[Federal Register Volume 62, Number 175 (Wednesday, September 10, 1997)]
[Notices]
[Pages 47626-47632]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-24000]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-201-802]


Preliminary Results of Antidumping Duty Administrative Review 
Gray Portland Cement and Clinker From Mexico

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

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

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SUMMARY: In response to requests from interested parties, the 
Department of Commerce is conducting an administrative review of the 
antidumping duty order on gray portland cement and clinker from Mexico. 
The review covers exports of subject merchandise to the United States 
during the period August 1, 1995, through July 31, 1996, and one firm, 
CEMEX, S.A., and its affiliated party Cementos de Chihuahua, S.A. de 
C.V. The results of this review indicate the existence of dumping 
margins for the period.
    We invite interested parties to comment on these preliminary 
results. Parties who submit arguments in this proceeding are requested 
to submit with the argument (1) a statement of the issue, and (2) a 
brief summary of the argument.

EFFECTIVE DATE: September 10, 1997.

FOR FURTHER INFORMATION CONTACT: Steven Presing, Kristen Smith or 
Kristen Stevens, Office VII, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, N.W., Washington, DC 20230; telephone (202) 482-
3793.

SUPPLEMENTARY INFORMATION:

Applicable Statute and Regulations

    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 Round Agreements Act (URAA). In addition, unless otherwise 
indicated, all citations to the Department's regulations are to the 
regulations at 19 CFR part 353 (April 1997).

Background

    On August 12, 1996, the Department of Commerce (the Department) 
published in the Federal Register a Notice of Opportunity to Request 
Administrative Review of the antidumping duty order on gray portland 
cement and clinker from Mexico for the above-referenced period (61 FR 
156, August 12, 1996). In accordance with 19 CFR 353.22, CEMEX, S.A. 
(CEMEX) and the Petitioner, the Southern Tier Cement Committee, 
requested a review of CEMEX. On October 17, 1996, the Department 
published a Notice of Initiation of Antidumping Review (61 FR 181, 
September 17, 1996). The Department is now conducting a review of this 
Respondent pursuant to section 751 of the Act.

Scope of Review

    The products covered by this review include gray portland cement 
and clinker. Gray portland cement is a hydraulic cement and the primary 
component of concrete. Clinker, an intermediate material product 
produced when manufacturing cement, has no use other than of being 
ground into finished cement. Gray portland cement is currently 
classifiable under the Harmonized Tariff Schedule (HTS) item number 
2523.29 and cement clinker is currently classifiable under number 
2523.10. Gray portland cement has also been entered under number 
2523.90 as ``other hydraulic cements.'' The HTS subheadings are 
provided for convenience and U.S. Customs Service (the Customs Service) 
purposes only. The Department's written description remains dispositive 
as to the scope of the product coverage.

Verification

    As provided in section 782(i) of the Act, we verified information 
provided by the Respondent using standard verification procedures, 
including on-site inspection of the manufacturer's facilities and the 
examination of relevant sales and financial records. Our verification 
results are outlined in verification reports in the official file for 
this case (public versions of these reports are on file in room B-099 
of the Department's main building).

Collapsing

    On May 19, 1997, the Department published new regulations (62 FR 
27296, May 19, 1997). Although this proceeding is not governed by those 
regulations, they are instructive where they describe current 
Department practice and policy. Section 351.401(f) of the new 
regulations, 62 FR at 27410, describes the Department's current policy 
regarding when it will treat two or more producers as a single entity 
(i.e., ``collapse'' the firms) for purposes of calculating a dumping 
margin. See also

[[Page 47627]]

Gray Portland Cement and Clinker from Mexico; Final Results of 
Antidumping Duty Administrative Review (62 FR 17148, 17154, April 9, 
1997). The regulations provide that the Department will treat two or 
more producers as a single entity where (1) the producers are 
affiliated; (2) the producers have production facilities that are 
sufficiently similar so that a shift in production would not require 
substantial retooling; and (3) there is a significant potential for the 
manipulation of price. For this last criterion, the Department may 
consider (a) the level of common ownership; (b) whether managerial 
employees or board members of one of the affiliated producers sit on 
the board of the other affiliated producer; and (c) whether operations 
are intertwined, such as through the sharing of sales information, 
involvement in production and pricing decisions, the sharing of 
facilities or employees, or significant transactions between affiliated 
producers. In the current review, CEMEX had equity ownership of over 5 
percent in Cementos de Chihuahua, S.A. de C.V. (CDC); therefore, we 
have preliminarily found that the two parties are affiliated. In 
addition, CDC and CEMEX have similar production processes and 
facilities. Therefore, a shift in production would not require 
substantial retooling. Finally, in regards to the last criterion, the 
Department reviewed levels of common ownership, shared board members, 
and intertwined business relations, and found a significant potential 
for the manipulation of price. As a result, the Department has 
preliminarily concluded that these affiliated producers should be 
treated as a single entity and that a single, weighted-average margin 
should be calculated for these companies. (A complete analysis of this 
issue is contained in a memorandum from Roland L. MacDonald to Joseph 
A. Spetrini, dated September 2, 1997, located in the official file of 
this case.)

