[Federal Register Volume 61, Number 142 (Tuesday, July 23, 1996)]
[Notices]
[Pages 38166-38189]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-18542]


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DEPARTMENT OF COMMERCE
[A-428-821]


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

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

EFFECTIVE DATE: July 23, 1996.

FOR FURTHER INFORMATION CONTACT: V. Irene Darzenta or William Crow, AD/
CVD Enforcement, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, N.W., Washington, D.C. 20230; Telephone: (202) 
482-6320 or (202) 482-0116, respectively.

The Applicable Statute

    Unless otherwise indicated, all citations to the statute are 
references to the provisions effective January 1, 1995, the effective 
date of the amendments made to the Tariff Act of 1930 (``the Act'') by 
the Uruguay Rounds Agreements Act (``URAA'').

Final Determination

    We determine that large newspaper printing presses and components 
thereof (``LNPPs'') from Germany are being, or are likely to be, sold 
in the United States at less than fair value (``LTFV''), as provided in 
section 735 of the Act.

Case History

    Since the publication of the preliminary determination of sales at 
LTFV (60 FR 8035, March 1, 1996), the following events have occurred:
    On February 27, 1996, the Department disclosed to the petitioner 
(Rockwell Graphics, Inc. ) and the respondents (MAN Roland 
Druckmaschinen AG (``MRD'') and Koenig Bauer-Albert AG (``KBA'')) the 
calculation methodologies used in the preliminary determination. On 
March 4 and 5, 1996, the petitioner and MRD, respectively, alleged that 
the Department made certain ministerial errors in its preliminary 
calculations. On March 15, 1996, the Department determined that none of 
the allegations constituted ministerial errors. See March 15, 1996, 
Memorandum from the Team to Richard W. Moreland Re: Alleged Ministerial 
Errors in the Calculation of the Preliminary Antidumping Duty Margin 
for MAN Roland Druckmaschinen AG.
    On March 4 and 6, 1996, the Department issued supplemental cost and 
sales questionnaires to MRD and its U.S. subsidiary MAN Roland Inc. 
(``MRU''). MRD submitted responses to these questionnaires on March 13, 
1996.
    On March 7, 1996, we met with members of the German Ministry of 
Economics to discuss the status of the proceeding.
    On March 14, 1996, the Department returned the updated cost 
information submitted by MRD in its March 13, 1996, submission which 
was determined to be untimely.
    In March and April 1996, we conducted verification of the cost and 
sales questionnaire responses of MRD in Germany and the United States. 
On April 3 and 25, 1996, MRD submitted the corrections to its response 
that were presented at verification. On May 14 and 16, 1996, the 
Department issued its reports on verification findings.
    On May 8, 1996, the Department received comments it solicited from 
interested parties in its preliminary determination regarding scope 
issues. KBA refiled its scope comments on May

[[Page 38167]]

17, 1996, pursuant to the Department's request to exclude new 
information determined to be filed untimely.
    The petitioner and the respondents submitted case briefs on June 3, 
1996, and rebuttal briefs on June 10, 1996. On June 11, 1996, the 
Department requested that MRD revise its case brief to exclude untimely 
new factual information. MRD submitted revised briefs on June 13, 1996. 
The Department held a public hearing for this investigation on June 17, 
1996.

Facts Available

    KBA failed to respond to the Department's questionnaire. Section 
776(a)(2) of the Act provides that if an interested party (1) withholds 
information that has been requested by the Department, (2) fails to 
provide such information in a timely manner or in the form or manner 
requested, (3) significantly impedes a determination under the 
antidumping statute, or (4) provides such information but the 
information cannot be verified, the Department shall use facts 
otherwise available in reaching the applicable determination. Because 
KBA failed to respond to the Department's questionnaire, we must use 
facts otherwise available with regard to KBA.
    Section 776(b) provides that adverse inferences may be used against 
a party that has failed to cooperate by not acting to the best of its 
ability to comply with requests for information. See also Statement of 
Administrative Action (``SAA''), at 870. KBA's failure to reply to the 
Department's questionnaire demonstrates that KBA has failed to 
cooperate to the best of its ability in this investigation. Thus, the 
Department has determined that, in selecting among the facts otherwise 
available to KBA, an adverse inference is warranted. As facts otherwise 
available, we are assigning to KBA the margin stated in the notice of 
initiation, 46.40 percent.
    Section 776(c) provides that when the Department relies on 
secondary information (such as the petition) in using the facts 
otherwise available it must, to the extent practicable, corroborate 
that information from independent sources that are reasonably at its 
disposal. When analyzing the petition, the Department reviewed all of 
the data the petitioner relied upon in calculating the estimated 
dumping margin. This estimated dumping margin was based on a comparison 
of the bid price for a sale of a LNPP system made by MRD to an 
unrelated U.S. customer and the constructed value (``CV'') of that LNPP 
system. As a result of that analysis, the Department modified the CV 
methodology that the petitioner relied upon in calculating the 
estimated margin. On the basis of those modifications, the Department 
recalculated the estimated dumping margin and found it to be 46.40 
percent. The Department corroborated all of the secondary information 
from which the margin was calculated during our pre-initiation analysis 
of the petition, to the extent appropriate information was available 
for this purpose at that time. For purposes of the preliminary 
determination, the Department re-examined the price information 
provided in the petition in light of information developed during the 
investigation, and found that it continued to be of probative value. 
For purposes of the final determination, we compared the petition price 
information against verified data, and again found that it continued to 
be of probative value. See Comment 1 of the ``Company-Specific'' 
subsection of the ``Interested Party Comments'' section of this notice.

Scope of Investigation

    Note: The following scope language reflects certain 
modifications from the notice of the preliminary determination. As 
specified below, we have clarified the scope to include incomplete 
LNPP systems, additions and components. We have also clarified the 
scope to include ``elements'' (otherwise referred to as ``parts'' or 
``subcomponents'') of a LNPP system, addition or component, which 
taken altogether, constitute at least 50 percent of the cost of 
manufacture of the LNPP component of which they are a part. We have 
also excluded from the definition of the five subject LNPP 
components any reference to specific subcomponents (i.e., the 
reference to a printing-unit cylinder in the definition of a LNPP 
printing unit). In addition, we have excluded the following 
Harmonized Tariff System of the United States (``HTSUS'') 
subheadings from the scope: 8524.51.30, 8524.52.20, 8524.53.20, 
8524.91.00, and 8524.99.00. See ``Scope Comments'' section of this 
notice and the July 15, 1996 Decision Memorandum to Barbara Stafford 
from The Team Re: Scope Issues in the Final Determinations.

    Scope: The products covered by these investigations are 
largenewspaper printing presses, including press systems, press 
additions and press components, whether assembled or unassembled, 
whether complete or incomplete, 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 press 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;
    (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, complete or incomplete, and are 
assembled and/or completed prior to and/or during the installation 
process in the United States. 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 a 
LNPP system, addition or component, which taken altogether, constitute 
at least 50 percent of the cost of manufacture of any of the five major 
LNPP components of which they are a part.
    For purposes of this investigation, the following definitions apply 
irrespective of any different definition that may be found in Customs 
rulings, U.S. Customs law or the HTSUS: the term ``unassembled'' means 
fully or partially unassembled or disassembled; and (2) the term 
``incomplete'' means lacking one or more elements with which the LNPP 
is intended to be equipped in

[[Page 38168]]

order to fulfill a contract for a LNPP system, addition or component.
    This scope does not cover spare or replacement parts. Spare or 
replacement parts imported pursuant to a LNPP contract, which are not 
integral to the original start-up and operation of the LNPP, and are 
separately identified and valued in a 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, this investigation covers 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 this investigation 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, and 8537.10.90. Although the HTSUS subheadings 
are provided for convenience and Customs purposes, our written 
description of the scope of this investigation is dispositive.

Scope Comments

    The petitioner and the respondents in this investigation and the 
concurrent investigation of LNPPs from Japan submitted comments in 
their case and rebuttal briefs on several scope-related issues. These 
scope issues pertain to: (1) the treatment of elements (parts or 
subcomponents) of LNPPs; (2) the use of the ``to fulfill a contract'' 
language; (3) the inclusion of HTSUS subheading 8524 which encompasses 
magnetic tapes; and (4) the treatment of imported merchandise of U.S. 
origin. Although certain issues were raised by the parties within the 
context of either the German or Japanese investigation, we have 
consolidated them for purposes of the final determinations because the 
resolution of these issues impacts the scope of both investigations. 
Each of these issues, the interested parties' comments and the 
Department's position are summarized below. For the complete discussion 
and analysis, see the July 15, 1996 Memorandum to Barbara Stafford from 
The Team Re: Scope Issues in the Final Determinations.
1. Elements of LNPPs
    As stated in the ``Scope of Investigation'' section above, the 
scope of the LNPPs investigations covers LNPP systems, additions and 
the five major press system components, whether assembled or 
unassembled, that are capable of printing or otherwise manipulating a 
roll of paper more than two pages across. Because of their large size, 
LNPPs are typically imported into the United States in either partially 
assembled or disassembled form, in multiple shipments over an extended 
period of time, and may require the addition and integration of non-
subject elements prior to or during the installation process in the 
United States. Consequently, we stated in our notice of initiation that 
``any of the five components, or collection of components, the use of 
which is to fulfill a contract for an LNPP system, addition, or 
component, regardless of degree of disassembly and/or degree of 
combination with non-subject elements before or after importation, is 
included in the scope of [these] investigation[s].'' The interpretation 
of the intent of this language in the scope resulted in significant 
controversy among the interested parties in these investigations. 
Generally, the petitioner has interpreted it to mean that incomplete 
components and their constituent elements from a subject country are 
covered within the scope. The respondents have generally interpreted 
our initiation scope language to include only complete components, 
arguing that the inclusion of incomplete merchandise in the scope would 
necessarily precipitate the inclusion of elements which would conflict 
with the Department's industry support determination.
    To clarify the issue, in our preliminary determinations, we stated 
that we interpreted the current scope to ``include those elements or 
collection of elements imported from a subject country insofar 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.'' We also stated that ``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, raised the question: at what 
point do the elements imported from a subject country rise to the level 
of a LNPP component, addition or system subject to the scope of these 
investigations? This question was particularly difficult to answer in 
light of the complex nature of the importation of LNPPs--i.e., the high 
degree of disassembly and/or incompleteness and the multiple shipments 
of parts and subcomponents in various combinations over an extended 
period of time. Therefore, we had to decide on a reasonable and 
practical 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 considered primarily two alternative approaches for analyzing 
what governs the inclusion of parts or subcomponents within the scope 
of these investigations (other than spare or replacement parts which 
are expressly excluded from the scope if they are separately identified 
and valued in a LNPP contract), and solicited comments from interested 
parties on the merits of these approaches. One approach considers, on a 
case-by-case basis, whether the imported parts or subcomponents when 
taken together are essentially a LNPP system, addition or component. 
This so-called ``essence'' approach focuses on the question of which 
parts are most critical to the operation of the subject merchandise so 
that when taken together they constitute an essentially complete LNPP 
component, addition or system. A second approach considers 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 or subcomponents of a finished LNPP system, 
addition or component. This value would be measured in terms of the 
cost of manufacture, rather than price, because (1) we are primarily 
concerned with where the actual manufacturing is occurring and not the 
market value, and (2) the imported elements are not normally priced 
separately from the LNPP which they comprise in the ordinary course of 
business.
    In general, the interested party comments received on this issue 
reflect widely diverging views. The basis of the controversy among the 
parties centers on the interpretation of the following excerpts from 
the current scope language: (1) ``regardless of degree of disassembly 
and/or degree of combination with non-subject elements before or after 
importation;'' and (2) ``individual elements when taken as a

[[Page 38169]]

whole constitute a subject component.'' The petitioner views this 
language as necessarily referring to both complete and incomplete 
components given the nature of the imported merchandise, and proposes 
that the Department clarify the scope to include incomplete merchandise 
from a subject country insofar as it includes any one of 16 key 
elements, which it defines to be critical to the functioning of a LNPP. 
KBA and the respondents in the Japan investigation, Mitsubishi Heavy 
Industries, Ltd. (``MHI'') and Tokyo Kikai Seisakusho, Ltd. (``TKS''), 
view the scope language as referring to complete merchandise. 
Alternatively, KBA argues for a value test whereby imported elements 
would be covered if their value exceeded at least 60 percent of the 
value (or 50 percent of the cost) of the finished system (or at least 
90 percent of the value of any individual LNPP component), while MHI 
advances arguments for an essence approach that would be predicated 
upon the importation of all elements which it defines to be critical to 
the functioning of a LNPP. MRD generally supports an essence approach 
assessed on a case-by-case basis but favors maintaining flexibility on 
the issue, while TKS offers no option, arguing that both approaches 
would result in the unlawful expansion of the scope to include parts 
and subcomponents.
    We agree with the petitioner that incomplete merchandise by 
necessity must be included in the scope of these investigations. Given 
the very large size of LNPPs and the complex importation process, 
complicated by the further manufacturing and/or installation activities 
performed in the United States by the respondents, it was the 
Department's intent to use the language at issue to avoid creating 
loopholes for circumvention, including those arising from differing 
degrees of completeness of the imported merchandise. The Department is 
concerned that, because of the great number of parts involved, there is 
the potential that a party may attempt to exclude its merchandise from 
the scope of these investigations on the basis of a lack of completion. 
From the Department's standpoint, it is not (and never has been) the 
individual elements per se that are the issue, but the combination of 
these elements that would rise to the level of covered merchandise 
whether by essence or by value (i.e., the sum of importations pursuant 
to a LNPP contract, not the individual importations or parts 
themselves). Given the significant controversy that has been generated 
over the scope of these investigations, we believe that clarification 
of the scope is warranted in this case. We note that the Department has 
the authority to clarify the scope language at any time during an 
investigation. See Final Determination of Sales at Less Than Fair 
Value: Small Diameter Seamless Carbon and Alloy Standard, Line and 
Pressure Pipe from Italy, 60 FR 31981, 31984, 31987 (June 19, 1995); 
Minebea Co., Ltd. v. United States, 782 F. Supp. 117, 120 (CIT 1992); 
and Kern-Liebers USA v. United States, 881 F. Supp. 618 (CIT 1995).
    The parties' diverging views on the approach the Department should 
pursue in resolving the issue attests to the fact that there is no 
perfect solution to the problem. The selection of one or the other 
approach for purposes of the final determinations, however, is 
unavoidable if our scope is to have reasonable clarity and 
administrability, given the complexity of the importation of the 
subject merchandise and the potential for circumvention. The pursuit of 
either approach necessitates clarification of the scope to include 
explicitly incomplete Japanese- or German-origin LNPPs. Given that the 
minimum level of scope coverage is any of the five LNPP components, 
both the essence and value approaches must be examined on a component-
specific basis.
    The essence approach has superficial appeal because it seeks, in 
principle, to capture what a particular subject LNPP component actually 
is--i.e., the ``heart'' of it. However, the information obtained from 
the interested parties and other sources make it difficult, if not 
impossible, to state that a particular element is the ``essence'' of a 
LNPP component. In past cases in which the number of parts and 
subcomponents comprising the subject merchandise was limited, we have 
identified specific elements, or groups of elements, as constituting 
the ``whole'' or ``essence'' of the subject merchandise. See e.g., 
Final Determination of Sales at Less Than Fair Value: Bicycles from the 
People's Republic of China, 61 FR 19026 (April 30, 1996); Final 
Determination of Sales at Less Than Fair Value: Professional Electric 
Cutting Tools and Professional Electric Sanding/Grinding Tools from 
Japan, 58 FR 30144 (May 26, 1993); and Final Determination of Sales at 
Less Than Fair Value: Gene Amplification Thermal Cyclers and 
Subassemblies Thereof, from the United Kingdom, 56 FR 32172 (July 15, 
1991). In this case, however, given the large number of parts and 
subcomponents which are combined to produce a subject LNPP component, 
we believe that it is impossible to conclude, for example, that a side 
frame or a blanket cylinder is the ``essence'' of a printing unit, as 
suggested by the petitioner.
    Added to the difficulty of accepting the petitioner's ``essence'' 
proposition in general is the fact that many of the critical elements 
identified by the petitioner individually represent an insignificant 
portion of the total value of the LNPP component of which they are 
part, and the identification of named elements may require modification 
over time due to technological advances. Furthermore, there is the 
unresolved question of whether a critical element would constitute the 
``essence'' of a subject component if it itself were incomplete in some 
minor way. In other words, the problem faced in this case is 
qualitatively unlike the problems faced in the other cases, cited 
above, where it was possible to reduce the ``essence'' definition to a 
single, non-contradictory definition.
    Therefore, if no single element can be identified as the 
``essence'' of a particular LNPP component, and if requiring that all 
of the ``essential'' elements listed by the petitioner or other parties 
be of subject country origin would unacceptably limit the intended 
scope of these investigations, then the ``essence'' approach is 
unworkable.
    We believe that the value approach is consistent, predictable, and 
administrable. According to this approach, imported elements are 
covered if they constitute a certain minimum percentage of the value, 
based on the cost of manufacture, of the particular component of which 
they are a part. We acknowledge, however, that in order to perform the 
value test, we will have to wait until after all of the elements 
comprising the LNPP component are imported and the LNPP component is 
produced, and that we will suspend liquidation on all imported elements 
in the meantime. In addition, the argument has been made that the value 
approach is more uncertain with respect to duty assessment, as all 
shipments would need to be completed before the value test on a 
finished product basis would be assessed. However, we note that this 
would also be true if we took the ``essence'' approach, in that the 
identification of critical elements could only take place after all 
importations have been made.
    Furthermore, we have instituted the concept of a value test in the 
past where the nature of the merchandise and its importation lent 
itself to circumvention. See Final Determination at Sales at Less Than 
Fair Value: Cellular Mobile Telephones and Subassemblies from Japan, 50 
FR 45447, 45448 (October 31,

