[Federal Register Volume 61, Number 42 (Friday, March 1, 1996)]
[Notices]
[Pages 8029-8034]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-4729]



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DEPARTMENT OF COMMERCE
[A-588-837]


Notice of Preliminary Determination of Sales at Less Than Fair 
Value and Postponement of Final Determination: Large Newspaper Printing 
Presses and Components Thereof, Whether Assembled or Unassembled, From 
Japan

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

EFFECTIVE DATE: March 1, 1996.

FOR FURTHER INFORMATION CONTACT: William Crow or Irene Darzenta, Office 
of Antidumping Investigations, Import Administration, International 
Trade Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202) 
482-0116 or (202) 482-6320.

THE APPLICABLE STATUTE: Unless otherwise indicated, all citations to 
the Tariff Act of 1930, as amended (the Act) are references to the 
provisions effective January 1, 1995, the effective date of the 
amendments made to the Act by the Uruguay Rounds Agreements Act.

PRELIMINARY DETERMINATION: As explained in the memoranda from the 
Assistant Secretary for Import Administration dated November 22, 1995, 
and January 11, 1996, the Department of Commerce (the Department) has 
exercised its discretion to toll all deadlines for the duration of the 
partial shutdowns of the Federal Government from November 15 through 
November 21, 1995, and December 16, 1995, through January 6, 1996. 
Thus, all deadlines in this investigation have been extended by 28 
days, i.e., one day for each day (or partial day) the Department was 
closed. The revised deadline for this preliminary determination is 
February 23, 1996.
    We preliminarily determine that large newspaper printing presses 
and components thereof (LNPPs) from Japan are being, or are likely to 
be, sold in the United States at less than fair value (LTFV), as 
provided in section 733 of the Act. The estimated margins of sales at 
LTFV are shown in the ``Suspension of Liquidation'' section of this 
notice.

Case History

    Since the initiation of this investigation on July 20, 1995 (60 FR 
38546 (July 27, 1995)), the following events have occurred:
    On August 14, 1995, the United States International Trade 
Commission (ITC) notified the Department of Commerce (the Department) 
of its affirmative preliminary determination. (See ITC Investigation 
No. 731-TA-736 and 737.)
    On August 28, 1995, we presented Section A 1 of the 
questionnaires to the Japanese embassy, counsel for Mitsubishi Heavy 
Industries, Ltd., (MHI) and Tokyo Kikai Seisakusho, Ltd. (TKS). MHI 
submitted responses to Section A on September 27, 1995, and October 10, 
1995, as revised on December 13, 1995. TKS submitted responses to 
Section A on September 27, 1995, and October 2,5, and 10, 1995, as 
revised on October 17, 1995.

    \1\ Section A requests data concerning corporate organization, 
accounting practices, markets and merchandise.
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    On October 20, 1995, at the request of Rockwell Graphics Systems, 
Inc. And its parent company, Rockwell International Corporation (the 
petitioner), we postponed the preliminary determination to January 26, 
1996. See Notice of Postponement of Preliminary Determinations: 
Antidumping Investigation of Large Newspaper Printing Presses and 
Components Thereof, Whether Assembled or Unassembled from Japan (60 FR 
54841, October 26, 1995).
    On October 19, 1995, the petitioner alleged that there are 
reasonable grounds to believe or suspect that MHI and TKS made below-
cost sales of the subject merchandise in Japan, and that these below-
cost sales must be excluded from the Department's calculation of profit 
for constructed value (CV). Because we determined the appropriate basis 
for normal value (NV) to be CV, we did not address petitioner's below-
cost allegation. We did, however, solicit contract price and production 
costs data for MHI's and TKS's home market sales of subject merchandise 
in order to compute selling,general and administratie expenses (SG&A) 
and profit for CV in accordance with section 773(e)(2)(A) of the Act. 
(See ``Product Comparisons'' section of this notice.)
    The Department issued Sections C and D of its questionnaire to MHI 
on October 27, 1995.2 The Department issued Section C, D, and E 
3 to TKS on October 27, 1995. MHI submitted its response to 
Section C and D on December 1, 1995, as revised December 13, 1995. TKS 
submitted its response to Section C, D, and E on December 1, 1995. 
Because of the first partial federal government shutdown mentioned 
previously, a supplemental questionnaire was not issued until December 
8, 1995. Because of the second partial government shutdown, MHI and TKS 
responded to the supplemental questionnaires on January 18, 1996.