Duty Absorption

    On September 30, 1996, Petitioner requested that the Department 
determine whether Respondent had absorbed antidumping duties during the 
POR. Section 751(a)(4) of the Act provides for the Department, if 
requested, to determine during an administrative review initiated two 
or four years after the publication of the order, whether antidumping 
duties have been absorbed by a foreign producer or exporter. The 
Department's interim regulations do not address this provision of the 
Act.
    For transition orders as defined in section 751(c)(6)(C) of the 
Act, i.e., orders in effect as of January 1, 1995, section 
351.213(j)(2) of the Department's new antidumping regulations provides 
that the Department will make a duty-absorption determination, if 
requested, for any administrative review initiated in 1996 or 1998. See 
62 FR 27394 (May 19, 1997). Because the antidumping duty order on 
Mexican cement has been in effect since 1990, this order is a 
transition order in accordance with section 751(c)(6)(C) of the Act. 
(See Antifriction Bearings (Other Than Tapered Roller Bearings) and 
Parts Thereof from France, et. al,: Preliminary Results of Antidumping 
Administrative Review (62 FR 31568, June 10, 1997). The preamble to the 
new antidumping regulations explains that reviews initiated in 1996 
will be considered initiated in the second year, and reviews initiated 
in 1998 will be considered initiated in the fourth year (62 FR 27317, 
May 19, 1997). This approach ensures that interested parties will have 
the opportunity to request a duty-absorption determination prior to the 
time for a sunset review of the order under section 751(c) of the Act 
on entries for which the second and fourth years following an order 
have already passed. Since this review was initiated in 1996, and a 
request was made for a determination, we are making a duty-absorption 
determination as part of this administrative review.
    The statute provides for a determination on duty absorption if the 
subject merchandise is sold in the United States through an affiliated 
importer. In this case, Respondent sold through importers that are 
affiliated within the meaning of section 751(a)(4) of the Act. 
Furthermore, we have preliminarily determined that CEMEX has margins on 
92.59 percent of its U.S. sales.
    We presume that duties will be absorbed for sales which were 
dumped. See Antifriction Bearings (Other Than Tapered Roller Bearings) 
and Parts Thereof from France, et.al,: Preliminary Results of 
Antidumping Administrative Review (62 FR 31568, June 10, 1997). Our 
duty-absorption presumption can be rebutted with evidence that the 
unaffiliated purchasers in the United States will pay the ultimately 
assessed duty. However, there is no such evidence on the record. Under 
these circumstances, we preliminarily find that antidumping duties have 
been absorbed by CEMEX on the percentage of U.S. sales indicated.

Transactions Reviewed

    In accordance with section 751 of the Act, the Department is 
required to determine the normal value (NV) and export price (EP) or 
constructed export price (CEP) of each entry of subject merchandise. 
Because there can be a significant lag between entry date and sale date 
for CEP sales, it has been the Department's practice to examine U.S. 
CEP sales during the period of review. See Gray Portland Cement and 
Clinker from Japan; Final Results of Antidumping Duty Administrative 
Review (58 FR 48826, 1993) (Department did not consider ESP (now CEP) 
entries which were sold after the POR). The Court of International 
Trade has upheld the Department's practice in this regard. See The Ad 
Hoc Committee of Southern California Producers of Gray Portland Cement 
v. United States, Slip Op. 95-195 (CIT 1995.)

Fair Value Comparisons

    To determine whether sales of gray portland cement by Respondent to 
the United States were made at less than fair value, we compared the EP 
or CEP to the NV as described in the ``Export Price and Constructed 
Export Price'' and ``Normal Value'' sections of this notice. In 
accordance with section 777A(d)(2), we calculated monthly weighted-
average prices for NV and compared these to individual U.S. 
transactions, during the same month and at the same level of trade.

Export Price and Constructed Export Price

    We used EP, in accordance with subsections 772 (a) and (c) of the 
Act, where the subject merchandise was sold directly or indirectly to 
the first unaffiliated purchaser in the United States prior to 
importation and CEP was not otherwise warranted based on the facts of 
the record. In addition, we used CEP in accordance with subsections 772 
(b), (c), and (d) of the Act, for those sales to the first unaffiliated 
purchaser that took place after importation into the United States.
    We calculated EP based on delivered prices to unaffiliated 
customers in the United States. Where appropriate, we made adjustments 
from the starting price for early payment discounts, foreign inland 
freight, foreign brokerage and handling, international freight, U.S. 
inland freight, U.S. brokerage and handling, and U.S. customs duties. 
We also adjusted the starting price for billing adjustments to the 
invoice price.
    We calculated CEP based on delivered prices to unaffiliated 
customers. Where appropriate, we made adjustments for

[[Page 47628]]

early payment discounts and corrections for billing errors. We deducted 
direct and indirect selling expenses, including imputed credit expenses 
and inventory carrying costs, that related to commercial activity in 
the United States in accordance with section 772(d) of the Act. We also 
made deductions for foreign brokerage and handling, foreign inland 
freight, international freight, U.S. inland freight, U.S. brokerage and 
handling, and U.S. duty in accordance with section 772(c)(2) of the 
Act. Finally, we made an adjustment for CEP profit in accordance with 
section 772 (d)(3) of the Act.

