[Federal Register Volume 62, Number 91 (Monday, May 12, 1997)]
[Notices]
[Pages 25908-25915]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-12396]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-201-504]


Porcelain-on-Steel Cookware From Mexico: Notice of Final Results 
of Antidumping Duty Administrative Review

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

ACTION: Notice of final results of antidumping duty administrative 
review.

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SUMMARY: On November 24, 1995, the Department of Commerce (the 
Department) published the preliminary results of its administrative 
review of the antidumping duty order on porcelain-on-steel (POS) 
cookware from Mexico. This review covers the period December 1, 1993, 
through November 30, 1994.
    We gave interested parties an opportunity to comment on the 
preliminary results. Based on our analysis of the comments received and 
the correction of certain clerical and computer program errors, we have 
changed the preliminary results, as described below in the comments 
section of this notice.

EFFECTIVE DATE: May 12, 1997.

FOR FURTHER INFORMATION CONTACT: Katherine Johnson or Mary Jenkins, 
Import Administration, International Trade Administration, U.S. 
Department of Commerce, 14th Street and Constitution Avenue, N.W., 
Washington, D.C. 20230; telephone, (202) 482-4929 or (202) 482-1756, 
respectively.

SUPPLEMENTARY INFORMATION:

Background

    On November 24, 1995, the Department published in the Federal 
Register the Notice of Preliminary Results of Administrative Review: 
Porcelain-on-Steel Cookware from Mexico (60 FR 58044) (Preliminary 
Results). The Department has now completed that administrative review 
in accordance with section 751 of the Tariff Act of 1930, as amended 
(the Act).

Scope of the Review

    The merchandise covered by this review is porcelain-on-steel 
cookware, including tea kettles that do not have self-contained 
electric heating elements. All of the foregoing are constructed of 
steel and are enameled or glazed with vitreous glasses. This 
merchandise is currently classifiable under Harmonized Tariff Schedule 
of the United States (HTSUS) subheading 7323.94.00. Kitchenware 
currently entering under HTSUS subheading 7323.94.00.30 is not subject 
to the order. Although the HTSUS subheadings are provided for 
convenience and Customs purposes, our written description of the scope 
of this proceeding is dispositive.
    The period of review (POR) is December 1, 1993, to November 30, 
1994. The review covers one manufacturer/exporter of Mexican POS 
cookware, Cinsa, S.A. de C.V. (Cinsa).

Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute and to the 
Department's regulations are in reference to the provisions as they 
existed on December 31, 1994.

Product Comparisons

    In accordance with the Department's standard methodology, we 
calculated transaction-specific U.S. prices for Cinsa based on purchase 
price (PP), and compared these U.S. sales to foreign market values 
(FMVs) based on either monthly weighted-average home market prices or 
constructed value (CV). For price-to-price comparisons, we made 
comparisons based on the following product characteristics: gauge 
(i.e., whether heavy or light), quality, product configuration/size 
(e.g., frying pan, roaster), number of enamel coats, and color.
    We have determined that heavy gauge (HG) and light gauge (LG) 
cookware are not such or similar merchandise (see Final Analysis 
Changes for the 8th Review of Porcelain-on-Steel Cookware from Mexico, 
Memorandum from the Team to Louis Apple, Acting Director, Group II, AD/
CVD Enforcement dated February 21, 1997, (Final Analysis Memorandum)). 
For this reason, and because Cinsa made no home market sales of HG 
merchandise and there were no CV data on the record for Cinsa's sales 
of HG merchandise, we assigned these HG sales the weighted average of 
all margins calculated for Cinsa's U.S. sales of LG cookware. See 
Comments 1-4.

Verification

    As provided in section 776(b) of the Tariff Act, we verified 
information provided by Cinsa using standard verification procedures, 
including onsite inspection of the manufacturers' facilities, the 
examination of relevant sales and financial records, and selection of 
original documentation containing relevant information. Although 
primarily engaged in the production and sale of LG cookware,

[[Page 25909]]

Cinsa also made a few U.S. sales of HG cookware produced by ENASA, a 
manufacturer of HG cookware. Cinsa did not make any home market sales 
of HG cookware.

United States Price

    We calculated PP based on the same methodology used in the 
Preliminary Results, except in the following instances: (1) we used a 
revised U.S. interest rate to calculate imputed credit expenses; and 
(2) we calculated U.S. imputed credit expenses on sales to U.S. 
customers who paid by letter of credit. See Comment 9.

Foreign Market Value

    We calculated FMV based on the same methodology used in the 
Preliminary Results, except in the following instances: (1) We 
recalculated home market credit expenses using the revised interest 
rate reported in the July 26, 1995, supplemental response; (2) for 
sales in the home market with missing payment dates, we applied a 
credit expense calculated using the average period between shipment and 
payment for those sales where payment date was reported; and (3) we 
deducted home market commissions and added U.S. indirect selling 
expenses capped by the amount of home market commissions, in accordance 
with 19 CFR 353.56.

Cost of Production

    As discussed in the Preliminary Results, the Department conducted a 
test of home market sales made during the POR to determine if sales 
were made at prices below Cinsa's cost of production (COP) within the 
meaning of section 773(b) of the Act. For home market models which 
would have been the best match for a U.S. model but for which there 
were insufficient home market sales at or above the COP, we compared 
USP to CV.

A. Calculation of COP

    We calculated COP based on the sum of respondent's cost of 
materials, fabrication, and general expenses, in accordance with 19 CFR 
353.51(c), and as described in the Preliminary Results.

