[Federal Register Volume 60, Number 163 (Wednesday, August 23, 1995)]
[Notices]
[Pages 43761-43769]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-20929]



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DEPARTMENT OF COMMERCE
International Trade Administration
[A-588-815]


Gray Portland Cement and Clinker From Japan; Final Results of 
Antidumping Duty Administrative Review

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

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

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SUMMARY: On February 11, 1994, the Department of Commerce (the 
Department) published the preliminary results of review of the 
antidumping duty order on gray portland cement and clinker from Japan. 
The review covers one manufacturer/exporter, Onoda Cement Co., Ltd., 
and the period May 1, 1992, through April 30, 1993.
    We gave interested parties an opportunity to comment on the 
preliminary results. Based on our analysis of the comments received, 
and the correction of clerical errors, we have changed the final 
results from those presented in the preliminary results of review.

EFFECTIVE DATE: August 23, 1995.

FOR FURTHER INFORMATION CONTACT:
David Genovese or Michael Heaney, Office of Antidumping Compliance, 
International Trade Administration, U.S. Department of Commerce, 
Washington, DC. 20230; telephone (202) 482-5254.

SUPPLEMENTARY INFORMATION:

Background

    On May 3, 1993, the Ad Hoc Committee of Southern California 
Producers of Gray Portland Cement (the petitioner) requested that the 
Department conduct an administrative review of the antidumping duty 
order on gray portland cement and clinker from Japan (56 FR 21658, May 
10, 1991) for Onoda Cement Co., Ltd. (Onoda). We initiated the review, 
covering the period May 1, 1992, through April 30, 1993, on June 25, 
1993 (58 FR 34414). On February 11, 1994, we published the preliminary 
results of the administrative review (59 FR 6614). The Department has 
now completed the administrative review in accordance with section 751 
of the Tariff Act of 1930, as amended (the Act).

Scope of the Review

    The products covered by this review are gray portland cement and 
clinker from Japan. Gray portland cement is a hydraulic cement and the 
primary component of concrete. Clinker, an intermediate material 
produced when manufacturing cement, has no use other than grinding into 
finished cement. Microfine cement was specifically excluded from the 
antidumping duty order.
    Gray portland cement is currently classifiable under the Harmonized 
Tariff Schedule (HTS) item number 2523.29, and clinker is currently 
classifiable under HTS item number 2523.10. Gray portland cement has 
also been entered under item number 2523.90 as ``other hydraulic 
cements''.
    The HTS item numbers are provided for convenience and Customs 
purposes. The written product description remains dispositive as to the 
scope of the product coverage.

Analysis of Comments Received

    We gave interested parties an opportunity to comment on the 
preliminary results. We received comments from the petitioner and from 
the respondent. At the request of the petitioner and respondent, we 
held a public hearing on March 29, 1994.

Comment 1

    Petitioner argues that the Department inaccurately adjusted FMV for 
home market indirect selling expenses in those instances where the 
Department compared U.S. sales of cement imported into the United 
States and further manufactured into concrete with sales of cement in 
the home market. Where such comparisons occurred, petitioner states 
that, because the imported merchandise was cement, the Department 
appropriately deducted further manufacturing costs and attempted to 
make cement-to-cement comparisons. However, petitioner 

[[Page 43762]]
asserts that, for purposes of 19 CFR 353.56(b)(2), the Department must 
make an adjustment to the U.S. indirect selling expense figure for U.S. 
concrete sales, since Onoda's data reflect the expenses incurred on 
sales of concrete in the United States, not sales of cement. Petitioner 
maintains that 19 CFR 353.56(b)(2) directs the Department to limit the 
home market indirect selling expense adjustment to the amount of the 
indirect selling expense incurred on the U.S. merchandise. In 
petitioner's view, this requires the Department, for the purpose of 
establishing the appropriate adjustment to FMV for indirect selling 
expenses, to recalculate the indirect selling expense figure for the 
U.S. sales of concrete so that they reflect the cement equivalent. In 
this manner, petitioner concludes that the Department will meet the 
requirements of the regulations by limiting the indirect selling 
expense adjustment to home market sales of cement to those expenses 
associated with sales of cement in the United States.
    Onoda argues that the Department should base the exporter's sales 
price (ESP) ``cap'' on the entire amount of indirect selling expenses 
associated with ESP sales as it did in the 1990/92 review of this 
order. Onoda asserts that this method of determining the ESP cap is 
appropriate because indirect selling expenses associated with ESP sales 
can not be ascribed to foreign production and U.S. further 
manufacturing. Onoda cites the Court of International Trade's ruling in 
Torrington Co. v. United States, 818 F. Supp. 1563, 1576 (CIT 1993), 
and the Department's findings in Final Results of Antidumping Duty 
Administrative Review; Color Picture Tubes from Japan, 55 FR 37915 
(September 14, 1990) (hereafter CPTs), to argue that the Department's 
established practice has been to include in the ESP cap all indirect 
selling expenses deducted from ESP under 19 CFR 353.41(e).
Department's Position

    We agree with the petitioner. It is the Department's practice to 
allocate indirect expenses to the product imported into the United 
States (in this case cement) and to the further manufactured product 
sold in the United States (in this case, concrete) when calculating the 
ESP cap. (see Final Determination of Sales at Less Than Fair Value: 
Calcium Aluminate Cement, Cement Clinker and Flux from France, 59 FR 
14136 (March 25, 1994)) Because Onoda exported cement to the United 
States and, before selling it to an unrelated customer, converted the 
cement into concrete, our calculation of U.S. price (USP) reflects the 
deduction of the value which Onoda added in the United States, other 
expenses, and indirect selling expenses.
    In determining the appropriate adjustment to FMV under 19 CFR 
353.56(c), we have limited the home market indirect selling expense 
adjustment to the amount of those selling expenses associated with the 
cement which entered the United States, since we are making a cement-
to-cement comparison. This requires adjusting Onoda's total U.S. 
indirect selling expenses to reflect only those expenses associated 
with cement.
    Onoda's argument that indirect selling expenses are indivisible is 
inaccurate. The Department's goal is to make an apples-to-apples 
comparison when comparing merchandise sold in the United States with 
merchandise sold in the home market. In order to make such a 
comparison, it is necessary to allocate expenses so that we compare 
cement which enters the United States with cement sold in the home 
market.
    Additionally, the Torrington case cited by Onoda does not advocate 
including all indirect selling expenses associated with ESP sales in 
the ESP cap. Rather, Torrington advocates allocating expenses incurred 
on ESP sales between the imported product (which is the product sold in 
the home market) and the further-manufactured product. Accordingly, we 
allocated indirect expenses between the imported product (which is the 
product sold in the home market) and the further-manufactured product 
and limited the ESP cap to those indirect selling expenses incurred on 
the imported product.
    Similarly, in the aforementioned CPTs case, the respondent was 
importing color picture tubes (CPTs) and incorporating them into color 
televisions (CTVs). In CPTs, the Department determined that ``(s)ince 
it is the CTV and not the CPT that is ultimately sold in the United 
States, a proportional amount of the CTV indirect selling expenses was 
allocated to the CPT based upon the costs associated solely with the 
CPT to the total CTV cost. The total of the indirect selling expenses 
allocated to the CPT formed the cap for the allowable home market 
selling expenses offset under Sec. 353.56(b) of the Department's 
regulations.'' See CPTs at 37917.

