[Federal Register Volume 61, Number 238 (Tuesday, December 10, 1996)]
[Notices]
[Pages 65013-65018]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-31356]


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DEPARTMENT OF COMMERCE
International Trade Administration
[A-588-840]


Notice of Preliminary Determination of Sales at Less Than Fair 
Value and Postponement of Final Determination: Engineered Process Gas 
Turbo-Compressor Systems, Whether Assembled or Unassembled, and Whether 
Complete or Incomplete From Japan

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

EFFECTIVE DATE: December 10, 1996.

FOR FURTHER INFORMATION CONTACT: Irene Darzenta or Howard Smith, Office 
of Antidumping Investigations, Import Administration, International 
Trade Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202) 
482-6320 or (202) 482-5193.

The Applicable Statute

    Unless otherwise indicated, all citations to the Tariff Act of 
1930, as amended (the Act), are references to the provisions effective 
January 1, 1995, the effective date of the amendments made to the Act 
by the Uruguay Round Agreements Act (URAA). In addition, unless 
otherwise indicated, all citations to the Department's regulations are 
to the current regulations, as amended by the interim regulations 
published in the Federal Register on May 11, 1995 (60 FR 25130).

Preliminary Determination

    We preliminarily determine that engineered process gas turbo-
compressor systems (``EPGTS''), whether assembled or unassembled, and 
whether complete or incomplete, from Japan are being, or are likely to 
be, sold in the United States at less than fair value (``LTFV''), as 
provided in section 733 of the Act. The estimated margins of sales at 
LTFV are shown in the ``Suspension of Liquidation'' section of this 
notice.

Case History

    Since the initiation of this investigation on May 28, 1996 (Notice 
of Initiation of Antidumping Duty Investigation: Engineered Process Gas 
Turbo-Compressors, Whether Assembled or Unassembled, and Whether 
Complete or Incomplete from Japan, 61 FR 28164, June 4, 1996), the 
following events have occurred.
    On July 1, 1996, the United States International Trade Commission 
(``ITC'') notified the Department of Commerce (``the Department'') of 
its affirmative preliminary determination (see ITC Investigation No. 
731-TA-748). The ITC found that there is a reasonable indication that 
an industry in the United States is threatened with material injury by 
reason of imports from Japan of EPGTS.
    Also, on July 1, 1996, we presented Section A (Organization, 
Accounting Practices, Markets and Merchandise) of the Department's 
questionnaire to Mitsubishi Heavy Industries, Ltd. (``MHI'') and its 
U.S. affiliate Mitsubishi Heavy Industries America Inc. 
(``MHIA'')(collectively ``MHI''), the sole respondent in this 
investigation. See the ``Respondent Selection'' section of this

[[Page 65014]]