[[Page 38170]]

1985); and Mitsubishi Elec. Corp. v. United States, 898 F.2d. 1577, 
1582 (Fed. Cir. 1990).
    In this case, exercising our discretion to develop an administrable 
scope, we determine that if the sum of the value of elements imported 
to fulfill a LNPP contract is at least 50 percent of the value, 
measured in terms of the cost of manufacture, of any of the five named 
components covered by the scope into which they are incorporated, then 
the imported elements are covered by the scope. An individual component 
is covered by the scope if the imported elements comprising it 
represent at least 50 percent of the value of the component, even if 
the contract pursuant to which the elements are imported is for an 
entire LNPP system and the remaining components are not within the 
scope.
    We believe that this 50 percent threshold is a workable standard 
and is sufficiently significant to capture certain critical elements as 
well. We also believe that pursuing the value test on the basis of cost 
of manufacture, rather than price, is less susceptible to manipulation 
and more readily traceable to company records because the imported 
elements are normally not priced separately from the LNPP which they 
comprise in the ordinary course of business.
    In addition, given our rejection of the essence approach for the 
purpose of the scope, we believe that including any references to 
specific subcomponents of covered components (i.e., printing-unit 
cylinder) in the definition of the five covered components would be 
improper. Therefore, we have excluded them from the scope.
    Based on the foregoing analysis, we have clarified the scope to 
include incomplete LNPP systems, additions or components. For the 
reasons explained above, we note that this does not constitute an 
``expansion'' of the scope, as the respondents allege, but merely a 
necessary clarification.
    For purposes of these investigations, incomplete LNPPs will be 
defined as any element or group of elements of a LNPP system, addition 
or component that are imported from a subject country lacking one or 
more elements needed to fulfill a contract for a LNPP system, addition 
or component. Such elements would be covered by the scope of these 
investigations if they represent at least 50 percent of the value, 
measured in terms of the cost of manufacture, of the finished component 
of which they are a part. Therefore, as stipulated in the 
``Continuation of Suspension of Liquidation'' section of this notice, 
we are instructing the Customs Service to suspend liquidation on all 
entries of elements of LNPP components imported to fulfill a contract 
for a LNPP system, addition or component, in order to assess the cost 
of manufacture of these imports relative to the cost of manufacture of 
the finished component of which they are part. The 50 percent value 
test will be administered by the Department after all entries of such 
merchandise have been made and the component of which they are part is 
produced.
    To facilitate the Department's performance of the value test, all 
foreign producers/exporters and U.S. importers in the LNPP industry 
shall be required to provide clearly the following information on the 
documentation accompanying each entry from Germany and Japan of 
elements pursuant to a LNPP contract: (1) the identification of each of 
the elements included in the entry, (2) a description of each of the 
elements, (3) the name of the LNPP component of which each of the 
elements are part, (4) the LNPP contract number pursuant to which the 
elements are imported. The suspension of liquidation will remain in 
effect until such time as all of the requisite information is presented 
to U.S. Customs and the Department is able to make a determination as 
to whether the imported elements are at least 50 percent of cost of 
manufacture of the LNPP component of which they are part.
2. ``To Fulfill A Contract'' Language in the Scope
    The current scope of these investigations ties subject merchandise 
to a contract for the sale of a LNPP system, addition or component, and 
the issue has been raised by one respondent as to whether such 
provision is lawful. Specifically, MHI argues that the ``to fulfill a 
contract'' provision in the scope definition incorrectly applies the 
antidumping law and the assessment of antidumping duties to contracts 
instead of products, creates an unacceptable uncertainty as to the 
scope of products covered by these investigations, and risks being 
overinclusive. The petitioner argues that the Department has not 
applied the antidumping law to contracts. It asserts that the language 
at issue does not mean that the contract itself is the subject of the 
investigation, although it is an indispensable consideration in the 
investigation because it determines the price.
    We disagree with the respondent. A contract is neither the object 
of our investigations, nor the object of the assessment of tariffs. 
Instead, a contract is a documentary instrument for facilitating the 
identification of the subject merchandise for the assessment of duties 
arising from an antidumping order. As such, a contract is similar to 
customs entry forms and company invoices commonly used in the process 
of liquidating foreign products entering the customs territory of the 
United States. Therefore, we disagree with MHI's contention that the 
Department would be replacing products with contracts as the object of 
the investigation.
    Given the complex nature of the importation of the product (i.e., a 
high degree of disassembly/incompleteness, and multiple shipments of 
innumerable parts and subcomponents over an extended period of time), 
the reference to a LNPP contract in this context is the only 
administrable means of identifying the subject merchandise. Therefore, 
we have continued using the ``to fulfill a contract'' language in the 
scope and in our continuation of suspension of liquidation instructions 
to the Customs Service.
3. HTSUS Subheading 8524
    MHI maintains that the Department should amend the scope of these 
investigations to exclude those tariff categories that encompass 
magnetic tape--i.e., HTSUS numbers 8524.51.30, 8524.52.20. 8524.53.20, 
8524.91.00 and 8524.99.00--because the subject merchandise does not 
include magnetic tape. According to MHI, the only component covered by 
the scope that could possibly include such a product, the computerized 
control system, instead includes hard and floppy disks. MHI contends 
that if the Department includes the HTSUS classifications for either 
magnetic tape or other generic computer components, it will 
inappropriately interfere with the liquidation of a multitude of 
computer-related products that are not relevant to the LNPP 
investigations.
    HTSUS 8524 covers ``records, tapes and other recorded media for 
sound or other similarly recorded phenomena, including matrices and 
meters for the production of records,'' but excluding photographic or 
cinematographic goods. The above-specified HTSUS numbers currently 
included in the scope refer to ``other magnetic tapes,'' ``other video 
tape recordings'' and ``other recorded media for reproducing phenomena 
other than sound or image.'' HTSUS 8524 was included in the scope at 
the initiation stage of these investigations, pursuant to a 
conversation with the National Import Specialist who, at that time, 
advised the Department that the LNPP computerized control system may 
enter the U.S. Customs territory under the HTSUS

[[Page 38171]]

subheading 8524. See July 20, 1995, Memorandum to the File Re: Scope 
Definition-Discussion with National Import Specialist; and the February 
15, 1996, Memorandum to the File Re: HTSUS Subheadings.
    Pursuant to further conversations with the National Import 
Specialist for the merchandise at issue, we learned that imported 
software or media regardless of application is separately identified in 
the HTSUS for Customs valuation purposes, and that records, tapes and 
other recorded media of heading 8524 remain classified under that 
heading, whether or not they are entered with the apparatus for which 
they are intended. Therefore, theoretically, computer subcomponents 
such as the software destined for use in a LNPP could be classified as 
``other recorded media'' under HTSUS 8524. However, in practice, this 
classification may not necessarily apply to LNPPs. We note that there 
is no evidence on the record of these proceedings at the present time 
indicating that the software of computerized control systems imported 
to fulfill LNPP contracts is entered under the HTSUS subheading at 
issue.
    Our practice in crafting the scope of any investigation is to 
include language that states that ``[a]lthough the HTSUS subheadings 
are provided for convenience and Customs purposes, our written 
description of the scope . . . is dispositive.'' This language means 
that it is the description of the merchandise, and not its Customs 
classification, that is controlling for the assessment of antidumping 
duties. Therefore, notwithstanding the HTSUS numbers under which the 
software of a LNPP computerized control system is imported from Germany 
or Japan, it would be covered if it met the criteria set forth in Scope 
Comment 1 above.
    In this case, however, because we have no evidence on the record to 
indicate that computer control subcomponents are imported under the 
category at issue, we see no need to continue to include the above-
specified HTSUS numbers in the scope of these investigations.
    Therefore, we have excluded them from the scope of these 
investigations for purposes of the final determinations.
4. U.S.-Origin Goods Returned
    KBA requests clarification that U.S.-origin elements and components 
would not be subject to antidumping duties if any are reimported, in 
accordance with the HTSUS which provides that such ``U.S. goods 
returned'' are not subject to any duties.
    HTSUS 9801 generally provides that articles produced in and 
exported from the United States and subsequently returned to the United 
States, without having been advanced in value or improved in condition 
by any process of manufacture or other means while abroad, are exempt 
from duties. HTSUS 9802 generally provides that articles returned to 
the United States, after having been exported to be advanced in value 
or improved in condition by any process of manufacture or other means, 
are dutiable on the value of the processing conducted outside of the 
United States. Articles returned to the United States that have not 
lost their physical identity and have not undergone such advancement in 
value or improvement in condition abroad, except assembly and 
operations incidental to that assembly, would be subject to duties on 
the value of the imported article less the cost or the value of the 
U.S. content.
    Therefore, under HTSUS 9801, the respondent's proposition is valid 
if the U.S.-origin elements are returned to the United States in the 
same manner as they were exported from the United States. Under HTSUS 
9802, the issue is less clear for antidumping purposes. While U.S. 
Customs law provides for a partial exemption of duty for U.S.-articles 
sent abroad for processing or assembly and returned to the United 
States, the Department has concluded in the past that the general rule 
applicable to ordinary customs duties is not controlling with respect 
to antidumping duties, and that the United States Customs Service 
American Goods Returned (``AGR'') program, pursuant to HTSUS 9802, is 
subject to the collection of antidumping duties on the full value of 
the merchandise, including the U.S. portion. The Department has stated 
that any interpretation which sought to limit the application of 
antidumping duties on AGR goods to the foreign content would be 
inconsistent with the Department's statutory mandate to assess 
antidumping duties on the extent to which the normal value (``NV'') 
(previously referred to as ``foreign market value'') exceeds the export 
price (previously referred to as ``United States price''). Application 
of antidumping duties only on the foreign processing or content portion 
of the import might mean that the margin of dumping would not be fully 
offset. See Final Determination of Sales at Less Than Fair Value: 
Certain Corrosion-Resistant Carbon Steel Products from Canada (58 FR 
37099, July 9, 1993), as affirmed by the Binational Panel under the 
United States-Canada Free Trade Agreement (In the Matter of: Certain 
Corrosion-Resistant Carbon Steel Products from Canada; USA-93-1904-03 
(October 31, 1994)).
    In other words, if the U.S.-origin elements were combined with 
other elements prior to reimportation into the United States to produce 
a subject LNPP in accordance with the criteria set forth in Scope 
Comment 1 above, antidumping duties would be assessed on the full value 
of the import, inclusive of the U.S. content. Therefore, based on the 
foregoing analysis, we have not clarified the scope in the manner 
suggested by KBA.

Period of Investigation

    The POI for MRD is July 1, 1993 through June 30, 1995. See 
Preliminary Determination of Sales at Less Than Fair Value: Large 
Newspaper Printing Presses and Components Thereof, Whether Assembled or 
Unassembled, from Germany, 61 FR 8035, March 1, 1996) (``LNPPs 
Preliminary Determination'').

Product Comparisons

    Although the home market was viable, in accordance with section 773 
of the Act, we based NV on 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 LNPPs Preliminary Determination.

Fair Value Comparisons

    To determine whether MRD's sales of LNPPs to the United States were 
made at LTFV, 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. See LNPPs Preliminary Determination.

Constructed Export Price

    MRD reported its sales as either CEP or EP. We classified all of 
MRD's sales as CEP sales because its 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; and the U.S. 
affiliate engaged in a broad range of activities including installation 
support, which we have classified as further manufacturing. See Comment 
2 and Comment 3 of the ``Common Issues'' subsection of the

[[Page 38172]]

``Interested Party Comments'' section of this notice. We calculated 
CEP, in accordance with subsections 772 (b) and (d) of the Act, for 
those sales to the first unaffiliated purchaser by a seller affiliated 
with the producer/exporter that took place before importation and 
involved further manufacturing in the United States.
    We excluded MRD's sale to The Charlotte Observer (``Charlotte'') 
from our final analysis because it involved the importation of parts 
and subcomponents, the sum of the cost of manufacture of which was less 
than 50 percent of the cost of manufacture of the LNPP component of 
which they are a part. See ``Scope of Investigation'' and ``Scope 
Comments'' sections of this notice. See also Comment 2 of the 
``Company-Specific Issues'' subsection of the ``Interested Party 
Comments'' section of this notice.
    We calculated CEP based on the same methodology used in the 
preliminary determination, with the following exceptions:
    (1) Where appropriate, we revised/updated the respondent's data in 
accordance with verification findings. See May 14, 1996 Memoranda for 
David L. Binder from V. Irene Darzenta Re: the Verification of the 
Questionnaire Responses of MAN Roland Druckmaschinen AG and MAN Roland 
Inc. (``MRD and MRU Sales Verification Reports.'').
    (2) We excluded all post-POI price amendments. See Comment 3 of the 
``Company-Specific Issues'' subsection of the ``Interested Party 
Comments'' section of this notice.
    (3) We deducted from CEP those indirect selling expenses that were 
associated with economic activity in the United States, whether 
incurred in the United States or in Germany, and irrespective of where 
recorded, after making certain adjustments. We recalculated those 
indirect selling expenses incurred by MRD in Germany in accordance with 
the methodology explained in the DOC Position to Comment 1 of the 
``Common Issues'' subsection of the ``Interested Party Comments'' 
section of this notice. We recalculated those indirect selling expenses 
incurred by MRU in the United States using the verified indirect 
selling expense rate for the POI based on sales revenues. See Comment 5 
of the ``Company-Specific Issues'' subsection of the ``Interested Party 
Comments'' section of this notice.
    (4) For the Rochester and Wilkes Barre sales, we recalculated 
warranty expenses using the verified warranty expense factor applicable 
to MRD's historical experience in the home market for all LNPP products 
based on the respondent's representations at verification that MRD 
would be primarily responsible for any warranty servicing necessary for 
these two sales. For Fargo and Global, warranty expenses were 
recalculated based on the warranty expense factor reflecting MRU's 
historical experience, revised to reflect verification findings, given 
the respondent's representations that MRU is primarily responsible for 
any warranty servicing necessary for these two sales. See Comment 6 of 
the ``Company-Specific Issues'' subsection of the ``Interested Party 
Comments'' section of this notice.
    (5) We added warehousing income accrued on one sale.

Normal Value/Constructed Value

    For the reasons outlined in the ``Product Comparisons'' section of 
this notice, we based NV on CV.
    In accordance with section 773(e) of the Act, we calculated CV 
based on the sum of the respondent's materials and fabrication costs, 
plus amounts for selling, general and administrative (``SG&A'') 
expenses and U.S. packing costs. We based our CV calculation on the 
same methodology used in the preliminary determination, revised to 
reflect verification findings, where appropriate, with the following 
exceptions:
    (1) As facts available, we calculated the cost of manufacturing for 
the sales to Rochester and Wilkes Barre based on the respondent's 
submitted cost estimates, adjusted for the variance between estimated 
and actual costs for a completed sale of a similar Geoman press. See 
Comment 9 of the ``Company-Specific Issues'' subsection of the 
``Interested Party Comments'' section of this notice.
    (2) In calculating MRU's further manufacturing general and 
administrative (``G&A'') rate, we divided POI G&A expenses by cost of 
sales recognized during the POI, excluding the cost for parts purchased 
from MRD. See Comment 14 of the ``Company-Specific Issues'' subsection 
of the ``Interested Party Comments'' section of this notice.

Price to CV Comparisons

    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.

Verification

    As provided in section 782(i) of the Act, we attempted to verify 
the information submitted by the respondent. We used standard 
verification procedures, including examination of relevant accounting 
and sales records and original source documents provided by the 
respondent.

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 
MRD reported that forward currency exchange contracts applied to 
certain U.S. sales, we could not verify that these contracts were 
directly linked to the particular sales in question. See May 14, 1996 
MRD Sales Verification Report at 37. Therefore, for the purpose of the 
final determination, we made currency conversions into U.S. dollars 
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 final determination, we 
have determined that a fluctuation exists when the daily exchange rate 
differs from the benchmark rate by 2.25 percent. The benchmark rate 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. A sustained movement has occurred when the weekly 
average of actual daily rates exceeds the weekly average of benchmark 
rates by more than five percent for eight consecutive weeks. (For an 
explanation of this method, see, Policy Bulletin 96-1: Currency 
Conversions, 61 FR 9434, March 8, 1996.). 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 deutschemark did not undergo a sustained movement, nor were 
there any currency fluctuations during the POI.

