[Federal Register Volume 64, Number 51 (Wednesday, March 17, 1999)]
[Notices]
[Pages 13148-13169]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-6402]
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DEPARTMENT OF COMMERCE
International Trade Administration
[A-201-802]
Gray Portland Cement and Clinker 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 September 10, 1998, the Department of Commerce published
the preliminary results of its administrative review of the antidumping
duty order on gray portland cement and clinker from Mexico. The review
covers one manufacturer/exporter, CEMEX, S.A. de C.V. (CEMEX), and an
affiliated party, Cementos de Chihuahua, S.A. de C.V. (CDC), and the
period August 1, 1996, through July 31, 1997. We gave interested
parties an opportunity to comment on the preliminary results. Based on
our analysis of the comments received, we have made changes, including
corrections of certain inadvertent programming and clerical errors, in
the margin calculation. These corrections and adjustments to margin
calculation program are described in the sections entitled ``6.
Difference-in-Merchandise Information'' and ``18. Ministerial Errors,''
of the Issues Appendix. The final weighted-average dumping margin for
CEMEX and CDC is 49.58 percent ad valorem.
EFFECTIVE DATE: March 17, 1999.
FOR FURTHER INFORMATION CONTACT: Diane Krawczun, Anne Copper, or George
Callen; Import Administration, International Trade Administration, U.S.
Department of Commerce, 14th Street and Constitution Avenue, NW.,
Washington, DC. 20230; telephone (202) 482-0198, (202) 482-0090, and
(202) 482-0180, respectively.
SUPPLEMENTARY INFORMATION:
Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute are
references to the provisions effective January 1, 1995, the effective
date of the amendments made to the Tariff Act of 1930 (the Act) by the
Uruguay Round Agreements Act (URAA). In addition, unless otherwise
indicated, all citations to the Department of Commerce's (the
Department's) regulations are to the regulations at 19 CFR part 351
(1998).
Background
On September 10, 1998, the Department published in the Federal
Register the preliminary results of its administrative review of the
antidumping duty order on gray portland cement and clinker from Mexico.
Preliminary Results of Antidumping Duty Administrative Review: Gray
Portland Cement and Clinker From Mexico, 63 FR 48471 (1998)
(preliminary results). The Southern Tier Cement Committee (the
petitioner) submitted its case brief on October 13, 1998; CEMEX and CDC
submitted case briefs on October 30, 1998. CDC re-submitted its case
brief on December 2, 1998. The petitioner, CEMEX, and CDC submitted
their rebuttal briefs on November 3, 1998. The Department held a public
hearing on November 20, 1998. All issues raised in the case and
rebuttal briefs by parties to this administrative review are addressed
in the ``Issues Appendix,'' which is appended to this notice of final
results. The Department has now completed this review in accordance
with section 751(a) of the Act.
Scope of the Review
The products covered by this review include gray portland cement
and clinker. Gray portland cement is a hydraulic cement and the primary
component of concrete. Clinker, an intermediate material product
produced when manufacturing cement, has no use other than being ground
into finished cement. Gray portland cement is currently classifiable
under the Harmonized Tariff Schedule (HTS) item number 2523.29 and
cement clinker is currently classifiable under HTS item number 2523.10.
Gray portland cement has also been entered under HTS item number
2523.90 as ``other hydraulic cements.'' The HTS subheadings are
provided for convenience and customs purposes only. The Department's
written description remains dispositive as to the scope of the product
coverage.
Verification
Pursuant to section 782(i) of the Act, we verified information
provided by CEMEX using standard verification procedures, including on-
site inspection of the manufacturer's facilities and the examination of
relevant sales and financial records, and selection of original
documentation containing relevant information. Our verification results
are outlined in public versions of the verification reports, dated
August 21, 1998, and located in the public file in Room B-099 of the
Department's main building.
Final Results of Review
We determine that the following weighted-average margin exists for
the period August 1, 1996, through July 31, 1997:
------------------------------------------------------------------------
Company Margin
------------------------------------------------------------------------
CEMEX/CDC................................................. 49.58%
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The Department shall determine, and the Customs Service shall
assess, antidumping duties on all appropriate entries. The Department
shall issue appraisement instructions directly to the Customs Service.
For assessment purposes, we have calculated an importer-specific duty
assessment rate for the merchandise based on the ratio of the total
amount of antidumping duties calculated for the examined sales to the
total entered value of sales examined.
Furthermore, the following deposit requirements shall be effective
upon publication of this notice of final results of review for all
shipments of gray portland cement and clinker from Mexico, entered, or
withdrawn from warehouse, for consumption on or after the publication
date, as provided for by section 751(a)(1) of the Act: (1) The cash
deposit rate for CEMEX/CDC will be 49.58 percent; (2) for previously
investigated or reviewed 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
or any previous reviews or the original less-than-fair-value (LTFV)
investigation, but the manufacturer is, the cash deposit rate will be
the rate established for the most recent period for the manufacturer of
the merchandise; and (4) if neither the exporter nor the manufacturer
is a firm covered in this review, the cash deposit rate will continue
to be 61.85 percent, which was the ``all others'' rate in the LTFV
investigation. See Final Determination of Sales at Less Than Fair
Value: Gray Portland Cement and Clinker from Mexico, 55 FR 29244
(1990).
The deposit requirements shall remain in effect until publication
of the final results of the next administrative review.
This notice serves as a final reminder to importers of their
responsibility
[[Page 13149]]
under 19 CFR 351.402(f) 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 order (APO) of their responsibility
concerning the disposition of proprietary information disclosed under
APO in accordance with 19 CFR 351.305. Timely 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.
We are issuing and publishing this determination in accordance with
sections 751(a)(1) and 777(i)(1) of the Act.
Dated: March 9, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
Issues Appendix Contents
1. Revocation of the Underlying Order
2. Collapsing
3. Facts Available/CEMEX's Hidalgo Sales
4. As Invoiced vs. As Produced
5. Ordinary Course of Trade
6. Difference-in-Merchandise Information
7. Level-of-Trade Determination for CEP Sales
8. CEP Offset Justification
9. CEP Calculation
10. Regional Assessment
11. Bulk vs. Bag Sales
12. Rebates
13. Freight
14. Other Adjustments
15. Pre-sale Warehousing
16. Advertising Expenses
17. Ministerial Errors
1. Revocation of the Underlying Order
CEMEX and CDC argue that the Department must terminate this review
and revoke the underlying antidumping duty order. CEMEX contends that
at the time of the initiation of the original LTFV investigation
(October 16, 1989), the Department assumed that the petition was filed
``on behalf of'' a regional industry without measuring whether a
majority of the industry actually supported the request. The Department
should have done so, CEMEX argues, because a July 1992 General
Agreement on Tariffs and Trade (GATT) panel decided that the 1979
antidumping code required that an antidumping petition filed ``on
behalf of'' an industry must be supported by an appropriate majority of
the industry and that such support must be ascertained prior to
initiating an investigation. According to CEMEX, the panel's decision
applies to the instant administrative review for two reasons:
(1) The Antidumping Agreement resulting from the Uruguay Round
negotiations adopted the requirement of industry support articulated by
the GATT panel. CEMEX asserts U.S. law incorporated the new standing
requirements contained in the Antidumping Agreement, citing section
732(c)(4)(C) of the Act.
(2) Even if the pre-URAA antidumping law applies, the antidumping
statute that was in effect in 1989 did not define the term ``on behalf
of.'' CEMEX argues that the Department is compelled by the decision in
Murray v. Schooner Charming Betsy, 6 U.S. 64, 2 Cranch 64 (1804), to
reinterpret U.S. law in accordance with the international obligations
of the United States.
Based on the above, CEMEX asserts that the Department is therefore
required in this review to revisit the issue of initiation in the
original LTFV investigation.
According to CDC, the plain language of section 771(4)(C) of the
Act requires petitions in regional-industry cases to be filed on behalf
of the producers which account for ``all, or almost all, of the
production in the region.'' Since the antidumping order covering cement
from Mexico was based on a petition that was unsupported by producers
accounting for all or almost all of the region's production, CDC
asserts, the Department issued the order in violation of U.S. law.
CDC argues that lack of standing to file an antidumping duty
petition is a ``jurisdictional'' defect which parties may raise at any
time. Citing Zenith Electronics Corp. v. United States, 872 F. Supp.
992 (CIT 1994) (Zenith Electronics), Gilmore Steel Corp. v. United
States, 585 F. Supp. 670 (CIT 1984) (Gilmore Steel), and Oregon Steel
Mills, Inc. v. United States, 862 F.2d 1541 (Fed. Cir. 1988) (Oregon
Steel Mills), CDC contends that the Department has the authority to
revoke an order that never had the requisite level of industry support.
The petitioner argues that the Department initiated the original
antidumping investigation properly. The petitioner notes that CEMEX and
CDC raised the issue of whether the Department initiated the
investigation improperly in the third, fourth, fifth, and sixth reviews
and were unsuccessful without exception. The petitioner also notes that
both parties challenged the initiation of the LTFV investigation before
a North American Free Trade Agreement (NAFTA) panel to review the final
results of the third administrative review. In a unanimous opinion
issued on September 13, 1996, according to the petitioner, the panel
rejected the claims that CEMEX and CDC advance here.
The petitioner also contends that respondents' claim is barred by
the statute of limitations, requiring that appeals to the decision to
initiate an investigation be filed within 30 days of the publication of
the antidumping order. The petitioner also contends that respondents
did not raise the issue in the now-concluded U.S. Court of
International Trade (CIT) appeal from the Department's final
determination in the original investigation. Furthermore, the
petitioner cites the Department's sixth review final results (Gray
Portland Cement and Clinker From Mexico, 63 FR 12764 (March 16, 1998)
(Sixth Review Final Results)), in which the Department noted that panel
reports under the 1947 GATT were not self-executing and had no legal
effect under U.S. law and that neither the 1947 GATT nor the 1979 GATT
Antidumping Code obligated the United States to establish industry
support in regional-industry cases.
The petitioner contends that the Department lacks authority under
the statute to rescind its decision to initiate or to re-examine the
issue of industry support in a review. Finally, citing Suramerica de
Aleaciones Laminada, C.A. v. United States, 966 F. 2d 660 (Fed. Cir.
1992) (Suramerica), and the Sixth Review Final Results, the petitioner
asserts that courts have affirmed the Department's presumption of
industry support.
Department's Position: We agree with the petitioner that, as we
stated in our Sixth Review Final Results, the Department has no
obligation to determine whether a majority of the industry or the
region supported the petition.
Neither the 1947 GATT nor the 1979 GATT Antidumping Code obligated
the United States to establish affirmatively prior to the initiation of
a regional-industry case that all or almost all of the producers in the
region supported the petition. Neither instrument suggested that the
standing requirements in regional-industry cases were any more rigorous
than the standing requirements in national-industry cases.
Furthermore, GATT panel reports, such as the report issued in 1992,
had no legal effect or formal status unless and until they were adopted
by the
[[Page 13150]]
GATT Council or, in the case of antidumping measures, the GATT
Antidumping Code Committee. This followed from the fact that the 1947
GATT operated, throughout its history, on the basis of consensus for
purposes of decision-making in general and the resolution of disputes
in particular. It is undisputed in the present case that the
Antidumping Code Committee never adopted the GATT panel report. Thus,
the recommendations contained in the report were never binding, did not
impose any international obligations upon the United States, and did
not trigger the rule of statutory construction set forth in Murray v.
Schooner Charming Betsy.
The object of respondents' comments is not the preliminary results
of this review. Rather, respondents challenge the initiation of the
original LTFV investigation--an event which occurred almost ten years
ago and over five years before the effective date of the URAA. The time
to voice such objections before the Department was during the
investigation. Instead, CEMEX and CDC, as well as the other Mexican
cement producer that participated in the original investigation
(Apasco, S.A. de C.V.), did not raise this argument before the
Department. See Final Determination of Sales at Less Than Fair Value;
Gray Portland Cement and Clinker From Mexico, 55 FR 29244 (1990)
(Original LTFV Investigation). Moreover, neither CEMEX nor any other
party appealed the agency's final affirmative LTFV determination
(including the decision to initiate) to the appropriate court, and the
deadline for doing so has long expired. See section 516A of the Act.
Therefore, even if the Department, of its own volition, were to
reinterpret U.S. law in light of the 1992 GATT panel report, it lacks
the legal authority in this review to revoke the order or otherwise
rescind the initiation of the underlying investigation. See also Gray
Portland Cement and Clinker from Mexico; Final Results of Antidumping
Duty Administrative Review, 62 FR 17581 (1997) (Fourth Review Final
Results); Gray Portland Cement and Clinker from Mexico; Final Results
of Antidumping Duty Administrative Review, 62 FR 17148 (1997) (Fifth
Review Final Results); Sixth Review Final Results.
The cases cited by CEMEX and CDC are inapposite. None of them
supports the argument that the Department has the authority, in an
administrative review under section 751(a) of the Act, to reach back
almost ten years and reexamine the issue of industry support for the
original petition. In Gilmore Steel, the plaintiff contended that the
Department lacked the authority to rescind the investigation based upon
insufficient industry support for the petition after the 20-day period
established in section 732(c) of the Act had elapsed. 585 F. Supp. at
673. In Zenith Electronics, the plaintiff alleged that the petitioner
was no longer a domestic ``interested party'' with standing to request
an administrative review. 872 F. Supp. at 994. Nothing in Zenith
Electronics or Gilmore Steel supports CDC's argument that a party may
challenge industry support for a petition almost ten years after the
fact in the context of an administrative review under section 751(a) of
the Act.
Oregon Steel Mills involved a challenge to the Department's
authority to revoke an antidumping duty order based upon new facts,
i.e., the industry's affirmative expression of no further support for
the antidumping order, not upon a reexamination of the facts as they
existed during the original LTFV investigation. The Federal Circuit
held that it was lawful for the Department, in the context of a
``changed circumstances'' review pursuant to section 751(b) of the Act,
to revoke an order over the objection of one member of the industry.
862 F.2d at 1544-46. The court did not state that industry support for
an order must be affirmatively established throughout the life of an
order. Indeed, the court went to lengths to explain that it was not
ruling on the claim that ``loss of industry support for an existing
order creates a `jurisdictional defect.' '' Id. at 1545 n. 4. As courts
explained subsequently, the holding in Oregon Steel Mills is limited to
the proposition that the Department may, but need not, revoke an order
when presented with record evidence which demonstrates a lack of
industry support for the continuation of the order. See, e.g.,
Suramerica at 666 and Citrosuco Paulista, S.A. v. United States, 704 F.
Supp. 1075, 1085 (CIT 1988) (Citrosuco).
Finally, we note, as we did in the final results of the third,
fourth, fifth, and sixth administrative reviews, that numerous courts
upheld our practice under the pre-URAA statute of assuming, in the
absence of evidence to the contrary, that a petition filed on behalf of
a regional or national industry is supported by that industry. See,
e.g., NTN Bearing Corp. v. United States, 757 F. Supp. 1425, 1427-30
(CIT 1991), Citrosuco at 1085, and Comeau Seafoods v. United States,
724 F. Supp. 1407, 1410-12 (CIT 1989). Indeed, this issue raised by
CEMEX and CDC was before the Federal Circuit in the Suramerica case
(966 F.2d at 665, 667). In Suramerica the plaintiffs challenged the
Department's interpretation of the phrase ``on behalf of'' which
applied to both national- and regional-industry cases. In affirming the
Department's practice, the court observed that the phrase ``on behalf
of'' was not defined in the statute. Id. at 666-67. The statute was, in
fact, open ``to several possible interpretations.'' In the opinion of
the court, the Department's practice with regard to standing and
industry support for a petition reflected a reasonable ``middle
position.'' 966 F.2d at 667. While there was a gap in the statute, the
court stated, ``Congress did make (one thing) clear--Commerce has broad
discretion in deciding when to pursue an investigation, and when to
terminate one.'' Id. Therefore, we reject respondents' arguments that
we lack the authority to assess antidumping duties pursuant to these
final results of review and that we must revoke the underlying duty
order.
2. Collapsing
CDC argues that the Department's decision to collapse CDC and CEMEX
is contrary to law and the Department's established practice, and it is
unsupported by the record of this review. CDC cites Antifriction
Bearings (Other Than Tapered Rolling Bearings) and Parts Thereof From
the Federal Republic of Germany, Final Determination of Sales at Less
Than Fair Value, 54 FR 18992, 19089 (1989), in which the Department
stated that ``it is the Department's general practice not to collapse
related parties except in relatively unusual situations, where the type
and degree of relationship is so significant that we find that there is
strong possibility of price manipulation.''
