[Federal Register Volume 60, Number 163 (Wednesday, August 23, 1995)]
[Notices]
[Pages 43761-43769]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-20929]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-588-815]
Gray Portland Cement and Clinker From Japan; 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 review of the
antidumping duty order on gray portland cement and clinker from Japan.
The review covers one manufacturer/exporter, Onoda Cement Co., Ltd.,
and the period May 1, 1992, through April 30, 1993.
We gave interested parties an opportunity to comment on the
preliminary results. Based on our analysis of the comments received,
and the correction of clerical errors, we have changed the final
results from those presented in the preliminary results of review.
EFFECTIVE DATE: August 23, 1995.
FOR FURTHER INFORMATION CONTACT:
David Genovese or Michael Heaney, Office of Antidumping Compliance,
International Trade Administration, U.S. Department of Commerce,
Washington, DC. 20230; telephone (202) 482-5254.
SUPPLEMENTARY INFORMATION:
Background
On May 3, 1993, the Ad Hoc Committee of Southern California
Producers of Gray Portland Cement (the petitioner) requested that the
Department conduct an administrative review of the antidumping duty
order on gray portland cement and clinker from Japan (56 FR 21658, May
10, 1991) for Onoda Cement Co., Ltd. (Onoda). We initiated the review,
covering the period May 1, 1992, through April 30, 1993, on June 25,
1993 (58 FR 34414). On February 11, 1994, we published the preliminary
results of the administrative review (59 FR 6614). The Department has
now completed the administrative review in accordance with section 751
of the Tariff Act of 1930, as amended (the Act).
Scope of the Review
The products covered by this review are gray portland cement and
clinker from Japan. Gray portland cement is a hydraulic cement and the
primary component of concrete. Clinker, an intermediate material
produced when manufacturing cement, has no use other than grinding into
finished cement. Microfine cement was specifically excluded from the
antidumping duty order.
Gray portland cement is currently classifiable under the Harmonized
Tariff Schedule (HTS) item number 2523.29, and clinker is currently
classifiable under HTS item number 2523.10. Gray portland cement has
also been entered under item number 2523.90 as ``other hydraulic
cements''.
The HTS item numbers are provided for convenience and Customs
purposes. The written product description remains dispositive as to the
scope of the product coverage.
Analysis of Comments Received
We gave interested parties an opportunity to comment on the
preliminary results. We received comments from the petitioner and from
the respondent. At the request of the petitioner and respondent, we
held a public hearing on March 29, 1994.
Comment 1
Petitioner argues that the Department inaccurately adjusted FMV for
home market indirect selling expenses in those instances where the
Department compared U.S. sales of cement imported into the United
States and further manufactured into concrete with sales of cement in
the home market. Where such comparisons occurred, petitioner states
that, because the imported merchandise was cement, the Department
appropriately deducted further manufacturing costs and attempted to
make cement-to-cement comparisons. However, petitioner
[[Page 43762]]
asserts that, for purposes of 19 CFR 353.56(b)(2), the Department must
make an adjustment to the U.S. indirect selling expense figure for U.S.
concrete sales, since Onoda's data reflect the expenses incurred on
sales of concrete in the United States, not sales of cement. Petitioner
maintains that 19 CFR 353.56(b)(2) directs the Department to limit the
home market indirect selling expense adjustment to the amount of the
indirect selling expense incurred on the U.S. merchandise. In
petitioner's view, this requires the Department, for the purpose of
establishing the appropriate adjustment to FMV for indirect selling
expenses, to recalculate the indirect selling expense figure for the
U.S. sales of concrete so that they reflect the cement equivalent. In
this manner, petitioner concludes that the Department will meet the
requirements of the regulations by limiting the indirect selling
expense adjustment to home market sales of cement to those expenses
associated with sales of cement in the United States.
Onoda argues that the Department should base the exporter's sales
price (ESP) ``cap'' on the entire amount of indirect selling expenses
associated with ESP sales as it did in the 1990/92 review of this
order. Onoda asserts that this method of determining the ESP cap is
appropriate because indirect selling expenses associated with ESP sales
can not be ascribed to foreign production and U.S. further
manufacturing. Onoda cites the Court of International Trade's ruling in
Torrington Co. v. United States, 818 F. Supp. 1563, 1576 (CIT 1993),
and the Department's findings in Final Results of Antidumping Duty
Administrative Review; Color Picture Tubes from Japan, 55 FR 37915
(September 14, 1990) (hereafter CPTs), to argue that the Department's
established practice has been to include in the ESP cap all indirect
selling expenses deducted from ESP under 19 CFR 353.41(e).
Department's Position
We agree with the petitioner. It is the Department's practice to
allocate indirect expenses to the product imported into the United
States (in this case cement) and to the further manufactured product
sold in the United States (in this case, concrete) when calculating the
ESP cap. (see Final Determination of Sales at Less Than Fair Value:
Calcium Aluminate Cement, Cement Clinker and Flux from France, 59 FR
14136 (March 25, 1994)) Because Onoda exported cement to the United
States and, before selling it to an unrelated customer, converted the
cement into concrete, our calculation of U.S. price (USP) reflects the
deduction of the value which Onoda added in the United States, other
expenses, and indirect selling expenses.
In determining the appropriate adjustment to FMV under 19 CFR
353.56(c), we have limited the home market indirect selling expense
adjustment to the amount of those selling expenses associated with the
cement which entered the United States, since we are making a cement-
to-cement comparison. This requires adjusting Onoda's total U.S.
indirect selling expenses to reflect only those expenses associated
with cement.
Onoda's argument that indirect selling expenses are indivisible is
inaccurate. The Department's goal is to make an apples-to-apples
comparison when comparing merchandise sold in the United States with
merchandise sold in the home market. In order to make such a
comparison, it is necessary to allocate expenses so that we compare
cement which enters the United States with cement sold in the home
market.