Comment 2

    Petitioner argues that Onoda is not entitled to a difference-in-
merchandise (difmer) adjustment for the cost differences between U.S. 
models Type I and Type II, and home market models Type N and Type M. 
Petitioner argues that Onoda has failed to meet the criterion for a 
difmer adjustment that was articulated in the Department's Policy 
Bulletin No. 92.2 and in other antidumping cases. According to 
petitioner, that criterion is that respondents are entitled to difmer 
adjustments only if they show that the difference in cost between the 
two models is attributable to the difference in physical 
characteristics of the merchandise. Petitioner relies upon plant-by-
plant variable cost of manufacture data for Type N cement to argue that 
the weighted-average difmer adjustments reported by Onoda are largely 
attributable to differences in efficiencies between Onoda's various 
production facilities and not to cost differences associated with the 
physical characteristics of the merchandise. Accordingly, petitioner 
requests that the Department deny Onoda's difmer adjustment.
    Onoda argues that it followed the exact same procedure in preparing 
its difmer adjustment in this segment of the proceeding as it did in 
the less-than-fair-value (LTFV) investigation and the 1990/92 review. 
Onoda notes that during the LTFV investigation, the Department verified 
the difmer data, and granted the difmer adjustment in calculating the 
dumping margin. Furthermore, Onoda observes that in the LTFV 
investigation the Department was satisfied that Onoda had reasonably 
tied cost differences to physical differences (Final Determination of 
Sales at Less Than Fair Value; Gray Portland Cement and Clinker from 
Japan, 56 FR 12156, March 22, 1991 (Gray Portland Cement--LTFV 
Investigation)). Additionally, Onoda notes that the Department 
determined in the final results of the 1990/92 review that evidence on 
the record did not establish that any differences in plant efficiencies 
were the source of the cost differences (Gray Portland Cement and 
Clinker from Japan, Final Results of Antidumping Duty Administrative 
Review, 58 FR 48826, September 20, 1993 (Gray Portland Cement--First 
Review)).
    Additionally, Onoda argues that the only way it can calculate the 
difmer adjustment is to weight-average the variable costs to produce 
Type N cement at all plants and compare that amount to the variable 
costs to produce Type I cement at the single plant where it produced 
Type I cement. Onoda argues that this methodology of weight-averaging 
costs across all plants is consistent with Departmental practice.
    Thus, according to Onoda, there is no reason for the Department not 
to grant the adjustment in this review. However, 

[[Page 43763]]
should the Department decline to grant the full difmer adjustment, 
Onoda argues that the Department should at least grant a difmer 
adjustment for the cost differences of the material inputs.

Department's Position

    Consistent with the Department's practice in the LTFV investigation 
and the 1990/92 review of this case, we have allowed the difmer 
adjustment claimed by Onoda. As we stated in the 1990/92 review, which 
was the first review, although Onoda's plants may have different 
efficiencies, evidence on record does not establish that any 
differences in plant efficiencies are the source of the cost 
differences identified by Onoda (see Gray Portland Cement and Clinker--
First Review at 48827). Rather, cost differences are due to differences 
in material inputs and the physical differences which result from 
different production processes.
    First, as stated previously, the Department compared Type I and 
Type II cement in the United States with Type N and Type M cement in 
the home market, respectively. The specific differences in costs among 
the various cement types are due to the varying costs of the inputs, 
including material inputs (limestone, clay, silica, etc.), fuel inputs 
(fuel oil, coal, anthracite, etc.) and electricity (mixing, grinding, 
burning, etc.). For example, Type I cement contains clinker, gypsum and 
minor grinding agents. In contrast, Type N cement contains clinker, 
gypsum, minor grinding agents and additives. Furthermore, Type I cement 
contains a higher percentage of clinker and gypsum than Type N cement. 
Moreover, Type I, on average, has a slightly higher percentage of 
silicon dioxide. Similarly, Type II and Type M cement also differ in 
terms of their chemical and physical composition. Type M cement 
generally has a higher percentage of clinker and a lower percentage of 
gypsum than Type II cement. Additionally, Type M cement has a lower 
tricalcium aluminate level than Type II.
    Second, as noted in the LTFV investigation, ``we verified Onoda's 
claimed difference in merchandise adjustment and found it to be an 
accurate representation of the relevant variable costs of production as 
reflected in its actual cost accounting records. Given the fact that 
physical differences between types of cement arise from differences in 
the production process (e.g., amount and duration of heat), and from 
differences in component materials, we are satisfied that Onoda has 
reasonably tied cost differences to physical differences'' (see Gray 
Portland Cement and Clinker--LTFV Investigation at 12161).
    Additionally, with regard to the weighted-average methodology 
employed by Onoda, the Department specifically requested that Onoda 
report its cost of manufacture information on a weighted-average basis 
(see the Department's questionnaire at page 54: ``If the subject 
merchandise is manufactured at more than one facility, the reported COM 
should be the weighted-average manufacturing cost from all 
facilities'').
    Accordingly, we have allowed Onoda's claimed difmer adjustment.

