[Federal Register Volume 60, Number 5 (Monday, January 9, 1995)]
[Notices]
[Pages 2378-2382]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-450]



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DEPARTMENT OF COMMERCE
International Trade Administration
[A-201-504]


Porcelain-on-Steel Cooking Ware From Mexico; Final Results of 
Antidumping Duty Administrative Review

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

ACTION: Notice of Final Results of Antidumping Duty Administrative 
Review.

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SUMMARY: On February 11, 1994, the Department of Commerce (the 
Department) published the preliminary results of its administrative 
review of the antidumping duty order on porcelain-on-steel cooking ware 
(POS cooking ware) from Mexico. The review covers two manufacturers/
exporters of this merchandise to the United States and the period 
December 1, 1990 through November 30, 1991.
    Based on our analysis of the comments received and the corrections 
of certain clerical and computer program errors, we have changed the 
preliminary results.

EFFECTIVE DATE: January 9, 1995.

FOR FURTHER INFORMATION CONTACT: Lorenza Olivas or Rick Herring, Office 
of Countervailing Compliance, Import Administration, International 
Trade Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-
2786.

SUPPLEMENTARY INFORMATION:

Background

    On February 11, 1994, the Department published in the Federal 
Register (59 FR 6616) the preliminary results of its administrative 
review of the antidumping duty order (51 FR 43415) on POS cooking ware 
from Mexico for the period December 1, 1990 through November 30, 1991. 
The review covers two manufacturers/exporters, Acero Porcelanizado, 
S.A. de C.V. (APSA) and CINSA, S.A. de C.V. (CINSA). The Department has 
now completed that administrative review in accordance with section 751 
of the Tariff Act of 1930, as amended (the Act).

Scope of Review

    Imports covered by this review are shipments of POS cooking ware, 
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 (HTS) item number 
7323.94.00. Kitchenware currently entering under HTS item number 
7323.94.00.30 is not subject to the order. The HTS item number is 
provided for convenience and Customs purposes. The written description 
remains dispositive.