Additionally, the Torrington case cited by Onoda does not advocate
including all indirect selling expenses associated with ESP sales in
the ESP cap. Rather, Torrington advocates allocating expenses incurred
on ESP sales between the imported product (which is the product sold in
the home market) and the further-manufactured product. Accordingly, we
allocated indirect expenses between the imported product (which is the
product sold in the home market) and the further-manufactured product
and limited the ESP cap to those indirect selling expenses incurred on
the imported product.
Similarly, in the aforementioned CPTs case, the respondent was
importing color picture tubes (CPTs) and incorporating them into color
televisions (CTVs). In CPTs, the Department determined that ``(s)ince
it is the CTV and not the CPT that is ultimately sold in the United
States, a proportional amount of the CTV indirect selling expenses was
allocated to the CPT based upon the costs associated solely with the
CPT to the total CTV cost. The total of the indirect selling expenses
allocated to the CPT formed the cap for the allowable home market
selling expenses offset under Sec. 353.56(b) of the Department's
regulations.'' See CPTs at 37917.
Comment 2
Petitioner argues that Onoda is not entitled to a difference-in-
merchandise (difmer) adjustment for the cost differences between U.S.
models Type I and Type II, and home market models Type N and Type M.
Petitioner argues that Onoda has failed to meet the criterion for a
difmer adjustment that was articulated in the Department's Policy
Bulletin No. 92.2 and in other antidumping cases. According to
petitioner, that criterion is that respondents are entitled to difmer
adjustments only if they show that the difference in cost between the
two models is attributable to the difference in physical
characteristics of the merchandise. Petitioner relies upon plant-by-
plant variable cost of manufacture data for Type N cement to argue that
the weighted-average difmer adjustments reported by Onoda are largely
attributable to differences in efficiencies between Onoda's various
production facilities and not to cost differences associated with the
physical characteristics of the merchandise. Accordingly, petitioner
requests that the Department deny Onoda's difmer adjustment.
Onoda argues that it followed the exact same procedure in preparing
its difmer adjustment in this segment of the proceeding as it did in
the less-than-fair-value (LTFV) investigation and the 1990/92 review.
Onoda notes that during the LTFV investigation, the Department verified
the difmer data, and granted the difmer adjustment in calculating the
dumping margin. Furthermore, Onoda observes that in the LTFV
investigation the Department was satisfied that Onoda had reasonably
tied cost differences to physical differences (Final Determination of
Sales at Less Than Fair Value; Gray Portland Cement and Clinker from
Japan, 56 FR 12156, March 22, 1991 (Gray Portland Cement--LTFV
Investigation)). Additionally, Onoda notes that the Department
determined in the final results of the 1990/92 review that evidence on
the record did not establish that any differences in plant efficiencies
were the source of the cost differences (Gray Portland Cement and
Clinker from Japan, Final Results of Antidumping Duty Administrative
Review, 58 FR 48826, September 20, 1993 (Gray Portland Cement--First
Review)).
Additionally, Onoda argues that the only way it can calculate the
difmer adjustment is to weight-average the variable costs to produce
Type N cement at all plants and compare that amount to the variable
costs to produce Type I cement at the single plant where it produced
Type I cement. Onoda argues that this methodology of weight-averaging
costs across all plants is consistent with Departmental practice.
Thus, according to Onoda, there is no reason for the Department not
to grant the adjustment in this review. However,
[[Page 43763]]
should the Department decline to grant the full difmer adjustment,
Onoda argues that the Department should at least grant a difmer
adjustment for the cost differences of the material inputs.
Department's Position
Consistent with the Department's practice in the LTFV investigation
and the 1990/92 review of this case, we have allowed the difmer
adjustment claimed by Onoda. As we stated in the 1990/92 review, which
was the first review, although Onoda's plants may have different
efficiencies, evidence on record does not establish that any
differences in plant efficiencies are the source of the cost
differences identified by Onoda (see Gray Portland Cement and Clinker--
First Review at 48827). Rather, cost differences are due to differences
in material inputs and the physical differences which result from
different production processes.
First, as stated previously, the Department compared Type I and
Type II cement in the United States with Type N and Type M cement in
the home market, respectively. The specific differences in costs among
the various cement types are due to the varying costs of the inputs,
including material inputs (limestone, clay, silica, etc.), fuel inputs
(fuel oil, coal, anthracite, etc.) and electricity (mixing, grinding,
burning, etc.). For example, Type I cement contains clinker, gypsum and
minor grinding agents. In contrast, Type N cement contains clinker,
gypsum, minor grinding agents and additives. Furthermore, Type I cement
contains a higher percentage of clinker and gypsum than Type N cement.
Moreover, Type I, on average, has a slightly higher percentage of
silicon dioxide. Similarly, Type II and Type M cement also differ in
terms of their chemical and physical composition. Type M cement
generally has a higher percentage of clinker and a lower percentage of
gypsum than Type II cement. Additionally, Type M cement has a lower
tricalcium aluminate level than Type II.
Second, as noted in the LTFV investigation, ``we verified Onoda's
claimed difference in merchandise adjustment and found it to be an
accurate representation of the relevant variable costs of production as
reflected in its actual cost accounting records. Given the fact that
physical differences between types of cement arise from differences in
the production process (e.g., amount and duration of heat), and from
differences in component materials, we are satisfied that Onoda has
reasonably tied cost differences to physical differences'' (see Gray
Portland Cement and Clinker--LTFV Investigation at 12161).
Additionally, with regard to the weighted-average methodology
employed by Onoda, the Department specifically requested that Onoda
report its cost of manufacture information on a weighted-average basis
(see the Department's questionnaire at page 54: ``If the subject
merchandise is manufactured at more than one facility, the reported COM
should be the weighted-average manufacturing cost from all
facilities'').