B. Test of Home Market Sales Prices

    As stated in the Preliminary Results, we used Cinsa's adjusted cost 
data. We compared the weighted average product specific COP figures to 
home market sales of the foreign like product as required under section 
773(b) of the Act. We tested whether a substantial quantity of 
respondent's home market sales of subject merchandise were made at 
prices below COP over an extended period of time. On a product-specific 
basis, we compared the COP to the reported home market prices, less any 
applicable movement charges and rebates. We made the following changes 
to the COP calculation used in the Preliminary Results: (a) as COP was 
calculated exclusive of packing expenses, we deducted these expenses 
from the net home market sales price used to determine whether sales 
were below the COP; and (b) we corrected the COP calculation to 
eliminate double counting of commission expenses in the COP selling 
expenses.
    To satisfy the requirement of section 773(b)(1) of the Act that 
below-cost sales be disregarded only if made in substantial quantities, 
we applied the following methodology. If, by quantity, over 90 percent 
of the respondent's sales of a given product were at prices equal to or 
greater than the COP, we did not disregard any below-cost sales of that 
product because we determined that the below-cost sales were not made 
in substantial quantities. If between 10 and 90 percent of the 
respondent's sales of a given product were at prices equal to or 
greater than the COP, and sales of that product were also found to be 
made over an extended period of time, we disregarded only the below-
cost sales. Where we found that more than 90 percent of the 
respondent's sales of a product were at prices below the COP, and the 
sales were made over an extended period of time, we disregarded all 
sales of that product, and calculated FMV based on CV, in accordance 
with section 773(b) of the Act.
    In accordance with section 773(b)(1) of the Act, in order to 
determine whether below-cost sales had been made over an extended 
period of time, we compared the number of months in which below-cost 
sales occurred for each product to the number of months in the POR in 
which that product was sold. If a product was sold in three or more 
months of the POR, we do not exclude below-cost sales unless there were 
below-cost sales in at least three months during the POR. When we found 
that sales of a product only occurred in one or two months, the number 
of months in which the sales occurred constituted the extended period 
of time, i.e., where sales of a product were made in only two months, 
the extended period of time was two months; where sales of a product 
were made in only one month, the extended period of time was one month. 
See Final Determination of Sales at Less Than Fair Value: Certain 
Carbon Steel Butt-Weld Pipe Fittings from the United Kingdom, 60 FR 
10558, 10560 (February 27, 1995).

C. Results of COP Test

    We found that for certain products, between 10 and 90 percent of 
Cinsa's home market sales were sold at below-COP prices over an 
extended period of time. Because Cinsa provided no indication that the 
disregarded sales were at prices that would permit recovery of all 
costs within a reasonable period of time in the normal course of trade, 
in accordance with section 773(b) of the Act, we based FMV on CV for 
all U.S. sales left without a home market sales match as a result of 
our application of the COP test.

D. Calculation of CV

    In accordance with section 773(e)(1) of the Act, we calculated CV 
based on the sum of respondent's cost of materials, fabrication, 
general expenses, packing costs, and profit. In accordance with section 
773(e)(1)(B)(i) and (ii), we used: (1) The actual amount of general 
expenses because those amounts were greater than the statutory minimum 
of ten percent and (2) the actual amount of profit where it exceeded 
the statutory minimum of eight percent on above-cost sales.

Price-to-CV Comparisons

    Where we made CV to PP comparisons, we made a circumstance-of-sale 
(COS) adjustment, where appropriate, for differences in credit expenses 
and bank fees between the two markets. We deducted home market 
commissions and added U.S. indirect selling expenses capped by the 
amount of home market commissions, in accordance with 19 CFR 353.56.

Interested Party Comments

Comment 1: Whether or not Cinsa and ENASA Should be Collapsed

    Petitioner argues that the Department's determination in the 
Preliminary Results not to collapse Cinsa and ENASA, a related 
manufacturer of HG cookware, is contrary to its long-standing practice 
with respect to collapsing related parties. Petitioner claims that, in 
the instant review, Cinsa and ENASA are so closely intertwined that 
there is a strong possibility of manipulation of prices and/or 
production decisions. Petitioner further argues that the Department 
must use a ``totality of the circumstances'' test in its collapsing 
analysis as opposed to determining that the ability to shift production 
between related parties without retooling is the determinative factor.
    Cinsa states that it would not contest a finding by the Department 
that the two companies should be collapsed and

[[Page 25910]]