CDC asserts that the preamble to the Department's 1997 regulations
supports this policy by rejecting a recommendation that the Department
collapse upon finding ``any potential for price manipulation.'' CDC
notes further that, in Nihon Cement Co. v. United States, 17 CIT 400
(1993), the court criticized the Department for failing to discuss key
collapsing criteria, adding that the Department had to consider all the
criteria, although each of them need not be met.
CDC contends that the Department based its decision to collapse on
an inadequate analysis of the collapsing factors (i.e., affiliation,
similar production facilities and the potential for price manipulation)
and a lack of record evidence. CDC asserts that, although it is
affiliated with CEMEX, affiliation alone is insufficient for
[[Page 13151]]
collapsing producers, according to the Department's policy.
CDC contends that the Department's conclusion regarding whether
CEMEX and CDC have similar production facilities is without basis. CDC
claims that the cement CEMEX and CDC export to the United States are
not the same type product and that CDC would have to take on
substantial retooling at its plant in order to produce the cement type
that CEMEX exports to the United States.
CDC also contends that the Department erroneously determined that
there was a significant potential for price manipulation. According to
CDC, the Department relied on evidence of the level of common ownership
and overlapping boards of directors, but not on intertwined business
operations. Regarding common ownership, CDC notes that CEMEX is only a
minority shareholder in CAMSA (CDC's parent company) and the majority
of shares are still retained by CDC. CDC asserts that its sale of stock
to CEMEX was purely a business decision and CEMEX's share does not
constitute a controlling interest under Mexican law.
Regarding overlapping boards of directors, CDC acknowledges that
members of CEMEX's management sit on the boards of directors of CDC and
its affiliated companies. However, CDC asserts, (1) CEMEX's
representatives are in the minority on all of these boards; (2) CDC's
pricing and production are not discussed at the board meetings of CDC
or any of the group's companies; (3) the Terrazas/Marquez families are
in the majority on all boards; and (4) CEMEX's interest in CDC is only
that of a passive investor.
As mentioned above, CDC argues that the Department did not address
the criteria of intertwined business operations. CDC asserts that the
factual basis upon which the Department relied in finding that this
criterion was satisfied in prior reviews does not exist in this review.
CDC claims that: (1) The companies do not share information on possible
sales opportunities in Mexico or the United States and there is no
coordination of sales, pricing or marketing policies; (2) CEMEX has no
involvement in CDC's pricing, sales and production decisions; (3) CDC
states that CDC and CEMEX do not share facilities or employees and that
each company has its own facilities, employees, and accounting records;
and (4) there were no commercial transactions between the parties
during the POR.
CDC states that, in past cases, the Department has relied on other
factors in determining whether to collapse affiliated companies and
that all these factors support not collapsing. CDC claims that
suppliers do not bill CDC and CEMEX jointly, each company has its own
distinct sales and distribution process and U.S. importer, and the
companies do not supply any material inputs to each other.
CDC distinguishes the facts in this case from those in Queen's
Flowers de Colombia v. United States, 981 F. Supp 617 (CIT 1997)
(Queen's Flowers). CDC asserts that, unlike the Queen's Flowers
decision, collapsing is not needed to prevent circumvention of the
antidumping law by means of significant manipulation of pricing or
production. CDC asserts that in the cement industry high inland freight
costs limit CDC's natural market; therefore, regardless of the
antidumping margin, CDC cannot increase its market beyond these
geographic constraints. Finally, CDC argues that CEMEX, as an indirect
minority shareholder, cannot authorize CDC to change its pricing and
production policies.
The petitioner argues that the Department should collapse CDC and
CEMEX as it has in previous reviews and in the LTFV investigation. The
petitioner asserts that CDC has provided no new evidence which would
reverse the Department's position.
The petitioner states that CDC concedes that the first prong of the
collapsing test (i.e., affiliation) is met. Regarding similar
production facilities, the petitioner asserts that the Department found
that substantial retooling of CEMEX or CDC's facilities would not be
necessary to produce cement Types II and V. The petitioner argues that
CDC's claim that CDC and CEMEX do not produce the same product for
export to the United States was rejected by the Department as untimely.
However, even if the Department considers CDC's assertions, the
petitioner argues, there is no evidence to support CDC's claims.
The petitioner agrees with the Department's determination that
there is a potential for price manipulation. The petitioner asserts
that the level of common ownership between CEMEX and CDC and other
relationships demonstrates that CEMEX has effective control of CDC. The
petitioner argues that the Department has collapsed in numerous cases
where there is less than a majority interest in another party, focusing
on joint manipulation of prices or production, not control.
Next, the petitioner claims that the level of shared board members
indicates a significant potential for the sharing of information about
pricing and production. Despite CDC's argument that pricing and
production issues are not discussed at board meetings, the petitioner
notes that nothing in Mexican law or company policy prohibits these
issues from being discussed, including a scheme to manipulate
production or price.
Furthermore, the petitioner asserts that the following facts
demonstrate that CEMEX and CDC have intertwined business operations:
(1) CEMEX and CDC formerly shipped to the United States through the
same distribution channel; (2) CEMEX provides CDC with consulting
services and assistance in marketing and exports; and (3) a 1996
financial report stated that CDC's affiliation with CEMEX positively
influenced CDC's stock.
Finally, the petitioner claims that the Department has expressly
rejected the argument that it may only collapse affiliated producers in
``exceptional'' circumstances. The petitioner cites the Department's
determination in Stainless Steel Wire Rod from Sweden, 63 FR 40449,
40453 (1998). The petitioner disagrees with CDC's assertion that
circumvention as described by the Department in Fresh Cut Flowers from
Columbia is not practicable because of the special characteristics of
the cement industry and ``the unique geographical features of CDC's
market.'' According to the petitioner, the record evidence demonstrates
that there is a natural overlap in the U.S. market for imports from CDC
and CEMEX. The petitioner states that the two producers can reallocate
their geographic shares of the Mexican market in a manner that
manipulates the dumping margin and circumvents the order.
Department's Position: We agree with CDC that we must consider all
relevant factors when collapsing two affiliated parties. Section
351.401(f) of the Department's regulations describes when the
Department will treat two or more affiliated producers as a single
entity (i.e., ``collapse'') for purposes of calculating a dumping
margin: (1) The producers must be affiliated, (2) the producers must
have production facilities that are sufficiently similar so that a
shift in production would not require substantial retooling, and (3)
there must be a significant potential for the manipulation of price or
production.
First, it is uncontested that CEMEX and CDC are affiliated within
the meaning of section 771(33)(E) of the Act.
Second, a shifting of production between CEMEX and CDC would not
require substantial retooling given the descriptions of respondents'
production facilities and the fact that respondents produce a fungible
product, gray
[[Page 13152]]
portland cement. (See CEMEX's December 8, 1997, submission and CDC's
November 10, 1997, submission.) Furthermore, we have not considered
CDC's argument regarding the shifting of production since we rejected
the information as untimely. (See Memorandum to File Removing Untimely
Information Submitted by CDC, dated November 30, 1998.) Thus, based on
the evidence on the record we have concluded that a shift in production
would not require substantial retooling.
Third, the Department may consider, inter alia, the following
factors in identifying the potential for manipulation of price or
production: (1) Level of common ownership; (2) whether managerial
employees or board members of one of the affiliated producers sit on
the board of directors of the other affiliated person; and (3) whether
operations are intertwined, such as through the sharing of sales
information, involvement in production and pricing decisions, the
sharing of facilities or employees, or significant transactions between
the affiliated producer. The level of common ownership and cross-board
members, provides a mechanism for the two parties to share pertinent
pricing and production information, as well as intertwined business
operations, given that CEMEX owns indirectly a large percentage of CDC
and that CEMEX's managers and directors sit on the board of directors
of CDC and its affiliated companies. The Department finds that, if CDC
and CEMEX are not collapsed, there is a significant potential for price
manipulation which could undermine the effectiveness of the order. The
decision to collapse is based upon the facts established on the record
for this period of review. These facts are similar to the facts
established on the record of the fifth and sixth reviews. A complete
analysis surrounding the Department's decision to collapse CDC and
CEMEX, requiring reference to proprietary information, is contained in
the Department's memorandum from Roland L. MacDonald to Joseph A.
Spetrini, dated August 31, 1998, located in the official file of this
case.
3. Facts Available/CEMEX's Hidalgo Sales
Comment 1: The petitioner argues that the Department should base
CEMEX's dumping margin on total adverse facts available, i.e., the
109.43 percent calculated on judicial remand in the second review, for
this review completely. The petitioner contends that CEMEX's reporting
of incorrect information regarding its Hidalgo sales, its cancellation
of verification, its provision of inadequate and delayed explanations
to the Department with respect to the cancellation, and its failure to
provide requested difference-in-merchandise (DIFMER) information
warrant the application of total adverse facts available in this
review. The petitioner also argues that the Department should describe
more fully, for the final results of this review, the circumstances
surrounding the use of adverse facts available with regard to CEMEX's
Hidalgo sales in the preliminary results of this review.
The petitioner asserts that, prior to May 15, 1998, CEMEX had
represented to the Department that its Hidalgo plant produced only Type
I cement and not Type V cement. The petitioner argues that CEMEX, on
May 15, 1998, canceled verification unilaterally, which was scheduled
to begin on May 18, 1998, because it became obvious that the Department
would discover at verification that CEMEX's Hidalgo plant produced and
sold cement meeting Type V specifications. The petitioner argues that
CEMEX, a highly experienced respondent, could have discovered the
Hidalgo sales information readily prior to verification, should have
provided the Department with corrected sales information prior to May
15, 1998, and should have proceeded with the verification on the
scheduled date. The petitioner maintains that CEMEX provided inadequate
and untimely explanations for its cancellation of verification that
could only be seen as an effort to engage in damage control, which
illustrates CEMEX's failure to provide full and accurate information.
The petitioner contends that CEMEX's delay tainted the integrity of the
Department's verification conducted July 20 through 31, 1998.
The petitioner asserts that the Department has used adverse facts
available or best information available consistently in cases where a
respondent refused to allow the Department to conduct verification, as
in Tapered Roller Bearings And Parts Thereof, Finished And Unfinished,
From The People's Republic of China, 62 FR 36,764 (1997), Silicon Metal
From Argentina, 60 FR 35551 (1995), and Sweaters Wholly Or In Chief
Weight of Man-Made Fiber From Taiwan, 58 FR 63913 (1993). The
petitioner also contends that the Department erred in using partial
adverse facts available as it was not sufficiently adverse to CEMEX,
given CEMEX's failure to cooperate with the Department.
CEMEX responds that the Department's use of CEMEX's verified sales
information as the basis of its dumping margin, rather than total facts
available, is proper and that the petitioner's allegation is incorrect
in law and fact. CEMEX contends that, after the Department conducted
U.S. sales verifications but before the home market (HM) verifications
were to begin, CEMEX discovered a discrepancy in its database regarding
its Hidalgo sales which amounted to less than one percent of CEMEX's
total HM sales. CEMEX argues that, to correct its submissions and
reschedule verification, it requested an extension of time in
accordance with the Department's statutory scheme. CEMEX notes that the
Department verified CEMEX's U.S. and HM database and issued the
preliminary results within its statutory deadlines. CEMEX concludes
that the Department's decision was in accordance with the statutory
requirement that determinations be based upon record information as
verified by the Department set forth in section 782(i)(3) of the Act.
CDC asserts that the petitioner's argument that the Department
should apply total facts available to CEMEX reinforces CDC's argument
that it should not be collapsed with CEMEX. Rather, according to CDC,
it should receive a separate rate as discussed in Issue 2,
``Collapsing,'' above. CDC maintains that a decision by the Department
to rely on facts available, to any extent, for CDC's indirect minority
shareholder punishes CDC unfairly.
Department's Position: Section 776(a) of the Act requires the
Department to use facts otherwise available when necessary information
is not on the record or an interested party withholds requested
information, fails to provide such information in a timely manner,
significantly impedes a proceeding, or provides information that cannot
be verified. Section 776(b) of the Act authorizes the Department to use
an adverse inference in determining the facts otherwise available
whenever an interested party has not cooperated with the Department by
not acting to the best of its ability to comply with requests for
information.
First, with respect to its Hidalgo sales, CEMEX provided inaccurate
information and sought to submit corrected information after the
deadline for the submission of factual information had passed. Because
CEMEX provided information regarding its Hidalgo sales in an untimely
manner, we were unable to verify this information. Therefore, pursuant
to section 776(d) of the Act, we have used facts available to establish
the normal value (NV) of CEMEX's Hidalgo sales in
[[Page 13153]]
the home market. In addition, we note that the nature and timing of
CEMEX's cancellation of the home-market verification the last business
day before it was scheduled to begin was unprecedented. Given CEMEX's
actions, we determine that CEMEX did not act to the best of its ability
to provide accurate and timely information for use in our review and
therefore our use of an adverse inference is appropriate under section
776(b) of the Act. Therefore, as facts available, we substituted the
highest calculated NV in this review for all HM sales of cement
produced at Hidalgo.
We disagree with the petitioner that we should have used total
adverse facts available in determining a margin. In determining whether
the use of total adverse facts available was appropriate, we considered
several factors. We considered the degree of overall cooperation we
received from CEMEX at the time of our initially planned verification
and the small proportion of HM sales affected by CEMEX's error. We
determined that, despite the delay caused by CEMEX's cancellation, we
were able to verify, with the exception of CEMEX's Hidalgo sales data,
CEMEX's timely reported data and complete the administrative review
within the timelines prescribed by the statute and our regulations.
Accordingly, by using the highest calculated NV in this review for all
sales of cement produced by Hidalgo as adverse facts available, we have
applied facts available in a manner that is significantly adverse to
CEMEX's interests. (See our response to Comment 2, below.) We consider
this decision to be consistent with the Statement of Administrative
Action, Agreement on Implementation of Article VI of the GATT (SAA) (at
870), and section 776 of the Act.
Comment 2: CEMEX contends that the Department should use its
corrected sales database for the Hidalgo plant to calculate NV. The
Department, CEMEX claims, has the authority under Sec. 351.301(c)(2) of
the regulations to accept and use this information which the Department
rejected as untimely filed. CEMEX also contends that the Department's
two-week verification confirms the overall integrity of CEMEX's
response, including data not verified.
The petitioner responds that the Department relied correctly upon
adverse facts available for CEMEX's Hidalgo sales and that CEMEX
provided no reason why the Department erred in using adverse facts
available for its Hidalgo sales. The petitioner notes that the
Department's regulations require the rejection of Hidalgo sales
information as untimely filed and that for the Department to accept
CEMEX's Hidalgo sales information would deprive the petitioner of the
chance to comment. The petitioner rejects CEMEX's argument that the
Department verified the overall integrity of CEMEX's home-market data,
noting that the Department rejected and returned CEMEX's revised
Hidalgo sales data.
Department's Position: As noted in the preliminary results,
although all data from the Hidalgo plant was reported as relating to
sales or production of only Type I cement, prior to the commencement of
verification, CEMEX notified the Department that the merchandise
produced at its Hidalgo plant was either Type V or Type I. See CEMEX's
June 3, 1998, submission explaining the discovery of misreported sales
at Hidalgo. CEMEX filed a submission on June 16, 1998, revising the
home-market sales database for sales of Type V cement from Hidalgo. As
this submission constituted unsolicited factual information received
after the deadline for submitting factual information under
Sec. 351.302(d)(1)-(2) of our regulations, we rejected the submission
on June 25, 1998. (See Department's Letter to CEMEX Rejecting Revised
Database as Untimely Filed Information, dated June 25, 1998.)
While we recognize that Sec. 351.301(c)(2) of our regulations
authorizes us to request factual information at any time during the
proceeding, allowing a party to re-submit information already rejected
as untimely would contravene the purpose of the established deadline
for the submission of factual information. As a result, we did not
request this information pursuant to Sec. 351.301(c)(2) of our
regulations. In addition, we reject CEMEX's assertion that we should
accept its untimely filed Hidalgo information because we verified the
overall integrity of its HM database. We did not verify the accuracy of
the Hidalgo information that CEMEX submitted improperly; rather we
rejected it as described above. Accordingly, CEMEX's revised, rejected
HM database cannot be considered part of the information we verified.
