D) of the statute, properly

excluded from the price calculated for

the U.S. CEP sales. Pursuant to this and

other section 772(d) adjustments, CIC’s

price to its unaffiliated customer (the

‘‘starting price’’) is transformed into a

constructed export price, i.e., a

constructed equivalent of a marketbased sale by Cinsa or ENASA to CIC.

This is the point at which the level of

trade comparison is made. See New

Regulations, 62 FR at 27414.1 Second,

Cinsa’s and ENASA’s itemized home

market indirect selling expenses and

itemized indirect selling expenses

incurred in Mexico with respect to

making sales to CIC are virtually the

same. Therefore, the record reflects no

difference between the functions

performed by the respondents in selling

to home market customers and the

functions performed in selling to CIC.

Accordingly, we can compare sales in

the home market and the U.S. market at
Federal Register / Vol. 63, No. 136 /Thursday, July 16, 1998 / Notices 38379

the same level of trade. Therefore, a CEP

offset is not warranted.

Comment 6: Whether to Limit NV

Comparisons to Sales Made in Same

Month

Cinsa and ENASA argue that the

Department’s high inflation margin

calculation methodology, which limits

NV comparisons to the month of the

U.S. sale, results in unduly high

margins in the instant review because

the Department based NV on CV when

there were no home market sales of the

most comparable model in the same

month as the U.S. sale. Cinsa and

ENASA suggest that, in order to obtain

more price-to-price matches, the

Department should use home market

matches within the full 90/60 window

period surrounding each U.S. sale, but

index prices when it is necessary to

compare a U.S. sale to a home market

sale during a different month.

Alternatively, Cinsa and ENASA

argue that the Department should

expand the one-month window forward

and use prices for identical merchandise

in one of the two months subsequent to

the date of the U.S. sales, without price

adjustment.

The petitioner states that Cinsa’s and

ENASA’s proposed methodology is not

in accordance with the Department’s

policy regarding high inflation

comparisons. In short, according to the

petitioner, Cinsa and ENASA have not

demonstrated that there is anything in

the way they manufacture and sell

subject merchandise that makes

application of the Department’s high

inflation price comparison methodology

inappropriate or unfair.

Finally, the petitioner believes the

Department should reject Cinsa’s and

ENASA’s alternative request to expand

the price comparison window by two

months because the further away from

the same month the Department looks

for a comparable home market sale in a

high inflation case, the more likely it is

that there would be distortion caused by

inflation.

DOC Position

We agree with the petitioner. As in

our preliminary results, we have limited

our comparisons to sales in the same

month rather than applying the

Department’s 90/60 rule, whereby the

Department may use as NV comparison

market prices from the three months

prior to and the two months after the

month in which the U.S. sale was made.

The same month comparison rule

accords with the Department’s current

practice in cases involving high

inflation.

We disagree with the respondents’

claim that the Department’s high

inflation methodology creates unduly

high margins in this review. The

Department’s inflation methodology is

designed to eliminate distortion caused

by high inflation. It is neutral in

purpose and is not designed to punish

or benefit anyone. However, as a result

of a recent court decision, the

respondents’ concerns have been

addressed at least in part, albeit

indirectly. On January 8, 1998, the Court

of Appeals for the Federal Circuit issued

a decision in CEMEX v. United States,

133 F.3d 897 (CEMEX). In that case,

based on the pre-URAA version of the

Act, the Court addressed the

appropriateness of using CV (rather than

similar merchandise) as the basis for

foreign market value when the

Department finds home market sales of

the most similar merchandise to be

outside the ‘‘ordinary course of trade.’’

This issue was not raised by any party

in this proceeding. However, in

response to the Court’s decision in

Cemex, the Department has revised its

application of the cost test and has

determined that it would be

inappropriate to resort directly to CV, in

lieu of foreign market sales, as the basis

for NV upon finding foreign market

sales of merchandise identical or most

similar to that sold in the United States

to be outside the ‘‘ordinary course of

trade.’’ Instead we will match a given

U.S. sale to foreign market sales of the

next most similar model sold during the

same month when all sales of the most

comparable model are below cost. The

Department will use CV as the basis for

NV only when there are no above-cost

sales in the appropriate comparison

period that are otherwise suitable for

comparison.