treated as a single entity given their common ownership, and shared 
board members and managerial employees. However, Cinsa also maintains 
that sufficient evidence exists on the administrative record in this 
case to support the Department's determination in the preliminary 
results not to collapse the two companies. Cinsa argues that the 
administrative record, including the Department's verification of the 
physical differences between HG and LG merchandise, the separate 
production facilities, and the different production processes provide 
sufficient evidence to support the substantial evidence standard for 
determining that the two companies should not be collapsed and treated 
as a single entity.
    DOC Position: The Department will collapse two producers if each of 
three requirements are met: (1) the producers must be ``affiliated''; 
(2) they must have manufacturing facilities sufficiently similar that 
no substantial retooling would be needed to restructure manufacturing 
priorities with respect to the subject merchandise (i.e., that the 
physical infrastructure exists for the two firms to act as one in 
producing the merchandise), and (3) the Department concludes, based on 
a series of listed factors, that there is a significant potential for 
manipulation of price or production (i.e., that the control 
infrastructure exists which would enable the firms to realize any 
ability to shift production or price made possible by the overlapping 
production facilities referred under the second requirement). See 
Antidumping Duties: Countervailing Duties: Notice of Proposed Rule 
Making and Request for Public Comments, 61 FR 7308, 7330 and 7381 
(February 27, 1996), at section 351.401. This proposed regulation 
represents the Department's current practice. The principles underlying 
these criteria have been cited with approval in court decisions. See, 
e.g., FAG Kugelfischer Georg Schafer KGaA v. United States, 932 F. 
Supp. 315, 323 (CIT 1996).
    The verification report states that Cinsa makes only LG cookware 
and ENASA makes only HG cookware, and that extensive and expensive 
retooling appeared to be necessary for Cinsa to produce HG products or 
for ENASA to produce LG products (see November 27, 1995, Verification 
Report at .4). Accordingly, we have determined that the physical 
infrastructures of the two firms are insufficiently similar to meet the 
second requirement of the collapsing test. Further, having made this 
determination, we do not need to examine the questions of significant 
common ownership and interlocking directors and managers. Therefore, it 
is not appropriate to treat these firms as a single entity for the 
purpose of assigning an antidumping margin. However, should changes in 
production occur in the future, we may reexamine this issue in the 
context of subsequent reviews.

Comment 2: Inclusion of HG Cookware Sales to the United States in the 
Review

    Petitioner argues that Cinsa's sales of ENASA-produced HG cookware 
to the United States were made during the POR and therefore should be 
included in the margin calculation. Petitioner contends that the facts 
concerning the appropriate date of sale for these U.S. sales are not in 
dispute, and that Cinsa's contention that the date of sale should be 
the date of ultimate reconciliation contradicts the fact that the sales 
contract was signed during the POR. Petitioner states that almost all 
shipments to the United States, pursuant to the contract, occurred 
during the POR, the subject merchandise was resold to end users during 
the POR, and end users were actually cooking with the merchandise 
during the POR. Petitioner also claims that, because the questionnaire 
states that there can be no new dates of sale after shipment, the date 
of sale for these U.S. sales must be either the date of the contract or 
the dates of shipment to the United States.
    Cinsa contends that the sales in question were not made during the 
POR. Cinsa argues that the Department's definition of date of sale 
expressly contemplates situations where a date ``subsequent to the date 
of shipment * * * may be the appropriate date of sale,'' particularly 
when the quantity terms change subsequent to the date of contract or 
the date of shipment. Cinsa cites Toho Titanium Co., Ltd. v. United 
States (``Toho''), 14 CIT 500, 501 (1990), for the proposition that the 
sale is complete when the essential terms of the transaction are set. 
Cinsa does not dispute that the contract was signed and shipments were 
made during the POR. However, in this particular instance, the quantity 
of HG cookware to be purchased by the customer was to be based solely 
upon the amount of merchandise used by the customer in a promotional 
program that ended outside the POR. Cinsa argues that because the final 
reconciliation of the contract occurred outside the POR, the date of 
sale for all sales of HG cookware was also outside the POR.
    DOC Position: We agree with petitioner. We consider the date of the 
contract between Cinsa's related sales entity, Yamaka China Co., Inc. 
(``Yamaka''), and its unrelated customer to be the date of sale for 
Yamaka's U.S. sales of HG cookware manufactured by ENASA during the 
POR. Thus we have included these sales in our analysis for this review.
    Cinsa has argued that Yamaka's customer had the ability to affect 
the quantity ultimately sold, based on its management of the logistics 
of the promotion. The contract between Yamaka and its unrelated 
customer established the terms on which the quantity to be sold would 
be set: the amount of goods sold through the promotion. Under the 
contract, the customer did not have the discretion to alter or 
renegotiate those terms. In the end, the quantity of goods which is 
sold and not returned will be decided by how much cookware the public 
buys during the promotion. Although the precise amount to be sold was 
not known at the time of the contract, the contract clearly spelled out 
the basis on which it would be determined; hence the contract is 
consummated and the sale made as of June 1994. The situation in this 
review can be distinguished from the situation underlying the CIT's 
decision in Toho. In that case, the contract at issue required a 
minimum purchase and gave the buyer the option of purchasing additional 
product at the same price. The CIT upheld Commerce's decision that the 
quantity in the contract became ``set'' only when the customer issued 
delivery instructions on each optional shipment, since it could have, 
had it chosen, renegotiated the contract price based on its total 
discretion to order beyond the minimum amount. In the instant case, 
there was no minimum purchase requirement in the contract, and the 
customer had no explicit discretion to set quantity that could serve as 
the basis of a future negotiation. Thus, whereas the seller in Toho 
contracted for a minimum amount and made a binding offer as to further 
sales, Yamaka entered into a binding contract for whatever business the 
promotion would generate.
    The fact that Yamaka at the same time contracted to, and later did, 
``repurchase'' cookware which its customer was unable to resell during 
the promotion does not mean that the sales of the cookware eventually 
repurchased were not made. The very fact that the contract refers to 
``repurchase'' rather than to return prior to invoicing, together with 
the fact that partial payment was received on these goods, indicates 
that this was a sale-and-refund arrangement, rather than a sale only of 
those items which were never returned.
    Because the June 1994 contract constitutes a binding agreement in 
the nature of a requirements contract, whereby Yamaka and its customer

[[Page 25911]]

agreed upon the price and quantity (whatever was sold in connection 
with the promotion, with a guarantee of repurchase for items not sold 
at retail), the date of this contract is the appropriate date of sale 
for all cookware sold to the United States in connection with the 
promotion.