[[Page 38173]]

Interested Party Comments

Common Issues in the German and Japanese LNPP Investigations

    The petitioner and the respondents in this investigation and the 
concurrent investigation of LNPPs from Japan raised certain common 
issues in their case and rebuttal briefs. Therefore, for purposes of 
these final determinations, we have consolidated the common issues in 
this notice in order to respond to them.
    Comment 1  Deduction of U.S. Indirect Selling Expenses from CEP: 
The petitioner maintains that the Department failed to deduct most of 
the U.S. indirect selling expenses because they were recorded in the 
accounts of the foreign LNPP manufacturers. According to the 
petitioner, the Department should deduct all indirect selling expenses 
incurred on behalf of U.S. sales, irrespective of the location at which 
the expenses are actually incurred or the location of the company in 
whose books the expenses are recorded. The petitioner interprets 
section 351.402(b) of the proposed regulations (Notice of Proposed 
Rulemaking and Request of Public Comments, 61 FR 7308, 7381 (February 
27, 1996)) which states that ``the Secretary will make adjustments to 
CEP under section 772(d) of the Act for expenses associated with 
commercial activities in the United States, no matter where incurred'' 
to mean that the actual physical location of those commercial 
activities is not a qualifying criterion. The petitioner maintains that 
much of the pre-contract sales activity is handled by the foreign 
manufacturer of LNPP and that the expenses incurred for such activity 
should be deducted from CEP. The petitioner states that if the 
Department deducts U.S. indirect selling expenses from CEP based on the 
geographic location in which they were incurred or booked, it would 
create an enormous loophole through which expenses directly associated 
with U.S. sales could simply disappear.
    According to the petitioner, respondents in antidumping cases with 
CEP could increase net U.S. prices by merely shifting selling expenses 
from the books of their U.S. affiliates to those of the foreign parent 
companies.
    The petitioner states further that, at a minimum, the Department 
should deduct from CEP all expenses included in the foreign 
manufacturer's accounts that relate to U.S. economic activity. These 
costs include: (1) All direct and indirect costs incurred for 
installation, warranty and technical servicing and training, regardless 
of where such expenses are originally incurred; (2) all indirect costs 
associated with pre-contract design, bid preparation, cost estimation, 
and negotiations for U.S. sales, regardless of where such expenses are 
originally incurred; and (3) all direct and indirect selling expenses 
which were originally incurred in the United States by either the U.S. 
affiliate or the foreign manufacturer, and have been recorded in the 
accounts of the foreign manufacturer. To the extent that a respondent 
has not specifically identified which portions of its U.S. indirect 
selling expenses booked by the foreign manufacturer are related to U.S. 
economic activity, the Department should deduct all such expenses from 
CEP.
    MRD disagrees. MRD argues that neither the statute nor the proposed 
regulations support the petitioner's proposition. MRD states that in 
accordance with section 772(d) of the Act and the Department's proposed 
regulations, the deduction for indirect selling expenses is limited to 
expenses incurred in the United States for economic activities in the 
United States. MRD adds that its sales section in Germany responsible 
for U.S. sales activities performs these activities in Germany, and 
that the costs for these activities cannot be deducted from U.S. price 
under section 772(d).
    MRD argues, however, that if the Department decides to deduct 
indirect selling expenses incurred outside the United States from U.S. 
price, then it should recalculate the amounts reported for U.S. sales. 
The respondent explains that to calculate the reported expenses, it 
first divided the actual MRD indirect selling expenses by the total 
value of sales recorded by MRD, and applied the resulting expense rate 
to the gross contract price for each U.S. sale. However, the MRD sales 
figures used to derive the expense rate include only the amounts for 
the sales from MRD to MRU and not the value added in the United States, 
whereas the gross contract price for each sale to which the expense 
rate was applied does reflects the total value of the presses delivered 
to the customer inclusive of the value added by MRU. Therefore, to make 
a consistent calculation, MRD argues that the Department should either 
recalculate the MRD indirect selling expense rate using figures that 
correspond to the gross contract prices, or it should use the existing 
rate but apply it only to the transfer price between MRD and MRU for 
each sale.
    TKS maintains that the Department has adopted a new methodology for 
calculating indirect selling expenses pursuant to the enactment of the 
URAA which make petitioner's arguments moot. According to TKS, the 
Department has determined that the language of the SAA which refers to 
``economic activity occurring in the United States'' is to be 
interpreted as activities of the respondent which physically occur in 
the United States. TKS cites to the Final Determination of Sales at 
Less Than Fair Value: Certain Pasta from Italy, 61 FR 30326 (June 14, 
1996) (``Pasta Final Determination'') and the Preliminary Results of 
Administrative Review: Certain Steel Wire Rod from France, 61 FR 8915, 
8917 (March 6, 1996) to support its contention that the petitioner's 
stance is inconsistent not only with the instructions of the SAA but 
with recent Department precedents.
    MHI argues that the Department properly excluded from U.S. indirect 
selling expenses those costs incurred for non-U.S. economic activity. 
MHI argues that the methodology adopted by the Department was 
consistent with the SAA, section 772(d), and the Department's proposed 
regulations. Finally, MHI cites the Pasta Final Determination (at 
Comment 2), explaining that the Act requires the Department to make 
deductions to CEP only for those expenses associated with economic 
activity in the United States. MHI further argues that if the 
Department continues to treat MHI's U.S. sales as CEP sales, then it 
should continue to deduct only the indirect selling expenses incurred 
on behalf of economic activities occurring in the United States.
    DOC Position: We agree with the petitioner in general. The SAA (at 
823) states that: ``[U]nder new section 772(d), constructed export 
price will be calculated by reducing the price of the first sale to an 
unaffiliated customer in the United States by the amount of expenses 
(and profit) associated with economic activities occurring in the 
United States,'' including, inter alia, ``any `indirect selling 
expenses' '' (emphasis added). In the Pasta Final Determination, the 
Department determined that it was proper to deduct indirect selling 
expenses incurred in the home market in support of U.S. sales because 
such expenses were ``specifically related to U.S. commercial 
activity.'' See Pasta Final Determination at 30352. The indirect 
selling expenses reported by the respondents in these investigations 
are of the same class and nature as those determined to be associated 
with U.S. economic activity in the Pasta Final Determination, i.e., 
they are general selling expenses incurred and booked by the parent 
company in the home market to support export sales, including those for 
the

[[Page 38174]]

United States. This approach is in conformity with the SAA at page 824, 
which directs that section 772(d)(1)(D) provides for the deduction of 
indirect selling expenses from CEP where those expenses ``* * * would 
be incurred by the seller regardless of whether the particular sales in 
question are made, but reasonably may be attributed (at least in part) 
to such sales.'' We have therefore deducted indirect selling expenses 
incurred in the home market on U.S. sales from CEP, after making 
certain necessary adjustments.
    While we agree with the petitioner that all indirect selling 
expenses directly associated with U.S. economic activity, irrespective 
of the location where they were incurred, should be deducted from CEP, 
we do not believe that it is correct to use an indirect selling expense 
factor which is derived from a pool of expenses and sales revenue which 
covers both U.S. and non-U.S. sales. The indirect selling expense ratio 
reported by MHI for activities recorded at MHI's Japanese headquarters 
and factory sales offices consists of a numerator inclusive of common 
selling expenses as well as specific selling expenses supporting U.S. 
exports and other exports sales, divided by a denominator consisting of 
all export sales. Similarly, the indirect selling expense ratio 
reported by MRD for activities recorded at MRD's Augsburg facilities 
consists of data related to both the U.S. and other export markets. The 
indirect selling expense ratio reported by TKS for activities recorded 
at TKS's Tokyo headquarters consists of a numerator inclusive of common 
selling expenses as well as specific selling expenses supporting U.S. 
exports, other exports sales, and domestic sales, divided by a 
denominator consisting of world-wide sales. These allocations resulted 
in each company's reported indirect selling expense rate.
    Each respondent's indirect selling expenses incurred in the home 
market were reported as including expenses generally associated with 
U.S. exports, although the respondents maintained that such expenses 
did not relate to ``U.S. economic activity.'' At verification, we were 
able to confirm that certain of the indirect selling expenses were 
associated with U.S. economic activity. We were unable, however, to 
quantify the portion of the total indirect selling expenses which were 
associated with the U.S. sales. Therefore, for these final 
determinations, we have deducted, as non-adverse facts available, only 
a portion of the total indirect selling expenses recorded in the home 
market using the following methodology. First, we calculated total 
indirect selling expenses by multiplying the reported rate referred to 
above by each CEP price. We then subtracted that amount from each CEP 
price. Next, we calculated a factor which is the proportion of all 
those adjustments to CEP made under section 772(d) of the Act divided 
by the contract price net of the total indirect selling expenses 
calculated previously. The resulting factor was then applied to the 
indirect selling expense amount. We then deducted the resulting value 
from CEP. This methodology applies the indirect selling expenses only 
to the portion of CEP price which differentiates CEP from export price 
(``EP'').
    Comment 2  EP or CEP Sales--U.S. Subsidiaries' Activities: MHI 
contests the Department's preliminary conclusion that the U.S. LNPP 
transactions under investigation should be classified as CEP sales. MHI 
argues that MHI's U.S. sales should not have been treated as CEP sales 
because (1) the Department mischaracterized the extent of the U.S. 
economic activities of its U.S. subsidiary MLP (USA) Inc. (``MLP''), 
and (2) the Department should not have treated installation as further 
manufacturing.
    MHI claims that MLP's sales activities were not as broad as 
characterized by the Department. According to MHI, MHI's sales clearly 
qualify as EP sales under Section 772(a) of the Act. MHI states that 
the Department generally has three criteria for determining if a sale 
is to be based on EP. MHI states that the third criterion, where an 
affiliated U.S. agent ``acted as more than a processor of sales-related 
documentation and a communications link with the unaffiliated United 
States customers * * * .'' was applied to MLP and was the main reason 
for applying CEP to MHI's sales. MHI claims that MLP's sales-related 
activities were limited. According to MHI, subcontractors were 
responsible for installation, and MLP only sent engineers to supervise. 
According to MHI, the primary role of MLP is to act as an interface 
between the MHI sales team in Tokyo and MHI's U.S. customers. MHI 
argues that MLP did nothing more than implement purchasing instructions 
from MHI for a certain limited number of parts.
    MHI cites the Final Results of the Administrative Review of Certain 
Corrosion-Resistant Carbon Steel Flat Products from Korea (61 FR 18547, 
18562, April 26, 1996) (``Flat Products from Korea'') to support its 
contention that in setting up MLP's sales activities, MHI merely 
transferred these routine selling functions to its related selling 
agent in the United States and the substance of the transaction was 
unchanged. In Flat Products from Korea, the Department treated the 
respondent's sales as EP sales (formerly referred to as ``purchase 
price'') even though the U.S. affiliate had engaged in activity in the 
United States. The Department found that not all of the respondent's 
sales were delivered directly to the customer. However, the selling 
functions were normally undertaken by the exporter. According to MHI, 
the Department's analysis in Flat Products from Korea centered on what 
activities were conducted for the transaction as a whole and not on 
where the transaction took place. MHI explains that MLP's limited 
installation activities, limited sales activities, and limited parts 
procurement activities only represent a transfer of routine sales-
related activities to the United States.
    MRD maintains that the Department should analyze the Rochester and 
Wilkes-Barre sales as EP sales, rather than CEP transactions. This 
respondent states that the Department's preliminary decision to treat 
these sales as CEP sales was based on a misapplication of the standards 
used to distinguish EP from CEP sales. MRD maintains that the standard 
for such differentiation is whether the performance of functions by the 
U.S. subsidiary changes the substance of the transaction or the 
functions themselves. According to MRD, MRU's role in the Rochester and 
Wilkes-Barre sales does not transform the sales from EP to CEP sales, 
as it was not essential. MRD asserts that the functions performed by 
MRU for these sales--document processing, arranging for local sourcing 
of certain materials and services, communicating and coordinating with 
the customer--are the same functions that MRD routinely performs from 
Germany for third country sales. By contrast, the sales to Charlotte, 
Fargo and Global did require MRU's participation and are properly 
characterized as CEP sales, as they were either produced almost 
entirely at MRU's facilities in the United States or underwent 
substantial further processing there.
    Furthermore, MRD argues that, because the Rochester and Wilkes-
Barre sales were made prior to importation and were not sold from the 
U.S. affiliate's inventory or subject to further manufacturing in the 
United States, they must be treated as EP sales under the Department's 
established practice. Also, MRD contends that the minor warehousing 
required for these sales as a result of the logistical problems 
inherent in shipments of large capital equipment, and the addition of 
non-

[[Page 38175]]

German parts during the installation process, does not transform these 
sales into CEP sales. Additionally, MRD notes that the Department's 
reliance on New Minivans from Japan (57 FR 21937, May 26, 1992) 
(``Minivans'') and Certain Internal-Combustion Forklift Trucks from 
Japan (``Forklifts'') (53 FR 12552, April 15, 1988) in the preliminary 
determination to treat the sales at issue as CEP sales is misplaced. 
MRD states that, in Minivans, the Department concluded that the U.S. 
subsidiaries of the Japanese automobile manufacturers played such a 
significant role in the U.S. sales and distribution structure for their 
imported automobiles that the sales had to be classified as CEP sales. 
The types of efforts performed by these U.S. subsidiaries required a 
U.S. presence similar to that required for a sale from the U.S. 
subsidiary's own inventory. In contrast, none of the functions 
performed by MRU for the Rochester and Wilkes-Barre sales require a 
presence in the United States. MRD explains that, in Forklifts, the 
Department's reasoning for classifying sales made through an affiliated 
sales agent to an unaffiliated purchaser as EP sales hinged in part on 
the fact that the functions performed by the affiliated seller did not 
change the substance of the transaction, and in part on the fact that 
the sales were made prior to importation. Therefore, MRD asserts that, 
in accordance with the reasoning outlined in Forklifts, the sales to 
Rochester and Wilkes-Barre should be treated as EP sales.
    The petitioner maintains that under the language of the statute, 
all U.S. sales made by all respondents in these investigations must be 
treated as CEP transactions. The petitioner argues that the export 
price definition contained in the statute does not apply to sales made 
by a U.S. selling affiliate of a foreign manufacturer or exporter. The 
petitioner states that, despite the apparent clarity of the statutory 
language, the Department's practice has been to consider a sale by an 
affiliate as an ``indirect'' export price transaction where the 
merchandise is shipped directly to the buyer without any inclusion in 
the selling affiliate's inventory, and where the U.S. sales affiliate 
acts only as a processor of documentation and as a communications link 
with the unaffiliated buyer. It maintains that the indirect export 
price definition in the respondents' case cannot be applied because the 
U.S. sales subsidiaries functioned as more than a mere processor of 
sales-related correspondence. The petitioner cites to the Flat Products 
from Korea and Polyethylene Terephthalate Film, Sheet and Strip from 
Japan (60 FR 32133, 32135, June 20, 1995) to support its contention 
that just as the lack of additional expenses such as technical 
services, advertising and warranties by an U.S. affiliate indicate the 
use of export price, so, conversely, where the U.S. affiliate performs 
additional functions such as technical support, training, and warranty 
servicing, the Department will treat the sale as a CEP transaction. The 
petitioner enumerates the various functions performed by the U.S. 
affiliates of MHI, TKS and MRD--marketing, sales promotion, training, 
warehousing and installation support, where applicable--and asserts 
that these activities constitute more than mere processing of sales 
documentation.
    Furthermore, the petitioner notes that TKS recognized that the 
selling activities of its selling agent far exceeded the Department's 
minimal threshold for indirect export price sales and reported its U.S. 
sales as CEP and further-manufactured sales. The petitioner states that 
although MHI reported its sales as EP transactions, the Department 
correctly classified its U.S. sales as CEP-further-manufactured sales 
at the preliminary determination. According to the petitioner, this 
preliminary determination was confirmed during verification, where the 
Department reviewed the documentation of MLP's procurement of auxiliary 
parts and its sales servicing activities, both of which go well beyond 
the narrow confines established by the Department for indirect export 
sales.The petitioner disagrees with MRD's claim that the Department 
classifies a sale as EP unless the functions performed by the U.S. 
affiliate could not have been performed by the foreign producer/
exporter without the U.S. affiliate. The petitioner asserts that it is 
the significance of the activities performed by the U.S. affiliate and 
not their transportability that counts in the CEP versus EP analysis. 
The petitioner also refutes MRD's analysis of the Department's 
decisions in Minivans and Forklifts, claiming that in both cases the 
Department focused on the functions performed by the U.S. sales 
affiliate. In addition, the petitioner states that the only exception 
to the rule that warehousing necessitates CEP treatment is when the 
producer provides warehousing at the customer's demand, which is not 
the case for the Rochester and Wilkes-Barre sales.
    Finally, the petitioner maintains that CEP treatment is required 
because the installation activities of respondents' U.S. affiliates 
constitute further manufacturing, which by definition means that these 
affiliates were more than documentation processors and communication 
links. According to the petitioner, maintaining U.S. operations to 
oversee further manufacturing of LNPPs necessarily entails salaries for 
engineers and supervisors, and the general and administrative expenses 
to support them. Under such circumstances, the petitioner argues that 
characterization of a further manufactured sale as a standard export 
price transaction would ignore these substantial U.S. expenses related 
to the sale of subject merchandise, and would not result in a fair 
comparison. For all of these reasons, the petitioner argues that the 
substantial U.S. economic activities require the Department to treat 
the U.S. sales as CEP transactions.
    DOC Position: We agree with the petitioner and have treated all of 
the respondents' U.S. sales as CEP sales. In past cases such as 
Forklifts, where the Department has ruled that sales such as those at 
issue (i.e., sales made through a related sales agent in the United 
States to an unrelated purchaser prior to the date of importation) are 
EP sales (formerly purchase price), it has examined several criteria, 
including: (1) Whether or not the sales were shipped directly from the 
manufacturer to the unaffiliated U.S. customer; (2) whether or not the 
sales follow customary commercial channels between the parties 
involved; and (3) whether or not the function of the U.S. selling agent 
is beyond that of a ``processor of sales-related documentation'' and a 
``communications link'' with the unrelated U.S. buyer. Where all three 
criteria are met (i.e., sales are not inventoried, the commercial 
channel is customary and the function of the U.S. selling agent is not 
substantively more than a ``processor of sales-related documentation'' 
and a ``communications link''), the Department has regarded the routine 
selling functions of the exporter as ``merely having been relocated 
geographically from the country of exportation to the United States,'' 
and has determined the sales to be EP sales. In other words, where the 
functions are performed ``does not change the substance of the 
transactions or the functions themselves.'' See Forklifts at 12553. 
There are numerous cases where the Department has relied on the above-
specified criteria to characterize sales as EP (formerly purchase 
price) or CEP (formerly exporter's sales price), including: Minivans; 
Flat Products from Korea; and Final Determination of Sales at Less Than 
Fair Value: Stainless Steel