Further Manufacturing

    With respect to subject merchandise to which value was added in the 
United States prior to sale to unaffiliated U.S. customers (e.g., 
cement that was imported and further processed into finished concrete 
by U.S. affiliates of foreign exporters), we determined that the 
special rule for merchandise with value added after importation under 
section 772(e) of the Act was applicable.
    Section 772(e) of the Act provides that, where the subject 
merchandise is imported by an affiliated person and the value added in 
the United States by the affiliated person is likely to exceed 
substantially the value of the subject merchandise, we shall determine 
the CEP for such merchandise using the price of identical or other 
subject merchandise if there is a sufficient quantity of sales to 
provide a reasonable basis for comparison and we determine that the use 
of such sales is appropriate. If there is not a sufficient quantity of 
such sales or if we determine that using the price of identical or 
other subject merchandise is not appropriate, we may use any other 
reasonable basis to determine the CEP.
    To determine whether the value added is likely to exceed 
substantially the value of the subject merchandise, we estimated the 
value added based on the difference between the averages of the prices 
charged to the first unaffiliated purchaser for the merchandise as sold 
in the United States and the averages of the prices paid for subject 
merchandise by the affiliated person. Based on this analysis, we 
estimated that the value added was at least 65 percent of the price 
charged to the first unaffiliated purchaser for the merchandise as sold 
in the United States. Therefore, we preliminarily determine the value 
added is likely to exceed substantially the value of the subject 
merchandise. In addition, sales of identical and other subject 
merchandise were made in sufficient quantities to serve as a basis for 
comparison. Accordingly, for purposes of determining dumping margins 
for these sales, we have used the weighted-average CEP calculated on 
sales of identical or other subject merchandise sold to unaffiliated 
persons.
    No other adjustments to EP or CEP were claimed or allowed.

Normal Value

    In order to determine whether there was a sufficient volume of 
sales in the home market to serve as a viable basis for calculating NV, 
we compared Respondent's volume of home market sales of the foreign 
like product to the volume of U.S. sales of the subject merchandise in 
accordance with section 773(a)(1)(C) of the Act. Since Respondent's 
aggregate volume of home market sales of the foreign like product was 
greater than five percent of its aggregate volume of U.S. sales for the 
subject merchandise, we determined the home market was viable. 
Therefore, we have based NV on home market sales.
    In particular, we based NV on home market sales of Type I cement by 
CEMEX and CDC. The statute expresses a preference for matching U.S. 
sales to identical merchandise in the home market. However, in 
situations where identical product types cannot be matched, the statute 
expresses a preference for basing NV on sales of similar merchandise. 
See section 773(a)(1)(B) and 771(16) of the Act. The history of this 
order demonstrates (and no party disputes) that, of the various types 
of cement subject to the order on Mexican cement, Type I cement is most 
similar to Type II and Type V cement, and pozzolanic cement is the 
least similar.
    During the POR, CDC only sold one type of cement in Mexico subject 
to the antidumping order-Type I cement. CEMEX, on the other hand, sold 
four basic types of cement in Mexico during the POR--Type I, Type II, 
Type V and pozzolanic. However, at verification the Department 
discovered that all of the merchandise produced at the Yaqui and 
Campana plants was either Type V or pozzolanic. In other words, cement 
sold as Type I and Type II from these plants was actually Type V. Since 
we received this information at such a late date, the Department was 
not able to determine whether these sales of Type I cement provide an 
appropriate basis for calculating NV. For example, the Department does 
not know whether these sales were made above cost or within the 
ordinary course of trade. In short, our sales and cost data base for 
these sales of Type I cement (produced at either Yaqui or Campana) is 
extremely flawed. Therefore, as facts available, the Department finds 
these sales to be an inappropriate basis for NV and is excluding them 
from its calculations.
    As for CEMEX's home market sales of Type II and Type V cement 
during the POR, the Department has preliminarily determined that they 
are outside the ordinary course of trade. As more fully described in 
the ``Ordinary Course of Trade'' section of this notice, these sales 
are not representative of CEMEX's home market sales.
    Where appropriate, we adjusted home market sales of Type I cement 
for discounts, credit expenses, inland freight, and inland insurance. 
We also adjusted the starting price for billing adjustments to the 
invoice price. In addition, in accordance with section 773(a)(6), we 
deducted home market packing costs and added U.S. packing costs.
    We made adjustments, where appropriate, for physical differences in 
merchandise (DIFMER) in accordance with section 773 (a)(6)(C)(ii) of 
the Act. For CDC's sales, we calculated a DIFMER adjustment using plant 
specific cost data reported by CDC. For sales made by CEMEX, we 
preliminarily determine, in accordance with section 776 of the Act, 
that the use of partial facts available for a DIFMER adjustment is 
appropriate, and that such partial facts available should be based on 
an adverse inference. Accordingly, we have applied a twenty percent 
upward adjustment (the maximum usually permitted by the Department) as 
adverse facts available.
    Section 776(a) of the Act requires that the Department use facts 
otherwise available when necessary information is not on the record, or 
an interested party withholds requested information, fails to provide 
such information in a timely manner, significantly impedes a 
proceeding, or provides information that cannot be verified. Section 
776(b) of the Act authorizes the Department to use an adverse inference 
in determining the facts otherwise available whenever an interested 
party has failed to cooperate with the Department by not acting to the 
best of its ability to comply with requests for information. Section 
776(b) authorizes the Department to base adverse facts available on 
information derived from the petition, the final determination in the 
investigation, a previous administrative review, or other information 
placed on the record.
    At verification, the Department found that the DIFMER reported by 
CEMEX was based not on physical differences, but an allocation of costs 
between Type I and Type II cement sales for what was in fact the same 
physical product--Type