Accordingly, we have allowed Onoda's claimed difmer adjustment.
Comment 3
The petitioner argues that home market sales of bagged cement
should be included in the calculation of FMV. Petitioner asserts that
this is appropriate since: (1) The technical specifications for cement
sold in bags and in bulk are identical; (2) charges related to sales of
bagged cement were included in the calculation of various adjustments
made to FMV; and (3) the Department has all the data necessary to
calculate FMV for bagged cement. Petitioner cites to Gray Portland
Cement and Cement Clinker from Venezuela, 56 FR 56390 (November 4,
1991), Industrial Phosphoric Acid from Israel, 52 FR 25440 (July 7,
1987, and Frozen Concentrated Orange Juice from Brazil, 57 FR 3995
(February 3, 1992) as examples where the Department compared identical
merchandise that was packaged differently.
Onoda argues that the Department should not include home market
sales of bagged cement in the FMV calculation since it only sold bulk
cement in the United States. Onoda asserts that since the Department's
goal should be to compare sales in the United States and foreign
markets which are as similar as possible, the Department should compare
bulk sales in the United States to bulk sales in the home market. Onoda
argues that it is not relevant that cement sold in bags is within the
scope of the order and is physically the same. Onoda asserts that it
would be unfair to include bagged cement sales in the calculation of
FMV since it would distort the FMV figure. Onoda cites Final
Determination of Sales at Less Than Fair Value: Fresh Kiwifruit from
New Zealand, 57 FR 13695 (April 17, 1992), Final Determination of Sales
at Less Than Fair Value: Gray Portland Cement and Clinker from Mexico,
55 FR 29244 (July 18, 1990), and Gray Portland Cement and Clinker from
Venezuela, 56 FR 56390 (November 4, 1991), to argue that the Department
has consistently made bulk-to-bulk and bag-to-bag comparisons.
Department's Position
We agree with the petitioner. There is no physical difference
between the bagged and bulk cement sold in Japan. The only difference
is the manner in which the merchandise is packed. Since packing in not
a criterion for comparability, and because there is no physical
difference between bulk and bagged cement sold in the home market, we
did not exclude home market sales of bagged cement from our
calculations of FMV.
In Brazilian orange juice, the Department based USP on packed
merchandise and FMV on packed and bulk merchandise. In Venezuelan
cement, the Department compared bulk-to-bulk and bagged-to-bagged sales
as well as bulk-to-bag sales. In Israeli acid, the Department compared
bulk U.S. product to the home market product packed in drums. The
comparison of bulk-to-bag and bulk-to-drum sales in Venezuelan cement
and Israeli acid supports the Department's conclusion in this case that
it is acceptable to compare bulk-to-bagged sales.
Additionally, the issue raised in New Zealand kiwifruit was whether
the Department ``must * * * adjust for difference in packing costs when
comparing differently packed identical merchandise,'' not whether the
Department should compare bulk-to-bulk and bagged-to-bagged
merchandise. In Mexican cement, the issue did not arise because all
U.S. sales and their corresponding identical matches in Mexico were
bulk sales. Finally, in prior segments of this proceeding, we made
bulk-to-bag and bag-to-bulk comparisons, with appropriate adjustments
for packing differences.
Therefore, because the cases cited by Onoda do not stand for the
proposition that the Department must always compare bulk-to-bulk and
bag-to-bag sales, and because packing is not a criterion for matching
types of cement, we compared sales of bulk cement in the United States
to sales of both bulk and bagged cement in the home market, and made
the appropriate adjustments to reflect the packing costs associated
with bagged cement.
Comment 4
Petitioner argues that the Department should disallow Onoda's
claimed deductions for commissions to distributors because Onoda has
not properly documented what portion of its commission payments are
made to related parties, or whether the terms of commissions paid to
related distributors
[[Page 43764]]
are comparable to the terms of commissions paid to unrelated
distributors.
Additionally, petitioner states that Onoda has failed to show how
one type of commission, which is offered to distributors to promote
sales of all Onoda cement, not just cement within the scope of the
order, is tied directly to the subject merchandise.
Onoda states that the Department should grant a full deduction for
these commissions in its FMV calculations because it has fully
explained the basis for the payment of the commissions in the home
market and has directly tied these commissions to its home market sales
of Types N and M cement.
Onoda disagrees with petitioner's assertion that it failed to tie
commissions to the subject merchandise. Onoda asserts that because Type
N and M cement accounted for the majority of home market sales, the
majority of the commissions in question were associated with the sale
of Types N and M cement. Additionally, Onoda argues that it did not
simply deduct the total commission expense from the sales price of
Types N and M cement. Rather, Onoda allocated these expenses over all
cement types.
Department's Position
We agree with Onoda. Onoda provided a sufficient response to the
Department's questions concerning the commissions it grants to related
and unrelated distributors in the home market. The terms of the
commissions offered by Onoda are fixed, so that related and unrelated
distributors are offered commissions on precisely the same terms that
do not vary according to the product sold. The commissions in question
are allocated to the subject merchandise, are offered to both related
and unrelated distributors, and, because the terms of the commissions
are the same whether the distributors are related or unrelated, we have
determined that the commissions are at arm's-length and therefore an
allowable deduction from the home market price.
Comment 5
Petitioner argues that the Department should include in its
calculation of FMV the price actually charged by Onoda's related
distributors to the first unrelated customer. To accomplish this,
petitioner suggests that the Department add to the related distributor
price a mark-up which Onoda provides to all of its distributors.
Petitioner contends that this is appropriate because the mark-up Onoda
provides to its related distributors is merely an intracompany transfer
that benefits Onoda.