notice. MHI's response to Section A was received on July 29, 1996.
    On August 6, 1996, Dresser-Rand Company, the petitioner in this 
investigation, alleged that there are reasonable grounds to believe or 
suspect that MHI's third country sales during the period of 
investigation (``POI'') were made at prices below the cost of 
production. MHI objected to the petitioner's allegation on August 9, 
1996. The petitioner supplemented its allegation with additional 
information on August 27, 1996. The Department initiated a sales-below-
cost investigation with respect to third country sales on August 30, 
1996. This issue, however, became moot when MHI reported on October 18, 
1996, that it had a viable home market based on the memorandum issued 
by the Department on October 8, 1996, which clarified the scope of the 
investigation.
    Based on the information received in MHI's Section A response, on 
August 9, 1996, we issued Sections A-1 (Supplier Affiliations), B 
(Third Country Sales), C (U.S. Sales) and D (Constructed Value 
(``CV'')) of the Department's questionnaire to MHI. Section D-1 (Cost 
of Production) of the questionnaire was issued on August 30, 1996. 
Responses to these sections were received on August 27, September 20, 
and September 30, 1996. A supplemental questionnaire relevant to 
Sections A-D was issued on October 15, 1996. MHI's response to Sections 
A and C of the Department's supplemental questionnaire were received on 
November 5, 1996.
    On September 12, 1996, at the request of the petitioner, we 
postponed the preliminary determination to December 4, 1996. (See 
Notice of Postponement of Preliminary Determination: Antidumping 
Investigation of Engineered Process Gas Turbo-Compressors, Whether 
Assembled or Unassembled, and Whether Complete or Incomplete from 
Japan, 61 FR 50272, September 25, 1996.)
    During the period June 19, 1995, through July 15, 1996, the 
petitioner and the respondent filed comments requesting clarification 
of the scope of this investigation with respect to: (1) the end uses of 
the subject merchandise; (2) the treatment of revamped and repair EPGTS 
parts and components; and (3) the definition of complete and incomplete 
EPGTS covered by the scope. On October 8, 1996, the Department 
clarified the scope of the investigation with respect to end uses and 
revamped and repair parts and components. See October 8, 1996, 
Memorandum to Jeffrey Bialos from The Team Re: Scope Issues. See also 
``Scope of Investigation'' section of this notice. With respect to the 
definition of complete and incomplete EPGTS, see ``Scope Issues'' 
section of this notice.
    Based on the Department's scope clarification made with respect to 
the end uses of the subject merchandise, on October 18, 1996, MHI 
informed the Department that its home market was viable, but that none 
of MHI's home market sales made during the POI was sufficiently similar 
to its U.S. sale to serve as the basis for price-to-price comparisons. 
Based on MHI's representations, subject to verification, the Department 
notified MHI on October 23, 1996, that it need no longer respond to the 
questions concerning third country sales contained in Sections B and D 
of the Department's October 15, 1996 supplemental questionnaire. 
Subsequently, on October 23, 1996, the Department issued a revised 
Section D supplemental questionnaire and requested that MHI provide 
complete home market sales data following the same format as that 
outlined in the Department's August 9, 1996 Section B questionnaire so 
that the Department could evaluate adequately its selling practices. 
MHI's response to the revised supplemental Section D questionnaire was 
received by the Department on November 12, 1996. Home market sales data 
was provided to the Department on November 8 and 22, 1996.
    MHI sold subject merchandise in the United States during the POI 
through a Japanese trading company and its U.S. subsidiary. In order to 
fully investigate the issue of whether MHI and the trading company (and 
its U.S. subsidiary) are affiliated parties, on October 23 and 28, 
1996, the Department issued questionnaires to MHI and the trading 
company, respectively. Responses to these questionnaires were received 
on November 8 and 19, 1996, respectively. MHI submitted supplemental 
responses on November 20 and 22, 1996.
    On November 18, 1996, the petitioner filed comments on issues to be 
resolved and methodologies to be employed in the preliminary 
determination. MHI filed rebuttal comments on November 25, 1996.
    On November 21, 1996, the petitioner filed a home market sales-
below-cost allegation, stating that during the POI, MHI sold subject 
merchandise in the home market below the cost of production and, 
therefore, should be excluded from the Department's calculation of 
profit for CV purposes. On November 22, 1996, MHI filed comments in 
rebuttal to the petitioner's allegation. The Department initiated a 
home market sales-below-cost investigation on December 4, 1996. See 
Memorandum to Louis Apple from The Team Regarding Initiation of Home 
Market Sales-Below-Cost Investigation dated December 4, 1996.

Respondent Selection

    The petitioner named five Japanese producers of subject merchandise 
in the petition, and stated that, of these five producers, only MHI 
sold subject merchandise in the United States during the POI. On June 
12, 1996, we sent a letter to the Japanese Embassy in Washington, D.C. 
requesting whether there were any shipments of the subject merchandise 
to the United States by any of the companies listed in the petition 
during the period May 1, 1991 through May 31, 1996. We received no 
response. On June 17, 1996, we contacted the U.S. Embassy in Tokyo, 
requesting the identification of Japanese producers or exporters (other 
than MHI) of EPGTS to the United States, and the quantity and value of 
subject merchandise they sold to the United States during 1994 and 
1995, or the latest available comparable periods in 1993 and 1994. On 
June 26, 1996, we received a reply cable from the U.S. Embassy which 
identified several Japanese producers of subject merchandise, only one 
of which, Ebara Corporation, may have exported to the United States. 
Based on the petition and the information received from the U.S. 
Embassy, we issued a Section A questionnaire to MHI on July 1, 1996. We 
also requested U.S. sales/shipment information during the period April 
1, 1995 through May 31, 1996 from Ebara Corporation on July 10, 1996. 
On July 22, 1996, Ebara Corporation sent a letter stating that it made 
no sales or shipments of the subject merchandise to the United States 
during the period specified by the Department. We did not send any 
additional questionnaires to any other producers (besides MHI), as no 
evidence on the record suggested that any other Japanese manufacturer 
sold EPGTS in the United States during the specified period.