[[Page 47629]]

V cement (see below). This information could not be used for purposes 
of the DIFMER calculation, and other information on the record is not 
appropriate for this purpose. Thus, pursuant to section 776(b) and 
782(e) of the Act, the Department had to rely on facts available for 
the DIFMER adjustment. In addition, we determined that CEMEX 
significantly impeded the review by not informing the Department until 
verification that there were no physical differences in any cement 
(other than pozzolanic) produced at Yaqui. As explained below, this 
failure prevented the Department from collecting and analyzing other 
information that could have been used to calculate the DIFMER 
adjustment.
    The Department first requested DIFMER information from CEMEX on 
September 23, 1996. CEMEX was asked to base its DIFMER calculations on 
differences in physical characteristics between Type I cement sold in 
Mexico and the type of cement being exported to the United States. 
CEMEX did not supply DIFMER information in response to this request. On 
December 24, 1996, in a supplemental questionnaire, the Department 
requested for the second time that CEMEX submit DIFMER information. On 
February 14, 1997, CEMEX reported variable cost information for Type I 
cement at 11 plants, including the Yaqui facility, and information for 
Type II cement for the Campana and Yaqui facilities. On March 10, 1997 
the Department sent another supplemental questionnaire requesting that 
CEMEX quantify the DIFMER. In response, CEMEX stated that ``differences 
in VCOM (variable cost of manufacturing) reflect differences in 
physical characteristics for Type I and Type II cement.'' In other 
words, CEMEX asserted that the Campana and Yaqui facilities produced 
different types of cement (Type I and Type II at Yaqui and Type II and 
Type V at Campana), each having different physical characteristics. At 
verification, the Department found that the VCOM reported by CEMEX for 
the Yaqui and Campana facilities was based on sales allocations, not 
physical differences. In fact, only one type of cement (other than 
pozzolanic) is produced at these plants--Type V. Although CEMEX 
produces only Type V at Yaqui, it sells this Type V cement sometimes as 
Type I and sometimes as Type II. In other words, CEMEX sold Type V 
cement to customers only requiring Type I or Type II cement. These 
facts rendered the reported DIFMER data unusable.
    Furthermore, it is not appropriate to use other information on the 
record as a basis for a DIFMER adjustment. We determined in the last 
administrative review that it is not appropriate to use the weighted-
average VCOM of all plants producing Type I and the VCOM of the U.S. 
merchandise due to efficiency differences between plants. Thus, we 
relied in that review on the purported VCOM differences for merchandise 
produced at Yaqui. Because we did not learn until verification in the 
instant review that in fact only one type of cement was produced at 
Yaqui and thus there were no cost differences, we were precluded from 
properly considering other appropriate alternatives for a DIFMER 
adjustment. For example, we did not have an opportunity to solicit 
comments and obtain information about differences in production 
processes, plant efficiencies, and material inputs that may have 
provided an appropriate basis for a DIFMER adjustment.
    Therefore, we have applied to CDC's home market sales a calculated 
DIFMER based upon plant-specific reported data, and as adverse facts 
available, applied a twenty percent upward adjustment for CEMEX's sales 
in the home market. See CEMEX S.A. v. United States, Slip Op. 96-132 at 
9 (CIT 1996), appeal pending, Appeal No. 97-1151 (Fed. Cir.) (upholding 
the use of 20% adverse DIFMER under similar circumstances).

A. Arm's-Length Sales

    Sales to affiliated customers in the home market not made at arm's 
length were excluded from our analysis. To test whether these sales 
were made at arm's length, we compared the starting prices of sales to 
affiliated and unaffiliated customers, net of all movement charges, 
direct and indirect selling expenses, discounts and packing. Where the 
price to the affiliated party was on average 99.5 percent or more of 
the price to the unaffiliated parties, we determined that the sales 
made to the affiliated party were at arm's length.