    \2\ Section C requests data on sales to the United States. 
Section D requests data on the cost of production and constructed 
value.
    \3\ Section E requests data on the cost of further manufacturing 
or assembly performed in the United States.
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    On October 26 and 31, 1995, TKS requested that the Department 
exclude a certain sale to the Dallas Morning News and a sale to the 
Spokane Spokesman Review from our antidumping analysis. During the 
period preceding this preliminary determination, the petitioner 
objected on several occasions to TKS's proposal. We determined to 
include these two sales in our preliminary antidumping analysis, 
contrary to TKS's arguments, since U.S. sales cannot classified as 
outside the ordinary course of trade, and because there are no 
administrative barriers to conducting an analysis of these sales. 

[[Page 8030]]
See February 23, 1996, Memorandum to Richard W. Moreland, from The 
Team, Re: Request for Exclusion of TKS Sales.
    During the period July 28, 1995 through January 23, 1996, the 
petitioner, MHI and TKS filed comments requesting clarification of the 
scope of this investigation with respect to elements (i.e., parts or 
subcomponents) of covered components, and spare and replacement parts. 
Respondents in the companion investigation of LNPPs from Germany, Konig 
Bauer Albert and MAN Roland Druckmaschienen, also submitted comments 
concerning scope on the record of this preceding. On January 23, 1996, 
petitioner clarified the scope to exclude used presses. See Scope of 
Investigation section of this notice. At the Department's request, on 
February 8, 1996, the parties filed comments on suspension of 
liquidation instructions.
    On February 2, 1996, petitioner filed comments on issues concerning 
MHI to be resolved and on general methodologies to be employed in the 
preliminary determination. Petitioner filed additional comments 
concerning MHI issues on February 8, 1996, and concerning TKS issues on 
February 6, 1996. MHI and TKS filed such comments on February 6 and 16, 
1996, respectively.

Respondent Selection

    The producers named in the petition were MHI and TKS. On August 2, 
1995, we contacted the U.S. Embassy in Tokyo, requesting the 
identification of Japanese producers and exporters of LNPPs to the 
United States, and the volume and value of subject merchandise they 
sold to the United States during the period January 1, 1991 through May 
31, 1995. On July 31, 1996, we requested the names and addresses of 
manufacturers or exporters; and the value and quantity of the subject 
merchandise sold and shipped to the United States for each company 
during the period January 1, 1991 through May 31, 1995, from the 
Embassy of Japan in Washington D.C. On August 11, 1995, we received a 
reply from the Embassy of Japan indicating that there were no other 
Japanese exporters of subject merchandise to the United States. At the 
time of respondent selection, no reply had been received from our 
Embassy in Tokyo.
    Based on the petition and the information received from the Embassy 
of Japan, we issued questionnaires to MHI and TKS. (See the August 28, 
1995, Memorandum to The File Re: Questionnaire Recipients.)

Postponement of Final Determination and Extension of Provisional 
Measures

    Pursuant to section 735(a)(2)(A) of the Act, on February 9, 1996, 
MHI requested, and on February 13, 1996, TKS requested that, in the 
event of an affirmative preliminary determination in this 
investigation, the Department postpone its final determination until 60 
days after the date of the scheduled final determination, which is 
equivalent to 135 days after the publication of an affirmative 
preliminary determination in the Federal Register. In accordance with 
19 CFR 353.20(b), because our preliminary determination is affirmative, 
the respondent accounts for a significant proportion of exports of the 
subject merchandise, and no compelling reasons for denial exist, we are 
granting respondents' request and postponing the final determination.
    Section 773(d) of the Act provides that provisional measures may 
not remain in effect for more than four months. However, that provision 
of the Act also states that the Department may extend that period to 
six months at the request of exporters representing a significant 
proportion of exports of the subject merchandise. Such a request was 
made by both respondents in this investigation on February 23, 1996. 
Accordingly, we are extending the applicability of the provisional 
measures to six months in this investigation.