Postponement of Final Determination and Extension of Provisional 
Measures

    Pursuant to section 735(a)(2)(A) of the Act, on December 4, 1996, 
MHI requested that in the event of an affirmative preliminary 
determination in this investigation, the Department postpone its final 
determination until not later than 135 days after the publication of an 
affirmative preliminary determination in the Federal Register. In 
accordance with 19 CFR 353.20(b)(1995), inasmuch as our preliminary 
determination is affirmative, MHI accounts for a significant proportion 
of exports of the

[[Page 65015]]

subject merchandise, and we are not aware of the existence of any 
compelling reasons for denying this request, we are granting MHI's 
request and postponing the final determination. Suspension of 
liquidation will be extended accordingly. See Preliminary Determination 
of Sales at Less Than Fair Value: Large Newspaper Printing Presses and 
Components Thereof, Whether Assembled or Unassembled from Japan (61 FR 
8029, March 1, 1996).

Scope of Investigation

    We have clarified the scope of investigation since our notice of 
initiation to include EPGTS used in the production of refinery 
products. Furthermore, we have clarified the scope to exclude repair or 
revamp parts and components that are not included in the original 
contract of sale for an EPGTS. See October 8, 1996, Decision Memorandum 
to Jeffrey P. Bialos from The Team Re: Scope Issues. We have also 
clarified the definition of ``incomplete'' EPGTS which are covered by 
the scope. See ``Scope Issues'' section of this notice.
    The products covered by this investigation are turbo-compressor 
systems (i.e., one or more ``assemblies'' or ``trains'') which are 
comprised of various configurations of process gas compressors, drivers 
(i.e., steam turbines or motor-gear systems designed to drive such 
compressors), and auxiliary control systems and lubrication systems for 
use with such compressors and compressor drivers, whether assembled or 
unassembled. One or more of these turbo-compressor assemblies or 
trains, may be combined. The systems covered are only those used in the 
petrochemical and fertilizer industries, in the production of ethylene, 
propylene, ammonia, urea, methanol, refinery and other petrochemical 
products. This investigation does not encompass turbo-compressor 
systems incorporating gas turbine drivers, which are typically used in 
pipeline transmission, injection, gas processing, and liquid natural 
gas service.
    The scope of this investigation excludes spare parts that are sold 
separately from a contract for an EPGTS. Parts or components imported 
for the revamp or repair of an existing EPGTS, or otherwise not 
included in the original contract of sale for the EPGTS of which they 
are intended to be a part, are expressly excluded from the scope.
    Compressors are machines used to increase the pressure of a gas or 
vapor, or mixture of gases and vapors. Compressors are commonly 
classified as reciprocating, rotary, jet, centrifugal, or axial 
(classified by the mechanical means of compressing the fluid), or as 
positive-displacement or dynamic-type (classified by the manner in 
which the mechanical elements act on the fluid to be compressed). 
Subject compressors include only centrifugal compressors engineered for 
process gas compression, e.g., ammonia, urea, methanol, propylene, or 
ethylene service.
    Turbines are classified (1) as steam or gas; (2) by mechanical 
arrangement as single-casing, multiple shaft, or tandem-compound (more 
than one casing with a single shaft); (3) by flow direction (axial or 
radial); (4) by steam cycle, whether condensing, non-condensing, 
automatic extraction, or reheat; and (5) by number of exhaust flows of 
a condensing unit. Steam and gas turbines are used in various 
applications. Only steam turbines dedicated for a turbo-compressor 
system are subject to this investigation.
    A motor and gear box is used as a compressor driver in lieu of a 
steam turbine. A control system is used to monitor and control the 