4. As Invoiced vs. As Produced
The petitioner contends that the Department erred by matching
merchandise in this review on the basis of the ASTM cement type ``as
produced'' rather than matching, as it had done in the original
investigation and in the first five administrative reviews, on an ``as
invoiced'' basis. The petitioner notes that the Department departed
from its consistent ``as invoiced'' matching methodology at CEMEX's
request after the Department discovered in the sixth review that all
cement produced in the Hermosillo plants, though sold as Types I, II,
and V, was physically Type V. The petitioner asserts that CEMEX altered
its production and shipping arrangements for Type II cement to lower
the dumping margin artificially.
The petitioner contends that matching identical products by ASTM
type ``as invoiced'' reflects commercial reality and allows for a fair
comparison as required by the statute. The petitioner asserts that the
Department has noted that courts have recognized the Department's
``broad discretion `to choose the manner in which ``such or similar'
merchandise shall be selected,' '' citing Certain Cold-Rolled Carbon
Steel Flat Products From Germany, 60 FR 65264, 65271 (1995) (Cold-
Rolled From Germany). The petitioner states further that cement
customers are only concerned that the cement they purchase meets the
ASTM type they have specified and are indifferent to whether the type
they purchase may satisfy the specifications of another cement type.
Thus, the petitioner maintains, prices of cement vary according to the
invoiced type and not the actual physical specifications. In addition,
the petitioner argues, no cement meeting the same ASTM specifications
is identical and cement can possess a broad range of characteristics.
The petitioner contends that to base matching criteria on physical
characteristics, as CEMEX propounds, results in a commercially
meaningless and an ``apples-to-oranges'' comparison. Indeed, the
petitioner asserts, CEMEX's arguments in prior segments of this
proceeding establish that the differences in specifications of cement
CEMEX sells are commercially significant.
The petitioner asserts that the Department should remain consistent
with its longstanding approach of matching identical merchandise based
on whether the products meet the same commercially significant
characteristics, citing, e.g., Certain Cut-To-Length Carbon Steel From
Finland, 62 FR 18468, 18470 (1997) (Cut-To-Length From Finland). The
petitioner argues that neither new facts nor legal justification exist
for departing from the Department's longstanding methodology of
matching cement ``as invoiced'' in the final results of this review.
Citing Cut-To-Length From Finland, the petitioner notes the
Department's finding that it would be inconsistent with its matching
criteria to consider products sold to
[[Page 13154]]
different specifications as identical. Id. at 18470.
CEMEX responds that the Department matched identical merchandise
properly on the basis of the ASTM specification to which the cement was
produced. CEMEX argues that matching merchandise according to how it
was sold does not meet the statutory requirement of section 771(16) of
the Act, which requires ``foreign like product'' to include only
merchandise sold in the home market that is physically identical with
the merchandise produced for sale to the United States. CEMEX argues
that, as the Department recognized in the Sixth Review Final Results,
the statute compels the Department to base NV on its sales of cement
that meet the customers' specifications physically. CEMEX notes that
the petitioner raises the same arguments and cites to the same cases
already rejected by the Department in the sixth review and in the
preliminary results of this review. CEMEX contends that the prior
determinations which the petitioner cites do not support its argument
because they involved the identification and order of matching
characteristics, which are not at issue here. CEMEX notes that, in this
case, no party disputes that product characteristics of cement are
determined on the highest ASTM specifications that it meets. Therefore,
CEMEX concludes, the Department's identification of HM cement sales
pursuant to the highest ASTM specifications to which the cement is
produced continues to be in accordance with law.
CDC, like CEMEX, argues that the Department's decision to match
sales on cement type ``as produced'' is justified on the record of this
review and that this methodology should be applied consistently to
CDC's margin calculations.
Department's Position: We agree, in part, with CEMEX. Section
771(16)(A) of the Act expresses a clear preference for matching sales
in the United States with sales in the home market of merchandise that
is ``identical in physical characteristics.'' See CEMEX, S.A. v. United
States, 133 F.3d 897 (Fed. Cir. 1988) (CEMEX v. U.S.). When
circumstances require the Department to compare non-identical
merchandise, the statute, at section 773(a)(6)(C)(ii) of the Act,
provides for a ``difference-in-merchandise'' adjustment (DIFMER) which
is normally equal to the difference in cost of production attributable
to differences in physical characteristics. See also 19 CFR 351.411.
Since the inception of this proceeding, we have seen that all
cement conforms generally to the standards established by the ASTM.
These standards tend to classify cement according to all significant
physical characteristics, dimensional characteristics and/or
performance properties. Also from the outset, interested parties and
the Department have used ASTM standards to identify merchandise subject
to this antidumping order and to establish how, and on what basis, the
Department should match sales of identical or similar merchandise.
Specifically, the Department has sought, wherever possible, to match
sales of ASTM standard Type II to Type II, ASTM standard Type V to Type
V, and so forth.
During the period covered by the original investigation, the
Department discovered one or more instances where Mexican producers
sold cement meeting one ASTM standard on the basis of cement meeting a
lower (included) ASTM standard. However, in the final determination,
the Department described these sales as a mistake and not ``the
ordinary practice in the industry.'' Original LTFV Investigation, 55 FR
at 29248. Therefore, based on the fact that it was the normal industry
practice to produce and sell on the same basis, the Department accepted
that ``matching by ASTM standard was the most reasonable basis for
making equitable identical merchandise comparisons.'' Id. at 29248.
Devising a methodology for matching sales is often a difficult task
and the courts have recognized that the Department has broad discretion
``to choose the manner in which * * * merchandise shall be selected.''
Koyo Seiko Co. v. United States, 66 F.3d 1204, 1209 (Fed. Cir. 1995).
We have sought, throughout the past reviews, and in the present one, to
(i) match based on physical characteristics, (ii) rely on ASTM
standards to distinguish one type of cement from another, and (iii)
rely on sales documentation as a convenient surrogate for more direct
evidence (e.g., mill test certificates) of cement type.
In the instant review, the Department requested CEMEX to report HM
and U.S. sales data on both an ``as produced'' basis (i.e., reporting
the physical properties of each product sold) and on an ``as sold''
basis. CEMEX reported that it produced cement meeting the physical
characteristics of Type V cement and sold this cement in the home
market as Types I, II, and V cement. CEMEX produced Type V cement at
its Yaqui and Campana plants located in the Hermosillo region of
Mexico. CEMEX noted, and the record reflects, that Yaqui and Campana
are the only two CEMEX plants which, on a consistent basis, produce
cement meeting the physical requirements of one type of cement and sell
that cement as another type of cement.
As we stated in our preliminary results, under these circumstances,
we believe it would be unreasonable to match merchandise on a ``sold
as'' basis. The appropriate product to which U.S. sales should be
matched is the HM product that is physically identical to the
merchandise produced for U.S.-market sales. Therefore, we appropriately
calculated NV based on respondents' sales of cement as produced.
Further, such an approach would not address any sales that were merely
``gray portland cement'' or ``cement.'' Finally, a ``sold as'' approach
would lend itself to the type of product manipulation about which the
petitioner has so often expressed concern. Therefore, for purposes of
the final results of this review, the Department has continued to apply
the matching methodology applied in the sixth administrative review and
the preliminary results of this review.
The petitioner has expressed concern that matching using physical
characteristics will enable CEMEX to manipulate HM sales to conform to
certain specifications, thereby limiting the Department's ability to
review sales of merchandise in the comparison markets properly. In
order to address these concerns, the Department will continue to review
and monitor closely sales of both identical and similar merchandise in
the home market to ensure that, in subsequent reviews, an accurate and
reliable database of HM and U.S. sales are reported. For example, we
will continue to request that CEMEX report its HM sales on both an ``as
sold'' and ``as produced'' basis. This requirement will limit the
possibility for manipulation and ensures additional scrutiny of CEMEX's
production processes.
Finally, we agree with CDC that we should apply our matching
methodology consistently to its margin calculations and have adjusted
our analysis accordingly.
5. Ordinary Course of Trade
CEMEX argues that HM sales of cement produced at Hermosillo were in
the ordinary course of trade and should be used in the calculation of
NV. CEMEX maintains that the Department did not take into account all
legally relevant factors, that sales invoiced as Type II and Type V
were made pursuant to a bona fide home-market demand for
[[Page 13155]]
those types of cement, that the merchandise sold was not obsolete or of
second quality, that it was sold for its intended purposes, and that
there were no special sales arrangements for these sales as a category.
CEMEX also argues that the Department applied selected factors in
performing its ordinary-course-of-trade analysis and that the
Department's analysis was not supported by substantial evidence. CEMEX
contends that the Department's analysis relies incorrectly on the
volume of the sales at issue relative to sales of Type I cement and
that the volume of the sales at issue was significant in absolute terms
and pursuant to a bona fide demand. CEMEX also argues that judicial
precedent and prior administrative practice establish that relatively
low sales volume signifies sales outside the ordinary course of trade
only when coupled with an absence of bona fide HM demand, which does
exist in this case.
CEMEX also contends that the Department should focus on the actual
terms of delivery for the sales at issue, identical to those of Type I
customers, rather than the geographic distance, and that the distance
to the customers is a geographic fact rather than a condition or
practice of sale. CEMEX argues that the Department has not relied on
shipping distances in determining whether sales were outside of
ordinary course of trade in prior cases. Furthermore, CEMEX argues, if
the Department continues to consider shipping distance in its analysis,
it should do so on an individual-sale basis. CEMEX also contends that
the Department's reliance on the low profitability of the sales at
issue ignores the fact that the profit levels on these sales, though
not as high as sales invoiced as Type I, are substantial and
significant in absolute terms. Moreover, CEMEX notes that the profit
differential is not the result of price disparities but rather higher
freight costs. CEMEX contends further that the Department's reliance on
the small number and type of customers for these sales is improper
because such evidence generally reflects sales outside the ordinary
course of trade in cases of sales of export overrun and off-
specification sales, rather than when sales are made to a bona fide
home market, which exists in this case. Moreover, CEMEX argues that the
twelve years of domestic sales of these products, before and after the
imposition of the order, constitutes a ``reasonable period of time''
regardless of the fact that such domestic sales did not begin until
after CEMEX began production for export.
With regard to Type V cement, CEMEX also argues that the
Department's preliminary results are factually incorrect because those
results failed to appreciate the prior history of this case.
Specifically, CEMEX states that, although the Department incorporated
portions of the second review analysis memorandum into this
administrative review, the Department did not acknowledge that during
the second administrative review the Department verified that Tolteca,
a CEMEX subsidiary whose production is subject to this review, has made
continuous HM sales of Type V cement since 1964. Thus, CEMEX contends
that its sales of Types II and V in the home market meet the statutory
definition of ordinary course of trade in section 771(15) of the Act.
CEMEX maintains that, although the Department relied on facts available
to infer that the sales at issue had a ``promotional quality'', there
is evidence on the record showing that the sales were no more
promotional than Type I sales. CEMEX challenges the overall relevance
of ``promotional quality'' as a factor in an ordinary-course-of-trade
inquiry and argues that there is no judicial or Departmental precedent
which has referred to this factor in any other ordinary-course-of-trade
analysis.
Finally, CEMEX argues that Hermosillo-produced cement sold as Type
I is within the ordinary course of trade because four out of six
factors (shipping distance, profit, promotional nature, and historical
pattern of sales) upon which the Department relied for its analysis of
Type II and Type V sales were not present and that the Department's two
other factors (number and type of customers and freight costs) are not
supported by substantial evidence. Specifically, CEMEX notes that the
volume of its Hermosillo Type I sales exceeded five percent of its U.S.
sales and, thus, constituted a viable basis to calculate NV under
section 351.404(b)(2) of the Department's regulations. In addition,
CEMEX contends that the freight cost differences upon which the
Department relied were insignificant. CEMEX also assserts that the
number and type of customers buying Type I from the Hermosillo plants
were consistent with the number and type of customers buying from other
plants. Last, CEMEX claims that the Department inaccurately relied upon
differences in handling charges between Hermosillo and non-Hermosillo
sales of Type I cement.
The petitioner maintains that CEMEX's HM sales of cement produced
as Type V are outside the ordinary course of trade. First, the
petitioner asserts that the Department must evaluate not just one
factor taken in isolation but rather all the circumstances particular
to the sales in question to determine whether the sales reflect the
conditions and practices which, for a reasonable time prior to the
exportation of the subject merchandise, have been normal. The
petitioner notes that the Department relied upon five key factors in
determining that Types II and V sales were outside the ordinary course
of trade in the second review and that the CIT and Federal Circuit
affirmed reliance on these five factors. The petitioner argues that the
Department considered these same factors in the fifth and sixth
administrative reviews when it found Types II and V to be outside the
ordinary course of trade. The petitioner argues that there has been no
material change in the evidence relating to these five factors which
would justify a different decision.
In addition to discussing the record evidence regarding the above-
described factors, the petitioner argues that there are additional
factors (e.g., changes in its shipping and production arrangements for
cement Types II and V, absorption of freight costs on sales of cement
Types II and V) supporting the Department's past determinations in this
matter. The petitioner also states that CEMEX's HM sales produced as
Type V but sold as Type I are outside the ordinary course of trade.
Among a number of arguments to support this contention, the petitioner
notes that the subject HM sales meet physical specifications for Type V
and that the customers do not need these traits, suggesting production
overruns as one possible explanation. Also, the petitioner notes, sales
of this merchandise as Type I cement represent a small percentage of HM
sales of Type I cement as well as a small percentage of CEMEX's
production of Type V. The petitioner also notes that CEMEX's freight
costs for these sales were significantly different from the freight
costs for other sales of Type I, that the number and type of customers
for these sales are unusual, and that CEMEX's profits on sales of
physically Type V cement sold as Type I are unusual.
The petitioner contends that CEMEX's HM sales of all cement
produced as Type V, regardless of how they were invoiced and sold, are
outside of the ordinary course of trade when considered in the
aggregate. In support, the petitioner discusses volume sold, freight
cost differences, type of customers, and profit differences. The
petitioner asserts that CEMEX's proposed ordinary-course-of-trade
analysis is erroneous, that the
[[Page 13156]]
Department expressly considered the totality of the circumstances, and
that the existence of a limited demand for sales of Type II and Type V
does not establish that they are within the ordinary course of trade.
Also, the petitioner maintains, only those factors relevant to HM sales
of cement are probative with respect to whether CEMEX's sales are
outside the ordinary course of trade and that the Department did not
consider one factor in isolation. Further, the petitioner contends, the
Department's analysis focuses on whether the sales are normal relative
to sales of other products of the same class or kind or the
respondent's usual practice with respect to the merchandise at issue.
Finally, the petitioner asserts that CEMEX's argument that its
sales of Type II and V cement represent sound business judgment is
irrelevant. The petitioner maintains that CEMEX has waived its claim
that consolidation of production at Hermosillo was a legitimate
business decision because it did not mention this argument in its case
brief. Also, the petitioner contends, whether CEMEX's decisions
regarding production and distribution arrangements were based on sound
business judgment is not a factor in determining if those sales were
outside the ordinary course of trade.
Department's Position: Consistent with our preliminary results, we
have determined that CEMEX's HM sales of Type II and Type V cement
produced at the Hermosillo plants were outside the ordinary course of
trade during the POR. Section 773(a)(1)(B) of the Act states, in part,
that NV is ``the price at which the foreign like product is first sold
(or, in absence of a sale, offered for sale) for consumption in the
exporting country, in the usual commercial quantities and in the
ordinary course of trade.'' The term ``ordinary course of trade'' is
defined as ``the conditions and practices which, for a reasonable time
prior to the exportation of the subject merchandise, have been normal
in the trade under consideration with respect to merchandise of the
same class or kind.'' The SAA which accompanied the passage of the URAA
clarifies this portion of the statute further when it states:
``Commerce may consider other types of sales or transactions to be
outside the ordinary course of trade when such sales or transactions
have characteristics that are not ordinary as compared to sales or
transactions generally made in the same market.'' SAA, at 164. Thus,
the statute and the SAA are clear that a determination of whether sales
(other than those specifically addressed in section 771(15) of the Act)
are in the ordinary course of trade must be based on an analysis
comparing the sales in question with sales of merchandise of the same
class or kind generally made in the home market (i.e., the Department
must consider whether certain HM sales of cement are ordinary in
comparison with other HM sales of cement).
The purpose of the ordinary-course-of-trade provision ``is to
prevent dumping margins from being based on sales which are not
representative'' of the home market. Thai Pineapple Public Co. v.