Department's Position
We disagree with the petitioner. Since the mark-up to related
distributors is at arm's-length (i.e., is the same for related and
unrelated distributors and the sales prices to related distributors are
comparable to the sales price to unrelated distributors (see our
response to comment 6)) and directly related to the sales in question,
the mark-up should not be added to the related distributor's price when
calculating FMV. Accordingly, when calculating FMV, the Department did
not add the mark-up to the price charged related distributors because
Onoda provides the identical mark-up to all its distributors, whether
related or unrelated.
Comment 6
The petitioner states that, when determining what sales to use to
calculate FMV, the Department should use only those related party sales
for which the price is greater than or equal to the price charged to
unrelated customers. Petitioner argues that using related party sales
whose prices are below those of unrelated party sales is inconsistent
with the Department's general practice in prior cases and fails to
eliminate related party sales that were not made at arm's-length.
Onoda states that it treats all sales to distributors, whether
related or unrelated, in the same fashion, and, therefore, all sales to
related distributors should be included in the calculation of FMV.
Moreover, Onoda asserts that the price it charges its distributors is
in no way influenced by Onoda, since it is based on a price that is
negotiated between the distributor and its unrelated customer. Thus,
argues Onoda, all sales to related distributors should be included in
the calculation of FMV.
Department's Position
Consistent with 19 CFR 353.45(a), we include related party
transactions in our calculation of FMV when we are satisfied that the
price of such sales are comparable to the prices of sales to the
unrelated party. In this case, since related party sales were generally
at prices equal to or greater than unrelated party sales, we determined
that related party sales are comparable to Onoda's sales to unrelated
parties. Accordingly, we have included all related party sales in our
calculation of FMV.
Comment 7
Petitioner argues that the commission Onoda granted to a Japanese
trading company should be deducted in its entirety from Onoda's U.S.
prices (i.e., the Department should deduct from U.S. price the result
of multiplying the F.O.B. Japan price by the contractually arranged
commission rate).
Onoda argues that petitioner's methodology represents only one-half
of the transaction. Onoda asserts that the actual commission is the net
amount which passes from the Onoda corporate family (i.e., Onoda and
Lone Star Northwest) to the Japanese trading company corporate family,
and that the sequence and composition of the payments have no bearing
on the value of the commission. Thus, Onoda argues that in the
preliminary results the Department correctly calculated the amount of
U.S. commissions.
Department's Position
We agree with Onoda. In a sales/distribution situation where there
are two payments and two corporate families, what is relevant is the
entire payment from one corporate family to the other. Thus, as we did
in the 1990/92 review of this case, we have included both portions of
the transaction in our calculation of the payment to the trading
company rather than applying the commission rate to the F.O.B. Japan
price as recommended by the petitioner.
Comment 8
Petitioner argues that the direct selling expenses Onoda reported
in its cost of production (COP) response do not equal the direct
selling expenses Onoda reported in its home market sales tape.
Petitioner states that certain expenses included in the direct selling
expense category of Onoda's home market sales tape were not included in
the direct selling expense category for Onoda's COP response.
Petitioner states that the Department should weight-average and add to
its COP calculations the direct selling expenses reported on Onoda's
home market sales tape in order to ensure that the direct selling
expenses used to determine FMV and COP are used consistently.
Petitioner asserts that this adjustment is necessary to ensure a fair
comparison of expenses in the COP and FMV calculations.
Onoda states that the direct selling expenses it reported on the
home market sales tape and the COP response are not equal because
certain direct selling expenses, such as two commission expenses, were
reported as indirect selling expenses rather than as direct selling
expenses in the COP response. Onoda states that, for COP purposes, it
does not matter if commission expenses are categorized as direct or
indirect, since all selling
[[Page 43765]]
expenses are treated identically in determining whether home market
sales are below cost. Onoda asserts that what is important is that the
total selling expenses reported on the home market sales tape and in
the COP response be equal.
Department's Position
It is important that the total selling expenses reported in the COP
response equal the total selling expenses reported on the home market
sales tape, since the Department will compare the COP with the net home
market price in order to determine if sales below cost occurred. Any
inequality in total selling expenses between COP and home market sales
will lead to an imperfect comparison and therefore an inaccurate
determination of sales below cost.
Accordingly, for these final results, we have added to the reported
total selling expenses for COP the weighted-average direct selling
expenses included in the home market sales tape (i.e., technical
service, quality control, plant quality control, and advertising) since
they were not included in the COP calculation reported by Onoda.
Additionally, we deducted from the reported total selling expenses for
COP the amounts included in the field DIRSELEX (tanker freight costs
and freight expense for swap transactions) since these selling expenses
were deducted from the calculation of net home market price for
comparison to the COP. We did not add commission expenses to the
reported total selling expenses for COP since, as noted by Onoda, they
were already included in the reported indirect selling expense figure.
This methodology ensures that the amount of total selling expenses we
use in our COP analysis equals the total selling expenses we use in our
FMV calculations.
Comment 9
Onoda argues that the decision by the Court of Appeals for the
Federal Circuit (Federal Circuit) in The Ad Hoc Committee of AZ-NM-TX-
FL Producers of Gray Portland Cement v. United States, 13 F.3d 398
(Federal Circuit 1994), (hereafter Ad Hoc Committee), which states that
pre-sale movement expenses cannot be deducted as a direct expense from
FMV, does not apply to FMV when the U.S. sales are ESP transactions.
(Since Onoda submitted its comments, the cite for Ad Hoc Committee has
changed. The revised cite is The Ad Hoc Committee of AZ-NM-TX-FL
Producers of Gray Portland Cement v. United States, 13 F.3d 398
(Federal Circuit 1994) cert. denied 115 S. Ct. 67 (1994).) Onoda cites
the Court of International Trade's decision, The Torrington Company v.