operation of a turbo-compressor system. A lubrication system is 
engineered to support a subject compressor and steam turbine (or motor/
gear box).
    A typical EPGTS consists of one or more compressors driven by a 
turbine (or in some cases a motor drive). A compressor is usually 
installed on a base plate and the drive is installed on a separate base 
plate. The turbine (or motor drive) base plate will typically also 
include any governing or safety systems, couplings, and a gearbox, if 
any. The lube and oil seal systems for the turbine and compressor(s) 
are usually mounted on a separate skid.
    The scope of this investigation covers both ``assembled and 
unassembled'' EPGTS from Japan. Because of their large size, EPGTS and 
their constituent parts are typically shipped partially assembled (or 
unassembled) to their destination where they are assembled and/or 
completed prior to their commissioning.
    The scope of this investigation also covers ``complete and 
incomplete'' EPGTS from Japan. A ``complete'' EPGTS covered by the 
scope consists of all of the components of an EPGTS (i.e., process gas 
compressor(s), driver(s), auxiliary control system(s) and lubrication 
system(s)) and their constituent parts, which are imported from Japan 
in assembled or unassembled form, individually or in combination, 
pursuant to a contract for a complete EPGTS in the United States. An 
``incomplete'' EPGTS covered by the scope of this investigation 
consists of parts of an EPGTS imported from Japan pursuant to a 
contract for a complete EPGTS in the United States, which taken 
altogether, constitute at least 50 percent of the cost of manufacture 
of the complete EPGTS of which they are a part.
    EPGTS imported from Japan as an assembly or train (i.e., including 
turbines, compressors, motor and gear boxes, control systems and 
lubrication systems, and auxiliary equipment) may be classified under 
Harmonized Tariff Schedule of the United States (``HTSUS'') subheading 
8414.80.2015, which provides for centrifugal and axial compressors. The 
U.S. Customs Service may view the combination of turbine driver and 
compressor as ``more than'' a compressor and, as a result, classify the 
combination under HTSUS subheading 8419.60.5000.
    Compressors for use in EPGTS, if imported separately, may also be 
classified under HTSUS subheading 8414.80.2015. Parts for such 
compressors, including rotors or impellers and housing, are classified 
under HTSUS subheading 8414.90.4045 and 8414.90.4055.
    Steam turbines for use in EPGTS, if imported separately, may be 
classified under the following HTSUS subheadings: 8406.81.1020: steam 
turbines, other than marine turbines, stationary, condensing type, of 
an output exceeding 40 MW; 8406.82.1010: steam turbines, other than 
marine turbines, stationary, condensing type, exceeding 7,460 Kw; 
8406.82.1020: steam turbines, other than marine turbines, stationary, 
condensing type, exceeding 7,460 Kw, but not exceeding 40 MW; 
8406.82.1050: steam turbines, other than marine turbines, stationary, 
other than condensing type, not exceeding 7,460 Kw; 8406.82.1070: steam 
turbines, other than marine turbines, stationary, other than condensing 
type, exceeding 7,460 Kw, but not exceeding 40 MW. Parts for such 
turbines are classified under HTSUS subheading 8406.90.2000 through 
8406.90.4580.
    Control and other auxiliary systems may be classified under HTSUS 
9032.89.6030, ``automatic regulating or controlling instruments and 
apparatus: complete process control systems.''
    Motor and gear box entries may be classified under HTSUS subheading 
8501.53.4080, 8501.53.6000, 8501.53.8040, or 8501.53.8060. Gear speed 
changers used to match the speed of an electric motor to the shaft 
speed of a driven compressor, would be classified under HTSUS 
subheading 8483.40.5010.
    Lubrication systems may be classified under HTSUS subheading 
8414.90.4075.

[[Page 65016]]

    Although the HTSUS subheadings are provided for convenience and 
customs purposes, our written description of the scope of this 
investigation is dispositive.