Scope of Investigation

    As specified below, we have revised the scope since our notice of 
initiation to exclude used presses, in accordance with the petitioner's 
January 23, 1996, clarification. Furthermore, we have clarified the 
scope to include ``elements'' (otherwise referred to as ``parts'' or 
``subcomponents'') of an LNPP system, addition or component, which 
taken as a whole, constitute a subject LNPP system, addition or 
component used to fulfill an LNPP contract. See ``Scope Issues'' 
section of this notice concerning the treatment of elements in the 
scope. In addition, we have stipulated that spare or replacement parts, 
which are imported pursuant to an LNPP contract and are separately 
identified and valued in that contract, whether or not shipped in 
combination with covered merchandise, are excluded from the scope of 
the investigation. (See February 23, 1996, Decision Memorandum to 
Richard Moreland from The Team Re: Scope Issues.)
    The products covered by these investigations are large newspaper 
printing presses, including press systems, press additions and press 
components, whether assembled or unassembled, that are capable of 
printing or otherwise manipulating a roll of paper more than two pages 
across. A page is defined as a newspaper broadsheet page in which the 
lines of type are printed perpendicular to the running of the direction 
of the paper or a newspaper tabloid page with lines of type parallel to 
the running of the direction of the paper.
    In addition to complete systems, the scope of these investigations 
includes the five press system components. They are:
    (1) A printing unit, which is any component that prints in 
monocolor, spot color and/or process (full) color, or a printing-unit 
cylinder;
    (2) A reel tension paster (RTP), which is any component that feeds 
a roll of paper more than two newspaper broadsheet pages in width into 
a subject printing unit;
    (3) A folder, which is a module or combination of modules capable 
of cutting, folding, and/or delivering the paper from a roll or rolls 
of newspaper broadsheet paper more than two pages in width into a 
newspaper format;
    (4) Conveyance and access apparatus capable of manipulating a roll 
of paper more than two newspaper broadsheet pages across through the 
production process and which provides structural support and access; 
and
    (5) A computerized control system, which is any computer equipment 
and/or software designed specifically to control, monitor, adjust, and 
coordinate the functions and operations of large newspaper printing 
presses or press components.
    A press addition is comprised of a union of one or more of the 
press components defined above and the equipment necessary to integrate 
such components into an existing press system.
    Because of their size, large newspaper printing press systems, 
press additions, and press components are typically shipped either 
partially assembled or unassembled. Any of the five components, or 
collection of components, the use of which is to fulfill a contract for 
large newspaper printing press systems, press additions, or press 
components, regardless of degree of assembly and/or degree of 
combination with non-subject elements before or after importation, is 
included in the scope of this investigation. Also included in the scope 
are elements of an LNPP system, addition or component, which taken as a 
whole, constitute a subject LNPP system, addition or 

[[Page 8031]]
component used to fulfill an LNPP contract.
    This scope does not cover spare or replacement parts. Spare or 
replacement parts imported pursuant to an LNPP contract, which are not 
integral to the original start-up and operation of the LNPP, and are 
separately identified and valued in an LNPP contract, whether or not 
shipped in combination with covered merchandise, are excluded from the 
scope of this investigation. Used presses are also not subject to this 
scope. Used presses are those that have been previously sold in an 
arm's length transaction to a purchaser that used them to produce 
newspapers in the ordinary course of business.
    Further, these investigations cover all current and future printing 
technologies capable of printing newspapers, including, but not limited 
to lithographic (offset or direct), flexographic, and letterpress 
systems.
    The products covered by these investigations are imported into the 
United States under subheadings 8443.11.10, 8443.11.50, 8443.30.00, 
8443.59.50, 8443.60.00, and 8443.90.50 of the HTSUS. Large newspaper 
printing presses may also enter under HTSUS subheadings 8443.21.00 and 
8443.40.00. Large newspaper printing press computerized control systems 
may enter under HTSUS subheadings 8471.49.10, 8471.49.21, 8471.49.26, 
8471.50.40, 8471.50.80, 8524.51.30, 8524.52.20, 8524.53.20, 8524.91.00, 
8524.99.00 and 8537.10.90. Although the HTSUS subheadings are provided 
for convenience and customs purposes, our written description of the 
scope of these investigations is dispositive.