Comment 3: Reporting of ENASA's Home Market Sales of HG Cookware Sets

    Petitioner states that during this review the Department sent a 
letter to Cinsa requiring it to report ``all sales of such or similar 
merchandise sold by ENASA in the home market during the 90/60 day 
period surrounding the date of each of ENASA's sales to the United 
States.'' Petitioner maintains that Cinsa did not comply with this 
request because it only submitted ENASA's home market sales of HG open 
stock (i.e., single piece) cookware and did not submit ENASA's home 
market sales of HG cookware sets. The issue, according to petitioner, 
is whether the Department should compare the individual pieces in the 
sets sold in the home market to open stock items sold in the United 
States.
    Cinsa states that, even if the Department concludes that its sales 
of ENASA-produced HG open stock cookware to the United States were made 
during the POR, the Department should decide that reporting was 
properly limited to home market sales of HG cookware that ENASA sold as 
open stock.
    Cinsa further contends that there is no basis to require reporting 
of sales of HG cookware sets since no HG sets were sold to the United 
States. Further, Cinsa argues that the cost of manufacture of a set of 
HG cookware would exceed that of a single piece by more than the 
Department's twenty percent limit on adjustments for differences in 
merchandise when comparing non-identical products.
    DOC Position: Because we decided not to collapse Cinsa and ENASA, 
we compared the prices of sales by Cinsa only to prices of other sales 
by Cinsa. The only HG cookware sold by Cinsa during the POR was open 
stock U.S. sales of cookware manufactured by ENASA. Because Cinsa made 
no home market sales of HG cookware sets during the POR, and only 
Cinsa's sales are being reviewed for this POR, we need not address the 
issue of whether sales of open stock cookware manufactured by ENASA and 
sold by Cinsa should be compared to individual components of HG 
cookware sets (which were sold only by ENASA). Furthermore, because we 
have determined that HG cookware is not properly compared to LG 
cookware (see Product Comparison section of this notice), we need not 
address the issue of whether Cinsa's U.S. sales of HG open stock 
cookware should be compared to Cinsa's sales of LG sets in the home 
market. (For a full discussion of set-splitting see Final Analysis 
Memorandum, page 9).

Comment 4: Cinsa's Failure To Submit COP and CV Data for HG Cookware

    Petitioner contends that Cinsa failed to report cost data with 
respect to sales of (ENASA-manufactured) HG cookware despite being 
required to do so by the questionnaire. Petitioner believes that the 
Department must resort to BIA (suggesting the highest margin calculated 
for any U.S. sale of LG cookware made during the POR) to calculate the 
dumping margin for each HG sale made to the United States. 
Alternatively, petitioner believes that the Department should reopen 
the record, collect cost data for all HG products sold in both the home 
market and the United States, and incorporate these data into the model 
matching, sales-below-cost, and CV analyses used in the final results.
    Cinsa contests petitioner's argument that the Department should use 
BIA in the absence of ENASA's cost information with respect to HG 
cookware. Cinsa states that the statute, at 19 U.S.C. 1677e(b), 
``requires noncompliance with an information request before resorting 
to the best information rule is justified.''
    Cinsa also states that 19 CFR 353.31(c)(i)(ii) specifically 
requires that allegations of below-cost sales must be made in a timely 
manner, in any event prior to the Department's verification and the 
issuance of the preliminary results. Therefore, Cinsa argues that, 
given that the Department never requested cost information for ENASA 
merchandise, and that prior to the preliminary results petitioner 
neither objected to the Department's limited information request nor 
alleged in a timely manner that ENASA's home market sales were made 
below cost, application of BIA would be inappropriate.
    DOC Position: We disagree with petitioner. In its June 5, 1995, 
supplemental questionnaire to Cinsa, the Department requested that 
Cinsa provide ENASA's home market and U.S. sales data as well as start 
up costs for ENASA's production of HG cookware. In response, Cinsa 
argued that reporting home market sales, cost and CV data was 
unnecessary because Cinsa's only sales of ENASA-produced HG cookware 
were made outside the POR. Because the date of sale issue remained 
unresolved for some time and because a review had not been initiated 
for ENASA, we did not pursue our request for ENASA's cost information. 
However, we subsequently determined that these U.S. sales of HG 
cookware were made within the POR (see Comment 2). Rather than unduly 
delay the review at this point to seek cost information for these 
sales, and because the sales of HG cookware constituted only a small 
part of Cinsa's total sales to the United States during the POR, we 
based the margin for these sales of HG cookware on the weighted average 
of all margins calculated for Cinsa's sales of LG cookware to the 
United States.