Comment 3

    The petitioner argues that home market sales of bagged cement 
should be included in the calculation of FMV. Petitioner asserts that 
this is appropriate since: (1) The technical specifications for cement 
sold in bags and in bulk are identical; (2) charges related to sales of 
bagged cement were included in the calculation of various adjustments 
made to FMV; and (3) the Department has all the data necessary to 
calculate FMV for bagged cement. Petitioner cites to Gray Portland 
Cement and Cement Clinker from Venezuela, 56 FR 56390 (November 4, 
1991), Industrial Phosphoric Acid from Israel, 52 FR 25440 (July 7, 
1987, and Frozen Concentrated Orange Juice from Brazil, 57 FR 3995 
(February 3, 1992) as examples where the Department compared identical 
merchandise that was packaged differently.
    Onoda argues that the Department should not include home market 
sales of bagged cement in the FMV calculation since it only sold bulk 
cement in the United States. Onoda asserts that since the Department's 
goal should be to compare sales in the United States and foreign 
markets which are as similar as possible, the Department should compare 
bulk sales in the United States to bulk sales in the home market. Onoda 
argues that it is not relevant that cement sold in bags is within the 
scope of the order and is physically the same. Onoda asserts that it 
would be unfair to include bagged cement sales in the calculation of 
FMV since it would distort the FMV figure. Onoda cites Final 
Determination of Sales at Less Than Fair Value: Fresh Kiwifruit from 
New Zealand, 57 FR 13695 (April 17, 1992), Final Determination of Sales 
at Less Than Fair Value: Gray Portland Cement and Clinker from Mexico, 
55 FR 29244 (July 18, 1990), and Gray Portland Cement and Clinker from 
Venezuela, 56 FR 56390 (November 4, 1991), to argue that the Department 
has consistently made bulk-to-bulk and bag-to-bag comparisons.

Department's Position

    We agree with the petitioner. There is no physical difference 
between the bagged and bulk cement sold in Japan. The only difference 
is the manner in which the merchandise is packed. Since packing in not 
a criterion for comparability, and because there is no physical 
difference between bulk and bagged cement sold in the home market, we 
did not exclude home market sales of bagged cement from our 
calculations of FMV.
    In Brazilian orange juice, the Department based USP on packed 
merchandise and FMV on packed and bulk merchandise. In Venezuelan 
cement, the Department compared bulk-to-bulk and bagged-to-bagged sales 
as well as bulk-to-bag sales. In Israeli acid, the Department compared 
bulk U.S. product to the home market product packed in drums. The 
comparison of bulk-to-bag and bulk-to-drum sales in Venezuelan cement 
and Israeli acid supports the Department's conclusion in this case that 
it is acceptable to compare bulk-to-bagged sales.
    Additionally, the issue raised in New Zealand kiwifruit was whether 
the Department ``must * * * adjust for difference in packing costs when 
comparing differently packed identical merchandise,'' not whether the 
Department should compare bulk-to-bulk and bagged-to-bagged 
merchandise. In Mexican cement, the issue did not arise because all 
U.S. sales and their corresponding identical matches in Mexico were 
bulk sales. Finally, in prior segments of this proceeding, we made 
bulk-to-bag and bag-to-bulk comparisons, with appropriate adjustments 
for packing differences.
    Therefore, because the cases cited by Onoda do not stand for the 
proposition that the Department must always compare bulk-to-bulk and 
bag-to-bag sales, and because packing is not a criterion for matching 
types of cement, we compared sales of bulk cement in the United States 
to sales of both bulk and bagged cement in the home market, and made 
the appropriate adjustments to reflect the packing costs associated 
with bagged cement.

Comment 4

    Petitioner argues that the Department should disallow Onoda's 
claimed deductions for commissions to distributors because Onoda has 
not properly documented what portion of its commission payments are 
made to related parties, or whether the terms of commissions paid to 
related distributors 

[[Page 43764]]
are comparable to the terms of commissions paid to unrelated 
distributors.
    Additionally, petitioner states that Onoda has failed to show how 
one type of commission, which is offered to distributors to promote 
sales of all Onoda cement, not just cement within the scope of the 
order, is tied directly to the subject merchandise.
    Onoda states that the Department should grant a full deduction for 
these commissions in its FMV calculations because it has fully 
explained the basis for the payment of the commissions in the home 
market and has directly tied these commissions to its home market sales 
of Types N and M cement.
    Onoda disagrees with petitioner's assertion that it failed to tie 
commissions to the subject merchandise. Onoda asserts that because Type 
N and M cement accounted for the majority of home market sales, the 
majority of the commissions in question were associated with the sale 
of Types N and M cement. Additionally, Onoda argues that it did not 
simply deduct the total commission expense from the sales price of 
Types N and M cement. Rather, Onoda allocated these expenses over all 
cement types.

Department's Position

    We agree with Onoda. Onoda provided a sufficient response to the 
Department's questions concerning the commissions it grants to related 
and unrelated distributors in the home market. The terms of the 
commissions offered by Onoda are fixed, so that related and unrelated 
distributors are offered commissions on precisely the same terms that 
do not vary according to the product sold. The commissions in question 
are allocated to the subject merchandise, are offered to both related 
and unrelated distributors, and, because the terms of the commissions 
are the same whether the distributors are related or unrelated, we have 
determined that the commissions are at arm's-length and therefore an 
allowable deduction from the home market price.

Comment 5

    Petitioner argues that the Department should include in its 
calculation of FMV the price actually charged by Onoda's related 
distributors to the first unrelated customer. To accomplish this, 
petitioner suggests that the Department add to the related distributor 
price a mark-up which Onoda provides to all of its distributors. 
Petitioner contends that this is appropriate because the mark-up Onoda 
provides to its related distributors is merely an intracompany transfer 
that benefits Onoda.

Department's Position

    We disagree with the petitioner. Since the mark-up to related 
distributors is at arm's-length (i.e., is the same for related and 
unrelated distributors and the sales prices to related distributors are 
comparable to the sales price to unrelated distributors (see our 
response to comment 6)) and directly related to the sales in question, 
the mark-up should not be added to the related distributor's price when 
calculating FMV. Accordingly, when calculating FMV, the Department did 
not add the mark-up to the price charged related distributors because 
Onoda provides the identical mark-up to all its distributors, whether 
related or unrelated.