Scope Issues

    Since our initiation, we received numerous comments from interested 
parties in this investigation and the concurrent investigation 
involving Germany, requesting that the Department clarify the treatment 
of ``elements'' in the scope of the investigation.
    In general, respondents believe that if the imported elements do 
not constitute a complete, albeit unassembled, component, or are 
missing ``essential'' elements to function as one of the five 
components named in the scope, they would not be subject to the scope 
of this investigation and the concurrent investigation involving 
Germany. The petitioner believes that, because an imported LNPP press, 
addition or component will almost always contain elements, which, by 
themselves, are not subject to the scope, it is not practical to 
exclude these elements from the scope of the investigation in so far as 
they comprise an incomplete subject component. (For a complete 
discussion of these comments, see February 23, 1996 Memorandum to 
Richard W. Moreland from The Team Re: Scope Issues.)
    As stated in the ``Scope of Investigations'' section above, we 
interpret the scope to include those elements or collection of elements 
imported from a subject country in so far as they constitute any one of 
the five covered components which are, in turn, used to fulfill a 
contract for a LNPP press system, press addition or press component. 
Individual parts per se are not covered by the scope of these 
investigations unless taken as a whole they constitute a subject 
component used to fulfill an LNPP contract. This interpretation, 
however, raises a question: at what point do the elements imported from 
a subject country rise to the level of an LNPP component, addition or 
system subject to the scope of these investigations?
    The Department must decide on a reasonable and practicable approach 
in determining what constitutes a subject LNPP component, addition or 
system, and in so doing, establish the basis on which we will include 
elements in the scope. We are considering two alternative approaches 
for analyzing what governs the inclusion of parts or subcomponents, 
other than spare or replacement parts, within the scope of these 
investigations. One approach would consider, on a case-by-case basis, 
whether the imported parts or subcomponents when taken together are 
essentially an LNPP system, addition or component. This so called 
``essence'' approach is of necessity subjective and turns on the 
question of how near the sum of the imported parts comes to comprising 
a complete LNPP system, addition or component. A second approach would 
consider the value of the imported parts or subcomponents relative to 
the total value of the finished LNPP component, addition or system in 
the United States. That is, we would determine that the imported parts 
or subcomponents would be within the scope if they comprised a certain 
minimum percentage of the value of the parts of a finished LNPP system, 
addition or component.
    Both of these approaches raise threshold questions. Because certain 
sales reported by respondents in both the German and Japanese 
investigations consist of imported elements from Germany or Japan, 
rather than a complete LNPP component, addition or system, acceptance 
of either of the two approaches will have implications as to which of 
the respondents sales the Department will consider in its final 
determination. Therefore, we are presently soliciting comments from 
interested parties as to the merits of these approaches and/or others 
that may be relevant for use in the final determination. Interested 
party comments on this topic are due no later than May 1, 1996.

Period of Investigation (POI)

    The petitioner, MHI, and TKS filed comments on October 19, 20, 25 
and 26, 1995, concerning the appropriate period of investigation (POI) 
and the use of home market sales as the basis for NV. On October 27, 
1995, we established the appropriate POI for MHI to be July 1, 1991 
through June 30, 1995, and for TKS to be July 1, 1992 through June 30, 
1995.
    As a result of changes to section 773(b)(2)(B) of the Act, which 
codified the normal period within which sales made below the cost of 
production are to be analyzed, the Department modified its practice so 
that the standard POI would cover a one-year period. In this 
investigation, however, in order to capture sufficient and 
representative sales, the Department established a POI beyond the 
normal one-year period because of the nature of the LNPP industry, 
characterized by custom order sales and long term sales contracts. (See 
October 27, 1995, Memorandum to Richard W. Moreland, from The Team Re: 
Establishing the Period of Investigation.)

Exclusion of the Washington Post Sale

    On October 27, 1995, the Department decided to exclude MHI's sale 
to the Washington Post from our antidumping analysis. (See Period of 
Investigation Memorandum). On November 7, and November 20, 1995, the 
petitioner requested that the Department reconsider its decision. On 
November 13 and November 29, 1995, MHI rebutted the petitioner's 
arguments.
    The Department reaffirmed its exclusion of the Washington Post sale 
from its margin analysis because (1) this sale was unbuilt, unshipped, 
and uninstalled at the time of our analysis; (2) the Department 
believes that the historical bench-marking integral to the use of 
estimated costs was not reasonably available; and (3) because the 
Department had two other sales available for analysis which were built, 
delivered and installed. (See February 23, 1996, Memorandum to Richard 
W. Moreland from The Team Re: Continuing the Exclusion of the 
Washington Post Sale). 