Comment 5: Inclusion of Home Market Sales of Second-Quality Merchandise 
in the Cost Test

    Petitioner asserts that the exclusion of sales of second-quality 
merchandise from the preliminary cost test is inconsistent with 
standard practice, including the Department's previous practice in 
reviews of imports subject to this order. Accordingly, petitioner 
claims that the Department should revise its preliminary results and 
include Cinsa's home market sales of second-quality merchandise in the 
sales-below-cost test for purposes of the final results.
    Cinsa contends that the Department has determined in this and all 
prior administrative reviews in this case that second-quality articles 
sold in the home market are not comparable to the first-quality 
articles sold to the United States. Thus, according to Cinsa, the 
Department has always excluded second-quality articles from the FMV 
calculation without regard to the results of the Department's cost 
test, which only serves to eliminate first quality home market sales 
sold below cost from consideration in the FMV calculation. Cinsa 
further adds that, since the second-quality articles are never used for 
comparison with any U.S. sales, there is no practical reason for the 
Department to use them to perform the cost test.
    DOC Position: We agree with petitioner and have included in the 
cost test all home market sales of both first and second quality 
merchandise. There are no production cost differences between first and 
second quality merchandise that is otherwise identical. See IPSCO, Inc. 
v. United States, 965 F.2d 1056, 1060-61 (Fed. Cir. 1992). Although in 
certain circumstances Commerce may choose to reduce its own 
administrative burden and simplify reporting by not requiring parties 
to report home market sales of types of merchandise unlikely to be 
matched to

[[Page 25912]]

any U.S. sales, data for second quality merchandise is already on the 
record of this review. Second quality merchandise can be compared to 
first quality merchandise if there are insufficient matches of first 
quality merchandise, and therefore second quality merchandise on the 
record is properly included in the cost test, just as similar 
merchandise is included in the cost test even when there are ample 
identical matches.
    As we did in the fourth review (See Porcelain-on-Steel Cooking Ware 
From Mexico: Final Results of Antidumping Duty Administrative Review, 
58 FR 43327 (August 16, 1993)), we compared only first quality 
merchandise sold in the U.S. market with first quality merchandise sold 
in the home market. We did not in calculating FMV use sales of second 
quality merchandise in the instant review because there were no sales 
of second quality merchandise in the United States--unlike in the 
fourth review where second quality merchandise sold in the United 
States was compared with second quality merchandise sold in the home 
market-- nor were there any instances where available first quality 
home market sales were not adequate for matching purposes.

Comment 6: Calculation of General and Administrative Expenses

    Petitioner argues that, consistent with its practice, the 
Department should have based Cinsa's G&A expenses on the consolidated 
G&A expenses of Grupo Industrial Saltillo, S.A. de C.V. (GIS), not 
Cinsa-specific G&A expenses. Accordingly, petitioner argues that the 
Department should modify its COP/CV calculations and use the ratio of 
GIS's 1993 consolidated G&A expenses to GIS's 1993 consolidated cost of 
goods sold, instead of the Cinsa-specific rate allocable to each 
product sold.
    Cinsa states that the statute requires that the COP and CV of 
merchandise subject to review be calculated in a manner that reflects 
the expenses attributable to the class or kind of merchandise, citing 
19 U.S.C. 1677b(e)(1)(B). In this instance, Cinsa maintains that it is 
the manufacturer, seller, shipper, and exporter of the subject 
merchandise, and that only the G&A expenses borne directly by Cinsa 
itself may be used to calculate COP and CV. Therefore, since GIS is not 
directly involved in any of Cinsa's production or sales activities 
concerning the subject merchandise, attributing all of GIS's G&A 
expenses to the subject merchandise would be inappropriate. Cinsa notes 
that the financial statements of GIS state that the entire household 
division of GIS, which includes Cinsa as well as other producers, only 
accounts for approximately one-third of the consolidated sales value of 
GIS. Cinsa further states that comparison of the total G&A expenses of 
Cinsa to the G&A expense of GIS establishes that the vast majority of 
the G&A expenses recorded in the consolidated GIS financial statement 
is attributable to activities other than Cinsa's production and sales 
of the subject merchandise.
    Cinsa maintains that, in the event the Department uses GIS's G&A 
expenses, the Department should base that calculation on GIS's 1993 and 
1994 financial statements, which were submitted as Appendix 24 to 
Cinsa's July 10, 1995, supplemental response.
    DOC Position: We disagree with petitioner. The petitioner's 
suggestion that the Department modify the COP/CV calculations and use 
the ratio of GIS's 1993 consolidated G&A expenses to GIS's 1993 
consolidated cost of goods sold, is contrary to Department practice. We 
only include a portion of these expenses if the parent performs 
services for the affiliated company (See Final Determination of Sales 
at Less Than Fair Value: Welded Stainless Steel Pipe from Malaysia, 59 
FR 4023, 4027 (January 28, 1994)). Based on the information on the 
record of this review, we used Cinsa's reported G&A factor for the 
final results. The record evidence does not indicate the value of 
services provided by GIS.

Comment 7: The ``Extended Period of Time'' Used in the Cost Test

    Petitioner states that Import Administration Policy Bulletin No. 
94.3 (March 25, 1994) states that the Department will consider below-
cost sales to have been made over an extended period of time only if:

    (a) the respondent sold a model in only one month of the POR and 
certain or all of those sales of the model in that month were below 
cost;
    (b) the respondent sold a model in two months of the POR and 
certain or all of those sales of that model in each of the two 
months were below cost; or
    (c) the respondent sold a model during three or more months of 
the POR and certain or all of those sales of that model in at least 
three of those months were below cost.