United States, Slip Op. 94-37, at 7 (CIT 1994) (hereafter Torrington
II), to support its claim that Ad Hoc Committee does not apply to ESP
sales. (Since Onoda submitted its comments, the cite for Torrington II
has changed. The revised cite is The Torrington Company v. United
States, 850 F. Supp 7, (CIT 1994).)
Onoda states that if the Department were to conclude that Ad Hoc
Committee does apply to FMV when calculating margins on ESP
transactions, then the Department should treat U.S. pre-sale freight
expenses as indirect expenses. Otherwise, Onoda argues that the
resulting comparison between U.S. and home market sales will be
inequitable.
Additionally, Onoda states that Ad Hoc Committee is not yet final
because there is still time to file a petition for appeal to the
Supreme Court. Therefore, Onoda urges the Department not to apply Ad
Hoc Committee until all possibilities for appeal have been exhausted.
Petitioner argues that Ad Hoc Committee applies to FMV in both ESP
and purchase price (PP) comparisons. Petitioner asserts that the issue
the Federal Circuit addressed in Ad Hoc Committee was whether pre-sale
transportation costs should be categorized as a direct or indirect
expense in calculating FMV. Petitioner contends that the Federal
Circuit did not distinguish between comparisons to PP and ESP in
reaching its conclusion.
Petitioner also argues that the Torrington II decision cited by the
respondent takes too narrow a view of the Federal Circuit's holding in
Ad Hoc Committee. Accordingly, petitioner argues that the Department
should follow the Federal Circuit's ruling in Ad Hoc Committee, and not
the CIT's decision in Torrington II interpreting the Federal Circuit's
decision. Accordingly, the Department should continue to follow Ad Hoc
Committee.
Moreover, petitioner cites Ayuda, Inc. v. Thornburgh, 919 F.2d 153
(D.C. Cir. 1990), to argue that a decision by the Federal Circuit is
final unless and until it is reversed or overruled by the U.S. Supreme
Court.
Finally, petitioner argues that the Department cannot treat pre-
sale transportation costs for U.S. sales as indirect expenses (which
would increase the ESP cap) because section 772(d)(2)(A) of the Act
clearly instructs the Department to treat these expenses as direct
expenses.
In a related matter, petitioner argues that because home market
pre-sale transportation costs are considered indirect selling expenses
(in accordance with the Court's decision in Ad Hoc Committee) and
because Onoda reported home market pre-sale transportation expenses
with other direct selling expenses in the field DIRSELH, the Department
should treat all expenses reported in the DIRSELH field as indirect,
rather than direct, selling expenses.
Department's Position
We agree with Onoda and the CIT's assertion in Torrington II, that
the Ad Hoc Committee decision was limited to the narrow question of our
inherent authority to deduct pre-sale freight expenses in purchase
price situations. However, as noted by the CIT in Ad Hoc Committee of
AZ-NM-TX-FL Producers of Gray Portland Cement v. United States, 865 F.
Supp. 857 (CIT 1994) (Ad Hoc Committee II), the Ad Hoc Committee
decision ``discussed without disapproval, Commerce's ESP-COS procedures
where, as indicated, indirect expenses, such as most pre-sale
transportation costs, are deductible from FMV to the extent of the USP
level of expenses.'' (emphasis added)
We have determined, in light of Ad Hoc Committee and its progeny,
that the Department no longer can deduct home market movement charges
from FMV pursuant to its inherent power to fill in gaps in the
antidumping statute. We instead adjust for those expenses under the
circumstance-of-sale (COS) provision of 19 CFR 353.56 and the ESP
offset provision of 19 CFR 353.56(b)(1) and (2), as appropriate, in the
manner described below.
When USP is based on either ESP or purchase price, we adjust FMV
for home market movement charges through the COS provision of 19 CFR
353.56(a). Under this adjustment, we capture only direct selling
expenses, which include post-sale movement expenses and, in some
circumstances, pre-sale movement expenses. Specifically, we 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, the Department examines 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, linked
to pre-sale warehousing expenses. See Final Results of Redetermination
Pursuant to Court Remand, dated January 5, 1995 (pertaining to Slip.
Op. 94-151). If the pre-sale warehousing constitutes an
[[Page 43766]]
indirect expense, the expense involved in getting the merchandise to
the warehouse, in the absence of contrary evidence, 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 COS adjustment
in a particular case if the respondent is able to demonstrate that the
expenses are directly related to the sales under consideration. See Ad
Hoc Committee of AZ-NM-TX-FL Producers of Gray Portland Cement v.
United States, Slip Op. 95-91 (CIT May 15, 1995) (upholding the
Department's pre-sale inland freight methodology set forth in its
January 5, 1995 Remand Results).
Respondent reported in its questionnaire response of August 26,
1993, that it incurred no after-sale warehousing expenses and
respondent did not claim any warehousing expenses as direct COS
expenses. The Department interprets this to mean that any warehousing
expenses incurred are properly classified as pre-sale, indirect selling
expenses and that the expense of transporting the cement to the
warehouse should also be treated as an indirect expense. Accordingly,
the Department has not deducted home market pre-sale movement expenses
from FMV for comparison to PP sales. However, we deducted post-sale
movement expenses from FMV as a direct expense.
When USP is based on ESP, the Department applies the COS adjustment
in the same manner as it does in PP situations. We treated pre-sale
movement charges as indirect expenses, which we deducted from FMV
pursuant to the ESP offset provision set forth in 19 CFR 353.56(b)(2).
We disagree with Onoda's assertion that the Department should treat
U.S. pre-sale freight expenses as indirect expenses. As Petitioner
states, section 772(d)(2)(A) of the Tariff Act clearly instructs the
Department to treat these expenses as direct expenses: The purchase
price and exporter's sales price ``shall be adjusted by being--reduced
by * * * any additional costs, charges, and expenses, * * * incident to
bringing the merchandise from the place of shipment in the country of
exportation to the place of delivery in the United States.''