B. Cost of Production Analysis

    Petitioner alleged, on December 12, 1996, that CEMEX and its 
affiliate, CDC, sold gray portland cement and clinker in the home 
market at prices below their cost of production (COP.) Based on these 
allegations, the Department determined, on January 3, 1997, that it had 
reasonable grounds to believe or suspect that CEMEX had sold the 
subject merchandise in the home market at prices below the COP. 
Therefore, pursuant to section 773(b)(1) of the Act, we initiated a COP 
investigation in order to determine whether CEMEX and CDC made home 
market sales during the POR at prices below their COP.
    In accordance with section 773(b)(3) of the Act, we calculated an 
average monthly COP based on the sum of the costs of materials and 
fabrication employed in producing the foreign like product plus 
selling, general and administrative (SG&A) expenses and all costs and 
expenses incidental to placing the foreign like product in condition 
ready for shipment. In our COP analysis, we used the home market sales 
and COP information provided by the Respondent in its questionnaire 
responses.
    After calculating an average monthly COP, we tested whether home 
market sales of cement were made at prices below COP within an extended 
period of time in substantial quantities and whether such prices permit 
recovery of all costs within a reasonable period of time. We compared 
model-specific average monthly COPs to the reported home market prices 
less any applicable movement charges, discounts and rebates. In 
determining whether to disregard home market sales made at prices below 
the average COP, we examined (1) whether, within an extended period of 
time, such sales were made in substantial quantities, and (2) whether 
such sales were made at prices which permitted the recovery of all 
costs within a reasonable period of time in the normal course of trade.
    Pursuant to section 773(b)(2)(C) of the Act, because less than 20 
percent of the Respondent's sales of the foreign like product under 
consideration for the determination of NV were at prices less than COP, 
we did not disregard any below-cost sales of the product.

C. Inflation

    Mexico experienced significant inflation during the POR, as 
measured by the consumer price index published in International 
Financial Statistics and the consumer price index from the Bank of 
Mexico. This data indicated that the annual inflation rate in Mexico 
during the POR exceeded 40 percent. In accordance with our practice, to 
avoid the distortions caused by the effects of this level of inflation 
in prices, we limited our comparisons to sales in the same month. See 
Notice of Final Determination of Sales at Less Than Fair Value: Certain 
Steel Concrete Reinforcing Bars from Turkey ( 62 FR 9738, March 4, 
1997). When the rate of home market inflation is significant, as it is 
in this case, it is important that we use as a basis for NV home market 
prices that are as contemporaneous as possible with the date of the 
U.S. sale. This is to minimize the extent to which calculated dumping 
margins are overstated or understated solely due to

[[Page 47630]]

price inflation that occurred in the intervening time period between 
the U.S. and home market sales. We have also used monthly cost of 
production data for this reason.

D. Currency Conversion

    The Department's preferred source for daily exchange rates is the 
Federal Reserve Bank. For purposes of the preliminary results, we made 
currency conversions based on the official exchange rates in effect on 
the dates of the U.S. sales as certified by the Federal Reserve Bank of 
New York pursuant to section 773(a) of the Act.
    Section 773A(a) directs the Department to use a daily exchange rate 
in order to convert foreign currencies into U.S. dollars, ignoring any 
``fluctuations.'' We determine that a fluctuation exists when the daily 
exchange rate differs from a bench mark rate by 2.25 percent or more. 
The benchmark rate is defined as the rolling average of the rates for 
the past 40 business days as reported by the Federal Reserve Bank of 
New York. When we determine that a fluctuation existed, we substitute 
the benchmark rate for the daily rate. For a complete discussion of the 
Department's exchange rate methodology, see ``Change in Policy 
Regarding Currency Conversions'' (61 FR 9434, March 8, 1996).