[[Page 8032]]


The Nature of the Guard Sale

    On November 1, 1995, the petitioner requested that the Department 
determine that the correct price for the Department to examine with 
regard to the ultimate purchase of an LNPP by the Guard Publication 
Company (Guard) is that set between MHI and the Sumitomo Trading 
Company. In response to the petitioner's questions, the Department held 
an ex parte meeting with counsel for MHI on December 7, 1995. Following 
this meeting MHI submitted documentation with respect to this 
transaction on December 7, 1995. MHI supplemented this submission with 
more documentation on December 12, 1995. On January 11, 1996, the 
petitioner submitted comments analyzing MHI's documentation of the 
transaction. Finally, MHI submitted additional information concerning 
this sale in its January 18, 1996, supplemental response. MHI 
maintained that the documentation was evidence that the sale was made 
by MHI to Guard.
    Because of the participation of MHI in the business dealings 
between Sumitomo and Guard, the documented correspondence between MHI 
and Guard, and MHI's actual performance pursuant to the Guard's 
technical requirements, we established that the appropriate transaction 
to examine was the sale from MHI to Guard Publishing Company. (See 
February 23, 1996, Memorandum to Richard W. Moreland from The Team Re: 
Establishing the Proper Guard Sale.)

Product Comparisons

    Although the home market was viable, in accordance with section 773 
of the Act, we based NV on constructed value (CV) because we determined 
that the particular market situation, which requires that the subject 
merchandise be built to each customer's specifications, does not permit 
proper price-to-price comparisons. (See November 9, 1995, Memorandum to 
Richard W. Moreland from The Team Re: Determining the Appropriate Basis 
for Normal Value.)

Fair Value Comparisons

    To determine whether MHI's and TKS's sales of LNPPs to the United 
States were made at less than fair value, we compared Constructed 
Export Price (CEP) to the NV, as described in the ``Constructed Export 
Price'' and ``Normal Value'' sections of this notice. In accordance 
with section 777A(d)(1)(A)(ii), we calculated transaction-specific CEPs 
(which in this case were synonymous with model-specific CEPs) for 
comparison to transaction-specific NVs because there are few sales and 
the merchandise is custom-made.

Constructed Export Price (CEP) and Further Manufacturing (FM)

TKS

    TKS reported its sales as CEP and CEP/FM sales. Because we have 
classified installation expenses as further manufacturing, we have 
treated all TKS sales as CEP/FM sales. We calculated CEP, in accordance 
with subsections 772 (b) and (d) of the Act, for (1) those sales to the 
first unaffiliated purchaser that took place after importation by a 
seller affiliated with the producer/exporter and (2) those sales 
involved in further manufacturing in the United States.
    We calculated CEP sales based on packed, installed prices to 
unaffiliated customers. We made deductions from the starting price 
(gross unit price), for foreign inland freight to port in Japan, 
foreign brokerage and handling, international freight, combined marine 
and foreign insurance, U.S. brokerage and handling, U.S. Customs duty, 
U.S. inland freight port to customer, U.S. inland freight U.S. 
warehouse to customer, and U.S. inland insurance. We also made 
deductions for imputed credit, warranty, and other direct selling 
expenses including certain U.S. trade show expenses.
    In calculating imputed credit, we took into account the unique 
nature and magnitude of the LNPP projects under investigation. These 
projects require substantial capital expenditures over an extended time 
period because of their size and their lengthy production process. 
Moreover, the projects generally call for the purchaser to provide 
scheduled progress payments prior to the completion of a given project. 
In consideration of these factors, we computed credit by applying an 
interest rate to the net balance of production costs incurred and 
progress payments made during the construction period. We imputed 
credit expenses for U.S. sales using U.S. prime short-term interest 
rates as reported by the Federal Reserve, calculated as a weighted-
average rate for each fiscal year in the POI, since these sales were 
denominated in U.S. dollars. However, because TKS reported that it did 
not borrow in U.S. dollars, we used U.S. prime short-term interest 
rates as a surrogate rate.
    We deducted those indirect selling expenses that related to 
economic activity in the United States. We have recalculated TKS's 
reported indirect selling expenses incurred in the United States using 
the total expenses and total revenue for TKS USA during the fiscal 
years 1991 through 1995, in order to remove distortions in TKS USA's 
financial statements caused by auditors' modifications to revenue 
recognized during the POI.
    We also deducted the cost of any further manufacturing or assembly 
(including additional material and labor). Finally, we made an 
adjustment for CEP profit in accordance with section 772(d)(3) of the 
Act.
    Furthermore, we have reclassified TKS's combined training and U.S. 
testing expenses as installation expenses. We then reclassified total 
installation expenses as U.S. further manufacturing activity.
    We classified installation charges as part of further 
manufacturing, because the U.S. installation process involves extensive 
technical activities on the part of engineers and installation 
supervisors and the integration of subject and non-subject merchandise 
necessary for the operation of LNPPs. See Certain Internal-Combustion, 
Industrial Forklift Trucks from Japan, 53 FR 12565 (Apr. 15, 1988) and 
Small Business Telephone Systems and Subassemblies thereof from Korea, 
54 FR 53151 (Dec. 27, 1989).
    We have also classified as part of further manufacturing costs the 
costs of certain non-Japanese items shipped directly to the United 
States without further processing in Japan, and non-Japanese items 
sourced in the United States, for integration into the overall LNPP 
during the installation process.
    We recomputed the U.S. further manufacturer's reported G&A rate 
using the cost of goods sold amount reported in its audited financial 
statements; and we included interest expense relating to the cost of 
installation in U.S. further manufacturing.