Additionally, Onoda's argument that Ad Hoc Committee is not yet final
because there is still time to file a petition for appeal to the
Supreme Court is moot. This case became final and conclusive in October
1994, when the U.S. Supreme Court denied the writ of certiorari
submitted by Onoda. We agree with petitioner that since Onoda reported
home market pre-sale transportation expenses (which are indirect
expenses) with direct selling expenses in the field DIRSELH, we should
treat all expenses reported in the DIRSELH field as indirect, rather
than direct, selling expenses. Comment 10: Onoda argues that the
Department, in accordance with its new tax methodology as outlined in
Federal-Mogul Corporation and the Torrington Company v. United States,
834 F. Supp. 1391 (CIT, 1993), included a tax adjustment for indirect
selling expenses when calculating the USP for ESP sales, but that the
Department failed to make a similar adjustment when calculating the net
FMV for home market sales that were subsequently compared to USP.
Accordingly, Onoda asserts that the Department should include a tax
adjustment for home market indirect selling expenses when calculating
the net home market price since the Department included this adjustment
in its calculation of USP.
Department's Position
We agree with Onoda and have made the appropriate correction to our
calculations.
Comment 11
Onoda argues that the Department should have made a difmer
adjustment to FMV for comparisons between U.S. sales of Type II cement
and home market sales of Type M cement during the period October 1992
through March 1993. Onoda asserts that the fact that these sales came
from inventory rather than from its cement production in no way affects
the applicability of a difmer adjustment. Onoda states that the
Department can correct its oversight by calculating a difmer adjustment
based on a comparison of U.S. Type II cement variable cost information
for the period April 1992 through September 1992 and variable cost
information for home market Type M cement for the period October 1992
through March 1993.
Petitioner argues that the Department should not grant a difmer
adjustment since it used the information which Onoda supplied.
Additionally, petitioner argues that it is not reasonable for the
Department to apply variable cost data from one period to another
period, since Onoda has not demonstrated that the use of such a difmer
calculation is warranted.
Department's Position
We agree with Onoda. Upon reviewing the data submitted by Onoda, we
have determined that a difmer adjustment when comparing Type II and
Type M cement for the period October 1992 through March 1993 is
appropriate even though Onoda did not produce Type II cement during the
period October 1992 through March 1993 (the threshold issue of whether
Onoda is entitled to a difmer adjustment was discussed in Comment 2).
Accordingly, for these final results, we used the variable cost of Type
II cement for the period April 1992 through September 1992, and
compared it with the variable cost of Type M cement for the period
October 1992 through March 1993 in order to determine a difmer
adjustment for comparison of Type II and Type M cement for the period
October 1992 through March 1993.
Comment 12
Onoda argues that the Department incorrectly calculated the
commission offset to FMV for comparisons to PP sales. Onoda states that
in calculating the FMV for PP sales, the Department used as the
commission offset either the indirect selling expenses of the division
responsible for export sales, or the sum of home market commissions,
whichever was lower. Onoda asserts that since commissions had been paid
on home market sales but not on PP sales, the Department should have
followed its normal practice and calculated the commission offset by
deducting the full amount of home market commissions from FMV and then
adding to FMV, as an offset, the amount of U.S. indirect expenses
capped by the amount of home market commissions.
Department's Position
We agree with Onoda and have made the appropriate adjustments to
our calculations.
Comment 13
Onoda argues that the Department should include in its calculation
of FMV, all home market sales in which a zero or a negative value
appeared under the variable for gross value, quantity, or gross unit
price. Onoda argues that these values are due to retroactive downward
price changes, input errors, or renegotiations with customers. Onoda
asserts that by dropping all sales with negative and zero values from
the FMV database, the Department has calculated monthly average FMVs
which do not reflect the actual sales value of the merchandise in the
home market.
[[Page 43767]]
Petitioner argues that the Department should continue to exclude
zero and negative values from its calculation of FMV since Onoda has
failed to provide a detailed explanation, or documentation, for these
values.
Department's Position
We agree with the petitioner. We requested in a supplemental
questionnaire (dated December 7, 1993) that Onoda provide a ``detailed
explanation'' of the retroactive price adjustments and adjustments to
volume that resulted in negative numbers or zeros for numerous
variables in the home market sales tape. In response to this request,
Onoda merely stated, without providing supporting documentation, that
such values occur due to retroactive downward price changes, input
errors or revisions after negotiations with customers. Since Onoda did
not support its claim, we have excluded from our calculations, sales in
which a zero or negative value appeared under the variable for gross
value, quantity or gross unit price.
Comment 14
Onoda argues that the Department, in its COP calculations, should
have accepted Onoda's claim that the interest expense it incurred
should reflect the short-term interest income it earned. Onoda argues
that its supporting documentation was adequate and that the Department
should have requested additional information if the documentation
submitted was considered inadequate.
Department's Position
We disagree with Onoda. When a respondent makes a claim for an
adjustment, it is the respondent's responsibility to provide a detailed
explanation of the adjustment as well as supporting documentation if
necessary. In its original questionnaire response, Onoda did not
provide documentation to support this adjustment. In a supplemental
questionnaire issued by the Department, we requested that Onoda provide
documentation to support its claim for a short-term interest income
offset. In response to this request, Onoda provided the Department with
two untranslated pages that are reported to be from a general ledger
showing bank interest earned by Onoda. Onoda's documentation is not
only ambiguous and untranslated, it also lacks a narrative response
explaining exactly how the documentation supports the deduction of
Onoda's short-term interest income from its interest expense.
Therefore, we have used the full interest figure in determining the
interest ratio for our COP calculations.