Petitioner argues that the Department's policy is arbitrary, unfair to 
petitioner and internally inconsistent. Petitioner believes that a more 
reasonable approach would be to consider below-cost sales made in at 
least 25 percent of the months in which a model was sold to have been 
made ``over an extended period of time.''
    Cinsa points out that the Department's three month test is an 
established Department administrative practice, adopted over two years 
ago and used consistently since that time. Cinsa cites numerous recent 
administrative and court proceedings to support its argument. Cinsa 
contends that petitioner's arguments have been considered repeatedly by 
the Department and the reviewing courts and have been consistently 
rejected. Therefore, Cinsa argues that, for purposes of the final 
results, the Department should continue to apply its standard test to 
determine whether below cost sales have been made over an extended 
period of time.
    DOC Position: We agree with Cinsa. The Department's three month 
test is an established administrative practice which has been affirmed 
by the U.S. Court of International Trade. See, e.g., NTN Bearing Corp. 
v. United States (``NTN Bearing Corp.''), 881 F. Supp. 595, 602 (1995). 
Accordingly, for purposes of the final results, we have applied our 
standard cost test to determine whether below cost sales have been made 
over an extended period of time.

Comment 8: Cinsa's October 3, 1995, Correction to its Home Market Sales 
Listing

    Cinsa argues that the Department's preliminary results incorrectly 
did not reflect the October 3, 1995, revision to the quantity and unit 
price for one transaction in its home market sales listing. Cinsa 
argues that because it notified the Department of the revision, 
including documentary support, approximately seven weeks prior to the 
issuance of the preliminary results, the preliminary results should 
have incorporated this correction.
    Cinsa further argues that petitioner's assertion that Cinsa's 
revision was untimely filed should be disregarded given the decision in 
NTN Bearing Corporation v. United States (``NTN Bearing Corp''), 74 
F.3d 1204 (December 11, 1995). Cinsa argues that the Court of Appeals 
for the Federal Circuit held that the Department has the authority to 
correct inadvertent data input errors made by, and then later 
discovered by a respondent, when such errors were brought to the 
attention of the Department in a timely manner during the comment 
period subsequent to the preliminary results. Cinsa also notes that the 
general 180-day time limit applies to new factual information being 
placed in the administrative record. Cinsa contends that the revision 
to its home market sales listing did not add additional sales or new 
information to

[[Page 25913]]

the record. Moreover, Cinsa claims that the revision is properly part 
of the administrative record and should be taken into account in the 
final results because the Department did not reject the submission 
despite a specific request for rejection by the petitioner. Finally, 
Cinsa argues that under similar circumstances in the fifth 
administrative review, when Cinsa brought corrections to the 
Department's attention prior to the preliminary results, and such 
corrections were not incorporated into the preliminary results, the 
Department agreed with Cinsa over the objection of the petitioner and 
incorporated the necessary corrections into the final results. 
Accordingly, Cinsa argues that since it notified the Department of this 
error prior to the issuance of the preliminary results, the final 
results should incorporate this correction.
    Petitioner argues that the opinion of the Federal Circuit in NTN 
Bearing Corp. simply does not apply in this situation. Petitioner 
states that NTN Bearing Corp. involved an antidumping administrative 
review in which there was no verification. Thus, all information 
submitted in that review was unverified, and the Department was not 
required by the statute to have verified all information relied upon in 
the final results. Petitioner contends that in contrast, the Department 
has no such discretion in this review. Petitioner argues that in this 
review the alleged clerical error represents new, untimely, unsolicited 
information that the Department has not verified; thus, under 19 U.S.C. 
1677e(b), the Department may not use this information, because it would 
be unlawful to rely upon unverified information in the final results of 
this review. Petitioner also believes that even if the Department could 
change this data, Cinsa has not established that any error was made 
because the invoice for this sale, which is the best evidence of the 
transaction, reflects that the unit price used in the preliminary 
results was correct.
    DOC Position: Cinsa's submission of October 3, 1995, does not 
adequately demonstrate why the reported information is incorrect, or 
that its post-verification revision is correct. In fact, the 
documentary evidence submitted in support of the proposed revision 
appears to support the reported information. Without clear documentary 
evidence that the response information is incorrect, and given that 
verification had already occurred at the time of the submission, the 
Department has no means to confirm Cinsa's claim. This situation is 
distinguishable from NTN Bearings Corp., in which supporting 
documentation in NTN's post-disclosure submission clearly indicated 
that an error had, in fact, been made. Merely deciding not to reject a 
submission does not constitute acceptance of the arguments put forth in 
the document. Because Cinsa is not able to establish that the reported 
quantity and unit price are actually erroneous, no revision is 
appropriate.

Comment 9: Inclusion of U.S. Imputed Credit Expenses on Sales to U.S. 
Customers Who Paid by Letter of Credit

    Cinsa argues that the Department's preliminary results improperly 
adjusted for U.S. imputed credit expenses on sales to U.S. customers 
who paid by letter of credit. Cinsa states that its revised U.S. sales 
listing mistakenly failed to list this expense as zero for the sales in 
question. According to Cinsa, the Department verified that two U.S. 
customers paid by letter of credit and did not incur imputed credit 
expenses. Cinsa argues that the final results should incorporate the 
verified information even though Cinsa failed to report it properly.
    Petitioner argues that it is too late in this instance for further 
correction of data when the failure to correct the data is the result 
of Cinsa's own negligence. Petitioner contends that permitting such 
requests would be a disincentive to respondents to respond accurately 
and a burden to administer for the Department.
    DOC Position: We verified that two U.S. customers paid by letter of 
credit and have included the associated bank fees for these letters of 
credit as a COS adjustment. However, Cinsa did not receive payment for 
these sales from its bank immediately upon shipment, but rather some 
time later. In accordance with our standard practice, we have also 
imputed credit expenses for these letter of credit sales for the days 
payment was outstanding between shipment and payment.