Therefore, for the final results in this

proceeding, when making comparisons

in accordance with section 771(16) of

the Act, we considered all products sold

in the home market, as described above

in the ‘‘Scope of Review’’ section of this

notice, that were in the ordinary course

of trade during the same month for

purposes of determining appropriate

product comparisons to U.S. sales.

Where there were no sales of identical

merchandise in the home market made

in the ordinary course of trade during

the same month to compare with U.S.

sales, we compared U.S. sales to sales of

the most similar foreign like product

made in the ordinary course of trade

during the same month, based on the

characteristics listed in Sections B and

C of our antidumping questionnaire.

With regard to comparisons involving

sets, where there were no sales of

identical merchandise in the home

market in the same month to compare

to U.S. sales of subject merchandise sold

in sets, we compared U.S. sales of sets

to the CV of the set as we do not have

the appropriate data in this review to

compare non-identical sets. We will,

however, request such information for

purposes of future reviews.

In a few instances involving

comparisons of open stock merchandise,

we have still resorted to the use of CV

due to the absence of comparable abovecost matches in the same month for

certain U.S. sales.

Finally, the respondent’s suggestion

that we account for the effects of

inflation by indexing prices for POS

cookware is contrary to the

Department’s high inflation

methodology. Although it is necessary

to use cost indexing in high-inflation

cases in order to calculate meaningful

POR-average costs, the Department has

rejected the use of indexed prices. It is

the Department’s position that price-toprice margin calculations should be

made based only on actual, rather than

indexed, prices, as using indexed prices

would yield less accurate results.

Comment 7: Home Market Freight

Expense Allocation

The petitioner argues that Cinsa’s and

ENASA’s claim for an adjustment to NV

for freight expenses incurred to ship

subject merchandise from the factories

in Saltillo to (1) the remote warehouses

in Mexico City and Guadalajara, and (2)

unaffiliated customers in the Monterrey

region is distortive and should be

rejected because these shipments

contained both Cinsa- and ENASAproduced merchandise, as well as both

subject and non-subject merchandise.

The petitioner further argues that Cinsa

billed ENASA for its share of the freight

expenses based on the number of boxes

of ENASA merchandise in each

shipment, as opposed to the weight of

the ENASA merchandise, which is

heavier gauge that Cinsa’s merchandise,

thus incorrectly shifting expense from

ENASA to Cinsa and artificially

reducing Cinsa’s NV.

In addition, with regard to post-sale

freight expenses, the petitioner contends

that allocating the total expense over

subject and non-subject merchandise

could inappropriately shift expense to

subject merchandise if non-subject

merchandise customers are located

farther from the factories, on average,

than customers of subject merchandise.

The petitioner urges the Department to

either reject Cinsa’s and ENASA’s claim

for a freight adjustment or require them

to revise their freight expense

allocation.
38380 Federal Register / Vol. 63, No. 136 /Thursday, July 16, 1998 / Notices

The respondents argue that they were

unable to report transaction-specific

freight expenses because they received

freight bills on a monthly basis, rather

than a shipment-by-shipment basis.

According to the respondents, the

allocation of mixed-shipment freight

expenses between the companies was

reasonable because the packing list

generated by the freight company

indicated the number of boxes but not

the weight of boxes. Moreover, the

respondents argue that, because the

freight expense was incurred on the

basis of weight and the freight rate did

not vary by the type of merchandise

shipped, inclusion of sales of nonsubject merchandise was not distortive

to the calculation. Finally, the

respondents note that not only has the

Department accepted Cinsa’s and

ENASA’s comparable allocations in all

previous proceedings, but that the

respondents’ reporting of warehousespecific freight factors represents a

refinement in their reporting of pre- and

post-sale freight expenses.