Comment 15
Onoda argues that the Department's methodology of using the mean
service station expense (SSLH) when calculating the COP directly
conflicts with the methodology employed in the 1990/92 review. Onoda
asserts that the Department should use the methodology it used in the
1990/92 review (i.e., calculating the total SSLH expense from the sales
tape, dividing this amount by the total gross value of home market
sales and then multiplying this percentage by the unit cost of
manufacture, and adding the resulting per unit amount to the COP).
Alternatively, Onoda urges the Department to use a weighted-average
SSLH expense in its calculations rather than a mean expense.
Petitioner argues that the methodology the Department used in the
1990/92 review would understate the amount of SSLH in COP, since the
cost of manufacture figure is a much lower number than the gross sales
price. Moreover, petitioner argues that the Department must treat SSLH
equally when calculating COP and home market price for the below-cost
test. Petitioner provides two methodologies it believes would result in
a fair treatment of SSLH costs in the sales-below-cost test: (1)
Calculate total SSLH as a percentage of total gross price, multiply
this percentage by the gross unit price, and add the resulting amount
to COP; or (2) calculate total SSLH as a percentage of total
manufacturing costs, multiply this ratio by COP, and add the resulting
amount to COP and net price.
Department's Position
In the 1990/92 review we calculated two COPs, one for the period
April 1990 through March 1991, and one for the period April 1991
through March 1992. The Department's goal in calculating two COPs was
to annualize costs in order to prevent the distortion of per unit
charges and adjustments due to the seasonal nature of the merchandise.
(Moreover, we did not simply divide the total SSLH by total QTYH as
given on the sales tape when calculating the two COPs since the sales
tape only covered the period October 31, 1990 through April 30, 1992.)
To calculate the per metric ton amount to add to the COP in the 1990/92
review, we first totaled the gross value (GRSVALH) and SSLH fields and
then divided total SSLH by total GRSVALH. We then multiplied the
resulting ratio by the total COM.
In this review, since the POR is one year, the Department does not
face the same situation (i.e., we do not have to annualize costs).
Accordingly, in this review, the Department followed its standard
practice and used a weighted-average, per unit, SSLH expense (i.e.,
total SSLH expense incurred divided by total quantity sold) and added
this amount to COP. The Department applied the weighted-average SSLH
expense reported by Onoda (in its case brief filed in response to the
Department's preliminary results of review) and added it to the COP.
The use of a weighted-average insures that SSLH expenses are accurately
represented in the sales-below-cost test.
The Department did not use the alternatives recommended by the
petitioner since it was our goal to calculate a per unit SSLH expense
to be added to COP since these expenses are reported in the home market
on a per unit basis.
Comment 16
Onoda argues that the Department should use the U.S. interest rate
for calculating imputed credit expenses associated with PP sales,
rather than Onoda's Japanese interest rate, since Onoda had access to
the lower U.S. interest rates.
Department's Position
We agree with Onoda. It is our practice to use U.S. interest rates
to calculate credit expenses incurred on U.S. sales when a respondent
demonstrates that it had either actual borrowings or access to U.S.
dollar loans during the period of review (see, e.g., Notice of Final
Determinations of Sales at Less Than Fair Value: Certain Hot-Rolled
Carbon Steel Flat Products, Certain Cold-Rolled Carbon Steel Flat
Products, Certain Corrosion-Resistant Carbon Steel Flat Products, and
Certain Cut-to-Length Carbon Steel Plate from France, 58 FR 37125 (July
9, 1993)). In the present case, Onoda's U.S. subsidiary, Lone Star
Northwest (LSNW), had access to U.S. dollar loans. Accordingly, for
these final results we have used the average U.S. interest rate
available to LSNW during the third quarter of 1992 for all PP sales.
Comment 17
Onoda disagrees with the Department's classification of U.S. port-
to-U.S. facility movement expense in its further manufacturing
calculations. Specifically, Onoda argues that the resulting allocations
between cost of manufacturing in Japan and value-added in the United
States are flawed. Onoda argues that these pre-value-added inland
freight expenses should be
[[Page 43768]]
considered part of the cost of materials of the imported product.
Onoda argues that based on Sec. 353.41(e) of the Department's
regulations and the wording of certain questions in the Department's
questionnaire, these costs should be attributed to the Japanese cost of
materials rather than to the amount of Onoda's U.S. further
manufacturing activities.
Onoda states that section 353.41(e) of the Department's
questionnaire directs the Department to reduce exporter's sales price
by the amount of ``(a)ny increased value resulting from a process of
production or assembly performed on the merchandise after importation
and before sale to a person who is not the exporter of the merchandise,
which value the Secretary generally will determine from the cost of
material, fabrication, and other expenses incurred in such production
and assembly.''
Onoda states that Sec. 353.41(e) clearly defines ``increased
value'' as that added by a manufacturing process or an assembly
operation after the merchandise is imported into the United States.
Onoda asserts that when a manufacturer merely moves a component or
product from the port to its factory, it does not perform a
manufacturing or assembly process on the imported merchandise.
Consequently, these movement costs should not be considered part of
U.S. value added.
With regards to the Department's questionnaire, Onoda states that
the section of the questionnaire entitled ``Further Processing''
discusses material costs in two places. Onoda refers to section 8A(1)
of the questionnaire which states: ``Material cost: Provide the
transfer prices of individual components, subassemblies and completed
units received by the U.S. affiliate(s) * * *'' Onoda states that this
definition of material cost refers to the price of the delivered item.