E. Ordinary Course of Trade

    Section 773(a)(1)(B) of the Act requires the Department to base NV 
on ``the price at which the foreign like product is first sold (or in 
the absence of sales, offered for sale) for consumption in the 
exporting country, in the usual commercial quantities and in the 
ordinary course of trade.'' Ordinary course of trade is defined as 
``the conditions and practices which, for a reasonable time prior to 
the exportation of the subject merchandise, have been normal in the 
trade under consideration with respect to merchandise of the same class 
or kind.''
    The purpose of the ordinary course of trade provision ``is to 
prevent dumping margins from being based on sales which are not 
representative'' of the home market. Monsanto Co. v. United States, 698 
F. Supp. 275, 278 (CIT 1988). By basing the determination of NV upon 
representative sales, the provision helps to ensure that the comparison 
between NV and U.S. sales is done on an ``apples to apples'' basis.
    Apart from identifying certain sales that are below cost (Section 
773(b)(1)) or between affiliated persons (section 773(f)(2)), Congress 
has not specified any criteria that the Department should use in 
determining the appropriate ``conditions and practices'' which are 
``normal in the trade under consideration.'' Therefore, ``Commerce, in 
its discretion, chooses how best to analyze the many factors involved 
in a determination of whether sales are made within the ordinary course 
of trade.'' Thai Pineapple Public Co. v. United States, 946 F. Supp. 
11, 14-17 (CIT 1996).
    The Department's ordinary course-of trade inquiry is far-reaching. 
It evaluates not just `` `one factor taken in isolation but rather . . 
. all the circumstances particular to the sales in question.' '' Murata 
Mfg. Co. v. United States, 820 F. Supp. 603, 607 (CIT 1993). In short, 
we examine the totality of the facts in each case to determine if sales 
are being made for ``unusual reasons'' or under ``unusual 
circumstances.'' Electrolytic Manganese Dioxide from Japan; Final 
Results of Antidumping Duty Administrative Review (58 FR 28551, 28552, 
1993).
    In the second administrative review of this order, the Department 
determined that CEMEX's sales of Type II and Type V cement were outside 
the ordinary course of trade and, therefore, could not be used in the 
calculation of NV (then referred to as ``foreign market value''). See 
Gray Portland Cement and Clinker from Mexico: Final Results of 
Antidumping Duty Administrative Review (58 FR 47253, 27254, Sept. 8, 
1993). In making this determination, the Department considered, inter 
alia, shipping distances and costs, sales volume, profit levels, sales 
history, home market demand and the promotional aspect of sales. See 
Decision Memorandum to Joseph A. Spetrini, August 31, 1994; see also 
Memorandum from Holly A. Kuga to Joseph A Spetrini, August 31, 1993 
(public versions of these memoranda are on file in Room B-099 of the 
Department's main building). Based upon similar facts and using a 
similar analysis, the Department reached the same conclusion in the 
final results of the fifth administrative review for certain sales of 
Type II cement by CEMEX in Mexico. Gray Portland Cement and Clinker 
from Mexico: Final Results of Antidumping Duty Administrative Review 
(62 FR 17148, 17151, April 9 1997).
    In the instant review, Petitioner alleged, as it did in the second 
review, that CEMEX's sales of Type II cement in Mexico were outside the 
ordinary course of trade. Based on this allegation and the relevant 
findings in the prior review, the Department determined that it had 
reasonable grounds to believe or suspect that CEMEX's home market sales 
of Type II cement were outside the ordinary course of trade. Therefore, 
pursuant to section 773(a)(1)(B) of the Act, the Department has 
examined the totality of the circumstances surrounding CEMEX's sales of 
cement in Mexico that are marketed as Type II cement (which are 
identical in physical characteristics to the cement that CEMEX sells in 
the United States).
    A full discussion of our preliminary conclusions, requiring 
reference to proprietary information, is contained in a Departmental 
memorandum in the official file for this case (a public version of this 
memorandum is on file in room B-099 of the Department's main building). 
Generally, however, we have found: (i) The volume of Type II home 
market sales is extremely small compared to sales of other cement 
types, (ii) the number and type of customers purchasing Type II cement 
is substantially different from other cement types, (iii) shipping 
distances and freight costs for Type II home market sales is 
significantly greater than for sales of other cement types, and (iv) 
CEMEX's profit on Type II sales is small in comparison to its profits 
on all cement types.
    There are two other factors, historical sales trends and the 
``promotional quality'' of Type II cement sales, which were considered 
in the second review ordinary-course-of-trade analysis. On March 10, 
1997, the Department issued a questionnaire requesting CEMEX to support 
its position that home market sales of Type II cement were in the 
ordinary course of trade by addressing, among other things, 
``historical sales trends'' and ``marketing reasons for sales other 
than profit.'' CEMEX's response (copies of its submission from the 
fifth administrative review), failed to address these two items. Thus, 
as facts available, the Department finds that the facts regarding these 
items have not changed since the second review and that: (i) CEMEX did 
not sell Type II cement until it began production for export in the 
mid-eighties, despite the fact that a small domestic demand for such 
existed prior to that time; and, (ii) sales of Type II cement continue 
to exhibit a promotional quality that is not evidenced in CEMEX's 
ordinary sales of cement (see memorandum from Holy A. Kuga to Joseph A. 
Spetrini, dated August 31, 1993). (A public version of this memorandum 
is on file in room B-099 of the Department's main building.)
    For the reasons stated above, the Department has preliminarily 
determined that CEMEX's home market sales of Type II cement during the 
review period were outside the ordinary course of trade. We note that 
the facts established in the record of this review