Comment 10: Revalued Versus Historical Depreciation

    Cinsa argues that the use of revalued rather than historical 
depreciation distorts Cinsa's COP and is contrary to law because it 
distorts Cinsa's actual fixed overhead cost incurred in producing the 
subject merchandise. Cinsa further states that, in this review, the 
Department verified that revalued depreciation was used for financial 
purposes only, and that historical depreciation is used in company 
records for income tax purposes. Consequently, according to Cinsa, the 
use of revalued depreciation in this case would overstate the actual 
depreciation expenses incurred in producing the subject merchandise, 
since Cinsa's cost and accounting records are maintained using 
historical, not revalued, depreciation.
    Petitioner maintains that the Department uses revalued depreciation 
in its calculation of COP/CV because use of historical acquisition 
costs, unadjusted for high inflation, would distort the measure of 
Cinsa's current depreciation cost. Petitioner cites numerous court 
proceedings to support its argument. Petitioner further states that, 
contrary to Cinsa's argument, the Department's use of revalued 
depreciation costs actually prevents distortion, by ensuring that 
Cinsa's depreciation costs are not understated due to currency 
devaluation resulting from inflation.
    DOC Position: We agree with petitioner and have included Cinsa's 
revalued depreciation expense in the company's COP and CV. We disagree 
with Cinsa's assertion that this methodology distorts the actual 
production costs of subject merchandise. See Results of Redetermination 
Pursuant to Court Remand in Aimcor, Alabama Silicon, Inc. v. United 
States, Ct. No. 93-07-00428 (May 15, 1995) (upheld by Order of the CIT, 
September 15, 1995), and Fresh Cut Roses from Ecuador, 60 FR 7019, 7029 
(February 6, 1995). It is the Department's policy to adhere to the home 
market Generally Accepted Accounting Principles (GAAP) as long as they 
reflect actual costs. Mexican GAAP require Cinsa to use revalued 
depreciation in its financial statements. In this case, we find the use 
of revalued depreciation reasonably reflects Cinsa's actual costs. 
Thus, Mexican GAAP recognize the effect of inflation upon the value of 
assets and require companies to revalue assets to compensate for the 
change. Depreciation enables companies to spread large expenditures on 
purchases of machinery and equipment over the expected useful lives of 
these assets. Not adjusting for the deflation of currency due to 
inflation results in the depreciation deferred to future years being 
understated in constant currency terms and, therefore, distorts the 
Department's COP and CV calculations. Thus, in light of the rate of 
inflation in Mexico during the POR, it would be distortive to use 
historical depreciation in this case.
    The Department's determination to use revalued rather than 
historical depreciation in accordance with home market GAAP was upheld 
by the Court of International Trade in Laclede Steel Co. v. United 
States, 18 CIT 965 (October 12, 1994). In Laclede Steel, the

[[Page 25914]]

Court found that depreciation expense based on the historical method 
rather than depreciation expense based on the revalued method would 
distort the production costs of the company because such a methodology 
would overlook the significant impact that revaluing the assets had on 
the company. We find the Court's analysis in Laclede Steel instructive 
with respect to the instant review. Due to the revaluation of assets as 
reflected on Cinsa's financial statements, Cinsa would enjoy an 
increase to its equity values reflected on the Company's balance sheet, 
a potentially enhanced stock value resulting from greater equity, and 
an improved ability to borrow or acquire capital. Therefore, the 
Department followed Mexican GAAP and adjusted CINSA's COP data to 
reflect the revalued depreciation. We note, although it is not binding 
precedent, that a NAFTA Panel has affirmed the Department's use of 
revalued depreciation for Cinsa in the fifth administrative review. In 
the Matter of Porcelain-on-Steel Cookware From Mexico (``POS Cookware 
NAFTA decision''), USA-95-1904-01 (April 30, 1996), at 31.