United States, 946 F. Supp. 11, 15 (CIT 1996) (quoting Laclede Steel
Co. v. United States, Slip Op. 95-144 at 6 (CIT Aug. 11, 1995)).
Congress has not specified any criteria that the agency should use in
determining the appropriate ``conditions and practices.'' Thus, the
Department, ``in its discretion, chooses how best to analyze the many
factors involved in a determination of whether sales are made within
the ordinary course of trade.'' Id. at 14-17.
In the instant review, the Department's decision to exclude sales
of Type II and Type V cement from the calculation of NV centered around
the unusual nature and characteristics of these sales compared to the
vast bulk of CEMEX's other HM sales. The Department's ordinary-course-
of-trade inquiry is far-reaching. The agency must evaluate not just
``one factor taken in isolation but rather all the circumstances
particular to the sales in question.'' Murata Mfg. Co. v. United
States, 820 F. Supp. 603, 607 (CIT 1993) (quoting Certain Welded Carbon
Steel Standard Pipes and Tubes from India, Final Results of Antidumping
Duty Administrative Review, 56 FR 64753, 64755 (1991)). This broad
approach recognizes that each company has its own conditions and
practices particular to its trade. In short, the Department examines
the totality of the facts in each case to determine if sales are being
made for ``unusual reasons'' or under ``unusual circumstances.''
Electrolytic Manganese Dioxide from Japan; Final Results of Antidumping
Duty Administrative Review, 58 FR 28551, 28552 (1993).
We disagree with CEMEX that our analysis used selective factors and
was not supported by substantial evidence. Pursuant to section
773(a)(1)(B) of the Act, the Department has examined the totality of
the circumstances surrounding CEMEX's sales of cement in Mexico that
are produced as Type V cement and marketed as Types I, II, and V (which
are identical in physical characteristics to the cement that CEMEX
sells in the United States).
In analyzing the ordinary-course-of-trade issue in arriving at its
preliminary results in this administrative review, the Department
considered the circumstances surrounding CEMEX's HM sales of Types I,
II, and V cement from the Hermosillo plants, Yaqui and Campana. An
expanded discussion of the most recent analysis can be found in a
memorandum dated August 31, 1998 (Memorandum from Roland L. MacDonald
to Joseph A. Spetrini, Seventh Antidumping Administrative Review on
Gray Portland Cement and Clinker from Mexico--Ordinary Course of
Trade). A public version of this memorandum is on file in room B-009 of
the Department's main building. As part of that analysis, the
Department considered certain data from the second, fifth, and sixth
reviews which were placed on the record of the instant review. CEMEX
provided no facts in this review that would alter the analysis. We find
that the information on the record continues to support the decision
that all three types of cement produced at the Hermosillo plants in the
home market are sold outside the ordinary course of trade.
First, we found that during the POR, as in previous reviews, CEMEX
sold very small amounts of Type II and Type V in the home market
compared to sales of cement produced as Type I. We found that freight
costs for Type II and Type V cement were higher than freight costs for
Type I sales, with CEMEX absorbing some of these costs. While it is
true, as CEMEX has pointed out, that shipping terms for Type II and
Type V cement are in some respects similar to Type I, for the years
preceding the antidumping order it was CEMEX's normal business practice
to pass along the cost of pre-sale freight to purchasers of its Type II
cement. Thus, we find it an ``unusual circumstance'' for CEMEX to
absorb freight costs after the issuance of the order, particularly
given the higher freight costs for Type II and Type V cement than for
Type I cement. Third, we found that the normal practice for CEMEX is to
ship cement, a heavy material, over relatively short distances. Over 95
percent of CEMEX's sales of cement in Mexico were shipped less than 150
miles and, during the POR, shipments of cement produced as Type I
conformed to this pattern. Shipments of Type II and Type V, however,
occurred over vastly greater distances. Fourth, we found that CEMEX's
profits on Type II and Type V cement sales during the POR are small
compared to those earned on sales of Type I cement. Fifth, we found
that the number and type of customers that purchase Type II
[[Page 13157]]
and Type V cement from CEMEX is substantially different from those who
purchase other cement types.
The Department disagrees with CEMEX's contention that (i) low sales
volume is only relevant to the ordinary-course-of-trade issue if there
is no bona fide HM demand, and (ii) the presence of HM demand is
indicative of sales within the ordinary course of trade. First, the
Department verified in the second review that there was a small, but
apparently legitimate, HM demand for Type II and Type V cements.
However, that finding did not lead to a determination that the subject
sales were made within the ordinary course of trade. As we note above,
the CAFC in CEMEX v. U.S. affirmed the Department's determination that
CEMEX's HM sales of Types II and V were outside the ordinary course of
trade. Second, the Department has often found sales to be outside the
ordinary course of trade where volume was considered with other, non-
demand-related, factors. For example, in Final Determination of Sales
at Less Than Fair Value; Sulfur Dyes Including Sulfur Vat Dyes From the
United Kingdom, 58 FR 3253, 3256 (1993), the Department concluded that
sales were outside the ordinary course of trade based upon abnormally
high volume, low price, and the existence of a ``special agreement'' to
promote the product at issue. In Tapered Roller Bearings and Parts
Thereof, Finished and Unfinished, From Japan, 52 FR 30700, 30704
(1987), the Department determined that sales were outside the ordinary
course of trade because the sales in question were of small volume and
high prices, most of the sales were canceled prior to invoice, and
there were no comparable sales in the United States. We have also
excluded transactions from the calculation of NV based upon sales made
to employees and negligible volume. See, e.g., New Minivans from Japan,
57 FR 43, 46 (1992). In short, the Department's consistent and
longstanding practice has been to consider sales volume along with
numerous other factors, depending upon the specific product involved.
We also disagree with CEMEX's claim that, instead of considering
shipping distances and freight costs, we should focus on shipping terms
and practices. In fact, in analyzing this issue, the Department has
examined both shipping distances and shipping terms and practices. With
respect to shipping distances, we found that the normal practice in
Mexico is to ship cement over relatively short distances. As we noted
earlier, over 95 percent of all cement shipments in Mexico cover
distances of less than 150 miles. While CEMEX's HM shipments of Type I
cement conformed to this norm, its shipments of Type II and Type V
occurred over substantially greater distances. CEMEX claims that the
``differences in shipping distances is simply a geographic fact'' and
the result of a ``legitimate business decision'' and that the
Department has not relied on shipping distances in determining whether
sales were outside of ordinary course of trade in prior cases. These
claims are inapposite. We are not questioning the reasoning behind but
the effect of the decision to ship long distances. As we noted in
earlier reviews, a company may have sound business reasons for changing
its methods of operation but, if sales resulting from this new business
practice are not normal for the company (for a reasonable time prior to
exportation), then they cannot be said to be within that company's
ordinary course of trade. The CIT and CAFC affirmed this analysis in
its examination of the second administrative review. CEMEX v. U.S.
With respect to shipping terms, while it is true, as CEMEX points
out, that shipping terms (e.g., CIF or FOB plant) for Type II and Type
V are in some respects similar to Type I, we believe this contention
proceeds from an incorrect premise. In an ordinary-course-of-trade
inquiry, the pertinent issue is whether the conditions and practices
are ``normal'' for the company in question. For the years preceding the
antidumping order, it was CEMEX's normal business practice to pass
along the cost of pre-sale freight to purchasers of its Type II and
Type V cement. For CEMEX to absorb freight costs after the issuance of
the order is an ``unusual circumstance,'' particularly given the high
freight costs for Type II and Type V cement. Thus, with respect to both
shipping distances and terms we find sales of Type II and Type V to be
outside the ordinary course of trade.
CEMEX argues that, in the preliminary results, the Department did
not acknowledge a legitimate HM demand for the cement from those plants
invoiced as Type II and Type V. However, the Department did consider
this information in preparing the preliminary results. As CEMEX itself
states in its case brief, the Department acknowledged that a legitimate
HM demand existed for Type II and Type V in the second review. The
Department acknowledged this in the Sixth Review Final Results and
continues to recognize that a legitimate HM demand exists for Type II
and Type V. But a range of other factors, such as the size of the home
market for Type II and Type V cement and other characteristics noted
above, were also considered, and we find, based on those factors, that
this demand does not compel us to consider sales of Type II and Type V
within CEMEX's ordinary course of trade.
Among the selected factors for which CEMEX argues the Department
misapplied the record evidence were historical sales trends and
``promotional quality'' of the products. We disagree. On September 25,
1997, the Department issued a questionnaire requesting CEMEX to support
its position that HM sales of Type V cement were in the ordinary course
of trade by addressing, among other things,``historical sales trends''
and various non-profit motives for making these sales. CEMEX's response
(copies of its submission from the fifth and sixth administrative
reviews) did not address these two items. Thus, the Department found in
the preliminary results that the facts regarding these items have not
changed since the second review, that CEMEX did not sell Type II and
Type V cement until it began production for export in the mid-eighties,
despite the fact that a small domestic demand for such existed prior to
that time, and that sales of Type II and Type V cement continue to
exhibit a promotional quality that is not evidenced in CEMEX's ordinary
sales of cement (for details on the conclusions reached in the second
review, see memorandum from Holly A. Kuga to Joseph A. Spetrini, dated
August 31, 1993).
For the reasons stated above, the Department has determined that
CEMEX's HM sales of Type V cement during the review period were outside
the ordinary course of trade. We note that the facts established in the
record of this review are very similar to the facts which led us to
determine in the second, fifth, and sixth reviews that HM sales of Type
V cement were outside the ordinary course of trade. The decision in the
second review, as noted above, was affirmed by the CIT and CAFC. In
conclusion, the decision to exclude sales of Type V cement from the
calculation of NV centers around the unusual nature and characteristics
of these sales compared to the vast majority of CEMEX's other HM sales.
Based upon these differences, the Department has determined that they
are not representative of CEMEX's HM sales and, therefore, these sales
were not within CEMEX's ordinary course of trade.
With respect to cement from the Hermosillo plants meeting Type V
specifications but sold in the HM as Type I, as noted in the memorandum
[[Page 13158]]
referred to above (August 31, 1998 Memorandum from Roland L. MacDonald
to Joseph A. Spetrini with subject: Seventh Antidumping Administrative
Review on Gray Portland Cement and Clinker from Mexico--Ordinary Course
of Trade), the record evidence indicates that only at the Hermosillo
plants did CEMEX produce consistently a cement meeting one ASTM
standard and sell that cement as a different ASTM type. That factor,
and others discussed in that memorandum, distinguishes sales of Type I
cement produced at Hermosillo from CEMEX's sales of Type I cement
produced as Type I from other production facilities.
6. Difference-in-Merchandise Information
Comment 1: CEMEX argues that the Department should revise its
treatment of difference-in-merchandise (DIFMER) information for the
following reasons. First, CEMEX maintains that the issue of a DIFMER
adjustment is moot because CEMEX's HM sales of Type V cement were made
in the ordinary course of trade thus requiring no DIFMER adjustment.
Second, CEMEX claims that it neither requested a DIFMER adjustment nor
withdrew such a request and the Department described the record
evidence incorrectly in the preliminary notice. CEMEX claims that its
views on various options for a DIFMER adjustment have been consistent.
Third, CEMEX contends that cost differences between Types I and V
cement are the result of plant efficiencies. CEMEX maintains that the
production process for all types of cement is identical. According to
CEMEX, cost differences among cement types are solely a function of the
extraction costs of clay and limestone, the two raw materials which
compose cement. CEMEX argues that the cost of these materials depends
upon the condition of the quarry and the distance between the plant and
the quarry. Thus, CEMEX maintains, the cost differences among the
cement types are not due to physical differences in the merchandise;
rather they are a function of the quarry itself. In the alternative,
CEMEX argues that the Department should either use CDC's DIFMER
adjustment since the Department collapsed CDC and CEMEX or calculate a
DIFMER using market values, as authorized by the Department's
regulations and in the Department's decision in Polyvinyl Alcohol From
Taiwan, 63 FR 32810 (June 16, 1998).
The petitioner responds that the Department based CEMEX's DIFMER
adjustment on adverse facts available correctly. The petitioner
maintains first that the DIFMER issue is not moot because the
Department found correctly that all of CEMEX's sales of cement produced
as Type V were outside the ordinary course of trade. The petitioner
responds next that the inaccuracies contained in the Department's
DIFMER discussion in the preliminary results are irrelevant to the
Department's conclusion that CEMEX did not provide the requested DIFMER
information. Moreover, the petitioner argues, CEMEX's description of
the record is inaccurate. The petitioner asserts that CEMEX did not
respond to the Department's requests for DIFMER information and that,
by its provision of variable cost of manufacturing (VCOM) data and
suggestions for DIFMER calculation, it led the Department to believe
that it was requesting a DIFMER adjustment. After suggesting previously
that a DIFMER adjustment should be made, the petitioner contends that
CEMEX requested a DIFMER adjustment expressly in its April 27, 1998,
submission to the Department, where it supplied VCOM data for Types V
LA and Type I cement. According to the petitioner, CEMEX led the
Department to believe that it was claiming a favorable DIFMER
adjustment and then, in effect, withdrew its request on May 8, 1998.
Third, the petitioner claims that the record evidence demonstrates
affirmatively that physical differences between Types I and V cement
contribute to different production costs, e.g., Types V and I differ in
the amount of an allowable raw material, tricalcium aluminate, and
differing production processes are also required. Fourth, the
petitioner argues that the Department should not apply CDC's DIFMER
adjustment to CEMEX because to do so would reward CEMEX improperly for
its lack of cooperation. The petitioner concludes that the Department
should not base CEMEX's DIFMER adjustment on market values because
CEMEX has not provided any information on which the Department could
calculate such an adjustment. Moreover, the petitioner notes, the
Department bases a DIFMER adjustment on differences in market value
rarely and disfavors basing adjustments on market value rather than
actual costs.
Department's Position: We agree with the petitioner that section
773(a)(6)(C)(ii) of the Act directs the Department to make an
adjustment to NV to account for differences in the physical
characteristics of merchandise where similar products are compared.
Section 351.411(b) of our regulations directs us to consider
differences in variable costs associated with the physical differences
in the merchandise. Where appropriate, we may also consider differences
in the market value. We determine that the record evidence demonstrates
the existence of differences in the physical characteristics of cement
Types I and V, and, therefore, a DIFMER adjustment is appropriate here.
Contrary to CEMEX's assertions, the data and product information on
the record reflect the existence of differences in the physical
characteristics of cement Types I and V. These physical differences
were originally made apparent in CEMEX's reported variable
manufacturing costs of producing Type I cement and Type V cement in the
home market. In addition, the statements CEMEX made in its April 20,
1998, and May 8, 1998, submissions indicating that no DIFMER adjustment
was necessary is contrary to the facts on the record of this and prior
reviews (currently on the record of the instant review), wherein CEMEX
has demonstrated that there are differences in the physical
characteristics of Types I and V cement which contribute to a
difference in their production costs.
Next, we note that CEMEX did not provide information regarding
process or production differences that are attributable to the
differences in physical characteristics of cement Types I and V from
which we could calculate a DIFMER adjustment. While we acknowledge that
our DIFMER discussion in the preliminary results of review contained
some sequential inaccuracies, none of these minor errors affect our
conclusion that CEMEX provided conflicting and incomplete DIFMER
information. We first requested CEMEX to provide DIFMER information in
our original questionnaire on October 3, 1997. CEMEX's response on
December 8, 1997, provided no information regarding process or
production differences that are attributable to the differences in
physical characteristics of Types I and V. CEMEX again did not provide
information with which we could make a DIFMER adjustment in its section
D response filed on March 3, 1998. On March 31, 1998, we requested
parties to submit information to assist in our determination of the
appropriate DIFMER calculation. On April 17, 1998, we made a second
request for DIFMER information. In response to our March 31 and April
17 requests, on April 20, 1998, CEMEX stated its belief that no DIFMER
adjustment was necessary in this review but offered suggestions for the
calculation of its DIFMER adjustment based upon hypothetical
[[Page 13159]]
data. However, CEMEX again did not demonstrate the existence of
variable cost differences between Types I and V resulting from physical
differences in the products. In a submission filed April 27, 1998,
CEMEX suggested that the Department base the DIFMER adjustment on
CEMEX's reported difference in variable costs for the production of
Types I and V although CEMEX had not provided the requisite VCOM data.