Comment 6

    The petitioner states that, when determining what sales to use to 
calculate FMV, the Department should use only those related party sales 
for which the price is greater than or equal to the price charged to 
unrelated customers. Petitioner argues that using related party sales 
whose prices are below those of unrelated party sales is inconsistent 
with the Department's general practice in prior cases and fails to 
eliminate related party sales that were not made at arm's-length.
    Onoda states that it treats all sales to distributors, whether 
related or unrelated, in the same fashion, and, therefore, all sales to 
related distributors should be included in the calculation of FMV. 
Moreover, Onoda asserts that the price it charges its distributors is 
in no way influenced by Onoda, since it is based on a price that is 
negotiated between the distributor and its unrelated customer. Thus, 
argues Onoda, all sales to related distributors should be included in 
the calculation of FMV.

Department's Position

    Consistent with 19 CFR 353.45(a), we include related party 
transactions in our calculation of FMV when we are satisfied that the 
price of such sales are comparable to the prices of sales to the 
unrelated party. In this case, since related party sales were generally 
at prices equal to or greater than unrelated party sales, we determined 
that related party sales are comparable to Onoda's sales to unrelated 
parties. Accordingly, we have included all related party sales in our 
calculation of FMV.

Comment 7

    Petitioner argues that the commission Onoda granted to a Japanese 
trading company should be deducted in its entirety from Onoda's U.S. 
prices (i.e., the Department should deduct from U.S. price the result 
of multiplying the F.O.B. Japan price by the contractually arranged 
commission rate).
    Onoda argues that petitioner's methodology represents only one-half 
of the transaction. Onoda asserts that the actual commission is the net 
amount which passes from the Onoda corporate family (i.e., Onoda and 
Lone Star Northwest) to the Japanese trading company corporate family, 
and that the sequence and composition of the payments have no bearing 
on the value of the commission. Thus, Onoda argues that in the 
preliminary results the Department correctly calculated the amount of 
U.S. commissions.

Department's Position

    We agree with Onoda. In a sales/distribution situation where there 
are two payments and two corporate families, what is relevant is the 
entire payment from one corporate family to the other. Thus, as we did 
in the 1990/92 review of this case, we have included both portions of 
the transaction in our calculation of the payment to the trading 
company rather than applying the commission rate to the F.O.B. Japan 
price as recommended by the petitioner.

Comment 8

    Petitioner argues that the direct selling expenses Onoda reported 
in its cost of production (COP) response do not equal the direct 
selling expenses Onoda reported in its home market sales tape. 
Petitioner states that certain expenses included in the direct selling 
expense category of Onoda's home market sales tape were not included in 
the direct selling expense category for Onoda's COP response. 
Petitioner states that the Department should weight-average and add to 
its COP calculations the direct selling expenses reported on Onoda's 
home market sales tape in order to ensure that the direct selling 
expenses used to determine FMV and COP are used consistently. 
Petitioner asserts that this adjustment is necessary to ensure a fair 
comparison of expenses in the COP and FMV calculations.
    Onoda states that the direct selling expenses it reported on the 
home market sales tape and the COP response are not equal because 
certain direct selling expenses, such as two commission expenses, were 
reported as indirect selling expenses rather than as direct selling 
expenses in the COP response. Onoda states that, for COP purposes, it 
does not matter if commission expenses are categorized as direct or 
indirect, since all selling 

[[Page 43765]]
expenses are treated identically in determining whether home market 
sales are below cost. Onoda asserts that what is important is that the 
total selling expenses reported on the home market sales tape and in 
the COP response be equal.

Department's Position

    It is important that the total selling expenses reported in the COP 
response equal the total selling expenses reported on the home market 
sales tape, since the Department will compare the COP with the net home 
market price in order to determine if sales below cost occurred. Any 
inequality in total selling expenses between COP and home market sales 
will lead to an imperfect comparison and therefore an inaccurate 
determination of sales below cost.
    Accordingly, for these final results, we have added to the reported 
total selling expenses for COP the weighted-average direct selling 
expenses included in the home market sales tape (i.e., technical 
service, quality control, plant quality control, and advertising) since 
they were not included in the COP calculation reported by Onoda. 
Additionally, we deducted from the reported total selling expenses for 
COP the amounts included in the field DIRSELEX (tanker freight costs 
and freight expense for swap transactions) since these selling expenses 
were deducted from the calculation of net home market price for 
comparison to the COP. We did not add commission expenses to the 
reported total selling expenses for COP since, as noted by Onoda, they 
were already included in the reported indirect selling expense figure. 
This methodology ensures that the amount of total selling expenses we 
use in our COP analysis equals the total selling expenses we use in our 
FMV calculations.