Comment 11: Inclusion of Profit Sharing Payments in COP and CV

    Cinsa argues that the inclusion of profit sharing payments as a 
component expense of Cinsa's COP and CV is contrary to law. Cinsa 
asserts that although the statutory definition of CV includes profit, 
the inclusion of an amount for profit, plus an additional amount 
(derived from Cinsa's profit) to account for profit sharing, results in 
the double counting of profits earned. Cinsa argues that in this 
review, profit sharing was inextricably linked to the amount of profit 
earned by Cinsa and was not dependent upon production of the subject 
merchandise. In addition, according to Cinsa, because both profit and 
profit sharing payments are determined at the close of the fiscal 
period, profit sharing payments were not incurred upon the production 
of the subject merchandise and were not incurred prior to exportation 
of the subject merchandise, as required by the statute if included as a 
cost. Finally, Cinsa claims that this payment is similar to dividend 
distributions or income tax payments, which are not included in COP and 
CV.
    Petitioner argues that, consistent with the Department's practice 
in previous administrative reviews of this order, the Department should 
continue to include profit sharing expenses in its calculation of 
Cinsa's COP and CV. Petitioner states that such payments are treated 
like bonuses for accounting purposes, and the Department's practice is 
to treat bonuses as labor costs. See, e.g., Certain Hot-Rolled Carbon 
Steel Flat Products, Certain Corrosion-Resistant Carbon Steel Flat 
Products, and Certain Cut-To-Length Carbon Steel from Canada, 58 FR 
37099, 37113-14 (July 9, 1993).
    Petitioner maintains that Cinsa's argument that profit sharing 
expenses are analogous to income taxes and are ``unrelated to the 
production of the subject merchandise'' is incorrect. Petitioner states 
that profit sharing expenses are more related to production than some 
other forms of compensation, such as health or pension benefits, 
because they are a function of gross revenue and profit, which 
generally vary according to production.
    Petitioner also refutes Cinsa's argument that the inclusion of both 
profit sharing expenses and profit in the CV calculation results in the 
double-counting of profits. Petitioner states that profit sharing 
expenses are not profit, but expenses, i.e., a reduction to profit. 
Petitioner states that the profit that is included in Cinsa's CV is the 
profit that remains after profit sharing expenses have been deducted. 
Therefore, the Department's inclusion of profit sharing expenses in the 
calculation of CV does not double-count profit.
    DOC Position: We disagree with the respondent and have included 
Cinsa's profit sharing expense in COP and CV because it relates to the 
compensation of direct labor, a factor of production. We treat profit-
sharing distributions to employees in a manner similar to bonuses. 
Further, we disagree with Cinsa's argument that the profit-sharing 
expense is similar to profit, dividends, and income tax.
    Profit-sharing is not profit because it is an expense which is a 
reduction to profit. Therefore, profit-sharing is not explicitly 
excluded from COP calculations under 19 CFR 353.51(c). As for Cinsa's 
concern that we double counted profit in its CV, we note that profit-
sharing expense is not part of the Company's ``profit'' included in CV. 
The ``profit'' that is included in Cinsa's CV represents the amount 
that remains after reductions to income, such as the profit-sharing 
expense.
    Cinsa's profit-sharing expense is distinct from dividends in two 
key respects. First, Cinsa's profit-sharing payments represent a legal 
obligation to a productive factor in the manufacturing process and not 
a distribution of profits to the owners of Cinsa. Second, the right to 
participate in profit-sharing conveys no ownership rights in Cinsa.
    Cinsa's profit-sharing expense is unlike an income tax because it 
is paid to labor. Thus, unlike income taxes paid to the government, 
profit sharing payments flow directly to a factor of production. Also, 
Cinsa's income tax is based on taxable income that is net of Cinsa's 
profit-sharing expense.
    We note that, although it is not binding precedent, a NAFTA Panel 
has affirmed the Department's inclusion of Cinsa's profit-sharing in 
COP and CV in the fifth administrative review. See POS Cookware NAFTA 
Decision, at 37-39.
Final Results of Review
    As a result of our review, we determine that the following margin 
exists for the period December 1, 1993, through November 30, 1994:

------------------------------------------------------------------------
                                                                Margin  
          Manufacturer/exporter             Review period     (percent) 
------------------------------------------------------------------------
Cinsa 1.................................   12/1/93-11/30/94         6.55
------------------------------------------------------------------------
1 Includes sales by Cinsa of HG merchandise manufactured by ENASA. No   
  review was requested of any sales which ENASA may have had to the     
  United States for this POR.                                           

    The Department shall determine, and the Customs Service shall 
assess, antidumping duties on all appropriate entries. Individual 
differences between USP and FMV may vary from the percentages stated 
above. The Department will issue appraisement instructions directly to 
the Customs Service.
    Further, the following deposit requirement will be effective for 
all shipments of subject merchandise from Mexico entered, or withdrawn 
from warehouse, for consumption on or after the publication date of the 
final results of this administrative review, as provided by section 
751(a)(1) of the Tariff Act: (1) The cash deposit rate for the reviewed 
company will be as outlined above; (2) for merchandise exported by 
manufacturers or exporters not covered in this review but covered in 
previous reviews or the original less-than-fair-value (LTFV) 
investigation, the cash deposit rate will continue to be the rate 
published in the most recent final results or determination for which 
the manufacturer or exporter received a company-specific rate; (3) if 
the exporter is not a firm covered in this review, an earlier review, 
or the LTFV investigation, but the manufacturer is, the cash deposit 
rate will be that established for the manufacturer of the merchandise 
in the final results of this review, earlier reviews, or the LTFV 
investigation, whichever is the most recent; (4) the cash deposit rate 
for all other manufacturers or exporters, including ENASA, will be 
29.52 percent, the ``all others'' rate established

[[Page 25915]]

in the original LTFV investigation by the Department.
    These cash deposit requirements, when imposed, shall remain in 
effect until publication of the final results of the next 
administrative review.
    This notice also serves as a final reminder to importers of their 
responsibility under 19 CFR 353.26 to file a certificate regarding the 
reimbursement of antidumping duties prior to liquidation of the 
relevant entries during this review period. Failure to comply with this 
requirement could result in the Secretary's presumption that 
reimbursement of antidumping duties occurred and the subsequent 
assessment of double antidumping duties.
    This notice also serves as the only reminder to parties subject to 
administrative protective order (APO) of their responsibility 
concerning the disposition of proprietary information disclosed under 
APO in accordance with 19 CFR 353.34(d). Timely written notification of 
return/destruction of APO materials or conversion to judicial 
protective order is hereby requested. Failure to comply with the 
regulations and terms of the APO is a sanctionable violation.
    This administrative review and notice are in accordance with 
section 751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1)) and 19 CFR 
353.22.

    Dated: May 5, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-12396 Filed 5-9-97; 8:45 am]
BILLING CODE 3510-DS-P