Finally, on May 8, 1998, CEMEX claimed in its second supplemental
response that no variable cost differences existed between Types I and
V. Thus the record of this review demonstrates that CEMEX did not
comply with the Department's requests for data demonstrating the cost
differences between cement Types I and V resulting from their physical
differences and offered conflicting information several times.
Because record evidence indicates the existence of physical
differences between cement Types I and V and because CEMEX did not
submit viable bases for a DIFMER adjustment, we have calculated a
DIFMER adjustment based upon facts otherwise available. Moreover,
because CEMEX failed repeatedly to provide requested information, we
conclude that CEMEX did not act to the best of its ability. Thus, in
accordance with section 776(b) of the Act, we have used an adverse
inference in applying facts available. Therefore, as facts available,
and in order to minimize the effect of varying plant efficiencies, the
Department has compared CEMEX's VCOM to produce cement at the
Hermosillo plants (sold as Types I, II, and V but physically Type V)
with the lowest variable costs reported by a CEMEX Type I facility.
However, we have found that, in our preliminary results, we calculated
DIFMER using the VCOM from CEMEX's second-most efficient plant rather
than CEMEX's most efficient plant. We have based this determination on
findings at the cost verification and Exhibit C-8 of the cost
verification report. See Cost Verification Report, dated August 21,
1998. Therefore, we have adjusted the DIFMER calculation using the VCOM
of CEMEX's most efficient Type I facility in accordance with the
methodology we used in the sixth review. This recalculation results in
an upward adjustment to NV in accordance with section 776(a) of the
Act.
CEMEX's remaining arguments supporting the use of a different facts
available are without merit. First, as we have concluded that CEMEX's
HM sales of Type V cement are outside the ordinary course of trade (see
5. Ordinary Course of Trade, above), the DIFMER issue remains active.
In addition, using CDC's DIFMER adjustment for CEMEX is contrary to our
directive under section 776(b) of the Act to apply adverse facts
available where an interested party has failed to cooperate by not
acting to the best of its ability to comply with a request for
information. We conclude that using CDC's DIFMER, as suggested by
CEMEX, would reward CEMEX improperly for its failure to provide the
information we requested. Further, we reject CEMEX's proposal that we
base our DIFMER adjustment on differences in market value rather than
actual costs. CEMEX provided no information upon which we could
calculate such an adjustment and, although we retain the discretion to
calculate DIFMER based upon market values, we do so rarely. See
Preamble to the Department's Regulations, 62 FR at 27370.
Comment 2: The petitioner contends that the Department's selection
of facts available for DIFMER was not sufficiently adverse. It concedes
that CEMEX provided variable cost data for Types I and V but, despite
the Department's requests, did not provide information on process/
production differences attributable to physical differences. The
petitioner argues that, instead, CEMEX offered a suggested DIFMER
calculation based upon hypothetical data. The petitioner also notes
that CEMEX stated later that there were no variable cost differences
between Types I and V but that Type V is in fact more expensive to
produce (physically) than Type I. The petitioner claims that CEMEX has
also refused repeatedly to provide DIFMER information in the second,
fifth, and sixth reviews. According to the petitioner, the Department
should apply total facts available based on CEMEX's refusal to provide
DIFMER or, at the very least, should use a 20-percent upward DIFMER
adjustment to NV as facts available, consistent with the final remand
results of the second review.
CEMEX argues that if the Department bases CEMEX's DIFMER on facts
available a 20-percent DIFMER adjustment is unreasonable as the
Department is authorized to rely on information placed on the record.
CEMEX contends that its information was timely, verified, and reliable.
According to CEMEX, a 20-percent DIFMER adjustment as applied for the
second review is unreasonable because each review is a distinct
proceeding and the facts differ. CEMEX argues that, in the second
review, the Department had only weighted-average VCOM data for Types I
and II and did not have plant-specific, cement type-specific VCOM data,
as the Department has here.
Department's Position: We do not agree that a more adverse rate
should be used. For the reasons stated in response to comment 1, above,
our DIFMER calculation is consistent with prior practice and based upon
review- and plant-specific reported data which we verified. We consider
our choice of facts available to be sufficiently adverse in order to
provide an incentive to respondents to provide complete and accurate
responses to our requests for information.
7. Level-of-Trade Determination for CEP Sales
The petitioner argues that the Department's methodology for
determining the level of trade (LOT) for CEP sales based on the level
of the constructed export price (CEP) from the exporter to the related
affiliated importer (after deductions required by section 772(d) of the
Act) is contrary to the Act and inconsistent with the methodology the
Department used to determine LOT for export price (EP) and NV sales. In
Borden, Inc. v. United States, 4 F.Supp.2d 1221 (CIT 1998), the
petitioner notes that the CIT found this methodology to be contrary to
the requirements of the plain language of the statute.
The petitioner notes that, for EP and NV, the Department bases LOT
on the unadjusted starting price in the relevant market. The petitioner
asserts that, in order to make an ``apples-to-apples'' LOT comparison,
the statute requires the Department to analyze the LOT for both HM and
CEP sales equivalently, based on the selling functions performed with
respect to the sales to the first unaffiliated customer in both
markets. The petitioner concludes that the Department's practice
results in an unfair, skewed comparison between an adjusted CEP and an
unadjusted NV.
CEMEX and CDC respond that the Department interpreted section
772(d) of the Act properly and based the CEP LOT appropriately on the
U.S. price after adjustments. CEMEX and CDC argue that the petitioner's
sole reliance upon the CIT decision in Borden is misplaced because, as
the Department stated in prior determinations, the decision is not
final and the Department is appealing the decision. Respondents also
assert that the Department's interpretation of the statute is supported
in the SAA and the Department's regulations as well as by Department
practice. In light of this interpretation of the statute, argues CDC,
any comparison of selling functions for the purpose of determining
CDC's eligibility for a CEP
[[Page 13160]]
offset must focus on CDC's activities in selling to the two markets,
not on the activities of its U.S. affiliate. In addition, CDC argues
that the Department applied the proper statutory interpretation in the
sixth review.
Department's Position: As we stated in prior determinations, our
practice of basing our LOT analysis on the CEP, rather than at the
starting price of CEP, is in full compliance with the statute and the
regulations. See Professional Electric Cutting Tools from Japan, 63 FR
54441, 54444 (1998). In addition, we have stated that the CIT's
decision in Borden is not binding as we are appealing this decision
while we continue to apply our current methodology. See Porcelain-on-
Steel Cookware from Mexico, 63 FR at 38378. Accordingly, consistent
with section 351.412 of our regulations, we have continued to base our
LOT analysis on the CEP reflecting the sale from exporter to importer
for these final results of review.
8. CEP Offset Justification
Comment 1: The petitioner argues that the Department determined
erroneously that CEMEX's and CDC's HM sales were at a different LOT
than their sales to the United States and, on that basis, granted CEMEX
and CDC an inappropriate CEP offset adjustment to NV. According to the
petitioner, the Department found no differences in LOT in the fifth
review and the facts in this review are virtually identical to the
facts in that review. Also, the petitioner claims that the Department's
methodology for analyzing the LOT and CEP offset issues has not changed
since the fifth review and, therefore, no basis exists for a different
result with respect to the LOT and CEP offset issues in this review.
The petitioner argues that, in the preliminary results of this
review, the Department found that CEMEX and CDC perform more selling
functions for sales to end-users and ready-mixers in the home market
than for sales to affiliated importers in the United States. The
petitioner argues that, with regard to CEMEX and CDC, the record either
contradicts or does not support the Department's finding that their HM
and adjusted CEP sales were at different levels of trade. The
petitioner argues that the Department must find more than different
levels of selling activities to determine that a respondent's HM and
U.S.-affiliate sales are at different levels. Also, the petitioner
asserts that HM selling functions must be provided to at least the
majority of customers, citing Notice of Final Determination of Sales at
Less Than Fair Value: Certain Pasta From Italy, 61 FR 30326, 30338
(1996), and that minor or relatively insignificant selling functions
cannot provide the basis for a determination that there are different
LOTs and that a CEP offset adjustment is warranted. With regard to both
CEMEX and CDC, the petitioner argues that the record does not support
the Department's finding that their HM sales were at a more advanced
stage of distribution than their CEP sales.
With regard to CEMEX, the petitioner argues that no basis exists
for the Department's conclusion that CEMEX's sales to its affiliated
U.S. distributor, Sunbelt Cement, were at a different place in the
distribution chain than CEMEX's HM sales. To the contrary, the
petitioner adds, the record evidence reflects that CEMEX's selling
activities with respect to its Sunbelt Cement sales were virtually
identical to its selling activities with respect to its HM sales.
The petitioner also contends that the Department's LOT memorandum
for the preliminary results contains several inaccuracies. First, the
petitioner maintains, for all but one expense, advertising, the
activities listed in the Department's chart of expenses relating to
CEMEX's indirect selling expenses do not correspond to CEMEX's itemized
indirect selling expenses as CEMEX reported in its response. The
petitioner next argues the Department relied incorrectly upon five
selling functions in its determination that CEMEX's HM sales were at a
more advanced LOT than its U.S. sales: strategic and economic planning,
market research, personnel training/personnel exchange, procurement and
sourcing services and after-sales servicing/warranty service. The
petitioner argues that the record demonstrates that the Department
found erroneously that CEMEX performs these functions only in the home
market. The petitioner also asserts that what the Department describes
separately as ``strategic and economic planning'' and ``market
research'' are the same activity and should be merged for LOT-analysis
purposes. The petitioner maintains further that CEMEX performed sales
forecasting in neither the U.S. nor the home market. The petitioner
also argues that CEMEX provided insufficient and inconsistent
information regarding the after-sale services it provides and failed to
establish that the selling functions were applied consistently ``to at
least the vast majority of customers and sales in each level of
trade,'' citing Certain Pasta From Italy. Finally, the petitioner
argues that selling functions such as market research, advertising, and
technical advice are insignificant in a mature market such as gray
portland cement.
CEMEX asserts that, based on the law and verified information on
the record, the Department's preliminary results properly included a
CEP offset. First, CEMEX concurs with the Department's determination
that the sales to CEMEX's unaffiliated U.S. distributor, Sunbelt
Cement, were at a less-advanced LOT than the LOT of HM sales. CEMEX
notes that the CEP adjustments made under section 772(d) of the Act
remove all the marketing and distribution activities of Sunbelt Cement,
thereby altering the LOT of the starting price to a less-remote link in
the chain of distribution. CEMEX contends that the appropriate
comparison is based on the selling functions performed by CEMEX with
respect to its sales in Mexico and its sales to the United States.
CEMEX argues that the Department determined appropriately that
CEMEX performed significantly different selling functions for CEP and
HM sales and that the HM level was more advanced. CEMEX rejects the
petitioner's implication that, because the Department reached a
different determination in the fifth review, the sixth review results
must be wrong. CEMEX also rejects the petitioner's hypothesis that,
because the U.S. market is important to CEMEX's business, CEMEX's
centralized strategic planning in Mexico must support exports to the
United States. CEMEX states that activities with respect to procuring/
sourcing materials and other assets for U.S. operations are performed
by CEMEX's U.S. affiliate. Finally, CEMEX disagrees with the
petitioner's argument that market research, advertising, after-sales
service, and technical advice are all insignificant in selling cement.
CEMEX notes that the list of selling activities that it included in its
responses are representative of the activities that the Department has
included in LOT questionnaires issued to companies in other cases.
Department's Position: In accordance with section 773(a)(1)(B) of
the Act, to the extent practicable, we determine NV based on sales in
the comparison market at the same LOT as the EP or CEP. The NV LOT is
that of the starting-price sales in the comparison market or, when NV
is based on constructed value (CV), that of sales from which we derive
selling, general and administrative (SG&A) expenses and profit. For EP,
the U.S. LOT is also the level of the starting-price sale, which is
usually from exporter to importer. For CEP, it is the level of the
constructed sales from the exporter to the importer.
To determine whether NV sales are at a different LOT than EP or
CEP, we examine stages in the marketing process
[[Page 13161]]
and selling functions along the chain of distribution between the
producer and the unaffiliated customer. If the comparison-market sales
are at a different LOT, and the difference affects price comparability,
as manifested in a pattern of consistent price differences between the
sales on which NV is based and comparison-market sales at the LOT of
the export transaction, we make a LOT adjustment under section
773(a)(7)(A) of the Act. Finally, for CEP sales, if the NV level is
more remote from the factory than the CEP level and based on the
available information, we are unable to determine the amount of a LOT
adjustment, we adjust NV under section 773(a)(7)(B) of the Act (the CEP
offset provision). See Notice of Final Determination of Sales at Less
Than Fair Value: Certain Cut-to-Length Carbon Steel Plate from South
Africa, 62 FR 61971 (November 19, 1997).
Based upon our analysis of the record, we determine, as in the
preliminary results of review, that CEMEX's HM sales occurred at a
different and more advanced stage of distribution than CEMEX's sales to
its U.S. affiliate. While we note that the LOT memorandum outlining our
analysis contains some minor errors, none of these inaccuracies alters
our conclusion that CEMEX performs more selling functions at a more
advanced stage of distribution in the home market than its CEP sales in
the United States. The record reflects that CEMEX performed eleven
selling functions in the home market: (1) Strategic and economic
planning; (2) market research; (3) advertising; (4) technical advice;
(5) personnel training/personnel exchange; (6) inventory maintenance;
(7) procurement and sourcing services; (8) freight and delivery
arrangements; (9) packaging; (10) credit; and (11) after-sales
services/warranties. We note that our LOT memorandum relied incorrectly
upon a function not performed by CEMEX, sales forecasting, and
therefore we have excluded this function from our analysis.
Table 6 of our LOT memorandum regarding advertising for CEMEX's CEP
sales is in error because the record reflects that CEMEX does not
perform advertising functions for its sales to Sunbelt Cement. However,
the record demonstrates that CEMEX performs strategic planning, market
research, advertising, procurement and sourcing services, personnel
training/personnel exchange, packaging, credit and after sales service/
warranty service for its sales in the home market but not for its CEP
sales to the U.S. affiliate after deducting the expenses pursuant to
section 772(d) of the Act. Thus, contrary to the petitioner's
assertions, we find adequate basis on the record to conclude that CEMEX
performs eight of its eleven selling functions with respect to only its
HM sales and not with respect to its CEP sales.
In addition, CEMEX performs a higher degree of inventory
maintenance for its HM sales than for its CEP sales. Contrary to the
petitioner's assertion, differences in the level of intensity with
which a respondent performs a selling function is relevant to our
analysis. See Professional Electric Cutting Tools From Japan;
Preliminary Results of Antidumping Duty Review, 63 FR 30706, 30708
(1998).
Thus, as the record demonstrates, CEMEX performs the majority of
its selling functions with respect to its HM sales and not with respect
to its CEP sales. In addition, CEMEX performs no services for its CEP
sales that it does not perform for its HM sales. Accordingly, we
determine that CEMEX's HM sales occur at a different and more advanced
stage of distribution than its CEP sales. We also determine that the
data provided do not permit us to calculate a LOT adjustment; thus in
accordance with section 773(a)(7)(B) of the Act, a CEP offset is
appropriate for these final results.
Moreover, we disagree with the petitioner's remaining arguments.
The petitioner challenges the Department's decision to grant a CEP
offset to CEMEX by asserting that CEMEX's itemized list of indirect
selling expenses and its selling functions do not correspond. However,
the list to which the petitioner refers (Exhibit B-14 of CEMEX's
December 8, 1997, Section B response) itemizes the names of CEMEX's
accounts for its indirect selling expenses in the home market and does
not provide the services performed as a result of those expenditures.
Because the list of accounts upon which the petitioner relies is not an
itemization of CEMEX's selling functions but rather lists the accounts
to which CEMEX's selling functions are recorded, we would, therefore,
not expect CEMEX's indirect selling expenses list and selling-functions
chart to correspond. The petitioner also argues that ``strategic and
economic planning'' and ``market research'' should be merged for LOT-
analysis purposes. We disagree with the petitioner. The record
characterizes strategic planning as relating to long-range production
activity while market research relates to locating markets and gauging
their activity, and these distinctions are commonly recognized and
understood. Regardless, assuming arguendo that we should merge the two
functions, our conclusion that CEMEX's HM sales were at a different and
more advanced LOT would remain unchanged since the record demonstrates
that CEMEX performed both selling functions for the home market but
neither for its U.S. sales
Comment 2: The petitioner argues that the Department found
erroneously that CDC's U.S. and HM sales were at different levels of
distribution. Furthermore, according to the petitioner, the Department
erred in finding that CDC's HM sales were at a more advanced stage of
distribution because CDC performed fewer and different selling
functions for CEP sales than for its HM sales. The petitioner argues
that CDC did not describe in sufficient detail its selling functions,
including ``market research,'' ``technical advice,'' ``customer
approval,'' ``solicitation of orders/customer visits,'' ``sales
promotion discount programs,'' and ``computer/legal/accounting/business
system development,'' so that the Department could determine whether
they involved distinct selling functions. Moreover, the petitioner
contends, CDC's reported selling functions were not provided to at
least a vast majority of customers and sales in the home market.