DOC Position

We have accepted the respondents’

methodology for the calculation of home

market freight expenses, including their

allocation of such expenses (1) between

Cinsa and ENASA and (2) between

subject and non-subject merchandise.

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.

See Final Determination of Sales at Less

Than Fair Value: Melamine Institutional

Dinnerware Products from Indonesia, 62

FR 1719, 1724 (January 13, 1997).

Cinsa and ENASA stated in their June

2, 1997, supplemental response that

they do not maintain freight records on

a sale-by-sale basis because Cinsa,

which handles freight arrangements for

both itself and ENASA, is billed only on

a weight-per-truckload basis by its

unaffiliated freight carrier. The freight

company does not provide a weightbased breakout between Cinsa

merchandise and ENASA merchandise.

However, the packing list for each

shipment indicates how many boxes

contain Cinsa merchandise and how

many boxes contain ENASA

merchandise.

We disagree with the petitioner’s

claim that allocating the cost for each

truckload between the two companies

on the basis of number of boxes shifts

freight expense to Cinsa. Although

ENASA’s products are heavy gauge steel

and Cinsa’s are light and medium gauge

steel, a Cinsa ‘‘box’’ is not necessarily

lighter than an ENASA ‘‘box’’; different

boxes may contain different cookware

items (i.e., different models and sizes),

and some boxes contain multiple items.

In the absence of weight-based data, the

box-based comparison is the most

reasonable overall.

Likewise, we disagree with the

petitioner’s claim that the respondents’

allocation of freight costs between

subject and non-subject merchandise is

distortive since the June 2, 1997,

response shows that subject and nonsubject merchandise destined for the

same delivery point are charged the

same weight-based rate. Further, the

record shows that the respondents

reported warehouse-specific freight

factors. Thus, calculation of a weightbased factor based upon the freight

expense and shipping weight for all

merchandise and application of the

resulting factor to the weight of subject

merchandise yields a non-distortive

allocation of the freight expense

attributable only to subject

merchandise. Finally, Cinsa and ENASA

have used comparable allocation

methodologies in each of the previous

segments of this proceeding, in each of

which the Department has determined

that they are reasonable in light of the

objectives of the antidumping law.

Accordingly, we accepted Cinsa’s and

ENASA’s freight calculations as

submitted in their sales databases in this

review as reasonable and non-distortive.

Comment 8: Freight Expenses on U.S.

Sales

The petitioner states that Cinsa and

ENASA reported freight expenses

incurred to ship subject merchandise to

the United States by allocating total

freight expenses incurred over the

weight of all merchandise shipped.

These freight expenses were reported in

two steps: (1) expenses incurred to ship

merchandise from Saltillo to the U.S.

border (for EP and CEP sales), and (2)

expenses incurred to ship merchandise

from the U.S. border to CIC’s warehouse

in San Antonio, Texas (CEP sales only).

The petitioner argues that the

denominators in the above-referenced

calculations are incorrect because the

weight of the merchandise shipped in

Step 1, which should contain both EP

and CEP sales, is significantly lower

than the weight of the merchandise

shipped in Step 2, which should

contain only CEP sales. Furthermore,

according to the petitioner, the weights

used in these calculations do not

correspond to the weights of

merchandise sold as reported on the

respondents’ sales tapes. Accordingly,

for purposes of the final results, the

petitioner maintains that the

Department should reject Cinsa’s and

ENASA’s U.S. freight calculations and,

as facts available, recalculate the per

kilogram expenses based on the weight

of merchandise sold as reported on the

sales tapes.