Comment 9

    Onoda argues that the decision by the Court of Appeals for the 
Federal Circuit (Federal Circuit) in The Ad Hoc Committee of AZ-NM-TX-
FL Producers of Gray Portland Cement v. United States, 13 F.3d 398 
(Federal Circuit 1994), (hereafter Ad Hoc Committee), which states that 
pre-sale movement expenses cannot be deducted as a direct expense from 
FMV, does not apply to FMV when the U.S. sales are ESP transactions. 
(Since Onoda submitted its comments, the cite for Ad Hoc Committee has 
changed. The revised cite is The Ad Hoc Committee of AZ-NM-TX-FL 
Producers of Gray Portland Cement v. United States, 13 F.3d 398 
(Federal Circuit 1994) cert. denied 115 S. Ct. 67 (1994).) Onoda cites 
the Court of International Trade's decision, The Torrington Company v. 
United States, Slip Op. 94-37, at 7 (CIT 1994) (hereafter Torrington 
II), to support its claim that Ad Hoc Committee does not apply to ESP 
sales. (Since Onoda submitted its comments, the cite for Torrington II 
has changed. The revised cite is The Torrington Company v. United 
States, 850 F. Supp 7, (CIT 1994).)
    Onoda states that if the Department were to conclude that Ad Hoc 
Committee does apply to FMV when calculating margins on ESP 
transactions, then the Department should treat U.S. pre-sale freight 
expenses as indirect expenses. Otherwise, Onoda argues that the 
resulting comparison between U.S. and home market sales will be 
inequitable.
    Additionally, Onoda states that Ad Hoc Committee is not yet final 
because there is still time to file a petition for appeal to the 
Supreme Court. Therefore, Onoda urges the Department not to apply Ad 
Hoc Committee until all possibilities for appeal have been exhausted.
    Petitioner argues that Ad Hoc Committee applies to FMV in both ESP 
and purchase price (PP) comparisons. Petitioner asserts that the issue 
the Federal Circuit addressed in Ad Hoc Committee was whether pre-sale 
transportation costs should be categorized as a direct or indirect 
expense in calculating FMV. Petitioner contends that the Federal 
Circuit did not distinguish between comparisons to PP and ESP in 
reaching its conclusion.
    Petitioner also argues that the Torrington II decision cited by the 
respondent takes too narrow a view of the Federal Circuit's holding in 
Ad Hoc Committee. Accordingly, petitioner argues that the Department 
should follow the Federal Circuit's ruling in Ad Hoc Committee, and not 
the CIT's decision in Torrington II interpreting the Federal Circuit's 
decision. Accordingly, the Department should continue to follow Ad Hoc 
Committee. 
    Moreover, petitioner cites Ayuda, Inc. v. Thornburgh, 919 F.2d 153 
(D.C. Cir. 1990), to argue that a decision by the Federal Circuit is 
final unless and until it is reversed or overruled by the U.S. Supreme 
Court.
    Finally, petitioner argues that the Department cannot treat pre-
sale transportation costs for U.S. sales as indirect expenses (which 
would increase the ESP cap) because section 772(d)(2)(A) of the Act 
clearly instructs the Department to treat these expenses as direct 
expenses.
    In a related matter, petitioner argues that because home market 
pre-sale transportation costs are considered indirect selling expenses 
(in accordance with the Court's decision in Ad Hoc Committee) and 
because Onoda reported home market pre-sale transportation expenses 
with other direct selling expenses in the field DIRSELH, the Department 
should treat all expenses reported in the DIRSELH field as indirect, 
rather than direct, selling expenses.

Department's Position

    We agree with Onoda and the CIT's assertion in Torrington II, that 
the Ad Hoc Committee decision was limited to the narrow question of our 
inherent authority to deduct pre-sale freight expenses in purchase 
price situations. However, as noted by the CIT in Ad Hoc Committee of 
AZ-NM-TX-FL Producers of Gray Portland Cement v. United States, 865 F. 
Supp. 857 (CIT 1994) (Ad Hoc Committee II), the Ad Hoc Committee 
decision ``discussed without disapproval, Commerce's ESP-COS procedures 
where, as indicated, indirect expenses, such as most pre-sale 
transportation costs, are deductible from FMV to the extent of the USP 
level of expenses.'' (emphasis added)
    We have determined, in light of Ad Hoc Committee and its progeny, 
that the Department no longer can deduct home market movement charges 
from FMV pursuant to its inherent power to fill in gaps in the 
antidumping statute. We instead adjust for those expenses under the 
circumstance-of-sale (COS) provision of 19 CFR 353.56 and the ESP 
offset provision of 19 CFR 353.56(b)(1) and (2), as appropriate, in the 
manner described below.
    When USP is based on either ESP or purchase price, we adjust FMV 
for home market movement charges through the COS provision of 19 CFR 
353.56(a). Under this adjustment, we capture only direct selling 
expenses, which include post-sale movement expenses and, in some 
circumstances, pre-sale movement expenses. Specifically, we treat pre-
sale movement expenses as direct expenses if those expenses are 
directly related to the home market sales of the merchandise under 
consideration.
    In order to determine whether pre-sale movement expenses are 
direct, the Department examines the respondent's pre-sale warehousing 
expenses, since the pre-sale movement charges incurred in positioning 
the merchandise at the warehouse are, for analytical purposes, linked 
to pre-sale warehousing expenses. See Final Results of Redetermination 
Pursuant to Court Remand, dated January 5, 1995 (pertaining to Slip. 
Op. 94-151). If the pre-sale warehousing constitutes an 

[[Page 43766]]
indirect expense, the expense involved in getting the merchandise to 
the warehouse, in the absence of contrary evidence, also must be 
indirect; conversely, a direct pre-sale warehousing expense necessarily 
implies a direct pre-sale movement expense. We note that although pre-
sale warehousing expenses in most cases have been found to be indirect 
expenses, these expenses may be deducted from FMV as a COS adjustment 
in a particular case if the respondent is able to demonstrate that the 
expenses are directly related to the sales under consideration. See Ad 
Hoc Committee of AZ-NM-TX-FL Producers of Gray Portland Cement v. 
United States, Slip Op. 95-91 (CIT May 15, 1995) (upholding the 
Department's pre-sale inland freight methodology set forth in its 
January 5, 1995 Remand Results).
    Respondent reported in its questionnaire response of August 26, 
1993, that it incurred no after-sale warehousing expenses and 
respondent did not claim any warehousing expenses as direct COS 
expenses. The Department interprets this to mean that any warehousing 
expenses incurred are properly classified as pre-sale, indirect selling 
expenses and that the expense of transporting the cement to the 
warehouse should also be treated as an indirect expense. Accordingly, 
the Department has not deducted home market pre-sale movement expenses 
from FMV for comparison to PP sales. However, we deducted post-sale 
movement expenses from FMV as a direct expense.
    When USP is based on ESP, the Department applies the COS adjustment 
in the same manner as it does in PP situations. We treated pre-sale 
movement charges as indirect expenses, which we deducted from FMV 
pursuant to the ESP offset provision set forth in 19 CFR 353.56(b)(2).
    We disagree with Onoda's assertion that the Department should treat 
U.S. pre-sale freight expenses as indirect expenses. As Petitioner 
states, section 772(d)(2)(A) of the Tariff Act clearly instructs the 
Department to treat these expenses as direct expenses: The purchase 
price and exporter's sales price ``shall be adjusted by being--reduced 
by * * * any additional costs, charges, and expenses, * * * incident to 
bringing the merchandise from the place of shipment in the country of 
exportation to the place of delivery in the United States.'' 
Additionally, Onoda's argument that Ad Hoc Committee is not yet final 
because there is still time to file a petition for appeal to the 
Supreme Court is moot. This case became final and conclusive in October 
1994, when the U.S. Supreme Court denied the writ of certiorari 
submitted by Onoda. We agree with petitioner that since Onoda reported 
home market pre-sale transportation expenses (which are indirect 
expenses) with direct selling expenses in the field DIRSELH, we should 
treat all expenses reported in the DIRSELH field as indirect, rather 
than direct, selling expenses. Comment 10: Onoda argues that the 
Department, in accordance with its new tax methodology as outlined in 
Federal-Mogul Corporation and the Torrington Company v. United States, 
834 F. Supp. 1391 (CIT, 1993), included a tax adjustment for indirect 
selling expenses when calculating the USP for ESP sales, but that the 
Department failed to make a similar adjustment when calculating the net 
FMV for home market sales that were subsequently compared to USP. 
Accordingly, Onoda asserts that the Department should include a tax 
adjustment for home market indirect selling expenses when calculating 
the net home market price since the Department included this adjustment 
in its calculation of USP.
Department's Position

