[Federal Register Volume 63, Number 28 (Wednesday, February 11, 1998)]
[Notices]
[Pages 6891-6899]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-3482]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-588-823]


Professional Electric Cutting Tools From Japan; 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 August 8, 1997, the Department of Commerce (the Department) 
published the preliminary results of its administrative review of the 
antidumping duty order on professional electric cutting tools (PECTs) 
from Japan. This review covers the period of July 1, 1995 through June 
30, 1996.
    We gave interested parties an opportunity to comment on our 
preliminary results. Based on our analysis of the comments received, we 
have changed the results from those presented in the preliminary 
results of review.

EFFECTIVE DATE: February 11, 1998.

FOR FURTHER INFORMATION CONTACT: Stephen Jacques, AD/CVD Enforcement 
Group III, Office 9, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, N.W., Washington, DC 20230; telephone: (202) 482-
1391.

SUPPLEMENTARY INFORMATION:

The Applicable Statute

    Unless otherwise indicated, all citations to the Tariff Act of 
1930, as

[[Page 6892]]

amended (the Act) are references to the provisions effective January 1, 
1995, the effective date of the amendments made by the Uruguay Rounds 
Agreements Act (URAA). In addition, unless otherwise indicated, all 
references to the Department's regulations as codified at 19 CFR part 
353, as they existed on April 1, 1996. Since the new regulations do not 
apply in these final results, we should note that whenever the new 
regulations are cited, they operate as a restatement of the 
Department's interpretation of the Act. See, 62 FR 27296, 27378 (May 
19, 1997).

Background

    On August 8, 1997, we published in the Federal Register (62 FR 
42750) the preliminary results of administrative review of the 
antidumping duty order on PECTs from Japan (58 FR 37461); July 12, 
1993. We received case briefs from the respondent, Makita Corporation 
and Makita U.S.A., Inc. (Makita) and the petitioner, Black and Decker 
(U.S.), Inc. (Black & Decker) on September 22, 1997. Petitioner and 
respondent submitted rebuttal briefs on September 29, 1997. We held a 
public hearing on October 29, 1996. The Department extended the final 
results of this review until February 4, 1998. We are conducting this 
administrative review in accordance with section 751 of the Act.