Analysis of Comments Received

    We gave interested parties an opportunity to comment on the 
preliminary results. At the request of the respondents, we held a 
hearing on March 28, 1994. We received comments and rebuttals from both 
respondents and the petitioner, General Housewares Corporation (GHC).
    Comment 1: CINSA contends that the Department incorrectly 
calculated depreciation on a revalued cost basis. CINSA states that 
since the Department only uses revalued depreciation for 
hyperinflationary economies, and Mexico was not experiencing 
hyperinflation during the review period, the Department should use 
depreciation expenses on an historical basis.
    Petitioner responds that the Department's use of depreciation 
expenses on a revalued basis in cases involving hyperinflationary 
economies does not mean that its practice is to limit the use of 
depreciation expenses based on a revalued basis to only those cases 
involving hyperinflationary economies. Petitioner furthermore argues 
that, since CINSA reported its depreciation on a revalued basis, as 
required by the Mexican Generally Accepted Accounting Principles 
(GAAP), for its audited financial statements, CINSA should also report 
cost of production (COP) and constructed value (CV) in this manner.
    Department's Position: We disagree with respondent. The Department 
followed Mexican GAAP and adjusted CINSA's COP data to reflect the 
revalued depreciation. This approach coincided with CINSA's financial 
statements which were also prepared in accordance with Mexican GAAP. It 
is the Department's policy to adhere to the home market GAAP as long as 
the home market GAAP reasonably reflects actual costs. Thus, Commerce 
has determined that when a foreign country allows a company to revalue 
its assets, as opposed to relying upon historical cost, and when a 
company reflects the revalued basis in its financial statements, it is 
appropriate to accept the financial statements as reflecting actual 
cost. See, Final Determination of Sales at Less Than Fair Value: 
Circular Welded Nonalloy Steel Pipe From the Republic of Korea (57 FR 
42942; September 17, 1992). See also, POS Cooking Ware From Mexico; 
Final Results of Antidumping Administrative Review (58 FR 43327; August 
16, 1993) (Mexican Cooking Ware Fourth Review Final Results).
    Comment 2: Assuming that the Department should continue to rely on 
the revalued depreciation expense as a component of fixed overhead 
costs, CINSA claims that the Department incorrectly calculated its 
preliminary COP adjustment. CINSA believes that the ``best information 
available'' (BIA) methodology used by the Department grossly overstates 
the amount of revalued depreciation expense, and is not appropriate 
since the Department can derive a suitable fixed overhead expense 
factor from available information provided in CINSA's responses of May 
18, 1992 and June 18, 1993.
    Petitioner, on the other hand, contends that the use of BIA for 
CINSA's unreported depreciation is justified and reasonable. The 
petitioner asserts that CINSA did not provide the Department with a 
complete and accurate response to the COP questionnaire.
    Department's Position: The Department has reviewed the information 
contained in CINSA's responses and found that adequate data was 
available for a more accurate calculation of COP. Therefore, BIA was 
not required since the COP questionnaire responses provided the 
necessary information for calculating an appropriate fixed overhead 
factor. Accordingly, the Department has revised the calculation of 
fixed overhead based on information contained in CINSA's responses.
    Comment 3: CINSA claims that the Department incorrectly increased 
the COP to account for mandatory profit [[Page 2379]] sharing payments 
made to its employees. CINSA contends that these payments are not 
related to the COP. CINSA explains that these payments are determined 
based upon the amount of profit earned by the company and, therefore, 
should be treated in the same manner as income taxes and excluded from 
COP. CINSA states that the Department's administrative precedent 
excludes from COP and CV non-operating expenses unrelated to the 
production of the subject merchandise. CINSA cites Television Receivers 
from Japan (56 FR 56189 (1991)) where the Department stated that ``[I]n 
determining the cost of the subject merchandise, the Act does not 
provide us with the authority to include income or expenses that are 
unrelated to the product's manufacture.'' CINSA further states that if 
the Department does include profit sharing in COP and CV, the 
adjustment should be based on information derived from the financial 
statement of CINSA's corporate parent rather than information derived 
from the financial statement of the operating division.
    Petitioner, on the other hand, states that the Department correctly 
included the profit sharing payments in its calculated COP. Petitioner 
contends the profitability of the company is derived from production 
and is directly related to production efficiency. Petitioner also 
states that these payments are part of the total compensation paid to 
employees and should be treated no differently than salaries and other 
employee benefits that are directly related to production.
    Petitioner further contends that the Department should base the 
profit sharing expenses on CINSA's financial statements and not on 
CINSA's parent company, Grupo Industrial Saltillo, S.A. de CV (GIS), 
since CINSA's experience more accurately reflects the profit sharing 
expenses of the entity producing the products. Furthermore, according 
to petitioner, Mexican law requires that certain companies make 
payments to employees based on the profit of the company. CINSA 
reported these payments in its financial statements, but excluded them 