Therefore, the petitioner concludes, CDC's claimed selling functions do
not provide the basis for a determination that CDC's HM and U.S. sales
were at different levels of trade. The petitioner also notes that the
Department reported erroneously in its LOT memorandum that it confirmed
CDC's selling functions performed in the home market during
verification when, in fact, the Department did not verify CDC's
response in this review.
CDC argues that the Department granted CDC a CEP offset properly.
CDC argues that the record demonstrates that its HM sales were made at
a more advanced LOT than its U.S. sales, thus satisfying the
Department's standard for a CEP offset.
Department's Position: We disagree with the petitioner that CDC's
U.S. and HM sales were at the same levels of distribution. Based upon
our analysis of the record, we determine that CDC's HM sales occur at a
different and more advanced stage of distribution than CDC's sales to
its U.S. affiliate. The record reflects, and our LOT memorandum shows,
that CDC performs ten selling functions in the home market: (1)
Inventory maintenance; (2) market research; (3) technical advice; (4)
advertising; (5) freight and delivery arrangement; (6) customer
approval; (7) solicitation of orders/customer visits; (8) sales
promotion/discount programs; (9) packing; and (10) computer/legal/
accounting/business system
[[Page 13162]]
development. The record demonstrates that, with the exception of
inventory maintenance and freight and delivery arrangements, CDC
performs its selling functions for its sales in the home market but not
for its CEP sales to the U.S. affiliate after deducting the expenses
pursuant to section 772(d) of the Act. The record also demonstrates in
sufficient detail for the Department to determine that the selling
functions that CDC provides for its HM sales are greater in number and
intensity than those selling functions that it provides for its CEP
sales. Accordingly, we determine that CDC's HM sales occur at a
different and more advanced stage of distribution than its CEP sales
and that a CEP offset is appropriate for these final results. We also
determine that the data does not provide an appropriate basis for a LOT
adjustment; thus in accordance with section 773(a)(7)(B) of the Act, a
CEP offset is appropriate for the final results. We note that although
our LOT memorandum refers erroneously to a verification at CDC this
error does not alter our conclusion for these final results.
9. CEP Calculation
Comment 1: The petitioner disagrees with the Department's decision
not to deduct indirect selling expenses incurred in the home market on
sales to its affiliate in the United States in calculating CEP. The
petitioner believes that this decision, although consistent with the
Department's current practice and regulations as well as the final
results of the fifth and sixth reviews, is contrary to the Act, the
URAA, the SAA and judicial precedent. The petitioner argues that the
indirect selling expenses, inventory carrying costs and general
advertising expenses CEMEX and CDC incurred in the home market with
respect to U.S. sales to its affiliate all constitute selling expenses
deductible under section 772(d)(1)(D) of the Act.
The petitioner challenges the Department's limitation of deductible
indirect selling expenses incurred in the home market for its CEP
calculation as artificial and unsupported by the statute and by
legislative history. First, the petitioner argues that the Department
has discretion over which expenses can be deducted from CEP and should
deduct all indirect expenses associated with U.S. sales from CEP.
Second, the petitioner argues that the Department's use of the term
``U.S. expenses'' is limited incorrectly to expenses incurred in
connection with a sale in the United States and that it should be
expanded to include expenses incurred in relation to sales by the
affiliated importer to U.S. customers. Third, the petitioner disagrees
with the Department's narrow interpretation of the language in section
772(d) referring to expenses ``associated with economic activities
occurring in the United States'' to be defined as only those expenses
related to sales by the affiliated importer to unaffiliated purchasers.
The petitioner contends that the language is interpreted more properly
to include all expenses related to U.S. sales. Fourth, the petitioner
cites the final results of the fifth review to demonstrate that the
Department acted inconsistently with section 772(d) by limiting the
deduction of ``any'' expenses incurred in selling subject merchandise
in the United States. Fifth, because the Department granted a CEP
offset, the petitioner maintains that CEP and NV do not represent an
``apples-to-apples'' comparison. Sixth, the petitioner claims that the
Department misinterprets Article 2.4 of the Antidumping Agreement to
require only the deduction of costs incurred between importation and
resale from CEP when the Agreement ``states that those expenses should
be deducted in addition to any other expenses that affect price
comparability.'' Finally, the petitioner contends that to allow a
deduction from CEP of only those indirect selling expenses incurred in
the United States permits respondents to avoid deduction of any selling
expenses by shifting U.S.-related selling activities offshore. The
petitioner also maintains that the Department must interpret section
772(d) according to its plain meaning, citing Mitsubishi Heavy
Industries, Ltd. v. United States, 15 F.Supp.2d 807 (CIT 1998)
(Mitsubishi). The CIT in Mitsubishi, the petitioner asserts, held that
the plain language of section 772(d) of the Act requires the deduction,
without limitation, of all expenses generally incurred in selling the
subject merchandise in the United States, regardless of where or when
paid.
CEMEX and CDC respond that the Department is correct in not
deducting indirect selling expenses incurred in the home market from
CEP calculations. CEMEX and CDC state that the petitioner raised the
same argument unsuccessfully in the fifth and sixth administrative
reviews. CEMEX argues further that the petitioner attempts to rewrite
the legislative history of the URAA and that the Department rejected
arguments similar to those advanced by the petitioner in the preamble
to the Department's regulations. CDC refutes the petitioner's claim
that Mitsubishi compels the Department to deduct from CEP expenses
incurred in the home market by a foreign producer and distinguishes the
facts in Mitsubishi from those in this case. Moreover, CDC believes
that Mitsubishi reinforces the Department's position to limit
acceptable deductions from CEP.
Department's Position: We agree with respondents that we calculated
CEP correctly. Upon analysis, the Department determined that the
indirect selling expenses at issue relate solely to respondents' sales
to their affiliated importers and are not associated with economic
activities in the United States. The Department does not deduct
indirect expenses incurred in selling to the affiliated U.S. importer
under section 772(d) of the Act. See Certain Pasta From Italy, 61 FR at
30352. Thus, we have used the same methodology for calculating CEP in
the final results, as was done for the preliminary results.
Comment 2: The petitioner maintains that the Department neglected
to include indirect selling expenses in the home market on sales to the
United States in ``total U.S. expenses'' for purposes of calculating
CEP profit under section 772(f) of the Act.
The petitioner argues that by including indirect selling expenses
in total U.S. expenses in calculating total actual profit but excluding
them from total U.S. expenses in determining the expense ratio renders
the calculation of CEP profit inconsistent. The petitioner argues that
this contradictory treatment of the same expenses cannot be reconciled
with the statute. The petitioner also cites U.S. Steel Group v. United
States, No. 97-05-00866, Slip Op. 98-96 (CIT 1998) (U.S. Steel),
whereby the CIT rejected the Department's inconsistent treatment of
movement expenses in the calculation of CEP. The petitioner concludes
that if indirect selling expenses incurred in Mexico are properly
attributable to U.S. sales for the purpose of calculating U.S. selling
expenses in the computation of ``total actual profit'' they must be
similarly attributable to U.S. sales for purposes of calculating
``total U.S. expenses'' for the purpose of applying the ``actual
percentage.''
CEMEX and CDC argue that the Department calculated ``total U.S.
expenses'' correctly in its ``total expenses'' calculations for CEP
profit. CEMEX contends that the petitioner has not cited a
determination supporting its argument that the Department excluded
foreign indirect selling in ``total U.S. expenses'' incorrectly. CEMEX
argues that the petitioner's citation to U.S. Steel Group is misplaced
because the decision is not final and it does not give deference to the
Department's statutory interpretation of the law that it is charged to
administer.
[[Page 13163]]
CDC asserts that it was appropriate for the Department to include
in total U.S. expenses for CEP profit only expenses related to U.S.
operations. CDC cites section 772(f) of the Act, stating that it
directs the Department to exclude HM indirect selling expenses
associated with U.S. sales and corresponding inventory carrying costs
from its definition of total U.S. expenses.
Department's Position: Pursuant to section 772(f) of the Act, CEP
profit includes the total revenue and total actual expenses incurred in
making the sale to the unaffiliated purchaser in the U.S. market.
However, since the statute directs that profit be allocated only to
expenses deducted under sections 772(d) (1) and (2) of the Act, we must
exclude indirect selling expenses incurred in Mexico for U.S. sales
from ``total U.S. expenses,'' the numerator of the expense ratio. Thus,
we did not include indirect selling expenses incurred in Mexico for
U.S. sales in ``total U.S. expenses'' in calculating CEP profit. This
interpretation is consistent with the intent of the statute. With
respect to the petitioner's reference to U.S. Steel, see our response
to Comment 3, below. In preparing for these final results, however, we
discovered a clerical error in the CEP calculation in our preliminary
results. We inadvertently did not include indirect expenses for
advertising in the calculation of profit to be allocated to expenses
deducted pursuant to section 772(d) of the Act. We have corrected this
clerical error for the final results.
Comment 3: The petitioner argues that the CIT's recent decision in
U.S. Steel directs the Department to calculate CEP profit by excluding
movement expenses from the denominator of the profit-allocation ratio.
The petitioner notes that, in that case, the CIT rejected the
Department's argument that the statute required the inclusion of ``all
expenses,'' including movement expenses, in the ratio.
CEMEX and CDC respond that the Department's inclusion of movement
expenses in its calculation of total expenses used to calculate CEP
profit is a reasonable interpretation of section 772(f) of the Act and
is consistent with the Department's past practice. CEMEX and CDC argue
that the CIT's decision in U.S. Steel is not final and that the
Department has not indicated its intention to abandon its prior policy
and adopt the decision.
Department's Position: We agree with the respondents that our
inclusion of movement expenses in the calculation of total expenses
used to calculate CEP profit is proper. The CIT's decision in U.S.
Steel is neither final nor binding. Accordingly, we have continued to
include movement expenses in ``total expenses'' for calculating CEP
profit for these final results. This is consistent with the
Department's practice in accordance with section 772(d)(3) of the Act.
Comment 4: The petitioner argues that the Department should revise
its calculation of CDC's U.S. indirect expenses because the Department
inadvertently allowed a deduction from U.S. indirect selling expenses
for the imputed costs of financing antidumping cash deposits. The
petitioner notes that the Department denied such an adjustment in the
sixth review and that this decision was consistent with past practice.
CDC responds that the Department's allowance of an offset for the
cost of financing cash deposits is in accordance with past practice and
CIT precedent. CDC argues that in the past the Department has not been
consistent in its treatment of imputed interest payments on cash
deposits. CDC contends that the Department has recognized that a
company incurs a real expense whether it actually obtained loans or
diverted funds from another investment activity to finance the
antidumping cash deposits, citing Tapered Roller Bearings, Four Inches
or Less in Outside Diameter, and Components Thereof, From Japan, 62 FR
11825, 11831 (March 13, 1997).
Department's Position: We agree that we have allowed CDC a
deduction for the imputed costs of financing cash deposits
inadvertently. For the final results, we have denied an adjustment to
CDC for imputed expenses which CDC claims are related to financing cash
deposits. This is consistent with the Department's treatment of such
expenses in the sixth review and its practice as described in
Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts
Thereof from France, et al., 62 FR 54043, 54079 (October 17, 1997). As
our position is unchanged from the prior review, we adopt the
discussion with respect to this issue in our Sixth Review Final Results
(63 FR at 1278).
10. Regional Assessment
CEMEX and CDC argue that the United States has not honored its
obligations under Article 4.2 of the WTO Antidumping Agreement and its
predecessor, Article 4.2 of the 1979 Tokyo Round Antidumping Code.
CEMEX and CDC claim that the Department has not implemented the special
antidumping duty assessment requirements for regional-industry cases
set forth in Article 4.2 because it has imposed antidumping duties on
all imports of subject merchandise, including those consigned for
consumption outside the Southern Tier region as defined by the ITC in
the original investigation. CDC argues that the Department did not give
exporters an opportunity to cease exporting at dumped prices into the
region prior to the assessment of duties and requests that the
Department terminate this review and revoke the antidumping order or,
alternatively, assess antidumping duties only on CDC's entries of
merchandise consumed within the Southern Tier region. CEMEX requests
only that the Department assess duties on its future entries consumed
within the Southern Tier region.
CDC contends that, because the United States did not implement
Article 4.2 until it adopted the Uruguay Round Agreement Act (URAA) in
1995, implementation was untimely because the regional assessment rules
were absent from U.S. law during the original investigation and during
the first several reviews of the antidumping order. CDC also asserts
that, in adopting section 218 of the URAA, the United States
implemented Article 4.2 inadequately. For instance, CDC asserts,
Section 218 does not address producers/exporters who, like CDC, export
merchandise both into and outside of the region. CDC proffers other
examples of the inadequate U.S. implementation of Article 4.2, which
are discussed below. If the Department does not terminate this review
and revoke the order, CDC asserts, the Department should levy
antidumping duties on a regional basis under Article 4.2.
CEMEX and CDC argue that the United States is obliged to comply
with Article 4.2 of the Antidumping Agreement, which states:
When the industry has been interpreted as referring to the
producers in a certain area, i.e., a market as defined in paragraph
1(ii), anti-dumping duties shall be levied only on the product in
question consigned for final consumption to that area. When the
constitutional law of the importing country does not permit the
levying of anti-dumping duties on such a basis, the importing Member
may levy the anti-dumping duties without limitation only if (a) the
exporters shall have been given an opportunity to cease exporting at
dumped prices to the area concerned or otherwise give assurances
pursuant to Article 8 of this Agreement, and adequate assurances in
this regard have not been promptly given, and (b) such duties cannot
be levied only on products of specific producers which supply the
area in question.
According to CEMEX and CDC, Article 4.2 compels the Department to
refrain from assessing duties on its subject
[[Page 13164]]
merchandise destined for consumption outside the Southern Tier. CDC
contends that the exception to Article 4.2 does not apply because none
of the conditions necessary to justify an exception to Article 4.2 are
satisfied in this case. First, both CEMEX and CDC assert that there is
no U.S. Constitutional prohibition against levying antidumping duties
on a regional basis. CEMEX and CDC contend that neither the port-
preference clause of the Constitution, which prohibits Congress from
regulating commerce or revenue of ports in a discriminatory manner that
would confer preferential treatment for the ports of one state over the
ports of another state, nor the uniformity clause, which requires the
uniform imposition of taxes throughout the United States, render the
regional assessment of antidumping duties unconstitutional, citing U.S.
Const. Art. I, Sec. 9, cl. 6, and Art. I, Sec. 8, cl. 1. CDC argues
further that the United States has never explained its theory that
implementing the general assessment rule would result in a
constitutional violation.
Next, CDC contends that the condition by which the Department would
be exempted from assessing antidumping duties regionally has not been
satisfied. CDC argues that the Department did not permit CDC to enter
into a suspension agreement at the time of the original investigation
because, at the time of the investigation, the Department's policy was
one of refusal to enter into suspension agreements. Moreover, CDC
maintains, the Department's decision to collapse CEMEX and CDC in the
original investigation diminished CDC's opportunity further to enter
into a suspension agreement. CDC also argues that the U.S.
implementation included no provisions by which the regional-assessment
rules could apply to cases predating the URAA. CDC argues the condition
that duties cannot be levied only on products of specific producers
which supply the area in question has not been met because the language
of Section 218 of the URAA and the Department's regulations demonstrate
that assessment on less than a national basis is possible. CDC contends
that the fact that Congress enacted Section 218 with language calling
for the regional assessment of duties attests to the absence of a U.S.
constitutional prohibition against regional assessment.