Cinsa and ENASA concede that the

weight amount reported by CIC for

shipment from Laredo to San Antonio

was inadvertently overstated, but state

that the error can be corrected using

information already in the record. The

respondents disagree with the

petitioner’s suggestion that the weight of

EP and CEP sales from the sale tape be

used as the denominator for Mexican

inland freight because that freight factor

was calculated on the basis of expenses

incurred upon sales of both subject and

non-subject merchandise, which were

shipped together. Therefore, according

to the respondents, the reported weight

of the merchandise shipped must

include both subject and non-subject

merchandise. Likewise, the respondents

also disagree with using the weight of

CEP sales from the sales tape as the

denominator for the U.S. inland freight

factor because in addition to the

inclusion of non-subject merchandise,

the U.S. inland freight factor was

calculated based on freight expenses

incurred on all merchandise shipped

from Laredo to San Antonio, regardless

of whether it was resold to unrelated

U.S. customers during the period of

review (POR) or whether it remained in

inventory in San Antonio.

DOC Position

The Department agrees that the

denominator of the U.S. inland freight

ratio (Step 2, above) should be

recalculated by subtracting the weight of

the merchandise shipped from Saltillo

to Laredo, which was inadvertently also

included in the Step 2 weight

calculation. The petitioner’s suggestion

that the weight of CEP sales, as derived

from the sales tape, be used as the

denominator for U.S. inland freight is

incorrect because it fails to take into

consideration two important details.

First, the numerator in the calculation

(freight expenses) includes both subject

and non-subject merchandise. Second,

the numerator also includes expenses

incurred on all merchandise shipped

from Laredo to San Antonio, Texas,
Federal Register / Vol. 63, No. 136 /Thursday, July 16, 1998 / Notices 38381

regardless of whether it was resold to

unrelated U.S. customers or whether it

remained in inventory in San Antonio.

Accordingly, in order to obtain a proper

ratio, the denominator (weight shipped)

must be based correspondingly upon the

weight of all subject and non-subject

merchandise as well as on the weight of

both merchandise sold and that

remaining in inventory in San Antonio.

The weight on the sales tapes represents

total CEP sales; thus this figure does not

include non-subject merchandise or

merchandise remaining in inventory in

San Antonio. Therefore, for purposes of

the final results, we have deducted

freight expenses, corrected as noted

above, from U.S. price. See Calculation

Memo.

Comment 9: Calculation of Indirect

Selling Expenses and CEP Profit

The petitioner argues that the

Department’s preliminary results

calculation of U.S. indirect selling

expenses and CEP profit for Cinsa and

ENASA are understated because they do

not include (1) all of CIC’s reported

indirect selling expenses (depreciation,

financial and bad debt expenses were

excluded), (2) expenses incurred by CIC

to finance antidumping duty cash

deposits and assessments, and (3)

indirect selling expenses incurred in

Mexico in support of sales to the United

States. The petitioner believes that the

Department should include the abovementioned expenses in the calculation

of U.S. indirect selling expenses and

CEP profit for purposes of the final

results.

Cinsa and ENASA disagree with the

petitioner’s claim that the Department

should have deducted the abovereferenced expenses from CEP. The

respondents claim that: (1)

Depreciation, financial and bad debt

expenses are financial and operating

expenses and do not involve expenses

related to the sale of the subject

merchandise or overhead expenses of

the U.S. affiliate and, according to the

statute, only direct selling expenses,

indirect selling expenses and general

and administrative expenses are to be

deducted from CEP; (2) expenses

incurred in the payment of antidumping

duties are not indirect selling expenses

that benefit U.S. sales of subject

merchandise; and (3) indirect selling

expenses of Cinsa’s export department

and the inventory carrying costs for the

period in which the exported

merchandise was in Mexican inventory

do not relate to economic activity in the

United States.

DOC Position

For purposes of the final results, we

have deducted from CEP depreciation,

financial and bad debt expenses, as well

as commissions. We did not deduct the

indirect selling expenses of Cinsa’s

export department or the inventory

carrying costs for the period in which

the exported merchandise was in

Mexican inventory.