MHI

    MHI reported its sales as EP sales. We have classified all MHI 
sales as CEP/FM sales because MHI's affiliated U.S. sales agent acted 
as more than a processor of sales-related documentation and a 
communication link with the unaffiliated U.S. customers; the U.S. 
affiliate engaged in a broad range of activities including coordination 
of installation, which we have classified as further manufacturing. We 
calculated CEP, in accordance with subsections 772 (b) and (d) of the 
Act, for these sales because they involved further manufacturing in the 
United States.
    We calculated CEP sales based on packed, installed prices to 
unaffiliated customers in the United States. We made deductions for 
inland freight to port in Japan; foreign brokerage and 

[[Page 8033]]
handling; international freight; combined foreign inland and marine 
insurance, export insurance and U.S. inland insurance, U.S. brokerage 
and handling, U.S. Customs duty.
    We also made deductions for post-sale warehousing, commissions, 
imputed credit, direct warranty and training expenses, where 
applicable.
    With respect to reported technical service expenses, direct and 
indirect, we have included these as part of total installation 
expenses. We then reclassified total installation expenses as U.S. 
further manufacturing activity. We are continuing to use the amounts 
reported for technical expenses for purposes of the preliminary 
determination. In light of MHI's claim that the expenses are limited in 
time, the magnitude of any changes, and the relationship between 
technical services in future years and the nature of MHI product 
warranties, we are not changing the reported values; we will require 
MHI to explain explicitly the administration of its technical servicing 
for purposes of the final determination.
    We deducted those indirect selling expenses that related to 
economic activity in the United States. We have modified the 
calculation of Mitsubishi Lithographic Presses--(MLP's) reported 
indirect selling expenses to correct the allocation methodology for 
common G&A expenses.
    In calculating imputed credit, we took into account the unique 
nature and magnitude of the LNPP projects under investigation. These 
projects require substantial capital expenditures over an extended time 
period because of their size and their lengthy production process. 
Moreover, the projects generally call for the purchaser to provide 
scheduled progress payments prior to the completion of a given project. 
In consideration of these factors, we computed credit by applying an 
interest rate to the net balance of production costs incurred and 
progress payments made during the construction period. We imputed 
credit expenses for U.S. sales using U.S. prime short-term interest 
rates as reported by the Federal Reserve, calculated as a weighted-
average rate for each fiscal year in the POI, since these sales were 
denominated in U.S. dollars. However, because MHI reported that it did 
not borrow in U.S. dollars, we used U.S. prime short-term interest 
rates as a surrogate rate.
    Furthermore, we classified total installation expenses as part of 
U.S. further manufacturing activity. We classified installation charges 
as part of further manufacturing, because the U.S. installation process 
involves extensive technical activities on the part of engineers and 
installation supervisors and the integration of subject and non-subject 
merchandise necessary for the operation of LNPPs.
    We have also classified as part of further manufacturing costs the 
costs of certain non-Japanese items shipped directly to the United 
States without further processing in Japan, and non-Japanese items 
sourced in the United States, for integration into the overall LNPP 
during the installation process.
    We also deducted the cost of any further manufacturing or assembly 
(including additional material and labor). We made an adjustment for 
CEP profit in accordance with section 772(d)(3) of the Act. Finally, we 
adjusted MHI's reported U.S. further manufacturing costs to include a 
portion of MHI's G&A and interest expense.
    We also deducted the value of spare and replacement parts which are 
excluded from the scope of the investigation, from the starting price, 
where the value of these spare and replacement parts was separately 
identified in the contractual documentation relevant to the sale.