The petitioner responds that the Department has assessed
antidumping duties properly on all nationwide entries of the subject
merchandise. First, the petitioner suggests that, since the Department
has not yet assessed duties for the seventh review period, this issue
is not ripe for the Department's consideration. However, assuming it is
ripe for decision, the petitioner argues that the Department need only
consider whether its assessment of antidumping duties under the order
is consistent with the U.S. statute. The petitioner asserts that,
because the Department's actions are consistent with the law, the
Department need not consider respondents' remaining arguments. The
petitioner contends that CEMEX, in referring only to Article 4.2,
ignores the U.S. law on this issue.
The petitioner asserts that the Department must act within its
authority under sections 736(d)(1)-(2) and 734(m)(1)-(2) of the Act,
which were amended by the URAA to conform to the regional-industry
provisions of the Antidumping Agreement. The petitioner contends that
these provisions are inapplicable to respondents and thus confer no
authority upon the Department to refrain from assessing antidumping
duties outside the Southern Tier. The petitioner asserts that sections
736(d)(1) and 734(m)(1)-(2) of the Act only apply in investigations and
not reviews. Second, the petitioner asserts that both CEMEX and CDC do
not qualify for the regional assessment of duties under section
736(d)(2) of the Act because both respondents exported subject
merchandise into the Southern Tier during the period of investigation
(POI). Third, the petitioners contend, the Department has no obligation
under sections 734(m)(1)-(2) of the Act to offer respondents a
suspension agreement because the Department may only accept a
suspension agreement during the pendency of an investigation or within
60 days after the publication of the antidumping order. For these
reasons, the petitioner concludes, the Department complied fully with
U.S. law.
In addition, the petitioner argues that the Department cannot
``implement'' its U.S. obligations under Article 4.2 because the Tokyo
Round Antidumping Code is without legal force and only assumes binding
character through implementing legislation enacted by Congress. Citing
the legislative history of the Trade Agreements Act of 1979 and the
URAA, the petitioner asserts that Congress intended U.S. law to prevail
in the event of a conflict between U.S. law and these Agreements.
Citing inter alia, Suramerica and Footwear Distrib. And Retailers of
Am. v. United States, 852 F.Supp. 1078 (CIT 1994), appeal dismissed, 43
F.3d 1486 (Fed. Cir. 1994), the petitioner notes that courts have
rejected the argument that U.S. law must be administered in conformity
with the GATT.
The petitioner also argues that the Department lacks the statutory
authority to terminate the antidumping order or assess duties
regionally based on a claim that the Department did not offer
respondents an opportunity to enter into a suspension agreement. Citing
the Sixth Review Final Results, 63 FR at 12766, the petitioner notes
that no respondent appealed the Department's final determination in
1990 based on an alleged lack of an opportunity for a suspension
agreement and the Department's determination in the original
investigation ``is final and binding on all persons, including the
Department.'' The petitioner also asserts that neither the statute nor
the Department's regulations authorize the Department to rescind a
determination made in the original investigation and revoke the order
in the context of an administrative review. The Department's authority
in an administrative review is limited to calculating a margin and
setting new cash deposit rates, the petitioner asserts, citing the
NAFTA binational panel decision for the Third Review Final Results.
The petitioner also notes that CDC's claim that the Department
neglected to offer an opportunity for a suspension agreement is barred
by the statute of limitations, by res judicata, and because CDC failed
to exhaust administrative remedies in the original investigation.
Finally, the petitioner notes that, even if it were necessary to
discuss the issue, Article 4.2 of the Antidumping Agreement does not
require assessment of duties only on imports of subject merchandise
consigned for consumption in the Southern Tier. The petitioner argues
that the Constitution bars regional assessment of duties, the
respondents had the opportunity to enter into a suspension agreement
during the original investigation, and the Act complies with the
requirement that antidumping duties be applied nationwide if they
cannot be assessed only on the products of exporters in the region.
Department's Position: Before considering respondents' substantive
arguments on this issue, we disagree with the petitioner's contention
that this issue is not ripe for consideration since we have not yet
assessed duties pursuant to the results of this administrative review.
The purpose of an administrative review is to ``review and determine *
* * the amount of any antidumping duty'' (section 751(a)(1)(B) of the
Act) and the results of an administrative review ``shall be the
[[Page 13165]]
basis for the assessment of * * * antidumping duties on entries of
merchandise covered by the determination and for deposits of estimated
duties.'' Section 751(a)(2)(C) of the Act. Therefore, the Department's
assessment procedures as they pertain to the antidumping duties
determined in this review are an appropriate issue for the Department
to consider for these final results.
Turning to arguments by CEMEX and CDC, we disagree that we should
exempt entries of subject merchandise exported into regions other than
the ``Southern Tier'' from antidumping duties and cash deposits.
Respondents' argument focuses on the compatibility of the U.S.
antidumping law with the United States' obligations under the URAA.
Specifically, respondents suggest that the U.S. antidumping law, as
amended by the URAA, does not implement the obligations contained in
Article 4.2 of the Antidumping Agreement, which governs the assessment
of antidumping duties in regional industry cases, properly.
The Department's determinations in an antidumping proceeding are
governed by the U.S. antidumping statute--specifically, Title VII of
the Tariff Act of 1930, as amended by the URAA in 1995. As numerous
courts have recognized, in the event of a conflict between a GATT
obligation and a statute, the statute must prevail. See Federal Mogul
Corp. v. United States, 63 F.3d 1572, 1581 (Fed. Cir. 1995), citing
Suramerica DeAleaciones Laminadas v. United States, 966 F.2d 660, 668
(Fed. Cir. 1992). Congress codified this principle in the URAA. Section
102 of the URAA states that ``[n]o provision of any of the Uruguay
Round Agreements, nor the application of any such provision to any
person or circumstance, that is inconsistent with any law of the United
States shall have effect.'' See also SAA at 659 (``The WTO will have no
power to change U.S. law. If there is a conflict between U.S. law and
any of the Uruguay Round agreements * * * U.S. law will take
precedence.''). Thus, even if respondents were correct in asserting
that the statutory provisions relating to regional assessment of duties
conflicted with the obligations contained in Article 4.2 of the
Antidumping Agreement, the Department must act in conformity with the
antidumping statute.
Sections 736(d)(1)-(2) and 734(m) of the Act govern the assessment
of antidumping duties in regional-industry cases. To this extent,
section 736(d)(1) of the Act provides that, in an investigation in
which the ITC makes a regional-industry determination, the Department
``shall, to the maximum extent possible, direct that duties be assessed
only on the subject merchandise of the specific exporters or producers
that exported the subject merchandise for sale in the region during the
period of investigation.'' Because the original Mexican cement
antidumping investigation occurred in 1989-90 and the URAA applies only
to investigations initiated on the basis of petitions filed after
January 1, 1995, this provision does not apply to CEMEX's and CDC's
exports. However, even if section 736(d)(1) of the Act did apply to
this review, since CEMEX and CDC exported subject merchandise into the
region during the POI, the Department directed properly that
antidumping duties be assessed on all entries of merchandise produced
by CEMEX and CDC. For the same reasons, contrary to CDC's argument,
section 351.212(f) of the Department's regulations does not apply to
CEMEX's and CDC's entries.
Moreover, section 736(d)(2) of the Act provides that, ``after
publication of the antidumping order, if the administering authority
finds that a new exporter or producer is exporting the subject
merchandise for sale in the region concerned, the administering
authority shall direct that duties be assessed on the subject
merchandise of the new exporter or producer consistent with the
provisions of section 751(a)(2)(B).'' Because neither CEMEX nor CDC is
a new exporter or producer as described in this provision, section
751(a)(2)(B) of the Act is inapplicable to the assessment of
antidumping duties on subject merchandise exported to the United States
by CEMEX or CDC.
Finally, pursuant to section 734(m) of the Act, in an investigation
in which the ITC makes a regional-industry determination, the
Department ``shall offer exporters of the subject merchandise who
account for substantially all exports of that merchandise for sale in
the region concerned the opportunity to enter into (a suspension)
agreement.'' Any such agreement is ``subject to all the requirements
imposed under this section for other (suspension) agreements, except
that if the Commission makes a regional industry determination * * * in
its final determination * * * but not in the preliminary affirmative
determination * * * any agreement * * * may be accepted within 60 days
after the antidumping order is published under section 736.''
Under section 734(b) of the Act, we may only accept a suspension
agreement during the pendency of an investigation. Because the
Department cannot enter into a suspension agreement once the 60-day
post-order period has passed (and, indeed, seven administrative reviews
have passed), the Department's decision not to offer respondents an
opportunity to enter into a suspension agreement in this review does
not violate section 734(m) of the Act.
Moreover, although CEMEX argues that the posting of cash deposits
should not be required of CEMEX's entries outside the Southern Tier,
the Act contains no provision and describes no circumstances under
which we may waive an importer's requirement to post cash deposits
except when conducting new-shipper reviews under section 751(b) of the
Act. Accordingly, for these final results, we will require the posting
of cash deposits and assess antidumping duties on entries of CEMEX's
and CDC's subject merchandise that have entered or will enter for
consumption both inside and outside the Southern Tier.
As demonstrated above, the Department's decision to assess duties
on all subject merchandise exported into the United States by CEMEX and
CDC is consistent with the antidumping statute. Indeed, neither CEMEX
nor CDC argue that the Department's actions fail to conform to these
statutory provisions. For purposes of this administrative review,
therefore, the Department need not consider respondents' arguments
further concerning the United States' implementation of its obligations
under the Antidumping Agreement.
Nonetheless, we disagree with respondents' contention that the
antidumping statute does not fully implement the United States'
obligations under the Antidumping Agreement. As the Federal Circuit in
Federal Mogul explained: ``GATT agreements are international
obligations, and absent express Congressional language to the contrary,
statutes should not be interpreted to conflict with international
obligations.'' Federal Mogul, 63 F.3d at 1581. Indeed, the U.S. Supreme
Court elaborated on this canon of construction. ``It has also been
observed that an act of Congress ought never to be construed to violate
the law of nations, if any other possible construction remains * * *.''
Murray v. Schooner Charming Betsy, 6 U.S. (2 Cranch.) 64, 118 (1804).
See also Fundicao Tupy S.A. v. United States, 652 F. Supp. 1538, 1543
(CIT 1987)(``An interpretation and application of the statute which
would conflict with the GATT Codes would clearly violate the intent of
Congress.''); Footwear Dist. and Retailers of America v. United States,
852 F. Supp. 1078, 1092-93 (CIT 1994), quoting Restatement (Third) of
the
[[Page 13166]]
Foreign Relations Law of the United States, at 115, comment a, p. 64
(1987) (``Congress does not intend to repudiate an international
obligation of the United States * * * Therefore, when an act of
Congress and an international agreement * * * relate to the same
subject, the courts, regulatory agencies, and the Executive Branch will
endeavor to construe them so as to give effect to both.''). Because
qualifying exporters are given an opportunity for exemption from the
assessment of antidumping duties, the statutory scheme described above
is consistent with Article 4.2 of the Antidumping Agreement. Thus, the
United States has fully implemented its obligations with respect to the
assessment of antidumping duties in regional industry cases.
We also disagree with CDC's contention that we must terminate the
review and revoke the underlying antidumping duty order because U.S.
implementation of its international obligations is allegedly untimely
and inadequate. First, as we stated in the third, fourth, fifth and
sixth administrative reviews and have reaffirmed in the ``Revocation of
Underlying Order'' section, above, we have no authority to revoke the
order. Third Review Final Results. See also Fourth Review Final
Results; Fifth Review Final Results; and Sixth Review Final Results.
Specifically, neither CEMEX nor CDC appealed the Department's final
determination based upon the Department's alleged refusal to offer a
suspension agreement. Thus, the antidumping duty order, based upon the
Department's LTFV determination, is final and binding.
11. Bulk vs. Bag Sales
CEMEX argues that the Department should calculate NV based only on
bulk sales rather than combining both bulk and bagged sales. CEMEX
argues that the Department justified its use of bagged cement sales in
its calculation incorrectly on the premise that, by excluding the cost
of packing from NV, it made the price of cement in bags equal to the
price of bulk cement. CEMEX argues that consumers are willing to pay a
premium for the convenience of buying a bag of cement and that this
fact is supported by record evidence. Additionally, CEMEX argues that,
based on commercial realty, sales of cement in bags are at a different
LOT than sales in bulk. CEMEX maintains that section 773(a)(7)(A) of
the Act requires the Department to adjust the sale price in the
comparison market to ``make due allowances'' for any difference in the
comparison market shown to be ``wholly or partly'' due to differences
in the LOT and that ``the amount of the adjustment shall be based on
the price differences between the two levels of trade in the country in
which NV is determined.'' Therefore, CEMEX argues, if the Department
uses bagged cement sales in its calculation of NV for the final
results, it must deduct the difference in average prices for bag and
bulk cement from the net price of bagged cement.
CDC argues that the Department should compare bag sales in the
United States to bag sales in the home market and bulk sales in the
United States to bulk sales in the home market in order to make a fair
comparison without distortions. CDC states that, in past segments of
this and other cement proceedings, the Department made comparisons on a
bag-to-bag and bulk-to-bulk basis, citing Original LTFV Investigation,
55 FR at 29245, and Concurrence Memorandum, Preliminary Determination:
Gray Portland Cement and Clinker from Venezuela (October 28, 1991). CDC
acknowledges that, in the fifth and sixth reviews of this order, when
CDC made sales of bag and bulk cement in the home market and only bulk
cement in the United States, the Department compared both bag and bulk
sales made in the home market to bulk sales made in the United States.
However, in this review, CDC argues, the Department should make
comparisons on a bag-to-bag and bulk-to-bulk basis as it did in the
original investigation under similar circumstances. CDC asserts that
comparing bulk and bag separately in both markets ensures that no
addition to HM price is necessary for the bulk HM sales and the
Department need only subtract the HM packing from and add U.S. packing
to NV for the HM bagged sale.
The petitioner responds that the Department compared both bulk and
bagged sales to the United States with bulk and bagged sales in the
home market in the preliminary results correctly. The petitioner
maintains that, except for packaging, the cement sold in both bulk and
bagged form is identical. The petitioner also argues that CDC has not
established that the Department has a rule of comparing bulk sales only
to bulk sales and bagged sales only to bagged sales which, the
petitioner asserts, would be contrary to the statute. The petitioner
states that sections 773(a)(1)(A)-(B) and section 771(16) of the Act
require the Department to compare U.S. sales with sales of the
``foreign like product,'' which is defined as the identical merchandise
sold in the home market or, if there is no identical HM merchandise,
the most similar merchandise. The petitioner maintains that, in the
fifth and sixth reviews, the Department found that bulk and bagged
sales ``constitute identical merchandise,'' citing Fifth Review Final
Results at 17165, and Sixth Review Final Results at 12777. The
petitioner argues that CEMEX misinterpreted the Department's findings
by stating that the Department was attempting to ``equalize'' the net
prices of bagged and bulk cement by excluding the cost of packing from
NV. In fact, the Department was making adjustments for packaging
differences which, the petitioner asserts, accounted for the ``only
difference between these products.''
The petitioner contends that the Department rejected CEMEX's
argument that sales of bagged cement were at a different LOT than the
HM sales of bulk cement in the fifth and sixth reviews and that CEMEX
has not demonstrated that the facts in this review warrant a different
result.
Finally, the petitioner claims that CEMEX has not satisfied the
Department's two-step LOT analysis. First, the petitioner argues that
CEMEX has not demonstrated that bagged and bulk cement are sold at
different points in the chain of distribution. Second, the petitioner
argues, CEMEX has not established differences in selling functions with
respect to different customer classifications. In conclusion, the
petitioner urges the Department to use bagged and bulk in its
calculation of NV.
Department's Position: We agree with the petitioner and have
included all Type I sales, bulk and bagged, in the calculation of NV.
The only difference between these products is the packaging; therefore,
we have made an adjustment downward to NV to account for packaging
differences. In addition, as stated in the LOT section of this notice,
we have determined that CEMEX sold at one LOT in the home market;
therefore, distinguishing discrete channels of distribution is not
warranted as there is only one LOT. Therefore, we have not calculated
NV for each channel of distribution as CEMEX requested and have used
our standard methodology for comparing NV to U.S. sales for purposes of
the final results.