in its COP and CV.
    Department's Position: We disagree with respondent. Mexican GAAP 
requires that the profit sharing costs be reflected in a company's 
financial statement. The profit sharing payments are mandatory 
according to Mexican law. The payments represent compensation to 
employees involved in the production of the merchandise and 
administration of the company. Therefore, these payments are labor 
costs related to the product's manufacture and are part of CINSA's COP 
for the subject merchandise. We agree with petitioner that the 
calculation should be based on CINSA's financial statements and not the 
parent company's financial statement in order to capture the profit 
sharing costs most closely attributable to the subject merchandise. 
See, Final Determination of Sales at Less Than Fair Market Value; 
Certain Hot-Rolled Carbon Steel Flat Products and Certain Cut-to-Length 
Carbon Steel Plate from Canada (58 FR 37099; July 9, 1993).
    Comment 4: CINSA claims that the Department improperly limited 
CINSA's short-term interest income that was used to offset interest 
expense incurred by its corporate parent. CINSA contends that the 
Department's current administrative practice of limiting the net short-
term interest expense does not reflect the economic reality of the 
information in the financial statement.
    Petitioner argues that the Department correctly excluded net 
financial income from CINSA's COP and CV. The petitioner contends that 
interest income does not directly relate to the manufacturing cost 
associated with the production of the product. Petitioner further 
states that using CINSA's methodology results in higher margins for 
companies with long term investments than for companies with short-term 
investments.
    Department's Position: We disagree with respondent. It is the 
Department's normal practice to allow short-term interest income to 
offset financing costs only up to the amount of such financing costs. 
See, Frozen Concentrated Orange Juice from Brazil; Final Results of 
Antidumping Administrative Review (55 FR 26721; June 29, 1990); Brass 
Sheet and Strip from Canada; Final Results of Antidumping 
Administrative Review (55 FR 31414; August 2, 1990); and Final 
Determination of Sales at less than Fair Market Value; Sweaters from 
Taiwan (55 FR 34585; August 23, 1990). The Department reduces interest 
expense by the amount of short-term income to the extent finance costs 
are included in COP. Using total short-term interest income in excess 
of interest expense to reduce production cost, as suggested by CINSA, 
would permit companies with large short-term investment activity to 
sell their products below the COP. Accordingly, we limited the amount 
of the offset to the amount of the expense from the related activity.
    Comment 5: CINSA and APSA argue that the Department's new 
methodology of adjusting U.S. price and foreign market value (FMV) for 
home market value added tax (IVA) is contrary to law. Respondent 
contends that by statute, the Department is directed to add to U.S. 
price ``the amount of any taxes imposed in the country of exportation'' 
which have not been collected by reason of exportation of the 
merchandise to the United States. 19 U.S.C. 1677a(d)(1)(C). 
Furthermore, the statute expressly sets the additions and subtractions 
that are to be made and does not authorize additional adjustment to 
those adjustments. Respondents further argue that Court of 
International Trade (CIT) has ruled that the Department must ``add the 
full amount of VAT [such as IVA] paid on each sale in the home market 
FMV without adjustment.'' See, Torrington Co. v. United States, 824 F. 
Supp. 1095, 1101 (1993). Respondents also argue that an adjustment to 
the amount of IVA charged by CINSA on its home market sales to parallel 
the Department's further adjustment to the imputed IVA on the U.S. 
price is not a circumstance-of-sale adjustment and, therefore, is 
outside the scope of the circumstance-of-sale provision, which, 
according to respondents, is strictly limited to differences in selling 
terms or conditions. To support their argument, respondents cite Zenith 
Electronics Corp. v. United States, 988 F.2d 1573, 1581 (Fed. Cir. 
1993) (Zenith), where the CIT held that the circumstances-of-sale 
adjustment does not encompass adjustments for commodity taxes 
specifically covered by section 1677A (d)(1)(C). Respondents contend 
that, although the Department claims to be following Zenith by applying 
a methodology that will not create margins where none exist, the 
Department's tax adjustment is nothing less than another attempt to 
achieve tax neutrality. Respondents suggest that the Department should 
not try to achieve tax neutrality and should only add to U.S. price the 
amount of the IVA tax rate multiplied by the U.S. price, net of 
discounts and rebates.
    Petitioner does not oppose the Department's new methodology.
    Department's Position: We disagree with respondents. Respondents' 
suggested methodology would lead to margin creation where none would 
otherwise exist. Recent case law makes it clear that there should be no 
margin creation where no margin would exist but for the imposition of a 
value added tax in the home market. See, Federal-Mogul Corporation v. 
United States, 813 F. Supp 856, 864-5 (1993). While the new methodology 
may not be specifically authorized by the Act, the Department has 
determined that it is neither contrary to the spirit of the case law, 
nor prohibited by the language of the Act. As such, the methodology is 
within the Department's discretion. [[Page 2380]] 
    The Department disagrees with respondents' assertion that this 
methodology is contrary to Zenith. We have acted reasonably in adopting 
the methodology set forth in Federal-Mogul, which was found by the CIT 