Scope of the Review

    Imports covered by this review are shipments of PECTs from Japan. 
PECTs may be assembled or unassembled, and corded or cordless.
    The term ``electric'' encompasses electromechanical devices, 
including tools with electronic variable speed features. The term 
``assembled'' includes unfinished or incomplete articles, which have 
the essential characteristics of the finished or complete tool. The 
term ``unassembled'' means components which, when taken as a whole, can 
be converted into the finished or unfinished or incomplete tool through 
simple assembly operations (e.g., kits).
    PECTs have blades or other cutting devices used for cutting wood, 
metal, and other materials. PECTs include chop saws, circular saws, jig 
saws, reciprocating saws, miter saws, portable bank saws, cut-off 
machines, shears, nibblers, planers, routers, joiners, jointers, metal 
cutting saws, and similar cutting tools.
    The products subject to this order include all hand-held PECTs and 
certain bench-top, hand-operated PECTs. Hand-operated tools are 
designed so that only the functional or moving part is held and moved 
by hand while in use, the whole being designed to rest on a table top, 
bench, or other surface. Bench-top tools are small stationary tools 
that can be mounted or placed on a table or bench. They are generally 
distinguishable from other stationary tools by size and ease of 
movement.
    The scope of the PECT order includes only the following bench-top, 
hand-operated tools: cut-off saws; PVC saws; chop saws; cut-off 
machines, currently classifiable under subheading 8461 of the 
Harmonized Tariff Schedule of the United States (HTSUS); all types of 
miter saws, including slide compound miter saws and compound miter 
saws, currently classifiable under subheading 8465 of the HTSUS; and 
portable band saws with detachable bases, also currently classifiable 
under subheading 8465 of the HTSUS.
    This order does not include: professional sanding/grinding tools; 
professional electric drilling/fastening tools; lawn and garden tools; 
heat guns; paint and wallpaper strippers; and chain saws, currently 
classifiable under subheading 8508 of the HTSUS.
    Parts or components of PECTs when they are imported as kits, or as 
accessories imported together with covered tools, are included within 
the scope of this order.
    ``Corded'' and ``cordless'' PECTs are included within the scope of 
this order. ``Corded'' PECTs, which are driven by electric current 
passed through a power cord, are, for purposes of this order, defined 
as power tools which have at least five of the following seven 
characteristics:
    1. The predominate use of ball, needle, or roller bearings (i.e., a 
majority or greater number of the bearings in the tool are ball, 
needle, or roller bearings;
    2. Helical, spiral bevel, or worm gearing;
    3. Rubber (or some equivalent material which meets UL's 
specifications S or SJ) jacketed power supply cord with a length of 8 
feet or more;
    4. Power supply cord with a separate cord protector;
    5. Externally accessible motor brushes;
    6. The predominate use of heat treated transmission parts (i.e., a 
majority or greater number of the transmission parts in the tool are 
heat treated); and
    7. The presence of more than one coil per slot armature.
    If only six of the above seven characteristics are applicable to a 
particular ``corded'' tool, then that tool must have at least four of 
the six characteristics to be considered a ``corded'' PECT.
    ``Cordless'' PECTs, for the purposes of this order, consist of 
those cordless electric power tools having a voltage greater than 7.2 
volts and a battery recharge time of one hour or less.
    PECTs are currently classifiable under the following subheadings of 
the HTSUS: 8508.20.00.20, 8508.20.00.70, 8508.20.00.90, 8461.50.00.20, 
8465.91.00.35, 85.80.00.55, 8508.80.00.65 and 8508.80.00.90. Although 
the HTSUS subheading is provided for convenience and customs purposes, 
the written description of the merchandise under review is dispositive.
    This review covers one company, Makita Corporation (``Makita''), 
and the period July 1, 1995 through June 30, 1996.

Analysis of the Comments Received

Comment 1

    Makita argues that in the preliminary results of this review, the 
Department erroneously granted Makita a level of trade adjustment 
rather than a Constructed Export Price (``CEP'') offset. Makita 
disagrees with the Department's decision to find that the CEP level of 
trade is comparable to the home market indirect (``wholesale'') level 
of trade. Makita argues that the CEP level of trade is less advanced 
than the home market levels of trade and therefore there is no 
equivalent level of trade. Makita made the following arguments 
concerning the level of trade/CEP offset issue:
(A) Differences in Selling Functions.
    First, Makita asserts that there are significant differences in 
selling functions and activities in the two home market levels of trade 
and the CEP (U.S.) level of trade. Makita notes that it submitted a 
chart detailing these differences in Appendix 20 of its questionnaire 
response. In addition, Makita argues that the evidence on the record 
requires the conclusion that the CEP and HM wholesale levels of trade 
are at different levels of trade and involve different functions and 
activities. Makita argues that the two home market levels of trade are 
much more similar to each other than either is to the CEP level of 
trade. While Makita agrees with the Department's decision to find two 
home market levels of trade, it notes that the Department found that, 
in comparing the two home market levels of trade to each other, there 
were six instances where the selling functions were identical in both 
function and intensity, and eight instances where the selling functions 
differed only in the level of intensity. However, Makita compares the 
Department's analysis of