12. Rebates
The petitioner argues that the Department should deny CEMEX's
claimed adjustment to NV for rebates. First, it claims that, prior to
sale, CEMEX did not communicate the conditions to be fulfilled to
qualify for the rebate and the amount of the rebate, which are
requirements the Department
[[Page 13167]]
has established for granting rebate claims (citing Certain Corrosion-
Resistant Carbon Steel Flat Products And Certain Cut-To-Length Carbon
Steel Plate From Canada, 61 FR 13815, 13822-23 (1996), and Certain
Corrosion-Resistant Carbon Steel Flat Products And Certain Cut-To-
Length Carbon Steel Plate From Canada, 63 FR 12725, 12741 (1998)). The
petitioner also asserts that CEMEX must establish that it granted the
rebate pursuant to its standard business practice or under a pre-
established program and cites Antifriction Bearings (Other Than Tapered
Roller Bearings) and Parts Thereof From The Federal Republic Of
Germany, 54 FR 18992, 19056 (1989), and Portable Electric Typewriters
From Japan, 56 FR 14072, 14078 (1991).
Second, the petitioner argues that the allocation methodology CEMEX
used for reporting certain rebates is distortive because the allocated
rebates may include rebates on sales of non-subject merchandise. In
this review, the petitioner contends, CEMEX used two different methods
for reporting rebates on HM sales. The petitioner acknowledges that, in
most instances, CEMEX reported rebates on a transaction-specific basis.
However, the petitioner argues that CEMEX reported rebates in the
REBALH field that it based on an allocation methodology, but it has not
provided any information to demonstrate that this allocation is the
most specific calculation feasible. Additionally, the petitioner claims
that CEMEX has provided no information confirming that it paid
allocated rebates on sales of subject merchandise.
CEMEX argues that the Department's preliminary results adjusted NV
correctly for CEMEX's verified rebates. CEMEX argues that the
Department has a long-standing practice of allowing a claimed rebate
without documentary evidence if the rebates are consistent with a
respondent's normal business practices and its past dealings with its
customers. CEMEX notes that it provided detailed descriptive data of
its rebate program in its response and adequate sample documentation.
CEMEX rejects the petitioner's claim that CEMEX's customers were not
aware of its rebate policies at the time they were purchasing cement
from CEMEX. According to CEMEX, as all rebates were negotiated on a
customer-specific basis, customers were aware of the discounts for
which they were eligible.
Next, CEMEX rebuts the petitioner's claim that the Department has a
long-standing policy to reject claims for a rebate adjustment unless
they are reported on a transaction-specific basis. CEMEX argues that
the Department recognizes that it is not unusual for price adjustments
to be granted to customers on a specific basis.
Additionally, CEMEX claims that the petitioner mischaracterizes the
record evidence by stating that CEMEX did not provide additional
information regarding the rebates reported in the REBALH field.
Contrary to the petitioner's argument, CEMEX asserts that, for the non-
transaction-specific rebates, CEMEX identified where the allocated
rebates were reported, the reasons why it allocated them, how it
allocated them, and why the allocation methodology it used was not
distortive. Therefore, CEMEX concludes, the Department's acceptance of
the rebate claims was appropriate.
Department's Position: We allow adjustments to NV for rebates if we
are satisfied that such rebates reflect the respondent's normal
business practice and not an attempt by the respondent to eliminate
dumping margins once we initiate an antidumping investigation or
review. See Certain Corrosion-Resistant Carbon Steel Flat Products From
Japan, 63 FR 47465, 47468 (1998). In this respect, based on CEMEX's
response and our verification of the response, we are satisfied that
rebates are a long-established business practice of CEMEX and that
CEMEX's customers had a reasonable expectation of receiving such
rebates based on their long-standing business relationships with CEMEX.
With respect to CEMEX's reporting methodology, we have allowed
CEMEX's claimed rebate adjustments because the data was submitted in
accordance with our methodology and was substantiated at verification.
These rebates were reported in the same manner as the sixth review
where we granted the adjustment. While the Department prefers that
discounts, rebates, and other price adjustments be reported on a
transaction-specific basis, the Department has long recognized that
some price adjustments are not granted to customers on that basis and
thus cannot be reported on that basis. Generally, ``we have accepted
claims for discounts, rebates, and other billing adjustments as direct
adjustments to price if we determined that the respondent, in reporting
these adjustments, acted to the best of its ability and that its
reporting methodology was not unreasonably distortive.'' See
Antifriction Bearings (Other than Tapered Roller Bearings) and Parts
Thereof from France, et al., Final Results of Antidumping Duty
Administrative Reviews, 62 FR 2081 (1997). Based on CEMEX's responses
to our questionnaire and our verification of those responses, and
consistent with our Sixth Review Final Results, we have allowed
adjustments for rebates.
13. Freight
Comment 1: The petitioner argues that the Department should deny
CEMEX's reported HM freight adjustment. The petitioner argues that
CEMEX did not demonstrate adequately that it is entitled to the
adjustment on HM sales. The petitioner contends that movement expenses
are allowable under the statute and under the Department's practice
only if they are reported based on the actual, transaction-specific
expense or on an allocation methodology that is not distortive. The
petitioner argues that CEMEX did not report its HM freight expenses on
a transaction-, customer-, point-of-sale- or even a plant-specific
basis and has not demonstrated that it was not feasible to report these
expenses on a such a basis. The petitioner notes specifically that
CEMEX's record-keeping system compiles freight-cost data on a
transaction-specific basis and thus CEMEX has failed to demonstrate why
it cannot provide the Department with freight expense information on
the same basis. The petitioner argues further that CEMEX's response
demonstrates CEMEX either did not report freight on a type- and
presentation (bulk vs. bag)-specific basis or failed to report a
significant volume of Type II cement sold in the home market. The
petitioner maintains that CEMEX provided an insufficient explanation
for this discrepancy. The petitioner also argues that CEMEX has not
demonstrated that its allocation methodology is not distortive of the
actual, transaction-specific freight cost. The petitioner notes that,
because cement costs vary widely depending upon transportation mode and
shipment distances, CEMEX's company-average reporting methodology does
not account for potentially significant variances in freight costs
among sales. The petitioner also asserts that CEMEX has not
demonstrated that freight provided by affiliated freight companies was
at arm's length.
CEMEX argues that the Department deducted its reported HM freight
expense from NV properly. CEMEX argues that it reported HM freight in
the most specific manner permitted by its record-keeping system and
that its methodology is not distortive. CEMEX observes that the
Department rejected identical arguments made by the petitioner
concerning HM freight expenses in the final results of the fifth and
sixth administrative reviews. CEMEX also contends that it did present
evidence that the expenses for freight
[[Page 13168]]
provided by affiliated parties were made at arm's length.
Department's Position: We disagree with the petitioner. Based on
our findings at verification, we determine that CEMEX's reported
freight costs for Type I cement are reported on as specific a basis as
is feasible given CEMEX's accounting system, and that they provide a
reasonable estimate of actual transaction-specific freight expenses.
Thus, it would be inappropriate to apply adverse facts available to
CEMEX's freight expense by rejecting the claimed adjustment.
Furthermore, with regard to the petitioner's assertion that CEMEX did
not demonstrate that the expense for freight provided by affiliated
parties was at arm's length, we find that, based on data CEMEX
submitted, the expense for freight provided by unaffiliated parties is
generally higher than the expense for freight provided by affiliated
parties. See Exhibit B-8-C of CEMEX's December 8, 1997, response. Based
on this fact, we determine that the expense for freight provided by
affiliated parties was at arm's length. Therefore, we have deducted
CEMEX's claimed HM freight expense for Type I cement from NV for the
final results.
Comment 2: The petitioner maintains that CDC has failed to
demonstrate entitlement to a freight expense adjustment for sales by
its affiliate Construcentro. Because CDC's responses demonstrate that
CDC's freight-expense methodology for Construcentro results in
commingled expenses for subject and non-subject merchandise, the
petitioner argues, and because CDC has not demonstrated, in accordance
with the preamble to the Department's regulations that its methodology
is not distortive, the Department should deny CDC a freight-expense
adjustment for sales by Construcentro.
CDC argues that the Department deducted its reported HM inland
freight incurred by Construcentro from NV properly. CDC argues that its
allocation is the most specific possible given its accounting system.
CDC claims further that, because the majority of its total shipments
were of subject cement, the freight expenses associated with its
shipments is not inherently distortive. Finally, CDC observes that the
Department made an adjustment for this expense in the fifth and sixth
administrative reviews where CDC used the same methodology.
Department's Position: As in prior reviews, we find that CDC
reported its freight expenses to the best of its ability given its
accounting system. Furthermore, the record indicates that at least 70
percent of this particular affiliate's shipments are of subject
merchandise and that at least another 10 percent of this affiliate's
shipments are of nonsubject ``powder materials.'' See CDC's
supplemental response dated May 8, 1998, at page B-6. Because the vast
majority of the freight is for subject merchandise or for products
sufficiently similar to subject merchandise, we can conclude the
relative freight costs would be virtually identical so we find that
CDC's methodology is not unreasonably distortive. Therefore, we have
deducted the reported HM expense incurred by the affiliate from NV for
the final results.
14. Other Adjustments
The petitioner argues that CDC is not entitled to a specific
deduction included under certain other price adjustments in the OTHADJH
field in its HM sales database. The petitioner claims that CDC did not
provide documentation demonstrating a standard policy or any agreements
communicated to its customers prior to sale and that the price
adjustment benefits consumers of an out-of-scope product rather than
subject merchandise.
CDC disagrees and asserts that the Department deducted CDC's
OTHADJH from NV correctly. CDC states that in other cases the
Department has allowed similar post-sale price adjustments where it was
satisfied that the adjustments were not attributable to a company's
attempt to lower or eliminate antidumping margins. CDC states that, in
its case, there is no evidence on the record to suggest that these
adjustments were an attempt to manipulate prices to lower its margin.
On the contrary, it notes that the Department has accepted these types
of adjustments in the fifth and sixth reviews. CDC also states that it
provided sample credit memoranda to support its claim that customers
were aware of the discount prior to sales. CDC also notes that the
Department rejected in past administrative reviews the petitioner's
argument that the discount is not awarded to cement customers.
Department's Position: Based on information CDC submitted and our
verification of similar information in prior reviews, we are satisfied
that the price adjustments in question are consistent with CDC's past
business practices and that CDC's customers would be knowledgeable of
these practices based on long-term business relationships with CDC.
Also, no record evidence for this review indicates that we should not
conclude, as we have in prior reivews, that the price adjustments
covered by this item were paid to cement customers and not attributable
to sales of non-subject merchandise. Since CDC was able to allocate the
adjustment on a product-specific and customer-specific basis in the
month in which the sale occurred, we conclude that such an allocation
did not have a distortive effect. Thus, we have allowed CDC's claimed
adjustment.
15. Pre-Sale Warehousing
CEMEX argues that the Department should have deducted pre-sale
warehousing expenses in Mexico from NV. CEMEX cites section
773(a)(6)(B)(ii) of the Act which requires the Department to reduce NV
if included in the price, by the amount of transportation and other
expenses, including warehousing expenses, incurred in bringing the
foreign like product from the original place of shipment to the place
of delivery to the purchaser. As further support, CEMEX also cites the
SAA at 827. CEMEX argues further that Sec. 351.401(e)(2) of the
Department's regulations provides that the warehousing expenses
incurred after the subject merchandise leaves the original place of
shipment are to be included in the adjustments for movement expenses.
In addition, CEMEX cites section 773a(6)(B)(ii) of the Act, which
recognizes that warehousing expenses incurred at facilities other than
the production site are considered part of the movement expenses and
should therefore be deducted from the sales price.
CEMEX disagrees with the Department's statement in its Calculation
Memorandum of August 31, 1998, that it had reviewed the record of the
instant review and found that there had been no change in the reporting
methodology of this item from previous reviews. CEMEX claims that it
provided the Department with new information such as the per-ton cost
of pre-sale warehousing incurred in Mexico and that cost was calculated
by company, by month, and reflects only the costs associated with the
remote terminals.
The petitioner agrees with the Department's decision not to include
CEMEX's HM pre-sale warehousing expenses as movement expenses. It
asserts that, since the Department was not able to verify CEMEX's
reported pre-sale warehousing expenses and no new information has been
provided, the Department has no reason to change its treatment of these
expenses. The petitioner contends that the expense figures CEMEX
reported reflect warehouses at locations remote from CEMEX's production
plants. In conclusion, the petitioner cites the Department's
regulations, the statute, and legislative history to define
[[Page 13169]]
movement expenses as only those expenses incurred after the subject
merchandise leaves the original place of shipment and that in CEMEX's
case these expenses represent only factory warehousing.
Department's Position: We agree with the petitioner and have not
deducted pre-sale warehousing expenses from NV. CEMEX did not, as in
prior reviews, submit its data in accordance with the Department's
instructions. Because there were no changes in CEMEX's reporting
methodology from previous reviews, we again denied the adjustment (see
Calculation Memorandum, dated August 31, 1998, located in Room B-009 of
the Department's main building).
16. Advertising Expenses
CDC argues that the Department treated CDC's HM advertising
expenses incorrectly as indirect rather than direct selling expenses.
CDC maintains that it demonstrated, through sample documents, that it
incurs these expenses directly in conjunction with sales of the product
under review and the advertising is directed towards the customer's
customer.
The petitioner disagrees and asserts that the Department treated
these expenses as indirect selling expenses correctly. The petitioner
maintains that the record evidence demonstrates that, as in the
previous review, CDC's advertising is corporate-image advertising and
is not related directly to sales of gray portland cement.
Department Position: As we have noted in prior reviews, we normally
consider direct expenses as expenses that result from, and bear a
direct relationship to, sales of products under review. With respect to
advertising, the expense must be assumed on behalf of a customer and
must be specifically associated with sales of subject merchandise for
the Department to treat this expense as a direct selling expense.
Although CDC argues that it submitted evidence to support its claim
that the expenses were direct, we disagree. The advertising at issue is
associated with sales of subject and non-subject cement and promotes
the overall corporate image of CDC rather than promoting sales of gray
portland cement. Therefore, consistent with our prior practice, we have
treated these expenses as indirect selling expenses in the home market.
17. Ministerial Errors
Comment 1: CEMEX claims that the Department did not deduct certain
rebates from NV inadvertently. The petitioner argues that, because the
rebates in question were reported using a distortive methodology, an
adjustment for these rebates should not be granted.
Department's Position: We agree with CEMEX. We have corrected this
clerical error for the final results. With regard to the petitioner's
argument that the methodology CEMEX used to report these rebates was
distortive, see our position for comment 11, above.
Comment 2: CEMEX claims that the Department used the wrong month
variable in recalculating credit for the arm's-length test. The
petitioner agrees with CEMEX.
Department's Position: We agree and have corrected this clerical
error for the final results.
Comment 3: CEMEX claims that, when the Department recalculated its
home-market imputed expenses using its revised interest rates, the
Department inadvertently used the cumulative average interest rate
instead of the monthly interest rate although CEMEX used the monthly
interest rates in its original submission. The petitioner argues that
the Department apparently used a monthly average interest rate.
Department's Position: We agree with CEMEX and have corrected this
clerical error for the final results.
Comment 4: CDC claims that the Department mismatched interest rates
in recalculating its home-market credit expenses by using the rates
that were off by one month. The petitioner agrees with CDC.
Department's Position: We agree and have corrected this clerical
error for the final results.
Comment 5: CDC argues that the Department should use 360 days in
recalculating HM credit expenses because that is the figure respondent
used in its original credit calculation.
Department's Position: We agree with CDC. Because CDC used the same
number of days in its U.S. credit expense calculation, we have changed
our calculation of CDC's HM credit expenses to reflect a 360 day-credit
calculation.
Comment 6: CDC argues that the Department should convert packing
expenses from pesos to U.S. dollars before making the packing
adjustment to NV. The petitioner agrees with CDC.
Department's Position: We agree with CDC and the petitioner and
have corrected this ministerial error for the final results.
Comment 7: CDC argues that the Department should also add U.S.
packing to NV rather than deduct it from U.S. price. The petitioner
agrees with CDC.
Department's Position: We agree with CDC and the petitioner and
have corrected this ministerial error for the final results.
Comment 8: CDC argues that the Department neglected to include U.S.
packing expenses in its calculation of the CEP ratio. The petitioner
agrees with CDC.
Department's Position: We agree with CDC and the petitioner and
have corrected this ministerial error for the final results.
Comment 9: CEMEX claims that, in calculating the assessment rates,
the Department should have included the entered value of cement used in
CEMEX's further-manufactured sales. The petitioner agrees with CEMEX.
Department's Position: We agree with CEMEX and the petitioner and
have corrected this error for the final results.
[FR Doc. 99-6402 Filed 3-16-99; 8:45 am]
BILLING CODE 3510-DS-P