    We agree with Onoda and have made the appropriate correction to our 
calculations.

Comment 11

    Onoda argues that the Department should have made a difmer 
adjustment to FMV for comparisons between U.S. sales of Type II cement 
and home market sales of Type M cement during the period October 1992 
through March 1993. Onoda asserts that the fact that these sales came 
from inventory rather than from its cement production in no way affects 
the applicability of a difmer adjustment. Onoda states that the 
Department can correct its oversight by calculating a difmer adjustment 
based on a comparison of U.S. Type II cement variable cost information 
for the period April 1992 through September 1992 and variable cost 
information for home market Type M cement for the period October 1992 
through March 1993.
    Petitioner argues that the Department should not grant a difmer 
adjustment since it used the information which Onoda supplied. 
Additionally, petitioner argues that it is not reasonable for the 
Department to apply variable cost data from one period to another 
period, since Onoda has not demonstrated that the use of such a difmer 
calculation is warranted.

Department's Position

    We agree with Onoda. Upon reviewing the data submitted by Onoda, we 
have determined that a difmer adjustment when comparing Type II and 
Type M cement for the period October 1992 through March 1993 is 
appropriate even though Onoda did not produce Type II cement during the 
period October 1992 through March 1993 (the threshold issue of whether 
Onoda is entitled to a difmer adjustment was discussed in Comment 2). 
Accordingly, for these final results, we used the variable cost of Type 
II cement for the period April 1992 through September 1992, and 
compared it with the variable cost of Type M cement for the period 
October 1992 through March 1993 in order to determine a difmer 
adjustment for comparison of Type II and Type M cement for the period 
October 1992 through March 1993.

Comment 12

    Onoda argues that the Department incorrectly calculated the 
commission offset to FMV for comparisons to PP sales. Onoda states that 
in calculating the FMV for PP sales, the Department used as the 
commission offset either the indirect selling expenses of the division 
responsible for export sales, or the sum of home market commissions, 
whichever was lower. Onoda asserts that since commissions had been paid 
on home market sales but not on PP sales, the Department should have 
followed its normal practice and calculated the commission offset by 
deducting the full amount of home market commissions from FMV and then 
adding to FMV, as an offset, the amount of U.S. indirect expenses 
capped by the amount of home market commissions.

Department's Position

    We agree with Onoda and have made the appropriate adjustments to 
our calculations.

Comment 13

    Onoda argues that the Department should include in its calculation 
of FMV, all home market sales in which a zero or a negative value 
appeared under the variable for gross value, quantity, or gross unit 
price. Onoda argues that these values are due to retroactive downward 
price changes, input errors, or renegotiations with customers. Onoda 
asserts that by dropping all sales with negative and zero values from 
the FMV database, the Department has calculated monthly average FMVs 
which do not reflect the actual sales value of the merchandise in the 
home market.


[[Page 43767]]

    Petitioner argues that the Department should continue to exclude 
zero and negative values from its calculation of FMV since Onoda has 
failed to provide a detailed explanation, or documentation, for these 
values.

Department's Position

    We agree with the petitioner. We requested in a supplemental 
questionnaire (dated December 7, 1993) that Onoda provide a ``detailed 
explanation'' of the retroactive price adjustments and adjustments to 
volume that resulted in negative numbers or zeros for numerous 
variables in the home market sales tape. In response to this request, 
Onoda merely stated, without providing supporting documentation, that 
such values occur due to retroactive downward price changes, input 
errors or revisions after negotiations with customers. Since Onoda did 
not support its claim, we have excluded from our calculations, sales in 
which a zero or negative value appeared under the variable for gross 
value, quantity or gross unit price.

Comment 14

    Onoda argues that the Department, in its COP calculations, should 
have accepted Onoda's claim that the interest expense it incurred 
should reflect the short-term interest income it earned. Onoda argues 
that its supporting documentation was adequate and that the Department 
should have requested additional information if the documentation 
submitted was considered inadequate.

Department's Position

    We disagree with Onoda. When a respondent makes a claim for an 
adjustment, it is the respondent's responsibility to provide a detailed 
explanation of the adjustment as well as supporting documentation if 
necessary. In its original questionnaire response, Onoda did not 
provide documentation to support this adjustment. In a supplemental 
questionnaire issued by the Department, we requested that Onoda provide 
documentation to support its claim for a short-term interest income 
offset. In response to this request, Onoda provided the Department with 
two untranslated pages that are reported to be from a general ledger 
showing bank interest earned by Onoda. Onoda's documentation is not 
only ambiguous and untranslated, it also lacks a narrative response 
explaining exactly how the documentation supports the deduction of 
Onoda's short-term interest income from its interest expense. 
Therefore, we have used the full interest figure in determining the 
interest ratio for our COP calculations.