[[Page 6893]]

the home market levels of trade with the Department's position in the 
preliminary results that the home market wholesale level of trade 
should be compared to the CEP level of trade. Makita notes that the 
latter comparison indicates that there are only six instances where the 
selling functions are identical in both function and intensity and only 
four instances where the selling functions differ only in their level 
of intensity. Most importantly, argues Makita, there are five instances 
where the selling functions are entirely different between the 
wholesale level of trade and the CEP level of trade (compared to 
Makita's assertion that there are no instances where the functions are 
entirely different between the two home market levels of trade). 
Consequently, Makita argues that the Department's finding that the CEP 
level of trade should be compared to the home market wholesale level of 
trade is internally inconsistent and at odds with evidence on the 
record.
    In addition, Makita argues that the Department's own precedents 
acknowledge a difference in levels of trade similar to the difference 
in this review. See, Preliminary Results of Antidumping Duty 
Administrative Review: Antifriction Bearings (Other than Tapered Roller 
Bearings) and Parts Thereof from France et al., 62 FR 31566 (June 10, 
1997); Preliminary Results of Antidumping Duty Administrative Review: 
Certain Welded Carbon Steel Standard Pipes and Tubes from India, 62 FR 
23760, 23762; Final Results of Antidumping Duty Administrative Review: 
Certain Corrosion-Resistant Carbon Steel Flat Products and Certain Cut-
to-Length Carbon Steel Plate from Canada, 61 FR 51891 (October 4, 
1996); Preliminary Results of Antidumping Duty Administrative Review: 
Dynamic Random Access Memory Semiconductors of One Megabyte or Above 
from the Republic of Korea, 62 FR 12794, 12798 (March 18, 1997); 
Preliminary Results of Antidumping Duty Administrative Review: 
Stainless Steel Plate from Sweden, 62 FR 36495, 36497 (July 8, 1997); 
and Preliminary Results of Antidumping Duty Administrative Review: 
Granular Polytertrafluoroethylene Resin from Italy, 62 FR 26283, 26285 
(May 13, 1997).
(B) Comparison of Home Market and CEP Prices
    Second, Makita argues that significant differences in selling 
functions and activities between the two home market and CEP levels can 
be established by comparing the home market starting price with the CEP 
price. Makita asserts that by comparing the elements that are included 
in the CEP transactions to the elements that are included in the home 
market transactions clearly indicates that the home market transactions 
are at a different level of trade, a level that Makita asserts is more 
developed than the CEP level of trade. Makita contends that the home 
market levels of trade have expense categories (i.e., selling 
functions) such as discounts and rebates that have no meaningful 
equivalent at the CEP level of trade. Consequently, Makita argues that 
the home market levels of trade are thus significantly different from, 
and more advanced than, the CEP level.
(C) Comparison of Indirect Selling Expenses
    Third, Makita asserts that the differences in selling functions can 
be observed in the substantial differences in the amount of indirect 
selling expenses between the two home market levels of trade and the 
CEP level of trade. Makita argues that the data regarding indirect 
selling expenses clearly supports Makita's claim that the CEP level of 
trade is (1) substantially different from the home market levels of 
trade and (2) not as far developed or advanced as either home market 
level of trade.
(D) Differences in Volumes
    Fourth, Makita argues that differences in selling functions and 
activities can also be seen in differences of volumes of subject 
merchandise supplied at each level. Makita contends that the average 
volume of tools shipped per invoice indicates that the selling 
functions performed for the CEP sales are materially different from the 
selling functions performed for the home market sales.
(E) Differences in Intensity of Selling Functions
    Fifth, Makita argues that differences in the level of intensity 
(i.e., the quantity of the function) should be considered in 
determining whether there are different levels of trade. Respondent 
contends that since performing quantitatively different functions 
characterizes sales at different levels of trade, it would be erroneous 
for the Department to have suggested in the preliminary results that 
the differences in intensity indicated by Makita for certain selling 
functions are somehow not important in the level of trade analysis.
(F) Quantification of Price Differences in Selling Functions
    Sixth, Makita contends that the differences in selling functions 
and activities can not be quantified (i.e., that price differences due 
to differences in levels of trade cannot be determined). Makita argues 
that since neither home market level of trade is equivalent to the CEP 
level of trade, no benchmark for comparison of the home market and CEP 
levels exists, and, accordingly, the price differences between the CEP 
level and either home market level of trade cannot be quantified.
(G) Results of Previous Administrative Review
    Seventh, Makita argues that the Department incorrectly relied on 
the results of the previous administrative review in determining that 
the wholesale level of trade in Japan is equivalent to the CEP level in 
the United States. Makita argues that it would be erroneous and highly 
prejudicial if the Department takes the position that its previous 
denial of the CEP offset in the second administrative review is 
dispositive of this review because: (1) the Department's current 
inquiry is materially different from that of the previous review, (2) 
most of the Department's current criteria for granting the CEP offset 
did not even exist during the information gathering period of the 
previous review, (3) the Department is not bound as a matter of law by 
what it did (or did not) find in the previous review, and (4) 
guidelines for administering the CEP offset are still in the process of 
being refined, making reliance on the results of the previous review 
inappropriate.
    Petitioner argues that the Department's decision in the preliminary 
results concerning the level of trade was correct. Petitioner agrees 
with the Department finding in the preliminary results that the CEP 
level of trade is comparable to the home market wholesale level of 
trade and that a CEP offset is not appropriate as a matter of fact and 
law. Petitioner made the following rebuttal arguments on the level of 
trade/CEP offset issue:
(A) Differences in Selling Functions
    Petitioner contends that Makita's request for a CEP offset should 
be denied because Makita has not established that sales to wholesalers 
in Japan are made at a different stage of marketing compared to its one 
wholesale level of trade in the United States. Petitioner notes that 
Makita merely discusses selling expense and sales activities, which are 
a necessary