[[Page 38176]]

Wire Rod from France (58 FR 68865, 68868-9, December 29, 1993).
    With respect to MHI, we believe that the various activities of 
MHI's subsidiary MLP were substantially more than ``routine selling 
functions.'' Rather, MLP was significantly involved with the sale of 
LNPP in the following areas: selling agency, after-sales servicing, 
sourcing of non-subject parts, and supervision of installation. As 
MHI's principal sales agent in the United States, MLP was directly 
responsible for identification of Piedmont as a buyer, and cooperated 
with Sumitomo in the delegation of oversight for the Guard sale. With 
respect to after-sales servicing, MLP incurred warranty expenses for 
both sales. Also, for both sales, MLP supervised installation through 
the work of its engineers, and procured parts which were substantial in 
quantity, value and functional importance. For the Piedmont sale, MLP 
provided direct technical assistance, and for both the Guard and 
Piedmont sales MLP was responsible for direct oversight of installation 
performed by subcontractors, including payment of services rendered.
    With respect to MRD, we also believe that the third EP criterion is 
not satisfied in the case of MRU. MRU's role with respect to the sales 
at issue is beyond that of a mere ``processor of sales documentation'' 
and ``communications link.'' MRU played a major role in the 
negotiations between MRD and the U.S. customer for the Rochester and 
Wilkes-Barre sales, from the bidding stage through to the final 
contracts and subsequent amendments to the final contracts, and 
incurred significant SG&A expenses in the process. The contractual 
documentation and sales-related correspondence viewed at verification 
attests to this fact. Furthermore, we verified that MRU supports MRD's 
activities in the shipment and installation process relevant to these 
sales. This is evidenced by the fact that MRU is responsible for the 
post-sale warehousing of the merchandise shipped from Germany (which, 
while performed to meet the customer''s timing needs, was not 
considered by the respondent to be a routine service performed under 
the terms of the original sales contract), as well as the contracting 
of rigging companies and the sourcing of auxiliary parts essential to 
the installation process in the United States. Given its parts 
procurement role, it is possible that MRU may engage in warranty 
servicing support activities for the Rochester and Wilkes-Barre sales 
in the post-installation and start-up period.
    Furthermore, this reasoning is consistent with our decision to 
treat installation expenses as part of further manufacturing under 
section 772(d). See DOC Position to Comment 3, below. Maintaining U.S. 
operations to oversee further manufacturing of LNPPs necessarily 
entails significant expenses including salaries for engineers and 
supervisors, and the general and administrative expenses to support 
them. Under such circumstances, the characterization of a further 
manufactured sale as an export price transaction would ignore these 
substantial U.S. expenses related to the sale of subject merchandise 
and would result in an unfair comparison in the dumping analysis. We 
believe that the presence of a subsidiary's participation in further-
manufacturing activities particularly bolsters the use of CEP analysis. 
We note that the Department has always analyzed further manufacturing 
in the context of CEP (formerly exporter's sales price) methodology. In 
the Final Determination of Sales at Less Than Fair Value: Certain 
Carbon and Alloy Steel Wire Rod from Canada, 59 FR 18791, 18794 (April 
20, 1994), the Department considered the possibility of performing EP 
(formerly purchase price) analysis on certain sales which involved 
further processing by an unaffiliated subcontractor. The Department 
excluded the sales in question from its analysis because the removal of 
value added by the unaffiliated purchaser from the purchase price would 
have resulted in further manufactured purchase price sales, and thus 
would have been completely inconsistent with section 772 of the Act.
    TKS reported all of its sales as CEP sales, so that the general 
issue of CEP analysis is moot. TKS maintains, however, that its Dow 
Jones sale is CEP but not a further-manufactured sale. For discussion 
of this issue, see TKS Comment 5 in the companion Federal Register 
notice for LNPPs from Japan.
    Comment 3  The Treatment of Installation Expenses: MHI argues that 
the Department should not treat installation expenses as further 
manufacturing. MHI refers to U.S. law and case precedent to support its 
claim that installation does not constitute further manufacturing. The 
respondent cites to the Senate Committee On Finance, et al., Uruguay 
Round Agreements Act, S. Rep. No. 412, 103d Cong., 2d Sess. 66 (1994), 
to support its contention that an adjustment for further manufacturing 
is appropriate for an increase in value based on a process of 
manufacture or assembly of the imported merchandise after importation 
and before the sale to an unaffiliated purchaser. MHI believes that 
these criteria form a temporal restriction whereby value must be added 
at a point after importation but prior to the date of sale of the 
subject merchandise. MHI therefore contends that the installation MHI 
provides on its U.S. sales cannot qualify for a further-manufacturing 
adjustment because it was provided after, and not prior to, sale and 
delivery to the customer's specified destination sites.
    MHI argues that the principles in Forklifts and Certain Small 
Business Telephone Systems and Subassemblies Thereof from Korea (54 FR 
53141, December 27, 1989) (``SBTS'') to which the Department referred 
at its preliminary determination, do not apply to LNPPs. According to 
MHI, in SBTS, the Department determined that the combination of subject 
and non-subject merchandise should be treated as further manufacturing 
activity. MHI contends that the bulk of its LNPP installation and 
installation supervision expenses do not relate to the combination of 
subject and non-subject merchandise, but to the reassembly of LNPP 
components.
    MHI claims that in its operations, while auxiliary parts were 
shipped directly to the site of installation, they could have easily 
been shipped to Japan and then back to the site of installation. MHI 
contends that this scenario is substantively different from that in 
Forklifts, where Toyota's U.S. economic activities involved extensive 
relocation of its Japanese manufacturing activities to the United 
States. MHI claims that it does not normally ``install'' a LNPP at its 
Wadaoki assembly facility prior to exportation, nor does it complete 
final reassembly of the finished components anywhere but at the 
customer site after shipment and delivery. MHI maintains that it is 
purely accidental that the Department happened to use the term 
``installation'' in discussing the respondent's U.S. economic activity 
in Forklifts.
    MHI argues that LNPP installation should be treated as a movement 
expense, rather than as part of further manufacturing. MHI cites 
section 772(c)(2)(A) of the Act which states that EP (or CEP) for 
movement related activity should be reduced by ``the amount, if any, 
included in such price, attributable to any additional costs, charges, 
or expenses * * * which are incident to bringing the subject 
merchandise * * * to the place of delivery in the United States * * 
*.'' MHI maintains that the Department should follow its practice in 
the

[[Page 38177]]

investigation of Mechanical Transfer Presses from Japan (55 FR 335, 
January 4, 1990) (``MTPs''), where it determined that installation 
charges should be treated as movement expenses, because LNPP systems 
present virtually identical shipment reassembly requirements as MTPs.
    MHI disagrees with the Department's preliminary determination that 
the items added to a LNPP during installation are ``integral'' to the 
function of the press, whereas those items added to MTPs during 
installation were not. MHI explains that the Department has not cited 
any support for determining that additions made to MTPs in the United 
States were not integral to MTPs. MHI maintains that, even assuming 
arguendo, that certain LNPP auxiliary parts were integral to press 
operation, the Department gave no reason why the addition of 
``integral'' parts, as opposed to ``non-integral'' parts, is a legally 
meaningful distinction. MHI states its conclusion that such a 
distinction is irrelevant to a determination on the nature of 
installation costs.
    MHI also disagrees with the Department's preliminary conclusion 
that LNPP installation is far more complex than the reassembly 
operations examined in the investigation of MTPs. MHI claims that its 
review of the public record of the MTPs investigation revealed no basis 
to determine that the reassembly and installation of LNPPs is more 
complex than that of MTPs, since there was no public discussion of any 
of the attributes of MTP installation which would indicate complexity, 
such as: the time involved in installation, the number of engineers 
required to complete installation, the length of time for installation, 
or the amount of expense (absolute or relative) incurred during 
installation.
    MRD argues that the Department should classify the installation 
costs for the Rochester and Wilkes-Barre sales as movement costs, 
rather than installation costs, in accordance with its longstanding 
practice in cases involving large capital equipment. MRD asserts that 
the factual pattern in this case is similar to that in MTPs and Large 
Power Transformers from Japan (48 FR 26498, 26501, June 8, 1993) 
(``LPTs''), rather than in SBTS and Forklifts, the cases on which the 
Department incorrectly relied in the preliminary determination. MRD 
explains that the installation process in the instant case, similar to 
that in MTPs, is required because of the size of the merchandise 
involved, and the resultant need for disassembly of the merchandise for 
exportation and subsequent reassembly at the customer's site. According 
to MRD, the situations in SBTS and Forklifts involved the modification 
of the subject merchandise after importation at the option of the 
customer not the simple reassembly of the merchandise as a result of 
the shipment process. In addition, MRD asserts that the fact that LNPPs 
often are not fully assembled before shipment (otherwise known as 
``staging''), or that some additional non-German items are incorporated 
into the press system during installation, does not change the nature 
of the installation process.
    The petitioner states that the Department properly classified 
installation charges in its preliminary determination as part of U.S. 
further manufacturing under section 772(d)(2) because the U.S. 
installation process involves extensive technical activities on the 
part of engineers and installation supervisors and the integration of 
subject and integral, non-subject merchandise necessary for the 
operation of LNPPs. The petitioner maintains that the Department has 
never applied a blanket rule on installation expenses, treating them as 
assembly, a circumstance of sale adjustment, or shipment expenses, 
depending on the particular circumstances involved. Where those 
circumstances include incorporation of integral, non-subject components 
during installation or complex installation operations that are more 
than mere reassembly, the precedent clearly supports treatment of 
installation expenses as further manufacturing. The petitioner 
contrasts the level of complexity in this investigation to that in MTPs 
to support its contention that, in addition to the integration of non-
subject parts, the very complexity of the installation and the extent 
of entirely new assembly also affects the Department's treatment of the 
expenses. The petitioner asserts that in MTPs, installation costs were 
treated as shipment expenses because installation primarily involved 
simple ``reassembly'' of parts originally disassembled at the foreign 
producer's export facilities. The petitioner maintains that the 
Department's determination in MTPs is not applicable to LNPPs because 
none of the U.S. LNPP sales involved the mere reassembly of subject 
merchandise. Also, the petitioner contends that the subject merchandise 
in this investigation was never fully assembled and tested before 
shipment, but instead was fully constructed for the first time at the 
customer's site, involving many hours of engineering, installation and 
testing, and the integration and installation of the subject 
merchandise into the physical and electrical plant of each customer's 
facility. In addition, the petitioner disagrees with MRD's analysis of 
Forklifts and SBTS, stating that in both cases the Department treated 
the addition of integral components, or integration of subject and non-
subject subassemblies, during installation as further manufacturing.
    DOC Position: We agree with the petitioner. We believe that the 
Department correctly 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. As the parties have stated, the 
Department has not applied a blanket rule on the treatment of 
installation expenses, sometimes treating them as assembly costs, a 
circumstance of sale adjustment or shipment expenses, depending on the 
particular circumstances involved. See Forklifts, 53 FR 12552, 12565 
(April 15, 1988); SBTS, 54 FR 53141, 53151 (December 27, 1989) and 
MTPs, 55 FR 335, 339 (January 4, 1990). Where those circumstances 
include the incorporation of integral, non-subject components during 
installation or complex installation operations that are more than mere 
reassembly, the precedent clearly supports treatment of installation 
expenses as further manufacturing. See SBTS. In this case, the 
respondents' U.S. subsidiaries' roles in the sale, installation and 
servicing of LNPPs, and their supervision of the incorporation of 
integral, non-subject components during installation, constitute a 
process that is more than mere reassembly.
    The integration of integral non-subject merchandise and the 
technical complexity of LNPP installation distinguishes the instant 
processes from that of MTPs, which was a ``mere reassembly of subject 
parts.'' Unlike the equipment covered in MTPs, the respondents' LNPPs 
were never fully assembled and fully tested in the country of 
production, since the integral parts incorporated at the plant sites in 
the U.S. were required for the press to actually run to print a 
newspaper. Finally, the installation of these LNPPs involves 
integration of the merchandise into the physical and electrical plant 
of the customer's installation site and often requires modification of 
LNPP components or the site itself for successful completion of the 
LNPP.
    With respect to MHI, for both the Piedmont and Guard sales, the 
purchase of integral parts for installation was not limited, as 
suggested by the respondent,

[[Page 38178]]

but was significant. The role played by MLP in installation activities 
is evidenced by its purchasing of auxiliary parts, installation 
supervision and other oversight responsibilities. The Department's 
treatment of MLP's oversight, control and payment of third-party 
installation as further manufacturing is completely consistent with the 
Final Determination of Sales at Less Than Fair Value: Dynamic Random 
Access Memory Semiconductors of One Megabit and Above from the Republic 
of Korea, 58 FR 15467, 15476 (March 23, 1993), wherein the Department 
determined that fees paid for processing by an unaffiliated 
subcontractor were further manufacturing expenses. Contrary to MHI's 
characterizations, the Department believes that the extent of such 
activities performed on these sales was significant, as measured by the 
value of such services to the total contract price of the sales.
    Further, with respect to MHI's arguments, we note also that there 
is no ``temporal restriction'' to the definition of further 
manufacturing. The Department stated in SBTS (at Comment 9):

    Because non-subject merchandise is added to the subject 
subassemblies, the portion of installation expenses attributable to 
the addition of the non-subject merchandise cannot reasonably be 
treated as a circumstance of sale adjustment. It is, rather, part of 
the value added in conjunction with the non-subject merchandise. 
Whether this value is added before or after the sale is irrelevant 
because, for this product, EIS's customers expect the installed 
system to have the characteristics added by the non-subject 
merchandise. (Emphasis added.)