CIC’s sole function is to sell

merchandise produced by Cinsa,

ENASA, and their affiliates in the U.S.

market. In such circumstances, the

Department’s practice is to deduct CIC’s

selling, general, and administrative

expenses from CEP. See Notice of Final

Determination of Sales at Less Than

Fair Value: Large Newspaper Printing

Presses and Components Thereof,

Whether Assembled or Unassembled,

from Germany, 61 FR 38166, 38176 (July

23, 1996). This includes CIC’s

depreciation, financial and bad debt

expenses, which are considered related

to CIC sales of the subject merchandise

and thus deducted from CEP pursuant

to section 772(d)(1)(D). With regard to

CIC’s expenses to finance loans from

Cinsa used for payment of antidumping

cash deposits, although we have long

maintained, and continue to maintain,

that antidumping duties and cash

deposits of antidumping duties are not

expenses that we should deduct from

U.S. price, it is also the Department’s

position that, unlike the duties and cash

deposits themselves, financial expenses

associated with cash deposits are not a

direct, inevitable consequence of an

antidumping duty order. Therefore, we

agree with the petitioner that it is

reasonable to include such financing

expenses in the indirect selling expense

calculation for the CEP sales made by

CIC. See Tapered Roller Bearings and

Parts Thereof, Finished and Unfinished,

from Japan, and Tapered Roller

Bearings, Four Inches or Less in Outside

Diameter, and Components Thereof,

from Japan, 63 FR 2558, 2571 (January

15, 1998). However, the record of this

review does not indicate whether CIC’s

interest expenses with respect to

intracorporate loans to pay antidumping

duties and cash deposits that were

either incurred or accrued during the

POR were included in CIC’s reported

U.S. indirect selling expense

calculation. Therefore, the Department

made no adjustment to U.S. indirect

selling expenses, which may already

include CIC’s interest expenses to

finance loans from Cinsa. We will,

however, request clarification of this

issue on the record of future reviews.

With regard to indirect selling

expenses incurred in Mexico in support

of sales to the United States, we agree

with the respondents that such expenses

do not relate to economic activity in the

United States. The Department’s current

practice, as indicated by the preamble to

the Department’s New Regulations, is to

deduct indirect selling expenses

incurred in Mexico from the CEP

calculation only if they relate to sales to

the unaffiliated purchaser in the United

States. We do not deduct from the CEP

calculation indirect selling expenses

incurred in Mexico on the sale to the

affiliated purchaser. Accordingly,

because Cinsa and ENASA reported that

certain indirect expenses incurred in

Mexico are not associated with selling

activity occurring in the United States,

but are limited to selling activities

associated with the sale of merchandise

in Mexico to the affiliated party, CIC, we

have not deducted these Mexican

indirect selling expenses from the CEP

calculation.

Comment 10: Calculation of U.S.

Imputed Credit Expenses

According to the respondents,

although the Department’s analysis

memorandum for the preliminary

results (see Antidumping Duty

Administrative Review of Porcelain-onSteel Cookware from Mexico (95–96):

Adjustments to Submitted Data) stated

that the Department modified the

calculation of reported credit cost to

reflect U.S. imputed credit cost based on

unit prices net of discounts, the

computer program used for the

preliminary results failed to reflect this

intent. Therefore, credit cost was

overstated because imputed credit on

U.S. sales was based on gross price

rather than net price.

The petitioner argues that the

Department did not deduct any values

from gross unit price in its calculation

of U.S. credit expense because Cinsa

and ENASA reported that they did not

grant any discounts or rebates on U.S.

sales during the POR. According to the

petitioner, the values identified as

rebates by Cinsa and ENASA are

actually warranty expenses and the

calculation of U.S. credit expenses net

of warranty or any other direct selling

expenses would be contrary to the

Department’s policy.

DOC Position

We agree with Cinsa and ENASA that

discounts should be deducted from the

U.S. imputed credit calculation.

However, for purposes of this review,

the issue is moot because no discounts

were reported in the U.S. market. We

also agree with the respondents that the

rebates reported by Cinsa and ENASA

are not warranties, as claimed by the
38382 Federal Register / Vol. 63, No. 136 /Thursday, July 16, 1998 / Notices

petitioner. The respondents have

characterized these rebates as ‘‘post-sale

price adjustments to account for shortshipments or returned merchandise.’’