Scope Issues

    Subsequent to initiation, MHI requested that the Department clarify 
the definition of an ``incomplete'' EPGTS covered by the scope of the 
investigation. As stated above, we have preliminarily determined that 
an ``incomplete'' EPGTS covered by the scope of this investigation 
consists of parts of an EPGTS from Japan pursuant to a contract for a 
complete EPGTS in the United States, which taken altogether, constitute 
at least 50 percent of the cost of manufacture of the complete EPGTS of 
which they are a part.
    Because of their large physical size, EPGTS are typically imported 
into the United States in either partially assembled or disassembled 
form, perhaps in multiple shipments over an extended period of time, 
and may require the addition and integration of non-subject parts prior 
to, or during, the installation process in the United States. 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 this investigation on the basis of a 
lack of completion at the time of importation. The Department's concern 
in this case has also been expressed in past cases with similar fact 
patterns (e.g., Final Determination of Sales at Less Than Fair Value: 
Large Newspaper Printing Presses and Components Thereof, from Germany 
and Japan, 61 FR 38166, 38139, July 23, 1996) (``LNPPs from Germany and 
Japan'').
    Therefore, for suspension of liquidation purposes, the Department 
must decide on a reasonable and administrable approach in determining 
what constitutes a subject incomplete EPGTS.
    For purposes of this preliminary determination, we have defined a 
``complete'' and an ``incomplete'' EPGTS covered by the scope of our 
investigation. See ``Scope of Investigation'' section of this notice. 
We have utilized this approach in the past where the nature of the 
merchandise and its importation lent itself to circumvention. (See 
LNPPs from Germany and Japan).
    In order to determine whether the imported merchandise constitutes 
a subject incomplete EPGTS through performance of this cost-based test, 
we will have to wait until all of the parts comprising the EPGTS are 
imported and the complete EPGTS is produced. Thus, we will suspend 
liquidation on all importations of EPGTS parts from Japan at the 
preliminary duty rate calculated by the Department unless a 
certification is provided by both the foreign manufacturer/exporter and 
U.S. importer that the parts to be imported, when taken altogether, 
constitute less than 50 percent of the cost of manufacture of the 
complete EPGTS of which they are a part. For entries which are 
accompanied by the appropriate certification, we will direct the U.S. 
Customs Service to suspend liquidation at a zero duty rate, subject to 
verification by the Department at a later date, if necessary. We will 
also require the interested parties to provide the following 
information on the documentation accompanying each entry from Japan of 
EPGTS parts: (1) the number of the sales contract pursuant to which the 
parts are imported, (2) a description of the parts included in the 
entry, (3) the actual cost of the imported parts, (4) the actual or 
estimated cost (depending on what is available at the time of 
importation) of the complete EPGTS, and historical cost variance (if 
the estimated cost is provided), (5) a schedule of parts shipments to 
be made pursuant to the particular EPGTS contract, if more than one 
shipment is relevant, and (6) a schedule of EPGTS production completion 
in the United States. See ``Suspension of Liquidation'' section of this 
notice.
    We are presently soliciting comments from interested parties as to 
the merits of this approach and/or any other approach that may be 
relevant for suspension of liquidation purposes in the final 
determination. Interested party comments on this topic are due no later 
than February 28, 1997.

Period of Investigation (POI)

    The POI is April 1, 1995 through May 31, 1996.

Product Comparisons

    Although the home market was viable, in accordance with section 773 
of the Act, we based normal value (``NV'') on CV because we determined 
that the merchandise sold in the home market during the POI was not 
sufficiently similar to that sold in the United States to permit proper 
price-to-price comparisons.

Fair Value Comparisons

    To determine whether MHI's sales of EPGTS to the United States were 
made at less than fair value, we compared Constructed Export Price 
(``CEP'') to the NV, as described in the ``Constructed Export Price'' 
and ``Normal Value'' sections of this notice.