in Federal-Mogul to be consistent with Zenith, the higher court 
holding. (See also, The Torrington Co. v. United States Slip Op. 94-51 
(CIT March 31, 1994), wherein the CIT upheld the new methodology for 
the value added tax adjustment without comment). See also, Avesta 
Sheffield, et al, v. United States, Slip Op. 94-53 (CIT March 31, 
1994).
    Comment 6: CINSA states that the Department failed to properly 
calculate the amount of IVA in COP. CINSA claims that the Department 
added the IVA collected by CINSA on HM sales to cost rather than the 
IVA incurred by CINSA on the purchase of direct raw materials, variable 
overhead and packaging materials and reported in its COP response.
    Petitioner does not oppose the Department's methodology but 
suggests that it would achieve the same objectives by comparing the 
home market sales with COP, exclusive of IVA, as used in the prior 
administrative review of this case. In the event the Department adjusts 
the amount of tax included in COP, petitioner notes that the difference 
in the tax treatment would yield a corresponding increase in CINSA's 
profit on home market sales. Therefore, if the Department makes the COP 
change requested by CINSA, the Department must also increase profit for 
CV to reflect CINSA's reduced COP.
    Department's Position: Value added taxes are paid on inputs and, 
therefore, are costs incurred in production. Upon the sale of the 
product, value added taxes are reimbursed to CINSA by the ultimate 
consumer. Any amount of tax which is in excess of the amount reimbursed 
is payable to the Mexican government. The Department's calculations 
must reflect the economic reality that CINSA does not receive a benefit 
from collecting and paying IVA. Therefore, because COP is compared to 
home market price which includes the entire IVA paid, to be neutral, 
our calculations of COP must take into account the entire IVA paid (a 
portion of which is paid on the inputs, and the remainder of which is 
due to the government). The amount of tax is based upon information 
reported in the home market sales tape which includes both components. 
See, Mexican Cooking Ware Fourth Review Final Results.
    Comment 7: CINSA argues that, in its price-to-price comparison, the 
Department incorrectly adjusted the U.S. price to account for the 
assessed countervailing duties. CINSA states that, pursuant to 19 
U.S.C. 1677a(d)(1)(D), the Department must add to U.S. price any 
countervailing duties imposed on the subject product to offset an 
export subsidy. CINSA points out that for all U.S. sales made between 
January 1, 1991 and June 5, 1991 the applicable rate is 2.18 percent. 
Thus, for all U.S. sales made between those dates, the Department 
should add 2.18 percent to U.S. price. Instead, the Department limited 
the period in which that amount was assessed from January 1, 1991 to 
January 5, 1991.
    Petitioner contends that the Department is only required to add to 
the U.S. price the amount of any countervailing duty ``imposed'' to 
offset an export subsidy. Petitioner states that there has been no 
countervailing duty imposed, because upon liquidation of the entries at 
issue, CINSA will be returned the ``assessed amount.''
    Department's Position: We agree with respondent and will make the 
correction.
    Comment 8: CINSA alleges that the Department failed to make the 
several corrections to information contained in CINSA's July 15, 1992, 
supplemental submission, which was provided in a timely fashion:
    A. In its COP/CV computer file, CINSA overstated the COP of certain 
items by failing to divide the cost of these items by four to reflect 
that four items were contained in one package. CINSA states that the 
Department should make this division.
    B. CINSA also overstated the weight of article 1065910 by a factor 
of four. To derive the per unit weight, CINSA asserts that the 
Department must divide the weight by the number of items contained in 
the package.
    C. Further, CINSA omitted the weights in certain items reported in 
its home market and U.S. sales tapes. CINSA asserts that the Department 
should include these corrected weights in the computer tape, since the 
weights are necessary to calculate the freight charges attributable to 
both home market and U.S. sales of these items.
    D. CINSA reported the incorrect number of units sold and the unit 
price for one home market sale of item number 1018001, and for one home 
market sale of item number 1061701, CINSA reported the incorrect unit 
price. CINSA asserts that the Department should make these corrections.
    Department's Position: We agree with respondent. Since the above 
corrections were submitted in a timely manner, we will make those 
corrections where appropriate.
    Comment 9: CINSA asserts that the COP data reported for item 
numbers 10158 and 19177 in its COP sales tape submission were based on 
the cost of producing two units and not based on a single cost. 
Therefore, CINSA stated that the Department should use the cost 
information included in the submission to derive the single unit COP 
for these items.
    Petitioner argues that there is no evidence of this fact on the 
record to support CINSA's claim.
    Department's Position: We agree with petitioner. There is no 
evidence in the administrative record satisfactorily demonstrating that 
these two items were not based on single unit costs.
    Comment 10: Petitioner contends that CINSA incorrectly weight-
averaged factory overhead included in the COP and CV. Petitioner states 
that the respondent weight-averaged using 13 months rather than the 12-
month review period.
    CINSA replies that the methodology employed for weight-averaging 
cost of certain production factors is reasonable, since any adjustment 
to this calculation would have a de minimis impact on CINSA's COP and 
