[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] ----------------------------------------------------------------------- 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. ----------------------------------------------------------------------- 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