Constructed Export Price

    Pursuant to section 772 of the Act, the basis for the fair value 
comparison is the price at which the merchandise is first sold to an 
unaffiliated purchaser in the United States or for export to the United 
States. MHI reported its sale to a Japanese trading company on the 
grounds that the trading company is an unaffiliated purchaser and, at 
the time of sale, MHI knew that merchandise was intended for export to 
the United States. However, based on our examination of the sales 
documentation provided by MHI, which shows that MHI played an integral 
role in the sale to the U.S. customer, we have preliminarily determined 
that the Japanese trading company and its U.S. subsidiary were acting 
as MHI's U.S. selling agents, not as resellers, in the transaction 
under investigation. Therefore, the proper basis for the fair value 
comparison is the sale by MHI, through the Japanese trading company and 
its U.S. subsidiary, to the U.S. customer. Because MHI made this 
transaction through a U.S. agent acting on behalf of the producer, we 
preliminarily determine that the use of CEP is appropriate in this 
case.
    We have preliminarily made this determination (see December 4, 1996 
Concurrence Memorandum) based on the role of the parties in the sales 
transaction and not on the basis of the corporate relationship between 
the parties. However, we are also continuing to examine the nature of 
the relationship between MHI and the Japanese trading company within 
the context of section 771(33) (F) and (G) of the Act.
    To determine whether sufficient control of one party over another 
exists pursuant to section 771(33) of the Act, the Department made 
inquiries on this issue in this case through the issuance of separate 
questionnaires to both MHI and the Japanese trading company and through 
a review of public source data. We collected information relevant to 
the various control indicia set forth in the Statement of 
Administrative Action (``SAA''), and plan to gather additional 
information as necessary to complete our analysis and to verify the 
data submitted. See December 4, 1996, Memorandum to Jeffrey Bialos from 
The Team Regarding Whether the Evidence on the Record of {this} 
Investigation Supports a Finding that {MHI} and {the Japanese Trading 
Company} Are Affiliated for Antidumping Purposes, and the Consequences 
of this Finding in Determining the Appropriate Basis for

[[Page 65017]]

U.S. Price. In this case, the Department faces complex issues involving 
the interpretation of the affiliation definition and the application of 
that definition to the facts at issue. The central issue is whether MHI 
and the Japanese trading company are legally or operationally in a 
position to exercise restraint or direction over the other or are under 
common control by third parties. The question of control is a 
particularly complex one where, as in the instant case, it may not 
involve direct control of one party over another, but may involve 
control exercised through financial entities which each have debt 
relationships with the two firms. Issues relevant to this determination 
include: how to evaluate the relative significance of debt 
relationships as indicia of control in the country under investigation 
(and whether any benchmarks are appropriate); when a close supplier 
relationship exists and its implication; and how to weigh the control 
indicia set forth in the SAA, especially if the Department finds that 
no single criterion is a sufficient indication of control.
    Given the Department's desire to develop an appropriate analytical 
framework to take into account all factors which, by themselves, or in 
combination, may indicate affiliation in this case, we are continuing 
to investigate the issue for purposes of the final determination. 
Additionally, we solicit comments from interested parties on the issues 
enumerated above. Interested party comments on this topic are due no 
later than February 17, 1997.
    In accordance with sections 772 (b) and (c) of the Act, we 
calculated CEP based on a packed, FOB Japanese port, duty paid price, 
inclusive of spare parts, to an unaffiliated customer in the United 
States through an unaffiliated trading company. We excluded from this 
price any post-POI price amendments, in accordance with our standard 
practice. See LNPPs from Germany (61 FR 38166, 38181-2, July 23, 1996). 
We made a deduction from the starting price for the value of the non-
subject parts which were included in the U.S. sale. We also made 
deductions for foreign inland freight expense, foreign inland 
insurance, foreign brokerage and handling, and export insurance.
    Pursuant to section 772(d) of the Act, we also made deductions for 
direct selling expenses, including imputed credit and installation-
related expenses, and indirect selling expenses that related to 
economic activity in the United States. We imputed credit expenses for 
the U.S. sale using the U.S. short-term interest rate reported for the 
POI because the sale was denominated in U.S. dollars. See LNPPs from 
Japan and Germany and Oil Country Tubular Goods from Austria (60 FR 
33551, 33555 (1995)).
    Furthermore, we also deducted an amount for the selling expenses 
incurred by the Japanese trading company and its U.S. subsidiary based 
on facts available, as actual expense data was not available. As facts 
available, we calculated an amount equal to the difference between the 
price MHI charged the Japanese trading company, and the price the 
Japanese trading company's U.S. subsidiary charged the U.S. customer 
(net of the value of the non-subject parts and post-POI price changes) 
as a surrogate for these expenses. Finally, we made an adjustment for 
CEP profit in accordance with section 722(d)(3) of the Act.