Comment 15

    Onoda argues that the Department's methodology of using the mean 
service station expense (SSLH) when calculating the COP directly 
conflicts with the methodology employed in the 1990/92 review. Onoda 
asserts that the Department should use the methodology it used in the 
1990/92 review (i.e., calculating the total SSLH expense from the sales 
tape, dividing this amount by the total gross value of home market 
sales and then multiplying this percentage by the unit cost of 
manufacture, and adding the resulting per unit amount to the COP). 
Alternatively, Onoda urges the Department to use a weighted-average 
SSLH expense in its calculations rather than a mean expense.
    Petitioner argues that the methodology the Department used in the 
1990/92 review would understate the amount of SSLH in COP, since the 
cost of manufacture figure is a much lower number than the gross sales 
price. Moreover, petitioner argues that the Department must treat SSLH 
equally when calculating COP and home market price for the below-cost 
test. Petitioner provides two methodologies it believes would result in 
a fair treatment of SSLH costs in the sales-below-cost test: (1) 
Calculate total SSLH as a percentage of total gross price, multiply 
this percentage by the gross unit price, and add the resulting amount 
to COP; or (2) calculate total SSLH as a percentage of total 
manufacturing costs, multiply this ratio by COP, and add the resulting 
amount to COP and net price.
Department's Position

    In the 1990/92 review we calculated two COPs, one for the period 
April 1990 through March 1991, and one for the period April 1991 
through March 1992. The Department's goal in calculating two COPs was 
to annualize costs in order to prevent the distortion of per unit 
charges and adjustments due to the seasonal nature of the merchandise. 
(Moreover, we did not simply divide the total SSLH by total QTYH as 
given on the sales tape when calculating the two COPs since the sales 
tape only covered the period October 31, 1990 through April 30, 1992.) 
To calculate the per metric ton amount to add to the COP in the 1990/92 
review, we first totaled the gross value (GRSVALH) and SSLH fields and 
then divided total SSLH by total GRSVALH. We then multiplied the 
resulting ratio by the total COM.
    In this review, since the POR is one year, the Department does not 
face the same situation (i.e., we do not have to annualize costs). 
Accordingly, in this review, the Department followed its standard 
practice and used a weighted-average, per unit, SSLH expense (i.e., 
total SSLH expense incurred divided by total quantity sold) and added 
this amount to COP. The Department applied the weighted-average SSLH 
expense reported by Onoda (in its case brief filed in response to the 
Department's preliminary results of review) and added it to the COP. 
The use of a weighted-average insures that SSLH expenses are accurately 
represented in the sales-below-cost test.
    The Department did not use the alternatives recommended by the 
petitioner since it was our goal to calculate a per unit SSLH expense 
to be added to COP since these expenses are reported in the home market 
on a per unit basis.

Comment 16

    Onoda argues that the Department should use the U.S. interest rate 
for calculating imputed credit expenses associated with PP sales, 
rather than Onoda's Japanese interest rate, since Onoda had access to 
the lower U.S. interest rates.

Department's Position

    We agree with Onoda. It is our practice to use U.S. interest rates 
to calculate credit expenses incurred on U.S. sales when a respondent 
demonstrates that it had either actual borrowings or access to U.S. 
dollar loans during the period of review (see, e.g., Notice of Final 
Determinations of Sales at Less Than Fair Value: Certain Hot-Rolled 
Carbon Steel Flat Products, Certain Cold-Rolled Carbon Steel Flat 
Products, Certain Corrosion-Resistant Carbon Steel Flat Products, and 
Certain Cut-to-Length Carbon Steel Plate from France, 58 FR 37125 (July 
9, 1993)). In the present case, Onoda's U.S. subsidiary, Lone Star 
Northwest (LSNW), had access to U.S. dollar loans. Accordingly, for 
these final results we have used the average U.S. interest rate 
available to LSNW during the third quarter of 1992 for all PP sales.

Comment 17

    Onoda disagrees with the Department's classification of U.S. port-
to-U.S. facility movement expense in its further manufacturing 
calculations. Specifically, Onoda argues that the resulting allocations 
between cost of manufacturing in Japan and value-added in the United 
States are flawed. Onoda argues that these pre-value-added inland 
freight expenses should be 

[[Page 43768]]
considered part of the cost of materials of the imported product.
    Onoda argues that based on Sec. 353.41(e) of the Department's 
regulations and the wording of certain questions in the Department's 
questionnaire, these costs should be attributed to the Japanese cost of 
materials rather than to the amount of Onoda's U.S. further 
manufacturing activities.
    Onoda states that section 353.41(e) of the Department's 
questionnaire directs the Department to reduce exporter's sales price 
by the amount of ``(a)ny increased value resulting from a process of 
production or assembly performed on the merchandise after importation 
and before sale to a person who is not the exporter of the merchandise, 
which value the Secretary generally will determine from the cost of 
material, fabrication, and other expenses incurred in such production 
and assembly.''
    Onoda states that Sec. 353.41(e) clearly defines ``increased 
value'' as that added by a manufacturing process or an assembly 
operation after the merchandise is imported into the United States. 
Onoda asserts that when a manufacturer merely moves a component or 
product from the port to its factory, it does not perform a 
manufacturing or assembly process on the imported merchandise. 
Consequently, these movement costs should not be considered part of 
U.S. value added.
    With regards to the Department's questionnaire, Onoda states that 
the section of the questionnaire entitled ``Further Processing'' 
discusses material costs in two places. Onoda refers to section 8A(1) 
of the questionnaire which states: ``Material cost: Provide the 
transfer prices of individual components, subassemblies and completed 
units received by the U.S. affiliate(s) * * *'' Onoda states that this 
definition of material cost refers to the price of the delivered item. 
Onoda further cites Section 8A(1)(c) which states: ``Provide the actual 
costs for all individual components * * * These should include the 
price paid to the third party, transportation costs, and other costs 
normally associated with materials costs.'' Accordingly, Onoda argues 
that movement expense is defined as part of the materials costs, and, 
therefore, transportation costs between the port and the factories 
should be allocated entirely to the Japanese portion of the cement 
cost. Onoda further states that in the cost of production and 
constructed value portion of the questionnaire (question 
VIII(3)(B)(2)(a)), the Department defines material cost as including 
``the purchase price, transportation charges, duties and all other 
expenses normally associated with obtaining the materials used in 
production.'' Onoda argues that in each of these provisions, the 
expense of transporting the material to the factory is defined as part 
of the cost of materials. Onoda concludes that it follows that the 
freight costs between the port and the terminals should be allocated 
entirely to the Japanese portion of the cement cost.