There is no information on the record to

indicate that the returned merchandise

is defective—a prerequisite for a

warranty expense. However, this issue

is also moot since we did not deduct

rebates or warranties from the price on

which imputed credit is based.

Final Results of Review

As a result of this review, we have

determined that the following margins

exist for the period December 1, 1995

through November 30, 1996:

Manufacturer/Exporter Margin

(percent)

Cinsa ......................................... 17.33

ENASA ...................................... 62.75

The Department shall determine, and

the U.S. Customs Service shall assess,

antidumping duties on all appropriate

entries. We have calculated an importerspecific assessment rate based on the

ratio of the total amount of antidumping

duties calculated for the examined sales

to the total value of those same sales.

This rate will be assessed uniformly on

all entries of that particular importer

made during the POR. The Department

will issue appraisement instructions

directly to the Customs Service.

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 cash deposit rate

has been determined on the basis of the

selling price to the first unaffiliated

customer in the United States. For

appraisement purposes, where

information is available, the Department

will use the entered value of the

merchandise to determine the

assessment rate.

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 sections

751(a)(1) and 777(i)(1) of the Act and 19

CFR 353.22.

Dated: July 8, 1998.

Richard W. Moreland,

Acting Assistant Secretary for Import

Administration.

[FR Doc. 98–18884 Filed 7–15–98; 8:45 am]

BILLING CODE 3510–DS–M

DEPARTMENT OF COMMERCE

International Trade Administration

A–583–815

Certain Welded Stainless Steel Pipe

From Taiwan; Final Results of

Administrative Review

AGENCY: Import Administration,

International Trade Administration,

Department of Commerce.

ACTION: Notice of final results of

administrative review.

SUMMARY: On January 9, 1998, the

Department of Commerce (the

Department) published in the Federal

Register the preliminary results of the

1995–1996 administrative review of the

antidumping duty order on certain

welded stainless steel pipe from Taiwan

(A–583–815). This review covers one

manufacturer/exporter of the subject

merchandise during the period

December 1, 1995 through November

30, 1996.

We gave interested parties an

opportunity to comment on the

preliminary results. Although, based

upon our analysis of the comments

received, we have changed the results

from those presented in our preliminary

results of review, a de minimis dumping

margin still exists for Ta Chen’s sales of

welded stainless steel pipe (WSSP) in

the United States. Accordingly, we will

instruct the U.S. Customs Service to

assess antidumping duties on entries of

Ta Chen merchandise during the period

of review, in accordance with the

Department’s regulations (19 CFR

353.6).

EFFECTIVE DATE: July 16, 1998.

FOR FURTHER INFORMATION CONTACT:

Robert James at (202) 482–5222 or John

Kugelman at (202) 482–0649,

Antidumping and Countervailing Duty

Enforcement Group III, Import

Administration, International Trade

Administration, U.S. Department of

Commerce, 14th Street and Constitution

Avenue, NW, Washington, DC 20230.

Applicable Statute and Regulations:

Unless otherwise indicated, all citations

to the Tariff Act of 1930, as amended

(the Tariff Act), are to the provisions

effective January 1, 1995, the effective

date of the amendments made to the

Tariff 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 1, 1997).

SUPPLEMENTARY INFORMATION:

Background

On December 30, 1992, the

Department published in the Federal

Register the antidumping duty order on

welded stainless steel pipe (WSSP) from

Taiwan (57 FR 62300). On December 3,

1996, the Department published the

notice of ‘‘Opportunity to Request

Administrative Review’’ for the period

December 1, 1995 through November

30, 1996 (61 FR 64051). In accordance

with 19 CFR 353.22(a)(1) (1997),

respondent Ta Chen Stainless Pipe Co.,

Ltd. and its wholly-owned U.S.

subsidiary, Ta Chen International

(collectively, Ta Chen), requested that

we conduct a review of their sales. On

January 17, 1997, we published in the

Federal Register our notice of initiation

of this antidumping duty administrative

review covering the period December 1,

1995 through November 30, 1996 (62 FR

2647).