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)(1) of the Act, we calculated CV 
based on the sum of MHI's cost of materials, fabrication, selling, 
general, and administrative expenses (``SG&A''), and profit, plus U.S. 
packing costs as reported in the U.S. sales database.
    In accordance with section 773(e)(2)(A) of the Act, we based SG&A 
and profit on the amounts incurred and realized by the respondent in 
connection with the production and sale of the foreign like product in 
the ordinary course of trade, for consumption in the foreign country. 
For selling expenses, we allocated the reported home market selling 
expenses over the cost of manufacture (``COM''), and applied the 
resulting percentage to the COM.
    We relied on the respondent's CV data, except in the following 
specific instances wherein the reported costs were improperly valued:
    1. We included the costs associated with performance tests in the 
COM because based on the respondent's description of the nature of 
these tests, they did not appear to be ``special tests'' specifically 
required by the customer that would go beyond routine quality control 
tests or which would not otherwise be performed on the subject 
merchandise during the production process.
    2. We adjusted the price of production inputs purchased by MHI from 
affiliated parties at non-arm's-length prices.

Level of Trade (LOT)

    As set forth in section 773(a)(1)(B)(i) of the Act and in the SAA 
at 829-831, to the extent practicable, the Department will calculate NV 
based on sales (or in this case CV) at the same level of trade as the 
U.S. sales. When the Department is unable to find sales in the 
comparison market at the same level of trade as the U.S. sale(s), the 
Department may compare sales in the U.S. and foreign markets at 
different levels of trade.
    In its questionnaire responses, MHI did not state that there were 
differences in its selling activities by customer categories within 
each market. Therefore, in the absence of information in MHI's 
questionnaire responses which might lead us to reach a different 
conclusion, we have determined for purposes of this preliminary 
determination that all sales in the home market and the U.S. market 
were made at the same level of trade. Therefore, all fair value 
comparisons are at the same level of trade and no adjustment pursuant 
to section 773(a)(7)(A) of the Act is warranted.

Price to CV Comparisons

    In comparing CEP to CV, we deducted from CV the home market direct 
selling expenses pursuant to section 773(a)(8) of the Act.

Currency Conversion

    We made currency conversions into U.S. dollars based on the 
official exchange rates in effect on the date of the U.S. sale as 
certified by the Federal Reserve Bank. The date of sale in this case is 
the earliest date on which the essential terms of sale were set by the 
U.S. customer and MHI's sales agent, the U.S. subsidiary of the 
Japanese trading company. See ``Constructed Export Price'' section of 
this notice.
    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.
    Section 773A(a) also 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. It is the

[[Page 65018]]

Department's practice to find that a fluctuation exists when the daily 
exchange rate differs from the benchmark rate by 2.25 percent. The 
benchmark is defined as the rolling average of rates for the past 40 
business days. When we determine a fluctuation existed, we substitute 
the benchmark for the daily rate, in accordance with established 
practice. 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 Japanese 
yen did not undergo a sustained movement, nor were there any currency 
fluctuations during the POI.