[[Page 47631]]

are very similar to the facts which led the Department to determine in 
the second and fifth reviews that home market sales of Type II cement 
were outside the ordinary course of trade. The determination involving 
the second review, as noted above, was affirmed by the CIT in the CEMEX 
case. Slip Op. 95-72 at 14.
    We have also preliminarily determined that home market sales of 
Type V cement by CEMEX during the POR are also outside the ordinary 
course of trade. As more fully described in the above-mentioned agency 
memorandum, these sales share many attributes with CEMEX's sales of 
Type II cement. First, the volume of these sales, either individually 
or in combination with sales of Type II cement, is extremely small 
compared to sales of Type I cement. Second, shipping distances and 
freight costs for sales of Type V cement are significantly greater than 
for sales of Type I. Third, the number and type of customers purchasing 
Type V cement is substantially different from those purchasing Type I.
    As part of this analysis, we have also determined, based upon the 
facts otherwise available, that: (i) CEMEX did not sell Type V cement 
in Mexico until it began production for export in the mid-eighties, 
despite the fact that a small domestic demand for such existed prior to 
that time; and, (ii) sales of Type V cement continue to exhibit (as 
they did in the second review) a promotional quality that is not 
evidenced in CEMEX's ordinary sales of cement. We believe that this use 
of facts available is warranted and appropriate. First, the Department 
did not learn until verification that these sales of Type V involved 
cement physically identical to the cement that CEMEX sold in Mexico 
(and the United States) as Type II. Had Respondent disclosed this fact 
earlier in the review, we could have expanded our ordinary-course-of-
trade inquiry for Type II sales, including the scope of verification 
and our questionnaires, to include home market sales of the physically 
identical Type V cement. Second, as noted above, the Type V and Type II 
sales involve physically identical merchandise marketed under similar 
conditions and circumstances (e.g., low sales volume shipped unusually 
long distances). Therefore, it is reasonable, as facts available, to 
extend the results of our inquiry concerning the history of Type II 
sales and their promotional nature to the Type V sales as well. We also 
note that those results are consistent with our findings in the second 
review concerning sales of Type V cement.
    In conclusion, the decision to exclude sales of Type II and Type V 
cement from the calculation of NV centers around the unusual nature and 
characteristics of these sales compared to the vast majority of CEMEX's 
other home market sales. Based upon these differences, the Department 
has preliminarily determined that they are not representative of 
CEMEX's home market sales. Stated differently, these sales were not 
within CEMEX's ordinary course of trade.

F. Fictitious Market

    Petitioner has also claimed that CEMEX established a fictitious 
market in Mexico for its sales of ``Type II'' cement. Since the sales 
in question have preliminarily been found to be outside the ordinary 
course of trade and, accordingly, will not be used in the calculation 
of NV, it is not necessary for us to address this issue for these 
preliminary results.

G. Level of Trade

    To the extent practicable, we determine NV for sales at the same 
level of trade as the U.S. sales (either EP or CEP). When there are no 
sales at the same level of trade, we compare U.S. sales to home market 
(or, if appropriate, third-country) sales at a different level of 
trade. The NV level of trade is that of the starting price sales in the 
home market. When NV is based on constructed value (CV), the level of 
trade is that of the sales from which we derive selling, general, and 
administrative expenses (SG&A) and profit.
    For both EP and CEP, the relevant transaction for the level of 
trade analysis is the sale (or constructed sale) from the exporter to 
the importer. While the starting price for CEP is that of a subsequent 
resale to an unaffiliated buyer, the construction of the CEP results in 
a price that would have been charged if the importer had not been 
affiliated. We calculate the CEP by removing from the first resale to 
an independent U.S. customer the expenses under section 772(d) of the 
Act and the profit associated with these expenses. These expenses 
represent activities undertaken by the affiliated importer. Because the 
expenses deducted under section 772(d) represent selling activities in 
the United States, the deduction of these expenses normally yields a 
different level of trade for CEP than for the later resale (which we 
use for the starting price). Movement charges, duties and taxes 
deducted under section 772(c) do not represent activities of the 
affiliated importer, and we do not remove them to obtain the CEP level 
of trade.
    To determine whether home market sales are at a different level of 
trade than U.S. sales, we examine whether the home market sales are at 
different stages in the marketing process than the U.S. sales. The 
marketing process in both markets begins with goods being sold by the 
producer and extends to the sale to the final user, regardless of 
whether the final user is an individual consumer or an industrial user. 
The chain of distribution between the producer and the final user may 
have many or few links, and each respondent's sales occur somewhere 
along this chain. In the United States, the respondent's sales are 
generally to an importer, whether independent or affiliated. We review 
and compare the distribution systems in the home market and U.S. export 
markets, including selling functions, class of customer, and the extent 
and level of selling expenses for each claimed level of trade. Customer 
categories such as distributor, original equipment manufacturer (OEM) 
or wholesaler are commonly used by respondents to describe levels of 
trade, but, without substantiation, they are insufficient to establish 
that a claimed level of trade is valid. An analysis of the chain of 
distribution and of the selling functions substantiates or invalidates 
the claimed levels of trade. Different levels of trade necessarily 
involve differences in selling functions, but differences in selling 
functions, even substantial ones, are not alone sufficient to establish 
a difference in the levels of trade. Different levels of trade are 
characterized by purchasers at different stages in the chain of 
distribution and sellers performing qualitatively or quantitatively 
different functions in selling to them.
    When we compare U.S. sales to home market sales at a different 
level of trade, we make a level-of-trade adjustment if the difference 
in levels of trade affects price comparability. We determine any effect 
on price comparability by examining sales at different levels of trade 
in a single market, the home market. Any price effect must be 
manifested in a pattern of consistent price differences between home 
market sales used for comparison and sales at the equivalent level of 
trade of the export transaction. To quantify the price differences, we 
calculate the difference in the average of the net prices of the same 
models sold at different levels of trade. We use the average difference 
in net prices to adjust NV when NV is based on a level of trade 
different from that of the export sale. If there is a pattern of no 
price differences, the