Onoda further cites Section 8A(1)(c) which states: ``Provide the actual
costs for all individual components * * * These should include the
price paid to the third party, transportation costs, and other costs
normally associated with materials costs.'' Accordingly, Onoda argues
that movement expense is defined as part of the materials costs, and,
therefore, transportation costs between the port and the factories
should be allocated entirely to the Japanese portion of the cement
cost. Onoda further states that in the cost of production and
constructed value portion of the questionnaire (question
VIII(3)(B)(2)(a)), the Department defines material cost as including
``the purchase price, transportation charges, duties and all other
expenses normally associated with obtaining the materials used in
production.'' Onoda argues that in each of these provisions, the
expense of transporting the material to the factory is defined as part
of the cost of materials. Onoda concludes that it follows that the
freight costs between the port and the terminals should be allocated
entirely to the Japanese portion of the cement cost.
Department's Position
We disagree with Onoda. It is the Department's established practice
to attribute all costs incurred after a product has arrived in the U.S.
to U.S. production costs when the product is further manufactured in
the United States. See Stainless Steel Hollow Products from Sweden;
Final Results of Antidumping Duty Administrative Review (57 FR 21389,
May 20, 1992) and Gray Portland Cement and Clinker from Japan; Final
Results of Antidumping Duty Administrative Review (58 FR 48826,
September 20, 1993).
Onoda correctly cites Sec. 353.41(e) of the Department's
regulations, but interprets the regulation too narrowly. The Department
has interpreted this regulation to include in further-manufacturing
expenses the cost of transporting the merchandise from the port to the
factory where further-manufacturing occurs. Only by incurring this
expense can increased value through the process of production occur.
Accordingly, the process of transporting the material is inextricably
linked to the ``process of production'' in further-manufactured sales.
Similarly, Onoda's cite to sections 8A(1) and 8A(1)(c) of the
Department's questionnaire to support its argument that movement costs
are considered part of materials costs is misleading. The Department
requests information on movement cost, but does not specifically state
that such costs should be allocated to the cost of materials in the
home market. Rather, as stated above, it is our practice to attribute
all costs incurred after a product has arrived in the United States to
U.S. production costs when the product is further-manufactured in the
United States.
Additionally, Onoda correctly cites the COP/CV section of the
questionnaire in explaining that in the home market, the expense of
transporting the material to the factory is defined as part of the cost
of materials which is then incorporated into the cost of manufacturing.
This is done so that the cost of materials and therefore, the cost of
manufacturing reflects all the expenses incurred during the production
process. Similarly, in further-manufacturing situations, the cost of
transporting the cement from the U.S. port to the U.S. factory is
included under ``process of production'' expenses used to determine
U.S. value added in order to accurately reflect all expenses incurred
during the further-manufacturing process.
Consistent with our established practice, we included freight
expense from the U.S. port to the U.S. plant in the U.S. further
manufacturing costs in establishing the relationship between U.S.
further manufacturing costs and total costs of the merchandise.
Comment 18
Onoda argues that the Department incorrectly calculated the profit
per transaction for each U.S. sale of ready-mix concrete by deducting
from the gross transaction price only the prompt payment discount and
the total cost of the further-manufactured product. Onoda argues that
the Department must also deduct from the gross price the cost of
delivery to the unrelated customer, including the associated insurance
cost, in order to calculate profit correctly. Onoda states that these
delivery costs are real costs, and, as such, directly reduce the profit
on each sale.
Petitioner argues that the Department should not adjust further
manufacturing profit to reflect LSNW's costs for ready-mix delivery and
related insurance. Petitioner states that, ``(i)n this case, Onoda asks
that the profit on further manufactured sales of concrete be reduced by
the costs incurred by Onoda to transport concrete'' to its unrelated
customers. Petitioner argues that the issue of whether ready-mix
delivery and insurance costs should be included in U.S. value added was
addressed and decided in the first review of this case where the
Department declined to include such costs in U.S. value added.
Department's Position
We agree with Onoda that the cost of delivery to the unrelated
customer, including the associated insurance cost, should be deducted
when determining the gross profit on further-manufactured sales since
these costs are real costs, and, as such, directly reduce the profit on
each sale. Therefore, we have revised our calculations in these final
results to ensure that freight and related insurance costs are deducted
from the gross price in calculating the profit on each U.S. sale.
Contrary to petitioner's statement, we did not address the issue of
[[Page 43769]]
transportation expenses in calculating the total profit in the last
review.
Final Results of Review
Based on our analysis of comments received, and the correction of
clerical errors, we have determined that a final margin of 24.27
percent exists for Onoda for the period May 1, 1992, through April 30,
1993.
The Department will instruct the Customs Service to assess
antidumping duties on all appropriate entries. Individual differences
between USP and FMV may vary from the percentage stated above. The
Department will issue appraisement instructions directly to the Customs
Service.
Furthermore, the following deposit requirements will be effective
for all shipments of the subject merchandise, entered or withdrawn from
warehouse, for consumption on or after the publication date of these
final results of administrative review, as provided by section
751(a)(1) of the Act: (1) The cash deposit rate for Onoda will be
24.27; (2) for merchandise exported by manufacturers or exporters not
covered in this review but covered in a previous review or the original
less-than-fair-value (LTFV) investigation, the cash deposit rate will
continue to be the rate published in the most recent final results or
determination for which the manufacturer or exporter received a
company-specific rate; (3) if the exporter is not a firm covered in
this review, earlier reviews, or the original investigation, but the
manufacturer is, the cash deposit rate will be that established for the
manufacturer of the merchandise in these final results of review,
earlier reviews, or the original investigation, whichever is the most
recent; and (4) the ``all others'' rate, as established in the original
investigation, will be 70.23 percent.
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 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 also serves as a reminder to parties subject to
administrative protective orders (APOs) 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
regulations and the terms of an APO is a sanctionable violation.
This administrative review and notice are in accordance with
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 353.22.
Dated: August 11, 1995.
Paul L. Joffe,
Deputy Assistant Secretary for Import Administration
[FR Doc. 95-20929 Filed 8-22-95; 8:45 am]
BILLING CODE 3510-DS-P