Normal Value/Constructed Value

    For the reasons outlined in the ``Product Comparisons'' section of 
this notice, we based NV on CV.

TKS

    In accordance with section 773(e)(1) of the Act, we calculated CV 
based on the sum of the respondent's cost of materials, fabrication, 
SG&A and U.S. packing costs as reported in the U.S. sales database. In 
accordance with section 773(e)(2)(A), we based SG&A and profit on the 
amounts incurred and realized by the respondent in connection with the 
production and sale of the foreign like product in the ordinary course 
of trade, for consumption in the foreign country.
    We relied on the respondent's CV amounts except in the following 
specific instance wherein the reported costs were improperly valued: 
For one Dallas Morning News sale, we included the costs of parts from 
earlier unsold models.
    We calculated imputed credit for CV purposes in accordance with the 
methodology explained in the ``Constructed Export Price'' section of 
this notice. We imputed credit expenses for CV using the weighted-
average home market short-term interest rate reported for the POI since 
these sales were denominated in yen.
    We also included in CV the costs of spare and replacement parts for 
those U.S. sales where the value of these parts could not be separately 
identified in the contractual documentation and therefore was not 
excluded from CEP.
    For selling expenses, we used the weighted-average home market 
selling expense rate, calculated based on sales made in the ordinary 
course of trade, and applied this rate to U.S. cost of manufacture.
    In accordance with section 773(a)(6)(B), we added U.S. packing 
costs to a CV net of packing.

MHI

    In accordance with section 773(e)(1) of the Act, we calculated CV 
based on the sum of the respondent's cost of materials, fabrication, 
SG&A and U.S. packing costs as reported in the U.S. sales database. In 
accordance with section 773(e)(2)(A), we based SG&A and profit on the 
amounts incurred and realized by the respondent in connection with the 
production and sale of the foreign like product in the ordinary course 
of trade, for consumption in the foreign country.
    We relied on the respondent's CV amounts except in the following 
specific instances wherein the reported costs were improperly valued:
    1. We increased materials and contract labor costs to account for 
inputs purchased from affiliated parties at below cost prices; and
    2. We recalculated G&A and interest expense to include all four 
years of the POI.
    We calculated imputed credit for CV purposes in accordance with the 
methodology explained in the ``Constructed Export Price'' section of 
this notice. We imputed credit expenses for CV using the weighted-
average home market short-term interest rate reported for the POI since 
these sales were denominated in yen.
    For selling expenses, we used the weighted-average home market 
selling expense rate, calculated based on sales made in the ordinary 
course of trade, and applied this rate to U.S. cost of manufacture.
    In accordance with section 773(a)(6)(B), we added the U.S. packing 
costs to a CV net of packing.

Price to CV Comparisons

TKS

    For CEP to CV comparisons, we deducted from CV the weighted-average 
home market direct selling expenses, pursuant to section 773(a)(8) of 
the Act.

MHI

    For CEP to CV comparisons, we deducted from CV the weighted-average 
home market direct selling expenses including commissions, pursuant to 
section 773(a)(8) of the Act. 

[[Page 8034]]


Currency Conversion

    Section 773A(a) of the Act directs the Department to convert 
foreign currencies based on the dollar exchange rate in effect on the 
date of sale of the subject merchandise, except if it is established 
that a currency transaction on forward markets is directly linked to an 
export sale. When a company demonstrates that a sale on forward markets 
is directly linked to a particular export sale in order to minimize its 
exposure to exchange rate losses, the Department will use the rate of 
exchange in the forward currency sale agreement. In this case, although 
one respondent reported that foreign exchange currency contracts 
applied to its reported U.S. sales, the record information was not 
sufficient to conclude that these contracts were directly linked to the 
particular sales in question.
    Therefore, for the purpose of the preliminary determination, we 
made currency conversions based on the official exchange rates in 
effect on the dates of the U.S. sales as certified by the Federal 
Reserve Bank. Section 773A(a) directs the Department to use a daily 
exchange rate in order to convert foreign currencies into U.S. dollars, 
unless the daily rate involves a ``fluctuation.'' For this preliminary 
determination, we have determined that a fluctuation exists when the 
daily exchange rate differs from the benchmark rate by 2.25 percent. 
The benchmark is defined as the rolling average of rates for the past 
40 business days. When we determined a fluctuation existed, we 
substituted the benchmark for the daily rate.
    Further, section 773A(b) directs the Department to allow a 60-day 
adjustment period when a currency has undergone a sustained movement. 
Such an adjustment period is required only when a foreign currency is 
appreciating against the U.S. dollar. The use of an adjustment period 
was not warranted in this case, because the dates of sale occurred 
within periods where the Japanese yen remained generally constant 
against the U.S. dollar.