any final antidumping margin.
    Department's Position: The methodology used by the respondent is 
inappropriate because the review period covers 12 months, not 13. 
However, the required adjustments to correct cost of manufacturing 
would have an insignificant impact on COP and no impact on the margin. 
Therefore, the Department did not adjust for the miscalculation.
    Comment 11: APSA claims the antidumping duty margin reported in the 
preliminary results published in the Federal Register does not 
accurately reflect the weighted-average margin calculation released to 
counsel by the Department in its disclosure documents.
    Department's Position: We agree and have made the correction.
    Comment 12: Petitioner contends CINSA's reported inland freight 
expenses should be disallowed, since it includes its factory-to-
warehouse pre-sale inland freight expenses. Petitioner argues that 
factory-to-warehouse freight charges incurred on home market sales 
cannot be deducted as direct sales expenses in purchase price 
comparisons because those charges were incurred prior to the date of 
sale. Petitioner cites The Ad Hoc Committee of AZ-NM-TX-FL Producers of 
Gray Portland Cement v. United States, CAFC Opinion 93-1239 (Jan 5, 
1994) and Gray Portland Cement and Clinker From Japan (59 FR 6614; 
February 11, 1994). The Court of Appeals for the Federal Circuit (CAFC) 
[[Page 2381]] held that the FMV value provision of the antidumping 
statute does not authorize a deduction from FMV for pre-sale 
transportation costs within the exporting country. According to 
petitioner, if the Department cannot separate home market direct 
movement expenses from the home market indirect expenses, then it must 
treat the entire reported amount as home market indirect expenses.
    CINSA argues that petitioner misinterprets the CAFC decision in Ad 
Hoc Committee, claiming that the CAFC's decision was based solely upon 
the Department's stated rationale for its decision, i.e.; the 
Department's inherent authority to fill gaps in the statutory framework 
and to make ex-factory comparisons in order to achieve an ``apples to 
apples'' comparison. Thus, the CAFC's decision did not decide if any 
alternative authority existed under which the Department could have 
adjusted FMV for the pre-sale transportation expense, including the 
circumstance-of sale adjustment, which is specifically authorized by 
statute and regulation. Therefore, the Department should not simply 
exclude pre-sale transportation expenses from the FMV calculation as 
suggested by petitioner, but should be deducted from FMV because such 
expenses are directly related to the sale of the subject merchandise in 
the home market.
    According to CINSA, petitioner also misstates the Department's 
current treatment of pre-sale selling expenses. By assuming that 
CINSA's pre-sale transportation expenses to the warehouses are indirect 
selling expenses, petitioner asserts that the entire transportation 
expense should be disallowed because CINSA's combined indirect and 
direct transportation expenses cannot be separated. According to CINSA, 
its reported pre-sale and post-sale transportation expenses are both 
directly related selling expenses and both equally qualify as a 
circumstance-of-sales adjustment.
    Department's Position: We have concluded that, in light of the 
CAFC's decision in Ad Hoc Committee, the Department no longer can 
deduct home market movement charges from foreign market pursuant to its 
inherent power to fill in gaps in the antidumping statute. We instead 
will adjust for those expenses under the circumstance-of-sale provision 
of 19 CFR 353.56 and the exporter's selling price (ESP) offset 
provision of 19 CFR 353.56(b)(1) and (2), as appropriate, in the 
following manner.
    When U.S. price is based on purchase price, we only adjust for home 
market movement charges through the circumstance-of-sale provision of 
19 CFR 353.56. Under this adjustment, we capture only direct selling 
expenses, which include post-sale movement expenses. We will treat pre-
sale movement expenses as direct expenses if those expenses are 
directly related to the home market sales of the merchandise under 
consideration. In order to determine whether pre-sale movement expenses 
are direct in this case, the Department will examine the respondent's 
pre-sale warehousing expenses, since the pre-sale movement charges 
incurred in positioning the merchandise at the warehouse are, for 
analytical purposes, inextricably linked to pre-sale warehousing 
expenses. If pre-sale warehousing constitutes an indirect expense, the 
expense involved in getting the merchandise to the warehouse also must 
be indirect. Conversely, a direct pre-sale warehousing expense 
necessarily implies a direct pre-sale movement expense. We note that 
although pre-sale warehousing expenses in most cases have been found to 
be indirect expenses, these expenses may be deducted from FMV as a 
circumstance-of-sale adjustment in a particular case if the respondent 
is able to demonstrate that the expenses are directly related to the 
sales under consideration.
    When U.S. price is based on ESP, the Department uses the 
circumstance-of-sale adjustment in the same manner as in purchase price 
situations. Additionally, under the ESP offset provision set forth in 
19 CFR 353.56(b)(1) and (2), we will adjust for any pre-sale movement 
charges which are treated as indirect selling expenses.
    Therefore, we requested that respondent provide separate factory-
to-warehouse transportation expenses. Based on the information 
provided, in the final results, we deducted only the post-sale 
transportation expenses in the home market from FMV, since the pre-sale 
warehousing and, thus, pre-sale inland freight were not shown to be 
directly related to the sales in question.