This fundamental customer expectation of the characteristics of the 
final, installed and functional equipment holds true for LNPP as well.
    Comment 4  Treatment of Sales With ``Abnormally High Profits'': If 
the Department continues to undertake a review of individual home 
market sales in its final calculation, MHI contends that the Department 
should also exclude sales with abnormally high profits. MHI argues that 
sales with abnormally high profit also fall within the definition of 
sales occurring outside the ordinary course of trade. MHI asserts that 
two of its home market sales have abnormally high profits and therefore 
should be excluded.
    MRD argues that the Department should include profit on ``after-
sale'' sales in calculating home market profit. However, since MRD's 
normal records do not segregate ``after-sale'' profits by market or 
product line, MRD asserts that the Department should use the overall 
average profit of its Web Press Division. If the Department calculates 
profit on a transaction-specific basis, MRD contends that home market 
sales with abnormally high profits should be excluded from the CV 
profit calculation.
    The petitioner maintains that the Department should use the same CV 
profit methodology applied in the preliminary determination (i.e., 
calculate profit on a model-specific basis). With respect to MHI, the 
petitioner asserts that there was nothing in the record which suggests 
that profits on any sales were ``abnormally'' high. The petitioner 
argues that the sales were at arm's length so the profit level should 
be normal. Moreover, the petitioner asserts that there are too few 
sales to establish a pattern of normal versus abnormal profit. In 
addition, the petitioner maintains that the profit rates suggested by 
MHI as being abnormally high do not distort the average profit.
    With respect to MRD, the petitioner asserts that even the highest 
profit calculated on MRD's home market sales is not abnormal because it 
falls with the variability range for all home market sales and, thus, 
should not be excluded. With respect to ``after-sale'' sales, the 
petitioner argues that the profit on ``after-sale'' services is not 
part of the foreign like product. Moreover, the petitioner could not 
segregate these ``after-sale'' profits by product-line.
    DOC Position: We disagree with respondents that simply because 
certain home market sales had profits higher than those of numerous 
other sales, the profits are automatically abnormally high and outside 
the ordinary course of trade for purposes of computing CV profit. In 
order to determine that profits are abnormally high, there must be 
certain unique or unusual characteristics related to the sales in 
question. However, the respondents have provided no credible 
information other than the numerical profit amounts to support their 
contention that certain home market sales had abnormally high profits. 
Accordingly, we excluded no home market sales from the CV profit 
calculation due to abnormally high profits.
    We agree with the petitioner that ``after-sale'' sales are not part 
of the foreign like product. Thus, MRD's argument that the Department 
should include profits from these ``after sale'' sales is misplaced.

Company-Specific Issues in the German LNPP Investigation

    Comment 1  KBA's Final Margin: KBA believes that its final margin 
should be based on the data relevant to the MRD sale in the petition, 
adjusted based on the verified information on the record. 
Alternatively, KBA believes that it should be assigned the ``all 
others'' rate.
    For purposes of the final determination, KBA argues that the 
Department cannot legally assign KBA the 46.40 percent margin based on 
the adjusted petition rate in the notice of initiation, as it did in 
the preliminary determination, because the record evidence shows that 
the petition data are incorrect and cannot be corroborated. In addition 
to the pre-initiation modifications made to the data in the petition, 
KBA asserts that the Department must further corroborate that 
information based on the accurate, verified information on the record 
and assign the resultant revised amount to KBA. KBA states that the SAA 
cautions that secondary information, such as petition information, used 
as facts otherwise available, may not be reliable because it is based 
on unverified allegations. Therefore, to the extent practicable, it 
must be corroborated from independent sources that are reasonably 
available to the Department. KBA points out that the SAA (and the 
Department's proposed regulations) also states that independent sources 
include information obtained from interested parties during the 
investigation. Because the revised petition rate is based solely on 
data for one of MRD's sales and MRD has fully participated in the 
investigation, KBA argues that the verified information on the record 
with respect to this sale can and should be used to corroborate and, if 
necessary, to revise petitioner's information further.
    Furthermore, KBA maintains that the Department's corroboration 
procedures for purposes of the preliminary determination were legally 
insufficient. KBA takes issue with the Department's claim that it re-
examined the petition price data and found it continued to have 
probative value. According to KBA, the test is not to re-examine or 
determine whether the data have probative value, but to corroborate 
that data to the extent practicable. KBA does not view the 46.40 
percent margin alleged in the notice of initiation, which is based on 
MRD's data, as evidence of the dumping margin on KBA imports of subject 
merchandise, because it is significantly higher than the 17.70 percent 
preliminary margin calculated for MRD. In light of this fact and the 
evidence on the record, KBA does not believe it is accurate or 
reasonable to claim that the petition price data has any probative 
value. In accordance with the statute and the practice set out in the 
preliminary determination of Bicycles from the People's Republic of 
China (60 FR 56567, November 9, 1995)

[[Page 38179]]

(``Bicycles''), KBA asserts that wherever data collected from MRD is 
inconsistent with the data contained in the petition on the MRD sale, 
the Department should reject the petition data in favor of MRD's actual 
data for use as facts otherwise available. KBA also asserts that the 
decision in the preliminary determination of Certain Pasta from Italy 
(61 FR 1344, January 19, 1996) (``Pasta Preliminary Determination'') on 
which the Department relied in making its facts available ruling for 
KBA in the preliminary determination was inconsistent with the statute 
to the extent that it did not go beyond its pre-initiation analysis in 
its efforts to corroborate petition information. In addition, unlike 
the Pasta Preliminary Determination, where the Department used as facts 
available the median of the range of estimated dumping margins from the 
notice of initiation, the Department in the instant investigation based 
KBA's margin on a sole sale of another company and the facts supporting 
the alleged margin have been proven incorrect during the course of this 
investigation.
    Alternatively, KBA suggests that it be assigned the ``all others'' 
rate. KBA adds that it withdrew its participation from the 
investigation because the extensive cost of preparing a response was 
totally disproportionate to its role in the U.S. market where its past 
sales of German-made LNPPs were insignificant and no future sales of 
German-made LNPPs were expected. For this reason, KBA asserts that the 
Department should consider it a non-shipper in which case it would 
receive the ``all others'' rate. KBA maintains that the Department 
should not make adverse inferences against KBA, as KBA's decision not 
to respond to the Department's questionnaire was driven by financial 
reasons and not by any other perceived benefit from non-submission of 
information. At the time KBA made its decision, it had no way of 
knowing the margin MRD would receive, whether the Department would 
accept its data, whether the information would be verified and/or 
whether the Department would use facts available. Additionally, KBA 
asserts that prior to the 1995 amendment to the antidumping statute, 
the Department's practice was to issue questionnaires to exporters 
accounting for the first 60 percent of exports of subject merchandise. 
Had this rule still been applicable, KBA states that it probably would 
not have been deemed a mandatory respondent and received a 
questionnaire in this investigation. Thus, it would have received the 
``all others'' rate which, in this case, would have been MRD's rate.
    The petitioner maintains that the Department properly assigned KBA 
the margin contained in the notice of initiation as facts available in 
the preliminary determination, contending that KBA's refusal to 
cooperate justifies an adverse inference. According to the petitioner, 
KBA was properly identified as one of two exporters of subject 
merchandise to the United States and, therefore, the Department was 
fully justified in its decision to require it to respond to the 
antidumping questionnaire. The petitioner also dismisses KBA's claims 
that its small volume of exports somehow exempts it from responding to 
the Department's questionnaire. Under the URAA, the Department must 
establish a separate margin for each exporter, unless the number of 
transactions or exporters makes such a procedure impractical, which is 
not the situation in this case. In addition, the petitioner dismisses 
KBA's reasons for refusing to cooperate as irrelevant since the statute 
does not condition the use of an adverse inference on the motive of a 
non-cooperating party. According to the petitioner, applying an adverse 
inference in KBA's case ensures that a non-cooperating party does not 
benefit more by its failure to cooperate than to comply with the 
Department's requirements. Finally, in the petitioner's view, the 
Department did corroborate the secondary data used as facts otherwise 
available. According to the petitioner, the statute establishes that 
the Department satisfies the corroboration requirement if it finds that 
the information at issue has probative value. In this investigation, 
the petitioner asserts that the pre-initiation analysis of the petition 
satisfied this threshold.
    DOC Position: We agree with the petitioner. In our preliminary 
determination, pursuant to section 776 of the Act, we assigned KBA the 
margin in the notice of initiation as facts otherwise available because 
it failed to respond to the Department's questionnaire. We stated at 
that time that, in accordance with section 776(b) of the Act, an 
adverse inference was warranted with respect to KBA because it failed 
to cooperate by not acting to the best of its ability to comply with 
the Department's request for information so that the Department could 
make a determination with respect to the extent of KBA's dumping or 
lack thereof. Consistent with our preliminary determination, we believe 
that an adverse inference is warranted with respect to KBA for purposes 
of the final determination. See ``Facts Available'' section of this 
notice.
    We disagree with the respondent's claim that the Department should 
not use facts available or make adverse inferences in its case, but 
rather should apply the ``all others'' rate . According to section 
776(a) of the Act, the Department shall use facts available if an 
interested party does not provide necessary information or 
significantly impedes an investigation. The SAA explains that the 
Department's potential use of facts available provides the ``only 
incentive to foreign exporters and producers to respond to the 
Department's questionnaire'' (SAA at 868). Applying an adverse 
inference to a non-cooperating party ensures that the non-responding 
party does not obtain a more favorable result by failing to cooperate 
than if it had cooperated fully. The facts available or adverse 
inference applied need not be proven to be the best alternative 
information, only that it is reasonable to use under the particular 
circumstances (SAA at 869). In this case, if KBA were to receive the 
``all others'' margin instead of the adverse facts available margin, as 
KBA suggests, it would receive the exact same treatment as MRD, which 
responded to the Department's questionnaire. This result would not 
fulfill the objective of section 776 of the Act. Similarly, we note 
that it would be inappropriate to assign to KBA, as adverse facts 
available, the actual margin calculated for the MRD sale in the 
petition, because this rate is lower than the final overall margin for 
MRD which cooperated fully in this investigation.
    With respect to the respondent's opposition to our corroboration 
procedures, we note that the SAA (at 870) defines corroboration of 
secondary information to mean that the Department will satisfy itself 
that the secondary information to be used as the basis for facts 
available has ``probative value.'' The determination of ``probative 
value'' is assessed on a case-by-case basis. We stated in our 
preliminary notice that, in accordance with section 776(c) of the Act, 
we corroborated all of the secondary information on which the margin in 
the petition was based during our pre-initiation analysis of the 
petition to the extent appropriate information was available for that 
purpose at that time. For purposes of the preliminary determination, we 
re-examined the price information provided in the petition in light of 
information developed during the investigation, and found that it 
continued to be of probative value. For the final determination, we 
compared

[[Page 38180]]

the petition price information with
verified data on the record and again
found that it continued to be of
probative value. Nothing in the statute
or the SAA compel us to go beyond
these procedures.
    Contrary to the respondent's claims, our corroboration procedures 
in this case are not inconsistent with the preliminary determinations 
in Pasta or Bicycles. In Bicycles, the Department compared the data in 
the petition to secondary data which included, but was not limited to, 
the same type of data used as the basis for the petition and the 
audited financial reports of two of the largest Indian bicycle 
producers. These procedures did not seek to replace the secondary 
information with respondent-specific information, but rather to compare 
it against that information in order to determine if it had ``probative 
value.'' In Pasta, unlike the instant investigation where KBA did not 
attempt at all to respond to the Department's questionnaire, the 
company to which facts available was applied at least attempted to 
respond to the Department's questionnaire, but the information it 
submitted was inadequate and unusable. Also, in the Pasta Final 
Determination, we concluded that the petition was the only appropriate 
information on the record to be used as facts available on the basis of 
having compared the sizes of the calculated margins for the other 
respondents to the estimated margins in the petition. In the Pasta 
case, as in the instant case, the other respondents' estimated margins 
were lower than the petition margins. In addition, in Pasta the 
Department did not go beyond its pre-initiation analysis in its 
corroboration procedures. See Pasta Final Determination, 61 FR 30326, 
30329 (June 14, 1996).
    Furthermore, KBA's references to the pre-1995 antidumping law with 
respect to the Department's determination of the appropriate recipients 
to the Department's questionnaire are irrelevant. Under the URAA, the 
Department is now required to investigate all known producers/exporters 
of subject merchandise unless the number of transactions or exporters 
is administratively burdensome (SAA at 814). Furthermore, despite the 
fact that there was no dumping allegation in the petition specifically 
against KBA, the Department is required to conduct its own research as 
to the universe of producers/exporters of subject merchandise and the 
appropriate recipients of its questionnaire. Thus, based on information 
received from the U.S. Embassy in Bonn, we named KBA as a respondent. 
See August 28, 1995, Memorandum to the File from Irene Darzenta, et 
al., Re: Questionnaire Recipients. For whatever reason KBA decided to 
withdraw from the investigation as an active respondent, the Department 
must now make adverse inferences consistent with the principles 
outlined above. Therefore, for purposes of the final determination, we 
have assigned to KBA the amended petition margin in the notice of 
initiation of 46.40 percent.
    Comment 2  Sales Exclusion Requests: MRD argues that the Department 
should exclude certain sales from its final calculations--namely, 
Charlotte, Fargo and Global--because they involve imports of parts and 
subcomponents that are not subject to the scope of the investigation. 
With respect to the Charlotte sale, the respondent argues that, in the 
initial phases of the investigation, both the petitioner and MRD agreed 
that it should be excluded from the Department's analysis because the 
substantial U.S. content would distort the Department's calculations. 
MRD states that, while the Department's preliminary determination did 
not dispute this reasoning, it questioned whether it had the authority 
to exclude this sale based solely on this fact. Because the Department 
had not reached a final decision on scope at that time, it decided to 
preliminarily include the Charlotte sale in its analysis. MRD continues 
to believe that this sale does not represent subject merchandise and 
therefore should be excluded. According to MRD, none of the imported 
parts and subcomponents (taken singly or together) constitutes a LNPP 
component whether defined by the Department in terms of essence or 
value.
    Moreover, MRD asserts that the Charlotte sale involved an unusual 
situation and, if included in the Department's analysis, would distort 
the calculation of the antidumping margin. Specifically, MRD states 
that MRU experienced significant problems in the design and 
manufacturing of the press because of ``mismanagement,'' which resulted 
in significant cost overruns and profit loss. The Department's 
preliminary determination deducted all of the costs incurred in the 
United States, including the unexpected cost overruns, from the total 
sales price to determine CEP, thereby resulting in a very high dumping 
margin for this sale. MRD points out that the Department has the 
authority to exclude unusual sales, such as Charlotte, from its 
analysis if inclusion of those sales would distort the results. 
Alternatively, if the Department does not exclude the sale to 
Charlotte, it should calculate CEP for that sale under the ``Special 
Rule'' of section 772(e) of the Act which provides that the Department 
may employ alternative methods to determine CEP when the U.S. value 
added exceeds the value of the imported merchandise. MRD asserts 
further that the first two alternative methodologies described in 
section 772(e) would be difficult to apply to the Charlotte sale 
because there were no sales of identical or other merchandise that 
could be compared to the NV for the Charlotte sale. Therefore, MRD 
maintains the Department should use ``another reasonable method'' 
permitted under the ``Special Rule'' of section 772(e) of the Act. At a 
minimum, MRD argues that the Department should assign a substantial 
portion of the loss on the sale to the U.S. operations that caused it.
    Furthermore, MRD argues that the sales to Fargo and Global should 
also be excluded because they do not consist of subject components and 
therefore fall outside the scope. Also, as explained in its various 
responses, both sales involved unusual circumstances. In general, the 
Fargo sale involved the sale of a discontinued printing unit produced 
partially in Germany and partially in the United States. The Global 
sale involved a combination of used equipment from MRU's inventory and 
a new printing unit which was produced partially in Germany and 
partially in the United States, and sold to a reseller which was 
responsible for its installation. Even if the Department were to 
conclude that the parts and subcomponents imported from Germany for 
these sales were within the scope, MRD urges the Department to exercise 
its discretion to exclude these sales from its analysis based on the 
fact that they are small and atypical.
    The petitioner states that the Department should include all three 
sales at issue in its analysis. With respect to Charlotte, the 
petitioner argues that the cost overruns as a result of 
``mismanagement'' experienced by the respondent on this sale are not a 
valid reason to exclude the sale or apply special methodology within 
the context of the antidumping statute or the Department's practice. 
According to the petitioner, if a cost overrun by itself required 
exclusion of a sale, the cost calculation would become unfairly skewed 
in favor of low-cost sales. The petitioner also disputes respondent's 
claim that Rockwell agreed to exclude this sale from the investigation, 
stating that only in the context of its proposal for a four-year POI 
did it think that the Department could forego analysis of this sale 
given its complexity and the reporting burden. However, in the two- 
year POI adopted by the Department,