Verification

    As provided in section 782(i) of the Act, we will verify all 
information used in making our final determination.

Suspension of Liquidation

    In accordance with section 733(d) of the Act, we are directing the 
Customs Service to suspend liquidation of all entries of LNPP systems, 
additions, and components, whether assembled or unassembled, from 
Japan, that are entered, or withdrawn from warehouse for consumption, 
on or after the date of publication of this notice in the Federal 
Register. Furthermore, because we are still in the process of 
clarifying the definition of a subject LNPP system, addition, or 
component, as explained in the ``Scope Issues'' section of this notice, 
we are also directing the Customs Service to suspend liquidation of 
entries of elements (parts or subcomponents) of components imported to 
fulfill a contract for an LNPP system, addition, or component, from 
Japan, that are entered, or withdrawn from warehouse for consumption, 
on or after the date of publication of this notice in the Federal 
Register.
    In addition, in order to ensure that our suspension of liquidation 
instructions are not so broad as to cover merchandise imported for non-
subject uses, foreign producers/exporters and U.S. importers in the 
LNPP industry shall be required to provide certification that the 
imported merchandise would not be used to fulfill an LNPP contract. We 
will also request that these parties register with the Customs Service 
the LNPP contract number pursuant to which the merchandise is imported. 
With respect to entries of LNPP spare and replacement parts, and used 
presses, from Japan, which are expressly excluded from the scope of the 
investigation, we will instruct the Customs Service not to suspend 
liquidation of these entries if they are separately identified and 
valued in the LNPP contract pursuant to which they are imported.
    The Customs Service will require a cash deposit or posting of a 
bond equal to the estimated amount by which the normal value exceeds 
the export price as shown below. These suspension of liquidation 
instructions will remain in effect until further notice.
    The weighted-average dumping margins are as follows:

------------------------------------------------------------------------
                                                              Weighted- 
                                                               average  
                   Exporter/Manufacturer                        margin  
                                                              percentage
------------------------------------------------------------------------
Mitsubishi Heavy Industries, Ltd...........................       47.57%
Tokyo Kikai Seisakusho, Ltd................................       58.14%
All Others.................................................       53.72%
------------------------------------------------------------------------

    The All Others rate applies to all entries of subject merchandise 
except for entries of merchandise produced by MHI and TKS.

ITC Notification

    In accordance with section 733(f) of the Act, we have notified the 
ITC of our determination. If our final determination is affirmative, 
the ITC will determine before the later of 120 days after the date of 
this preliminary determination or 45 days after our final determination 
whether these imports are materially injuring, or threaten material 
injury to, the U.S. industry.

Public Comment

    Case briefs or other written comments in at least ten copies must 
be submitted to the Assistant Secretary for Import Administration no 
later than May 24,1996, and rebuttal briefs, no later than May 30, 
1996. A list of authorities used and an executive summary of issues 
should accompany any briefs submitted to the Department. Such summary 
should be limited to five pages total, including footnotes. In 
accordance with section 774 of the Act, we will hold a public hearing, 
if requested, to afford interested parties an opportunity to comment on 
arguments raised in case or rebuttal briefs. Tentatively, the hearing 
will be held on June 4, 1996, time and place to be determined, at the 
U.S. Department of Commerce, 14th Street and Constitution Avenue, N.W., 
Washington, D.C. 20230. Parties should confirm by telephone the time, 
date, and place of the hearing 48 hours before the scheduled time.
    Interested parties who wish to request a hearing, or to participate 
if one is requested, must submit a written request to the Assistant 
Secretary for Import Administration, U.S. Department of Commerce, Room 
B-099, within ten days of the publication of this notice. Requests 
should contain: (1) The party's name, address, and telephone number; 
(2) the number of participants; and (3) a list of the issues to be 
discussed. Oral presentations will be limited to issues raised in the 
briefs. If this investigation proceeds normally, we will make our final 
determination by 135 days after the publication of this notice in the 
Federal Register.
    This determination is published pursuant to section 733(f) of the 
Act.

    Dated: February 23, 1996.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 96-4729 Filed 2-29-96; 8:45 am]
BILLING CODE 3510-DS-P