[[Page 47632]]

difference in levels of trade does not have a price effect and, 
therefore, no adjustment is necessary.
    The statute also provides for an adjustment to NV when NV is based 
on a level of trade different from that of the CEP if the NV is more 
remote from the factory than the CEP and if we are unable to determine 
whether the difference in levels of trade between CEP level and NV 
level affects the comparability of their prices. This latter situation 
can occur where there is no home market level of trade equivalent to 
the U.S. sales level or where there is an equivalent home market level 
but the data are insufficient to support a conclusion on price effect. 
This adjustment, the ``CEP offset,'' is identified in section 
773(a)(7)(B) of the Act and is the lower of the following:
     The indirect selling expenses on the home market sale, or
     The indirect selling expenses deducted from the starting 
price used to calculate CEP.
    The CEP offset is not automatic each time we use CEP. The CEP 
offset is made only when the level of trade of the home market sale is 
more advanced than the level of trade of the U.S. (CEP) sale and there 
is not an appropriate basis for determining whether there is an effect 
on price comparability.
    To determine whether an level-of-trade adjustment was appropriate, 
in accordance with the principles discussed above, we examined 
information regarding the distribution systems in both the United 
States and the Mexican markets, including the selling functions, 
classes of customer, and selling expenses for CEMEX and CDC. Upon 
consideration of these factors, the Department determined that there is 
one level-of-trade in the home market--sales of cement shipped to end-
users and ready-mixers in bulk and bagged form--and a different level-
of-trade in the U.S. market--sales to affiliated importers. Because 
there was only one level of trade in the home market, we were unable to 
perform the analysis for a level of trade adjustment. We further 
determined that Respondent's sales to end users and ready-mixers in the 
home market are at a more advanced level of trade than sales to 
affiliated importers in the United States because CEMEX and CDC perform 
more selling functions for sales to end-users and ready-mixers in the 
home market than for sales to affiliated importers in the United 
States. As a result, the Department has preliminarily determined to 
grant Respondent an adjustment to normal value in the form of a CEP 
offset.

Preliminary Results of Review

    As a result of our review, we preliminarily determine the dumping 
margin for CEMEX for the period August 1, 1995, through July 31, 1996, 
to be 35.88 percent.
    Interested parties may request disclosure within five days of the 
date of publication of this notice. Any interested party may request a 
hearing within 10 days of publication. Any hearing, if requested, will 
be held 44 days after the date of publication or the first business day 
thereafter. Case briefs and/or other written comments from interested 
parties may be submitted not later than 30 days after the date of 
publication. Rebuttal briefs and rebuttals to written comments, limited 
to issues raised in those comments, may be filed not later than 37 days 
after the date of publication of this notice. The Department will 
publish its final results of this administrative review, including its 
analysis of issues raised in any written comments or at a hearing, not 
later than 180 days after the date of publication of this notice.
    Upon completion of this review, the Department shall determine, and 
the Customs Service shall assess, antidumping duties on all appropriate 
entries.
    The Department will issue appropriate appraisement instructions 
directly to the Customs Service upon completion of this review.
    Furthermore, the following deposit requirements will be effective 
for all shipments of the subject merchandise entered, or withdrawn from 
warehouse, for consumption on or after the publication date of the 
final results of review, as provided by section 751(a)(1) of the Act: 
(1) The cash deposit rate for the reviewed company will be the rate 
determined in the final results of review; (2) for previously reviewed 
or investigated companies not mentioned above, the cash deposit rate 
will continue to be the company-specific rate published for the most 
recent period; (3) if the exporter is not a firm covered in this 
review, a prior review, or in the original LTFV investigation, but the 
manufacturer is, the cash deposit rate will be the rate established for 
the most recent period for the manufacture of the merchandise; and (4) 
the cash deposit rate for all other manufacturers or exporters will be 
61.85 percent, the all others rate from the LTFV investigation.
    These deposit requirements, when imposed, shall remain in effect 
until publication of the final results of the next administrative 
review.
    This notice also serves as a preliminary 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 dumping duties.
    This administrative review and notice are in accordance with the 
Act (19 U.S.C. 1675 (a)(1)) and 19 CFR 353.22.

    Dated: September 2, 1997.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 97-24000 Filed 9-9-97; 8:45 am]
BILLING CODE 3510-25-P