Verification

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

Suspension of Liquidation

    In accordance with section 733(d) of the Act, we are directing the 
Customs Service to suspend liquidation of all entries of EPGTS from 
Japan, as defined in the ``Scope of Investigation'' section of this 
notice, that are entered, or withdrawn from warehouse for consumption, 
on or after the date of publication of this notice in the Federal 
Register. We are also directing the Customs Service to suspend 
liquidation of all entries of parts of EPGTS imported pursuant to a 
contract for a complete EPGTS in the United States that are entered, or 
withdrawn from warehouse for consumption, on or after the date of 
publication of this notice in the Federal Register. For these entries, 
the Customs Service will require a cash deposit or posting of a bond 
equal to the estimated amount by which the normal value exceeds the 
constructed export price as shown below.
    The suspension of liquidation with respect to EPGTS parts will 
remain in effect provided that the sum of such entries represents at 
least 50 percent of the cost of manufacture of the complete EPGTS of 
which they are part. This determination will be made only after all 
entries of parts imported pursuant to an EPGTS contract are made and 
the complete EPGTS pursuant to that contract is produced, unless a 
certification is provided by both the foreign manufacturer/exporter and 
U.S. importer that the parts to be imported, when taken altogether, 
constitute less than 50 percent of the cost of manufacture of the 
complete EPGTS of which they are a part. For those entries which are 
accompanied by this certification, we will direct the U.S. Customs 
Service to suspend liquidation at a zero duty rate, subject to 
verification by the Department at a later date if necessary. We will 
also require the interested parties to provide clearly the following 
information on the documentation accompanying each entry from Japan of 
EPGTS parts: (1) the EPGTS contract pursuant to which the parts are 
imported, (2) a description of the parts included in the entry, (3) the 
actual cost of the imported parts, (4) the actual or estimated cost 
(depending on what is available at the time of importation) of the 
complete EPGTS, and historical cost variance (if the estimated cost is 
provided), (5) a schedule of parts shipments to be made pursuant to a 
particular EPGTS contract, if more than one shipment is relevant; and 
(6) a schedule of EPGTS production completion in the United States.
    With respect to entries of EPGTS spare and replacement/repair parts 
from Japan, we will instruct the Customs Service not to suspend 
liquidation of these entries if they are not included in the original 
contract of sale for the EPGTS of which they are intended to be a part.
    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 shall be 
required to provide certification that the imported merchandise would 
not be used to fulfill an EPGTS contract. We will also request that 
these parties register with the Customs Service the EPGTS contract 
numbers pursuant to which subject merchandise is imported. These 
suspension of liquidation instructions will remain in effect until 
further notice.
    The weighted-average dumping margins are as follows:

------------------------------------------------------------------------
                                                               Weighted-
                                                                average 
                    Exporter/Manufacturer                       margin  
                                                              percentage
------------------------------------------------------------------------
Mitsubishi Heavy Industries, Ltd. (MHI).....................      34.37 
All others..................................................      34.37 
------------------------------------------------------------------------

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

ITC Notification

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

Public Comment

    Case briefs or other written comments in at least ten copies must 
be submitted to the Assistant Secretary for Import Administration no 
later than March 12, 1997, and rebuttal briefs, no later than March 17, 
1997. A list of authorities used and an executive summary of issues 
should accompany any briefs submitted to the Department. Such summary 
should be limited to five pages total, including footnotes. In 
accordance with section 774 of the Act, we will hold a public hearing, 
if requested, to afford interested parties an opportunity to comment on 
arguments raised in case or rebuttal briefs. Tentatively, the hearing 
will be held on March 20, 1997, time and place to be determined, at the 
U.S. Department of Commerce, 14th Street and Constitution Avenue, N.W., 
Washington, D.C. 20230. Parties should confirm by telephone the time, 
date, and place of the hearing 48 hours before the scheduled time.
    Interested parties who wish to request a hearing, or to participate 
if one is requested, must submit a written request to the Assistant 
Secretary for Import Administration, U.S. Department of Commerce, Room 
B-099, within ten days of the publication of this notice. Requests 
should contain: (1) the party's name, address, and telephone number; 
(2) the number of participants; and (3) a list of the issues to be 
discussed. Oral presentations will be limited to issues raised in the 
briefs. If this investigation proceeds normally, we will make our final 
determination by 135 days after the publication of this notice in the 
Federal Register.
    This determination is published pursuant to section 733(f) of the 
Act.

    Dated: December 4, 1996.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 96-31356 Filed 12-09-96; 8:45 am]
BILLING CODE 3510-DS-P