[[Page 38181]]

the petitioner believes it is too significant to omit and the 
respondent has already met the burden of reporting the data for this 
sale.
    The petitioner argues that the Charlotte sale does not meet the 
criteria for exclusion of a U.S. sale from the dumping calculation 
because it is not ``atypical'' within the context of the LNPP industry 
or so small as to have an insignificant effect on the margin. In 
addition, the petitioner maintains that MRD's ``alternative methods'' 
approach is unsubstantiated. According to the petitioner, MRD's 
proposed alternative of attributing all or some of the loss on the 
Charlotte sale is unreasonable under section 772(e) of the Act which 
provides for the exclusion of losses in the adjustment for further 
manufacturing. Finally, the petitioner asserts that the merchandise 
sold to Charlotte is subject to the scope because it includes certain 
parts and subcomponents which are explicitly covered by the scope.
    With respect to Fargo and Global, the petitioner contends that 
these sales also constitute subject merchandise and were not 
``atypical.'' The petitioner claims that the imported merchandise for 
both transactions contained all of the relevant mechanical parts of one 
of the five LNPP components which would have included certain parts 
explicitly specified in the scope. The petitioner also maintains that 
the fact that these sales involved discontinued equipment or were small 
in terms of value does not make them ``atypical,'' given the limited 
number and uniqueness of each of the U.S. sales under investigation, 
and the nature of the LNPP industry where technological advances which 
result in the discontinuation of previous product lines are common.
    DOC Position: We agree generally with the respondent with respect 
to the Charlotte sale, and with the petitioner with respect to the 
Fargo and Global sales. The Charlotte sale involved the importation 
from Germany of less than complete components destined to fulfill a 
contract for a LNPP system in the United States. Both the Fargo and 
Global sales involved the importation from Germany of less than 
complete components for the fulfillment of a contract for LNPP 
additions. As stated in the ``Scope of Investigation'' section of this 
notice, we have determined that elements (i.e., parts and 
subcomponents) imported to fulfill a LNPP contract shall be included in 
the scope of the investigation if the sum of their cost of manufacture 
is at least 50 percent of the cost of manufacture of the finished LNPP 
component of which they are a part. In the case of Charlotte, our 
analysis of the sum of the manufacturing cost of the elements relative 
to the manufacturing cost of each of the components of which they are a 
part is less than 50 percent. Because the imported elements do not meet 
the 50 percent threshold on a component-specific basis and, therefore, 
do not constitute subject merchandise, we excluded the Charlotte sale 
from our final analysis.
    Applying the above-specified value test to the imported elements 
relevant to the Fargo and Global sales yields the opposite result. That 
is, the cost of the imported elements is greater than 50 percent of the 
cost of the component of which they are a part. The Department may 
exclude U.S. sales from its analysis if these sales are: (1) Not 
representative of the seller's behavior, or (2) so small that they 
would have an insignificant impact in the margin. See IPSCO, Inc. v. 
United States (714 F. Supp. 1211, 1217 (CIT 1989). In the past, the 
Department excluded certain ``atypical'' or unrepresentative U.S. 
sales, where the total pool of U.S. sales was great. See SBTS, 54 FR 
53141, 53148 (December 27, 1989). In the case of LNPPs, however, where 
the sales are few and unique, such exclusion would not be appropriate. 
Given the limited number of U.S. sales in this investigation and the 
fact that the sales at issue fall within the scope of the 
investigation, we have no basis on which to exclude these sales from 
our final analysis. Therefore, we included the sales to Fargo and 
Global in our final analysis.
    Comment 3  Post-Petition Price Amendments: The petitioner contends 
that the Department should disregard all post-petition price amendments 
and use instead the contract price as of the date of the filing of the 
petition as the starting price. The petitioner asserts that such 
amendments applied to the Rochester, Wilkes-Barre and Charlotte sales. 
Citing the Final Determination of Sales at Less Than Fair Value: Cell 
Site Transceivers from Japan, 49 FR 43080, 43084 (October 26, 1984) 
(``Cell Site Transceivers''), among other cases, the petitioner states 
that the Department's practice calls for the rejection of alterations 
in the prices of subject merchandise after the filing of a petition in 
order to prevent manipulation of potential dumping margins. According 
to the petitioner, that rationale is applicable in this investigation, 
where MRD had every reason to negotiate a new price that would reduce 
the dumping margin. With respect to Rochester in particular, the 
petitioner finds suspect the significant profit gained by MRD in the 
amended portion of the transaction. Moreover, the number of reported 
amendments indicates that even the latest reported price adjustments 
might not be the last. Therefore, the petitioner asserts that the 
Department should rely on the sales prices in effect on the date of the 
filing of the petition and disregard the effects of any post-POI 
amendments on prices and cost.
    MRD disagrees. First, it argues that it is common for 
specifications (and therefore price) for large capital equipment like 
LNPPs to be modified after the initial contract is signed, and the 
Department has recognized this in past cases. According to the 
respondent, such changes are not unusual and do not support the 
conclusion that the seller has manipulated its prices to avoid dumping. 
Second, with respect to the Rochester price amendment, the Department 
reviewed the correspondence which showed the amendment had been 
contemplated before the petition filing. Third, MRD finds the 
petitioner's analysis of its interests to be questionable, as it is 
always in MRD's interests to negotiate the highest possible price for 
its sales notwithstanding the filing of the antidumping case.
    DOC Position: We agree with the petitioner. In past cases, the 
Department has stated that its standard practice is not to accept price 
adjustments instituted after the filing of a petition. Despite the 
nature of the merchandise under investigation, we have held that we are 
cautious in accepting price increases which occur after receipt of a 
petition so as to discourage potential manipulation of potential 
dumping margins, and have determined the original contract price which 
pre-dated the filing of the petition as the proper basis for U.S. 
price. The transactions and prices under investigation are those in 
effect as of the filing of the petition. See Cell Site Transceivers; 
Final Determination 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 Canada, 58 FR 37099, 
37112 (July 9, 1993); Final Results of Administrative Review: Stainless 
Steel Wire Rod from France, 50 FR 9813, 9814 (March 12, 1995); and 
Final Results of Administrative Review: 64K Dynamic Random Access 
Memory Components from Japan, 51 FR 15943, 15953 (April 29, 1996). 
Similarly, at the preliminary determination in this investigation, we 
stated with respect to the Rochester price amendment that while we did 
not believe that the contract amendment per se altered the date of sale 
(given the industry involved

[[Page 38182]]

and the nature of the construction process for these large, customized 
machines under investigation, where minor specification changes are 
routine), we were ``troubled by the fact that the sale price was 
modified officially after the filing of the petition in this 
investigation, and that the potential for the respondent to influence 
purposely the margin calculation may exist.'' See February 23, 1996, 
Memorandum to Richard W. Moreland from The Team Re: Sales Exclusion 
Issues at 8.
    Therefore, based on the foregoing analysis, we have not considered 
any of the post-POI price amendments relevant to MRD's U.S. sales in 
our final analysis. In addition, we note that the petitioner's 
assertion that post-POI price amendments applied to three of MRD's 
sales is incorrect. While we verified that post-POI price amendments 
applied to MRD's Rochester and Wilkes Barre sales, we did not observe 
any such price amendment to apply to the Charlotte sale, as suggested 
by the petitioner. Notwithstanding this fact, the issue is moot with 
respect to the Charlotte sale given that we have excluded it from our 
final analysis. See DOC Position to Comment 2 of the ``Company-Specific 
Issues'' subsection of the ``Interested Party Comments'' section of 
this notice.
    We also note that our final calculation of CEP for the Rochester 
and Wilkes Barre sales, exclusive of post-POI price amendments, is 
consistent with our calculation of CV for these sales which is based on 
the respondent's submitted cost estimates and does not include the 
costs associated with the post-POI price amendments. See DOC Position 
to Comment 9 of the ``Company-Specific Issues'' subsection of the 
``Interested Party Comments'' section of this notice.
    Comment 4  Date of Sale: MRD maintains that the Department should 
use the letter of intent as the date of sale for its U.S. sales, as 
this document is the first written evidence that an agreement has been 
reached on the basic terms of those sales. Citing LPTs (48 FR 26498, 
26499, June 8, 1993) and MTPs (55 FR 335, 341, January 4, 1990), MRD 
asserts that the Department has consistently used the date of earliest 
written evidence of agreement as the date of sale in cases involving 
large made-to-order products and has consistently held that minor 
changes in technical specifications after the date of initial agreement 
do not alter the date of sale. MRD states that the basic terms in the 
final contracts were identical in all material respects to the terms 
outlined in the letters of intent, as supplemented by the additional 
terms set forth in the final proposals referenced in the letters of 
intent. In addition, the fact that MRD begins production after the 
signing of the letter of intent provides further justification for 
treating the letter of intent date as the sale date. According to MRD, 
general contract law (Section 2-201(3)(a) of the Uniform Commercial 
Code) provides that a valid contract exists when the seller starts 
production for custom order goods that are not suitable for sale to 
others in the ordinary course of trade. MRD argues further that the 
cancellation clauses in the letters of intent for Rochester and Wilkes 
Barre should not affect the date of sale analysis because the fact 
remains that at the time of the letter of intent, the parties had 
reached agreement on all of the basic terms of the sale.
    The petitioner argues that in accordance with the Department's 
long-standing practice, the appropriate date of sale in this 
investigation is the date of contract. According to the petitioner, the 
essential terms of sale in the LNPP industry (i.e., specifications, 
price, payment schedules, warranty terms and installation requirements) 
are established by the final contract, and not the letter of intent. 
The petitioner states that the Department verified that MRD's letters 
of intent for selected U.S. sales did not definitively establish the 
material terms of sale. Finally, the petitioner asserts that in the 
cases cited by the respondent to support its argument that the 
Department's precedent establishes the date of sale earlier in the 
transaction involving large customized equipment, the date of sale 
adopted was the contract date or, in the absence of a formal written 
confirmation of sale, the initial order date. In this case, the 
petitioner points out that the letters of intent required a formal 
written confirmation of sale.
    DOC Position: We agree with the petitioner. The Department has a 
longstanding practice, which bases the date of sale on the date when 
all the essential terms (usually price and quantity) are firmly 
established and no longer within the control of the parties to alter 
without penalty. See, e.g., Final Determination of Sales at Less Than 
Fair Value: Polyvinyl Alcohol from Taiwan, 61 FR 14064, 14067 (March 
29, 1996).
    In this case, we determined that the appropriate date of sale is 
the date of contract, and we solicited data from the respondent on this 
basis. As stated in MTPs, the Department's policy regarding the date of 
sale in the case of large, customized merchandise ``has favored 
establishing the date of sale at an earlier point in the sale 
transaction process than at a later point, as it might be the case of 
fungible-type commodities which are offered for sale in the ordinary 
course of trade.'' See MTPs at 341. The appropriate ``earlier point'' 
in the sale transaction for date of sale purposes is determined on a 
case-by-case basis. In this case, we determined that the earliest point 
in the sale transaction, where the essential terms of sale for the LNPP 
industry (i.e., specifications, price, payment schedules, warranty 
terms and installation requirements) would be established definitively, 
is the sale contract date, given the volume of sales correspondence 
generated in the sales process and the potential minor specification 
changes that may be made to the merchandise during the production 
process and after delivery. Furthermore, at verification, we observed 
that the terms of sale stipulated in the letters of intent did not 
definitively establish the material terms of sale, as they were subject 
to change and to a definitive agreement of sale (i.e., a sale 
contract). See MRD Sales Verification Report at 11-12.
    Therefore, for purposes of the final determination, we have 
determined the date of contract to be the appropriate date of sale. Our 
determination of the date of sale in this case is distinguishable from 
that in the case of MHI's Guard sale in the companion investigation of 
LNPPs from Japan. In MRD's case, the date of sale issue involves 
identifying the producer's earliest written documentation establishing 
the essential terms of sale, whereas in MHI's case the issue involves 
identifying the appropriate parties to the sale for date of sale 
purposes. See MHI Comment 4 in the Federal Register notice of LNPPs 
from Japan.
    Comment 5  U.S. Indirect Selling Expense Cap: The petitioner argues 
that the Department should not cap U.S. indirect selling expenses 
allocated to particular sales at the amount incurred during the POI 
because the allocation cap ignores the expenses incurred on sales of 
subject merchandise outside of the POI. According to the petitioner, 
the Department's allocation methodology employed in the preliminary 
determination rests on the assumption that POI sales could not have 
incurred selling expenses outside of the POI. But in cases such as the 
instant one, when sales efforts last for years and yield only a limited 
number of large sales at irregular intervals, it is logical to find 
that the amount spent to negotiate a given group of sales was greater 
than the total selling expenses incurred in the limited period in which 
the sales were made. Furthermore, the Department's cap is inconsistent 
with section

[[Page 38183]]

772(d)(1) of the Act which requires the deduction from CEP of any 
expenses generally incurred in selling the subject merchandise. 
According to the petitioner, whether the respondent incurred indirect 
selling expenses during the POI is irrelevant to this requirement. In 
addition, the Department's cap ignores the pattern of MRD's sales, 
where the POI sales are few but selling expenses are incurred on a 
regular basis before, during and after the POI to account for 
activities ranging from the development of bids to amendments to signed 
contracts. The petitioner argues further that the Department should 
reject MRD's proposals to cap U.S. indirect selling expenses up to the 
amount of total expenses incurred during the POI on newspaper sales, as 
this would amount to allocating POI indirect selling expenses over POI 
sales orders, which is contrary to the Department's normal calculation 
methodology.
    If the Department is concerned about the magnitude of the verified 
POI selling expenses and their potential overstatement relative to 
total POI sales, the petitioner suggests that the Department follow 
past practice and use verified data relevant to a three-year period. 
The petitioner asserts that the Department should not use the 
respondent's four-year data because, among other reasons, they were not 
reconciled to audited financial statements and included expenses 
incurred in 1991-1992 by a facility which is no longer in operation 
and, therefore, are unrepresentative of current experience.
    Furthermore, the petitioner argues that the Department should 
remove the data pertaining to Canadian transactions from the 
calculation of indirect selling expenses. According to the petitioner, 
section 772(d)(1) of the Act allows adjustments to CEP only to reflect 
costs of selling the subject merchandise. Since purchases by Canadian 
customers are not subject to this investigation, the petitioner 
maintains that they cannot be used in the allocation of indirect 
selling expenses. Furthermore, MRD provided no information illustrating 
that the selling expenses incurred on Canadian sales are representative 
of those incurred on U.S. sales.
    MRD maintains that the Department should allocate U.S. indirect 
selling expenses incurred during the POI over the value of orders 
received during that period, which would avoid the need to apply a 
``cap'' on such expenses as was done in the preliminary determination. 
Alternatively, the Department should revise the ``cap'' on U.S. 
indirect selling expenses to avoid assigning the selling expenses for 
commercial presses to newspaper presses.
    Furthermore, MRD finds the petitioner's proposals unacceptable. The 
respondent believes the petitioner's arguments are based on the 
incorrect assumption that indirect selling expenses can be matched to 
specific sales. To the contrary, MRD explains indirect selling expenses 
are fixed expenses that do not vary with sales, and thus they should be 
allocated over the value of orders received during the POI. MRD reasons 
that in this case, because the Department is applying the indirect 
selling expense rate to sales made during the POI (i.e., sales for 
which orders were received during the POI), it must calculate the rate 
on the basis of the total value of orders received. MRD attempts to 
refute the petitioner's assertions that a particular period or 
calculation would capture the expenses that properly relate to the 
sales under investigation, stating that the expenses can only relate 
generally to all of MRD's sales efforts. With respect to the three-year 
analysis advanced by the petitioner, MRD states that in the petition, 
Rockwell argued for a four-year POI because the three-year period from 
July 1992 to June 1995 was a period of sales depression that did not 
adequately capture the LNPP business cycle. If the Department were to 
accept the proposition that indirect selling expenses must be allocated 
over sales recognized for accounting purposes, then MRD maintains that 
it should use a period that encompasses the entire LNPP industry cycle, 
i.e., a four-year period.
    With respect to the petitioner's argument that the Department 
should remove the Canadian sales data from the calculation, MRD 
disagrees. It explains that MRU sales personnel who are responsible for 
sales in the United States are also responsible for sales in Canada and 
Latin America, and that the expenses for these salesmen cannot be tied 
to specific sales or markets. Accordingly, the only possible allocation 
method is to divide the total expenses of MRU's sales personnel by the 
total value of the sales generated by those personnel.
    DOC Position: We agree in part with both the petitioner and MRD. 
The Department normally calculates indirect selling expenses as a 
percentage of POI cost of goods sold or POI sales revenue recognized. 
See Final Determination of Sales at Less Than Fair Value: Certain 
Corrosion-Resistant Carbon Steel Flat Products and Certain Cut-to-
Length Carbon Steel Plate from Mexico, 58 FR 37192, 37198 (July 9, 
1993). In this case, the respondent has argued since the preliminary 
determination that the Department should calculate the POI selling 
expense rate based on sales orders, rather than sales recognized, so as 
not to overstate selling expenses on POI sales in years where sales 
revenue recognized is unusually low relative to actual selling expenses 
incurred. Conversely, the petitioner has maintained that such a 
calculation would grossly understate expenses for POI sales because it 
would disregard the substantial expenses incurred before and after the 
investigation period for POI sales.
    In the preliminary determination, because application of the POI 
indirect selling expense rate reported by MRD to U.S. sales prices 
resulted in transaction-specific selling expenses which exceeded the 
total indirect selling expenses incurred by MRU during the POI, we 
capped the amount of indirect selling expenses deducted from CEP by the 
total indirect selling expenses actually incurred by MRU during the 
POI. While this is not our normal practice, we applied a ``cap'' on 
U.S. indirect selling expenses in the preliminary determination because 
the figures reported by the respondent appeared inaccurate and we did 
not have sufficient information to make any other adjustment. The 
petitioner claims that this ``cap'' ignores the fact that, in cases 
such as LNPPs when sales efforts last for years and yield only large 
sales at irregular intervals, the amount spent to negotiate a given 
group of sales may be greater than the total selling expenses incurred 
in the limited period in which the sales were made. Likewise, we note 
that significant sales efforts may be made and significant selling 
expenses may be incurred in a given period in the pursuit of a given 
sale without resulting in the consummation of that sale. Contrary to 
the petitioner's claim, indirect selling expenses are period expenses 
which cannot be associated directly with specific sales and, therefore, 
no direct correlation is possible despite the particular period chosen 
for analysis.
    Since our preliminary determination, we verified that the actual 
POI indirect selling expense rate was significantly lower than that 
reported by the respondent, as a result of the correction of clerical 
errors. See MRU Sales Verification Report at 22-24. Our analysis of the 
verified actual indirect selling expenses incurred relative to the 
verified sales revenue recognized for the two fiscal years captured by 
the POI does not indicate that application of the verified POI rate 
would distort the calculation of CEP. Consequently, we see no need to 
cap these expenses for