Final Results of the Review

    As a result of our review, we determine the margins to be:

                                                                        
------------------------------------------------------------------------
                                                                Margin  
    Manufacturer/exporter               Time period            (percent)
------------------------------------------------------------------------
APSA.........................  12/01/90-                            4.66
                               11/30/91                                 
CINSA........................  12/01/90-                           27.96
                               11/30/91                                 
------------------------------------------------------------------------

    The Department will instruct the Customs Service to assess 
antidumping duties on all appropriate entries. Individual differences 
between U.S. price and FMV may vary from the percentages stated above. 
The Department will issue appraisement instructions directly to the 
Customs Service.
    Furthermore, the following deposit requirements will be effective 
upon publication of this notice of final results of administrative 
review for all shipments of the subject merchandise, entered, or 
withdrawn from warehouse, for consumption on or after the publication 
date, as provided by section 751(a)(1) of the Act: (1) The cash deposit 
rate for the reviewed companies will be as outlined above; (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 less-than-fair-
value (LTFV), 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 will be 29.52 percent, 
the ``all others'' rate established in the LTFV investigation. See, 
Floral Trade Council v. United States, Slip Op. 93-79, and Federal 
Mogul Corp. v. United States, Slip Op. 93-83.
    These deposit requirements, when imposed, shall remain in effect 
until publication of the final results of the next administrative 
review.
    This notice also serves as a 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 the 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 responsibilities concerning the return or destruction of 
proprietary information disclosed under APO in accordance with 19 CFR 
353.34(d). Failure to comply is a violation of the APO.
    This administrative review and notice are in accordance with 
section 751(a)(1) of the Act, as amended (19 U.S.C. 1675(a)(1)) and 19 
CFR 353.22.

     [[Page 2382]] Dated: December 21, 1994.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 95-450 Filed 1-6-95; 8:45 am]
BILLING CODE 3510-DS-P