Department's Position

    We disagree with Onoda. It is the Department's established practice 
to attribute all costs incurred after a product has arrived in the U.S. 
to U.S. production costs when the product is further manufactured in 
the United States. See Stainless Steel Hollow Products from Sweden; 
Final Results of Antidumping Duty Administrative Review (57 FR 21389, 
May 20, 1992) and Gray Portland Cement and Clinker from Japan; Final 
Results of Antidumping Duty Administrative Review (58 FR 48826, 
September 20, 1993).
    Onoda correctly cites Sec. 353.41(e) of the Department's 
regulations, but interprets the regulation too narrowly. The Department 
has interpreted this regulation to include in further-manufacturing 
expenses the cost of transporting the merchandise from the port to the 
factory where further-manufacturing occurs. Only by incurring this 
expense can increased value through the process of production occur. 
Accordingly, the process of transporting the material is inextricably 
linked to the ``process of production'' in further-manufactured sales.
    Similarly, Onoda's cite to sections 8A(1) and 8A(1)(c) of the 
Department's questionnaire to support its argument that movement costs 
are considered part of materials costs is misleading. The Department 
requests information on movement cost, but does not specifically state 
that such costs should be allocated to the cost of materials in the 
home market. Rather, as stated above, it is our practice to attribute 
all costs incurred after a product has arrived in the United States to 
U.S. production costs when the product is further-manufactured in the 
United States.
    Additionally, Onoda correctly cites the COP/CV section of the 
questionnaire in explaining that in the home market, the expense of 
transporting the material to the factory is defined as part of the cost 
of materials which is then incorporated into the cost of manufacturing. 
This is done so that the cost of materials and therefore, the cost of 
manufacturing reflects all the expenses incurred during the production 
process. Similarly, in further-manufacturing situations, the cost of 
transporting the cement from the U.S. port to the U.S. factory is 
included under ``process of production'' expenses used to determine 
U.S. value added in order to accurately reflect all expenses incurred 
during the further-manufacturing process.

    Consistent with our established practice, we included freight 
expense from the U.S. port to the U.S. plant in the U.S. further 
manufacturing costs in establishing the relationship between U.S. 
further manufacturing costs and total costs of the merchandise.

Comment 18

    Onoda argues that the Department incorrectly calculated the profit 
per transaction for each U.S. sale of ready-mix concrete by deducting 
from the gross transaction price only the prompt payment discount and 
the total cost of the further-manufactured product. Onoda argues that 
the Department must also deduct from the gross price the cost of 
delivery to the unrelated customer, including the associated insurance 
cost, in order to calculate profit correctly. Onoda states that these 
delivery costs are real costs, and, as such, directly reduce the profit 
on each sale.

    Petitioner argues that the Department should not adjust further 
manufacturing profit to reflect LSNW's costs for ready-mix delivery and 
related insurance. Petitioner states that, ``(i)n this case, Onoda asks 
that the profit on further manufactured sales of concrete be reduced by 
the costs incurred by Onoda to transport concrete'' to its unrelated 
customers. Petitioner argues that the issue of whether ready-mix 
delivery and insurance costs should be included in U.S. value added was 
addressed and decided in the first review of this case where the 
Department declined to include such costs in U.S. value added.

Department's Position

    We agree with Onoda that the cost of delivery to the unrelated 
customer, including the associated insurance cost, should be deducted 
when determining the gross profit on further-manufactured sales since 
these costs are real costs, and, as such, directly reduce the profit on 
each sale. Therefore, we have revised our calculations in these final 
results to ensure that freight and related insurance costs are deducted 
from the gross price in calculating the profit on each U.S. sale.
    Contrary to petitioner's statement, we did not address the issue of 


[[Page 43769]]
transportation expenses in calculating the total profit in the last 
review.

Final Results of Review

    Based on our analysis of comments received, and the correction of 
clerical errors, we have determined that a final margin of 24.27 
percent exists for Onoda for the period May 1, 1992, through April 30, 
1993.
    The Department will instruct the Customs Service to assess 
antidumping duties on all appropriate entries. Individual differences 
between USP and FMV may vary from the percentage stated above. The 
Department will issue appraisement instructions directly to the Customs 
Service.
    Furthermore, the following deposit requirements will be effective 
for all shipments of the subject merchandise, entered or withdrawn from 
warehouse, for consumption on or after the publication date of these 
final results of administrative review, as provided by section 
751(a)(1) of the Act: (1) The cash deposit rate for Onoda will be 
24.27; (2) for merchandise exported by manufacturers or exporters not 
covered in this review but covered in a previous review or the original 
less-than-fair-value (LTFV) investigation, the cash deposit rate will 
continue to be the rate published in the most recent final results or 
determination for which the manufacturer or exporter received a 
company-specific rate; (3) if the exporter is not a firm covered in 
this review, earlier reviews, or the original investigation, but the 
manufacturer is, the cash deposit rate will be that established for the 
manufacturer of the merchandise in these final results of review, 
earlier reviews, or the original investigation, whichever is the most 
recent; and (4) the ``all others'' rate, as established in the original 
investigation, will be 70.23 percent.
    These deposit requirements, when imposed, shall remain in effect 
until publication of the final results of the next administrative 
review.
    This notice also serves as a final reminder to importers of their 
responsibility under 19 CFR 353.26 to file a certificate regarding the 
reimbursement of antidumping duties prior to liquidation of the 
relevant entries during this review period. Failure to comply with this 
requirement could result in the Secretary's presumption that 
reimbursement of antidumping duties occurred and the subsequent 
assessment of double antidumping duties.
    This notice also serves as a reminder to parties subject to 
administrative protective orders (APOs) of their responsibility 
concerning the disposition of proprietary information disclosed under 
APO in accordance with 19 CFR 353.34(d). Timely written notification of 
return/destruction of APO materials or conversion to judicial 
protective order is hereby requested. Failure to comply with the 
regulations and the terms of an APO is a sanctionable violation.
    This administrative review and notice are in accordance with 
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 353.22.

    Dated: August 11, 1995.
Paul L. Joffe,
Deputy Assistant Secretary for Import Administration
[FR Doc. 95-20929 Filed 8-22-95; 8:45 am]
BILLING CODE 3510-DS-P