[[Page 38184]]

purposes of the final determination. Therefore, we have applied the 
verified indirect selling expense percentage to U.S. sales contract 
prices (exclusive of post-POI price amendments) and have deducted the 
resulting expense amounts from CEP. Given the nature of these expenses, 
it is not possible to segregate the selling expenses that relate to 
foreign sales from those that relate to U.S. sales. Therefore, we did 
not remove the data pertaining to these sales from our calculation of 
the indirect selling expense rate, as suggested by the petitioner.
    Comment 6  General Methodology for Calculating U.S. Warranty 
Expenses: The petitioner maintains that the two U.S. warranty expense 
calculations provided by MRD in its questionnaire responses are flawed. 
The first one (contained in Appendix SC-21-A of the February 1, 1996 
submission), which the Department used in its preliminary 
determination, improperly included foreign sales data; and the second 
one (contained in Appendix 9 of the March 13, 1996 submission), which 
was examined by the Department at verification, improperly allocated 
four years of warranty expenses over more than seven years of sales, 
thereby understating U.S. warranty costs. The petitioner contends that 
the Department should recalculate the MRU warranty expense rate to be 
applied to CEP based on historical data for a four-year period 
exclusive of data pertaining to foreign sales and inclusive of sales 
revenues realized only during the period to which the warranty costs 
pertain. The petitioner explains that past Department decisions 
recognize that, especially on sales of large capital equipment such as 
LNPPs, the warranty expense calculation must estimate future expenses 
based on historical costs, rather than capture current warranty costs, 
for U.S. sales, because the long time for production and installation 
may lead to warranty expenses incurred long after the review period.
    The petitioner maintains further that the inclusion of sales to 
foreign customers (i.e., sales to Canadian customers) in the warranty 
expense rate calculation employed in the preliminary determination is 
improper. According to the petitioner, section 772(d)(1) of the Act 
allows adjustments to CEP only to reflect costs of selling the subject 
merchandise in the United States. Since purchases by Canadian customers 
are not subject to investigation, the petitioner maintains that they 
cannot be used in the calculation of warranty expenses. Moreover, MRD 
provided no evidence that the warranty expenses incurred on Canadian 
sales are representative of those incurred on U.S. sales.
    The petitioner explains further that, at verification, the 
Department examined a warranty calculation provided by the respondent 
(in Appendix 9 of the March 13, 1996 submission) that properly 
segregated U.S. and foreign sales. However, that calculation allocated 
four years of warranty expenses over contract values that spanned a 
period of more than seven years, which in the petitioner's opinion 
results in an understatement of the actual cost. Therefore, the 
petitioner suggests that the Department subtract from that warranty 
expense calculation both Canadian sales, and sales revenues realized 
for the period prior to that for which warranty expenses were reported. 
The petitioner argues that, unlike MRD's proposed calculations, its 
proposed calculation is consistent with historical experience.
    MRD argues that petitioner's proposition would result in a 
mismatching of warranty costs and sales, and would massively overstate 
the actual warranty expenses MRU will incur on sales during the POI. 
According to MRD, the purpose of the warranty calculation is to 
determine a reasonable estimate, based on an analysis of historical 
data, of the warranty costs that will be incurred in the future on the 
sales under investigation. As such, the petitioner's proposed 
calculations do not meet that purpose. With respect to the initial 
warranty expense calculation it reported based on historical 
experience, MRD contends that the removal of Canadian sales, as 
requested by the petitioner, would seriously distort the warranty 
calculations by leaving an unrepresentative sample that would not be 
sufficient to determine the historical ratio of warranty expenses to 
sales. MRD points out that in its March 13, 1996 submission, it 
provided a detailed analysis that shows the actual warranty expenses 
incurred on sales during the last four years. Based on this review of 
MRU's actual warranty expense experience on sales for which complete 
warranty expense information is available, the respondent argues that 
the U.S. warranty rate resulting from its initial calculation (February 
1, 1996 submission) reasonably reflects MRU's actual experience on 
sales for which the warranty period has been completed. This analysis 
also demonstrates that petitioner's proposed calculation grossly 
overestimates MRU's actual warranty experience. MRD notes that 
throughout this proceeding the petitioner has insisted that, before 
estimates can be used in this case, they must be supported by 
``benchmarks'' based on the actual costs for actual transactions. The 
respondent asserts that the petitioner's proposed calculation fails 
that test and accordingly must be rejected.
    In addition, MRD argues that the Department should revise its U.S. 
warranty calculation with respect to the Rochester, Wilkes-Barre and 
Fargo sales, so as to avoid double counting. MRD asserts that the 
warranty calculation methodology employed in the preliminary 
determination for Rochester and Wilkes-Barre was incorrect and 
unreasonable because it assumed that warranty services would be 
performed more than once, i.e., full warranty expenses were attributed 
to both MRD and MRU. According to MRD, whatever warranty services are 
needed for these presses will be performed only once--either by MRD, by 
MRU or a combination thereof. Therefore, the Department should either 
(1) apply only the MRD warranty expense rate to these sales; (2) apply 
only the MRU warranty expense rate to these sales; or (3) apply an 
average of the MRD and MRU rates to these sales. With respect to Fargo, 
MRD argues that the Department's preliminary calculations double-
counted warranty expenses by adding the actual warranty expenses 
already incurred with the total expected warranty expenses. To estimate 
expected warranty expenses, MRD states that one should use either the 
actual warranty expenses to date (plus an estimate of the remaining 
warranty expenses that are expected) or the estimated total warranty 
expenses based on the value of the product.
    DOC Position: We agree with both the petitioner and respondent, in 
part. The Department's normal practice in computing warranty expenses 
is to use historical data over a four- or five-year period preceding 
the filing of the petition to estimate the likely warranty expenses on 
POI sales. The underlying rationale for this practice is the 
recognition that, in many industries, warranty costs on sales made 
during the POI might not occur until long after the POI and, 
consequently, POI sales cannot be tied to their associated actual 
warranty expenses for reporting purposes. See Final Determination of 
Sales at Less Than Fair Value: Bicycles from the People's Republic of 
China, 61 FR 19026, 19041 (April 30, 1996); Final Determination of 
Sales at Less Than Fair Value: Certain Carbon and Alloy Steel Wire Rod 
from Canada, 59 FR 18791, 18795 (April 20, 1994); and Final 
Determination of Sales at Less Than Fair Value: Coated Groundwood Paper 
from Finland, 56 FR 56363, 56379

[[Page 38185]]

(November 4, 1991). Historical costs are especially appropriate in the 
case of LNPPs because the long time for production and installation of 
the subject merchandise may lead to warranty expenses being incurred 
long after the POI. See Final Results of Administrative Review: 
Mechanical Transfer Presses from Japan, 57 FR 12798, 12799 (April 13, 
1992).
    Therefore, for purposes of the final determination, we have used 
the warranty expense rate reported by the respondent in its February 1, 
1996 submission, revised to reflect the correction of certain clerical 
errors found at verification. We have applied this rate to the contract 
price of those U.S. POI sales for which MRU is primarily responsible 
for providing warranty servicing, and then deducted the resulting 
amount from CEP.
    As for the petitioner's requested removal from the calculation of 
the data pertaining to non-subject sales, we agree in principle. While 
we have the information to segregate the warranty costs that relate to 
these sales from those that relate to U.S. sales in the calculation, we 
do not have sufficient information to segregate the corresponding sales 
values from the calculation for two out of the four fiscal years 
included in the calculation. Therefore, given this problem and the fact 
that the warranty expense rate inclusive of the foreign sales 
reasonably reflects MRU's actual experience on sales whose warranty 
period has been completed, we have not made the adjustment proposed by 
the petitioner.
    With respect to the respondent's argument that the Department 
should revise its warranty expense calculation regarding Rochester, 
Wilkes-Barre and Fargo, we agree. In this case, both MRD and MRU 
provide warranty services. However, whether or not they incur warranty 
costs on a particular sale depends on their role in the production of 
the merchandise covered by the sale. In the preliminary determination, 
we incorrectly deducted from the CEP of the Rochester and Wilkes Barre 
sales warranty expenses reflecting the historical experience of MRU in 
addition to that of MRD, based on the assumption that both companies 
would be playing a role in warranty servicing. Since that time, 
however, we verified that MRD will be primarily responsible for the 
warranty servicing on these LNPP systems, given that they were almost 
entirely produced in Germany by MRD. See MRD Sales Verification Report 
at 28. Therefore, for the Rochester and Wilkes Barre sales, we have 
applied the verified warranty expense rate relevant to MRD's historical 
experience in Germany for all LNPP products. With respect to the Fargo 
and Global sales, MRD reported and the Department verified that MRU is 
primarily responsible for the servicing of any warranty claims on these 
sales. Therefore, for these sales it is more appropriate to use a 
warranty expense rate based on the historical experience of MRU as 
described above. Because we have excluded the Charlotte sale from our 
analysis for the reasons stated in the DOC Position to Comment 2 of the 
``Company-Specific Issues'' subsection of this notice, the issue is 
moot with respect to this sale.
    Comment 7  Global Sale: MRD asserts that, if the Department 
includes the sale to Global in its analysis, it should analyze the 
total sale, including the used merchandise that was an integral part of 
the sale. The respondent asserts that this sale was unusual in that it 
involved both new and used equipment that was purchased by a reseller 
in the United States for ultimate sale to the end user. MRD argues that 
the new and used equipment was sold as a package and the customer did 
not have the option of buying only the used equipment or the new 
equipment at the respective price stipulated in the sales contract. MRD 
submits that in past cases, the Department has ruled that, where the 
contract sets a separate price for non-integral, non-subject equipment, 
it will rely on the contract price to determine the value to be 
assigned to that equipment. However, with respect to the Global sale, 
MRD argues that the used equipment in that sale was clearly integral to 
the sale. As such, the Department should make an adjustment for that 
used equipment based on its cost, and should allocate to it a portion 
of the total profit or loss on the sale.
    The petitioner contends that MRD's failure to provide adequate 
information on the cost of the used equipment requires the exclusion of 
the used equipment from the Department's final calculations on the 
basis of the contract price. The petitioner asserts that the cost of 
this equipment reflected the inventory value which was, in turn, based 
on the acquisition price plus shipping costs less salvage value. This 
does not yield the market value which, according to the petitioner, is 
the correct measure of whether MRU received a reasonable profit on the 
used merchandise. The petitioner also claims that MRD did not present 
information at verification to allow the Department to confirm the 
reported cost.
    DOC Position: We disagree with the respondent. For the reasons 
outlined in DOC Position to Comment 2 of the ``Company-Specific 
Issues'' subsection of this notice, we have not excluded the Global 
sale from our final analysis. The Global sale involved the sale of both 
a used press and new equipment. Used presses are expressly excluded 
from the scope of our investigation. See ``Scope of Investigation'' 
section of this notice. We also note that the value of the used 
equipment was identified separately in the contractual documentation 
governing the sale. Given these facts, we have no basis upon which to 
include the used equipment portion of the sale in our final analysis as 
an integral part of the sale. As a result, we deducted from the 
calculation of CEP the contract price relevant to the used equipment. 
This is consistent with our treatment with respect to spare and 
replacement parts, which are also expressly excluded from the scope and 
therefore excluded from our analysis, where their value is separately 
outlined in the contractual documentation.
    Comment 8  Spare Parts: MRD requests that the Department adjust its 
calculations to avoid double-counting of the cost of spare parts. MRD 
assert that if the spare parts price is deducted from the U.S. price, 
then the cost of the spare parts should be excluded from CV. On the 
other hand, if the spare parts cost is included in the CV then the 
spare parts price should not be deducted from U.S. price.
    DOC Position: We agree. Consistent with our preliminary 
determination, where the value of the spare parts was separately 
identified in the contractual documentation governing the U.S. sale, we 
deducted the spare parts value from the contract price in the 
calculation of CEP. In this case, we also excluded the cost of the 
spare parts from the CV.
    Comment 9  Costs for Rochester and Wilkes-Barre Sales: MRD argues 
that the Department should calculate CV for the Rochester and Wilkes-
Barre sales based on costs calculated in accordance with the company's 
project-specific work plan. MRD contends that these costs are accurate 
and reliable, and that they are based on a system used by the company 
in its normal course of business. MRD states that it calculated the 
cost of each project-specific work plan based on a project-specific 
bill of materials and production instructions prepared before the 
initiation of this investigation.
    MRD further asserts that it did not mislead the Department 
regarding the availability of actual cost data for completed press 
components. MRD states that it was able to compare project-specific 
work plan costs to the actual costs recorded in its cost accounting 
system for certain home market sales. MRD also notes that for Rochester 
and a few home market sales,

[[Page 38186]]

it was able to compare the project-specific work plan costs for 
individual parts to the actual costs recorded in its normal accounting 
system for the same parts.
    MRD maintains that if the Department chooses to reject the costs 
calculated from the project-specific work plan for Rochester and 
Wilkes-Barre, it should rely on the cost estimates submitted by MRD as 
facts available rather than on the antidumping rate from the petition. 
According to MRD, the cost estimating system calculates costs based on 
an analysis of actual experience for previous projects of the same 
press model. MRD argues that the petition rate does not contain MRD's 
actual historical experience regarding materials, labor and production 
operations which was considered in developing the submitted cost 
estimates for the Rochester and Wilkes-Barre sales.
    The petitioner maintains that the Department should reject the cost 
figures reported for the Rochester and Wilkes-Barre sales because the 
basis for these costs deviates from MRD's normal accounting practices 
and the reported amounts were derived after initiation of the 
investigation. The petitioner notes that verification revealed that MRD 
created the project-specific standard work plan costs for these sales 
solely for the purpose of responding to the Department's antidumping 
questionnaire. Thus, according to the petitioner, the cost reporting 
methodology employed by the respondent for the Rochester and Wilkes-
Barre sales presents significant potential for manipulation. Even if 
MRD could not manipulate the actual parts listed in the work plan, the 
petitioner asserts that it is certainly possible for MRD to have 
manipulated the cost of those parts.
    The petitioner contends that MRD misled the Department about its 
method of calculating production costs for these unfinished sales. 
According to the petitioner, in making its decision whether to review 
the Rochester and Wilkes-Barre sales as part of our investigation, the 
Department relied on MRD's claims that, as part of verification, 
project-specific standard costs could be compared to actual costs 
incurred to date on a component-by-component basis. The petitioner 
notes, however, that MRD was unable to identify which components had 
been completed and could not reconcile costs actually incurred to the 
project-specific work plan costs. In addition, during verification, the 
Department found that the projects were not completed to the extent 
claimed by MRD. The petitioner also disagrees with MRD's 
characterization of its project-specific work plan standard costing 
system as the type of system routinely accepted by the Department in 
past cases. The petitioner asserts that the Department only accepts 
such systems when an adjustment can be made to convert standard costs 
to actual costs. According to the petitioner, MRD's methodology does 
not allow any such adjustment.
    For these reasons, the petitioner urges the Department to rely on 
facts available or exclude these sales altogether from its final 
analysis. As facts available, the petitioner suggests using the CV 
information in the petition which it argues contains the most probative 
facts on the record.
    DOC Position: We agree with the petitioner that we cannot rely on 
MRD's projected costs calculated from its project-specific work plans 
as the basis for CV in our final determination. The Department normally 
requires respondents to report the actual cost of producing the subject 
product. Since the Rochester and Wilkes-Barre sales were not completed 
as of the date we issued the Section D questionnaire, MRD could not 
provide the actual cost of production. However, for these two sales, 
the respondent urged the Department to rely on its projected cost of 
production, which we normally do not accept, because there were so few 
sales and there was concern as to whether we would have any sales to 
investigate. MRD stated that its projected costs would be derived from 
the company's ``standard costing performed in the normal course of 
business,'' that substantial actual costs would be incurred by 
verification, and that such actual costs could be reconciled to the 
costs of each project-specific work plan. Because MRD urged the 
Department to depart from its normal method of accepting only actual 
costs rather than projected costs, it was MRD's responsibility to 
provide the data necessary to justify the accuracy and reliability of 
its projected cost methodology.
    As part of its CV submissions to the Department, MRD explained its 
reporting methodology for the Rochester and Wilkes-Barre sales. 
Specifically, MRD claimed that: ``For those products for which 
production is not yet complete but for which detailed work-plans are 
available (such as Rochester and Wilkes-Barre), the actual costs have 
been used to determine the cost of manufacture to date, and the 
standard costs calculated from the project-specific work-plans have 
been used to determine the cost remaining for the project.'' See MRD's 
December 13, 1995 Section D response at 41. At verification, however, 
we learned that instead of including actual costs incurred to date for 
each project, MRD's submitted costs for the Rochester and Wilkes-Barre 
sales were based entirely on the total standard costs calculated from 
the project-specific work plans. Moreover, MRD's project-specific 
standard costing system, which was the basis for its submitted costs, 
could not be reconciled to MRD's audited financial statements. Absent 
the control of the respondent's normal audited accounting system, we 
are unable to determine whether MRD's projected cost data for the 
Rochester and Wilkes-Barre sales is reliable and accurate.
    In addition to the difficulties noted above in reconciling MRD's 
project-specific standard work plan costs for the Rochester and Wilkes-
Barre sales, we also found that the submitted costs for these projects 
had been derived after the initiation of this antidumping investigation 
and calculated specifically for the submission. MRD itself noted in its 
case brief that the company calculated the detailed standard costing of 
Rochester and Wilkes-Barre project-specific work plans after initiation 
of this antidumping investigation. See June 13, 1996 Revised Case Brief 
at 62. During verification, MRD officials also indicated that these 
same cost calculations had been prepared solely for the purpose of 
providing CV information in this case.
    For these reasons, we have rejected MRD's cost projections for the 
Rochester and Wilkes-Barre sales in our final determination, and have 
relied on facts available to compute the cost of these sales. As facts 
available, we used MRD's submitted cost estimates for each of the two 
sales. We adjusted the estimated cost for a cost variance amount which 
we calculated as the difference between estimated and actual costs for 
sales of the same press model produced and completed during the POI.
    We determined that the cost estimates could be relied upon for 
several reasons. First, unlike the project-specific standard work plan 
costs submitted by MRD for the Rochester and Wilkes-Barre sales, MRD 
prepares a cost estimate for every press in the normal course of 
business. Second, MRD completed the cost estimates for Rochester and 
Wilkes-Barre prior to the initiation of this case. Third, MRD relied on 
its actual production experience for the same model presses 
(``Geoman'') to develop cost estimates for similar Geoman presses 
included in the Rochester and Wilkes-Barre contracts. Lastly, MRD 
provided estimated and actual cost data for the Geoman sales completed 
during the POI, thus enabling us to adjust

[[Page 38187]]

estimated costs for the Rochester and Wilkes-Barre sales based on MRD's 
past experience with the same press model.
    Comment 10  Variances: MRD argues that the Department incorrectly 
used fiscal 1995 overhead variance rates to adjust overhead costs for 
the 1996 fiscal year. MRD contends that the Department should rely on 
the company's reported variance figures which were based on actual 
partial-year variance rates for the first six months of fiscal 1996 and 
full-year budgeted variance rates for the remainder of that year. MRD 
maintains that its use of a budgeted variance for fiscal year 1996 was 
actually conservative considering that the actual variance for the 
first half of that year was more favorable than the budgeted amount. 
Lastly, MRD argues that the Department cannot possibly apply the prior 
year's variance to the current period's costs as it did in the 
preliminary determination because the variance for each period reflects 
the utilization for that specific period.
    The petitioner argues that the Department should continue to adjust 
MRD's costs to reflect the full year's actual variance for fiscal 1995. 
The petitioner asserts that MRD's budgeted variances do not accurately 
predict full-year results and rely on potentially unrealistic capacity 
utilization statistics. According to the petitioner, MRD's comparison 
of budgeted and actual variances do not confirm the reasonableness of 
either the actual or budgeted variances reported. Moreover, the 
petitioner maintains that the part-year variances may exclude year-end 
adjustments reflected in the annual budgeted variance calculation. The 
petitioner concludes that prior year's actual experience provides a 
more accurate projection of fiscal 1996 actual costs given the 
uncertainty about the conflicting plant capacity and utilization rates 
on the record.
    DOC Position: We agree with the petitioner that MRD's budgeted 
variances do not accurately predict full-year operating results and 
rely on unrealistic capacity utilization levels. In addition, year-end 
adjustments or one-time annual costs may not be reflected in the part-
year actual variance. Therefore, we rejected MRD's reported part-year 
actual variance and budgeted fiscal year variance calculation for 
fiscal 1996. As an alternative, we relied on the prior fiscal year 
actual variance which is consistent with the methodology applied in our 
the preliminary determination.
    Comment 11  Imputed Credit: MRD contends that the Department's 
normal practice is to include only differences in selling expenses in 
the circumstance of sale adjustment. Therefore, MRD argues that the 
imputed cost of financing production should be excluded from the 
circumstance of sale credit calculation because the differences in the 
timing of production costs do not affect price comparability. 
Additionally, MRD asserts that negotiated payment terms are not 
affected by the lengthy production period for LNPPs. By linking the 
payment terms to the production cost schedules, as was done in the 
preliminary determination, the Department contradicts the basic 
principle that money is fungible. Thus, MRD argues that progress 
payments and production costs should not be matched on a customer-
specific basis. Also, MRD maintains that imputed interest expenses 
should not be calculated for SG&A expenses. Moreover, the Department 
should only apply this circumstance of sale adjustment to NV if the 
normal imputed credit is included in the CV calculation.
    The petitioner asserts that the Department correctly made a 
circumstance of sale adjustment for imputed credit expense by including 
both production costs and progress payments in the calculation. In 
addition, the petitioner argues that SG&A should be included in the 
imputed credit expense calculation because these costs are part of the 
total production costs compared to the total price of each press (i.e., 
total production plus profit). Furthermore, the petitioner agrees with 
MRD that the Department should deduct home market imputed credit 
expenses as a circumstance of sale adjustment only if they include 
imputed credit in CV.
    DOC Position: We believe that it is appropriate in this instance to 
recognize the comprehensive financing arrangement for each sale as a 
circumstance of sale adjustment. LNPPs require substantial capital 
expenditures over an extended time period because of their size and 
lengthy production process (e.g., two to three years including the 
design phase). Moreover, the projects generally call for the purchaser 
to provide scheduled progress payments before completion of a project. 
Our normal imputed credit calculation (i.e., cost of financing 
receivables between shipment dates and payment dates) does not measure 
the effect of progress payments made relative to production costs 
incurred. To adjust sales prices for the effect of the respondent 
incurring significant capital outlays at the beginning of a project 
(back loaded payments) or receiving large sums of money up front (front 
loaded payments), we calculated imputed credit for each home market and 
U.S. sale by recognizing both financing costs incurred and payments 
received.
    We agree with the petitioner that SG&A should be included as 
production costs for calculating the imputed credit expense because the 
total contract price for each press (sum of payments) reflects the 
total production costs plus profit. We disagree with the petitioner, 
however, with regard to the issue of including imputed credit expense 
in CV. Section 773(e)(2)(A) of the Act, requires that the Department 
include in CV the actual amount of SG&A, including net interest 
expense, incurred by the exporter or producer. We agree with the 
respondent's position that imputed credit is not an actual expense. 
Therefore, we did not include imputed credit in the CV calculation for 
the final determination.
    Comment 12  Imputed Capitalized Interest Costs: MRD claims that the 
statute and German Generally Accepted Accounting Principles (GAAP) do 
not allow imputed capitalized interest expenses in the cost of 
manufacture. Therefore, the Department should include only the actual 
interest costs incurred rather than both actual financing and imputed 
capitalized interest expenses. MRD further argues that the Department's 
normal interest expense calculation already includes all the actual 
costs of financing production. MRD further argues that the interest 
cost capitalized should not exceed the total interest cost incurred by 
the company and the Department should make an appropriate offset to the 
interest costs included in general expenses.
    The petitioner contends that if the Department does not include the 
timing of production costs as a factor in its credit calculation, it 
should include capitalized interest expenses in CV to reflect MRD's 
financing of production incurred prior to payments received.
    DOC Position: Since we are calculating imputed interest as a 
circumstance of sale adjustment and not as a capitalized cost in the 
cost of manufacture, this issue is moot.
    Comment 13  Combining MAN Plamag and MRD Production Costs: In 
calculating cost of manufacturing, MRD argues that the Department 
should average the labor and overhead rates of both the MAN Plamag and 
MRD facilities because LNPPs are produced at both locations. Although 
MAN Plamag is a separate legal entity from MRD, MRD contends that MAN 
Plamag meets the five criteria for collapsing companies as used in Iron 
Construction Castings from Canada, 59 FR 25603-04 (May 17, 1994). 
Moreover, MRD maintains that the Department's policy

[[Page 38188]]

is to average costs where management has the capability to shift 
production between multiple facilities. Therefore, the Department 
should include respondent's ``multiple facilities'' adjustment which 
modifies the single facility costs to reflect the average of the two 
facilities.
    The petitioner contends that, because the two facilities do not 
produce the same models, MRD has not met the criteria for cost 
averaging. Even if MRD had met the criteria for averaging costs, the 
petitioner argues that MRD's calculation is inconsistent with 
Department practice. MRD selectively averaged labor and overhead rates, 
but not SG&A expenses or research and development costs. The petitioner 
concludes that this selective form of weight averaging distorts costs 
and should be rejected.
    DOC Position: We agree with the petitioner that we should not 
average costs for MRD and MAD Plamag. MAN Plamag is a separate 
corporate entity from MRD. Specifically, MAN Plamag is an affiliated 
party to MRD (not a division or factory within MRD) which supplies MRD 
with one of the major production inputs (RTPs). In determining the cost 
of manufacturing, the Department evaluates whether affiliated party 
transactions for major inputs occur at prices that are arm's length in 
nature and above the supplier's cost of production. Contrary to MRD's 
assertion, the Department's normal practice is not to automatically 
collapse affiliated suppliers and the respondent company. In fact, the 
five criteria noted by MRD relate to collapsing companies for sales 
purposes rather than cost.
    Comment 14  Further Manufacturing G&A: The petitioner maintains 
that the Department should calculate an average further manufacturing 
G&A expense over a multiple-year period based on actual historical data 
that reasonably represents the costs incurred, and those yet to be 
incurred, by MRD from its LNPP operations. The petitioner also urges 
the Department to ensure that the denominator in its further 
manufacturing G&A expense rate is consistent with the allocation base 
of each individual transaction to which the rate is applied. Lastly, 
the petitioner contends that because MRD did not reconcile its 
submitted fiscal year 1992 and 1993 G&A expenses to its audited 
financial statements, the Department should reject the G&A expenses 
reported by MRD for those two years.
    MRD argues that the Department should allocate further 
manufacturing G&A expenses over the cost of sales orders during the POI 
rather than over the cost of sales actually recognized during that 
period. If the Department chooses to allocate G&A over sales 
recognized, then MRD asserts that the amount of G&A expenses should be 
capped. To calculate this cap, MRD contends that actual G&A expenses 
should be allocated between commercial and newspaper presses based on 
cost of goods sold during the POI.
    DOC Position: For the final determination, we computed MRD's 
further manufacturing G&A expense rate based on the ratio of the 
reported G&A expenses to cost of sales (less the cost of imported 
German parts recognized during the POI). Consistent with the 
petitioner's arguments, we applied this G&A expense rate to the U.S. 
further manufacturing costs of each press. G&A expenses are period 
costs which relate to activities of the company during the period in 
which they are incurred. Accordingly, we allocated G&A expenses over 
costs incurred during the POI rather than the hypothetical cost of 
orders received during the period. Based on our approach, we concluded 
capping of G&A was not necessary because the total G&A assigned to all 
U.S. sales does not exceed the total amount of G&A being allocated.
    Comment 15  Loss on Plant Closure and Disposal of Assets: MRD 
argues that the loss on the closure of the Middlesex and North 
Stonington facilities should be excluded from the cost calculation 
because these costs were extraordinary. In support of its position, MRD 
cites Certain Welded Stainless Steel Pipe from the Republic of Korea 
(57 FR 53693, 53704, November 12, 1992) in which the Department 
excluded the gain of the sale of a manufacturing plant because the 
transaction was considered extraordinary rather than a routine disposal 
of fixed assets.
    The petitioner maintains that the costs incurred for the Middlesex 
plant closure should be included in MRD's further manufacturing G&A 
expense calculation because this facility was the location of the 
newspaper press division.
    DOC Position: The plant closure costs at issue were incurred prior 
to the POI. Because we calculated G&A expenses based on POI data, this 
point is moot.

Continuation of Suspension of Liquidation

    In accordance with section 735(c)(1)(B) of the Act, we are 
directing the Customs Service to continue to suspend liquidation of all 
entries of LNPPs from Germany, as defined in the ``Scope of 
Investigation'' section of this notice, that are entered, or withdrawn 
from warehouse for consumption, on or after March 1, 1996, the date of 
publication of our preliminary determination in the Federal Register.
    Furthermore, we are also directing the U.S. Customs Service to 
continue to suspend liquidation of all entries of elements (parts or 
subcomponents) of components imported to fulfill a contract for a LNPP 
system, addition or component, from Germany, that are entered, or 
withdrawn from warehouse on or after March 1, 1996, with the exception 
of those entries of elements imported by MRU to fulfill the contract 
for the sale of a LNPP system to The Charlotte Observer (``Charlotte 
contract''). Such suspension of liquidation will remain in effect 
provided that the sum of such entries represent at least 50 percent of 
the value, measured in terms of the cost of manufacture, of the subject 
component of which they are part. This determination will be made by 
the Department only after all entries of the elements imported pursuant 
to a LNPP contract are made and the finished product pursuant to the 
LNPP contract is produced.
    For this determination, all foreign producers/exporters and U.S. 
importers in the LNPP industry be required to provide clearly the 
following information on the documentation accompanying each entry from 
Germany of elements pursuant to a LNPP contract: (1) The identification 
of each of the elements included in the entry, (2) a description of 
each of the elements, (3) the name of the LNPP component of which each 
of the elements are part, and (4) the LNPP contract number pursuant to 
which the elements are imported. The suspension of liquidation will 
remain in effect until such time as all of the requisite information is 
presented to U.S. Customs and the Department is able to make a 
determination as to whether the imported elements are at least 50 
percent of the cost of manufacture of the LNPP component of which they 
are part.
    With respect to entries of LNPP spare and replacement parts, and 
used presses, from Germany, which are expressly excluded from the scope 
of the investigation, we will instruct the Customs Service to continue 
not to suspend liquidation of these entries if they are separately 
identified and valued in the LNPP contract pursuant to which they are 
imported.
    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

[[Page 38189]]

shall continue to be required to provide certification that the 
imported merchandise would not be used to fulfill a LNPP contract. As 
indicated above, we will also continue to request that these parties 
register with the Customs Service the LNPP contract numbers pursuant to 
which subject merchandise is imported.
    The Customs Service shall 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. Any securities posted since March 1, 
1996, on entries of elements relevant to MRU's Charlotte contract shall 
be refunded or canceled.
    The weighted-average dumping margins are as follows:

------------------------------------------------------------------------
                                                              Weighted- 
                                                               average  
                   Exporter/manufacturer                        margin  
                                                              percentage
------------------------------------------------------------------------
MAN Roland Druckmaschinen AG...............................        30.80
Koenig Bauer-Albert AG.....................................    \1\ 46.40
All Others.................................................       30.80 
------------------------------------------------------------------------
\1\ Facts Available Rate.                                               

    The all others rate applies to all entries of subject merchandise 
except for entries of merchandise produced by the respondents listed 
above.

International Trade Commission (ITC) Notification

    In accordance with section 735(d) of the Act, we have notified the 
ITC of our determination. As our final determination is affirmative, 
the ITC will determine, within 45 days, whether these imports are 
causing material injury, or threat of material injury, to an industry 
in the United States. If the ITC determines that material injury, or 
threat of material injury, does not exist, the proceeding will be 
terminated and all securities posted will be refunded or canceled. If 
the ITC determines that such injury does exist, the Department will 
issue an antidumping duty order directing Customs officials to assess 
antidumping duties on all imports of the subject merchandise entered, 
or withdrawn from warehouse, for consumption on or after the effective 
date of the suspension of liquidation.
    This determination is published pursuant to section 735(d) of the 
Act.

    Dated: July 15, 1996.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 96-18542 Filed 7-22-96; 8:45 am]
BILLING CODE 3510-DS-P