[[Page 6894]]

but not sufficient condition for determining that there is a difference 
in the stage of marketing. Petitioner argues that Makita has failed to 
provide persuasive evidence that sales to the United States and home 
market sales are at different marketing stages (or their equivalent) as 
required by the regulations. See 19 CFR 351.412(c)(2) (1997). 
Petitioner argues that the law requires the Department to find 
different customer categories and different marketing stages, not 
differences in selling functions and expenses alone.
    Petitioner also argues that granting Makita's request for a CEP 
offset would distort the margin calculations by reducing the normal 
value by an amount that is disparate from the amount needed to adjust 
the prices at the retail level to make then comparable to the wholesale 
level in Japan under the level of trade adjustment analysis.
    Petitioner argues that the statute requires differences in the 
stages of marketing because the adjustments for levels of trade have to 
do with prices, not costs or selling expenses. Petitioner asserts that 
the Department examined Makita's response and concluded that Makita's 
sales to its one wholesaler in the United States could be compared to 
its sales at the wholesale level in Japan. Petitioner adds that the 
Department's determination is legally correct and is supported by 
substantial evidence on the record.
    Petitioner argues that the Department has refused to grant CEP 
offsets in recent cases. Petitioner argues that the facts in this 
review are analogous to cases cited and distinguished by respondents as 
being inappropriate. The petitioner argues that the Department's 
determination in Notice of Preliminary Results and Partial Rescission 
of Antidumping Duty Administrative Review: Roller Chain, Other Than 
Bicycle, from Japan (``Roller Chain''), 62 FR 25165, 26169 (May 8, 
1997); Canned Pineapple Fruit from Thailand; Preliminary Results of 
Partial Termination of Antidumping Duty Administrative Review (``Canned 
Pineapple''), 62 FR 42487 (August 7, 1997) and Notice of Preliminary 
Determination of Sales at Less Than Fair Value and Postponement of 
Final Determination; Collated Roofing Nails from Korea (``Collated 
Roofing Nails'') 62 FR 25895 (May 12, 1997) support their position that 
Makita is not entitled to a CEP offset.
(B) Comparison of Home Market and CEP Prices
    Petitioner asserts that Makita's argument does nothing more than 
reiterate in a different form the fact that different selling functions 
exist. Petitioner asserts that Makita's questionnaire response clearly 
indicates that while there are two distinct and separate levels of 
trade in the home market, the selling expenses are quite similar. 
Consequently, petitioner argues that selling expenses are not a 
reliable indicator of level of trade differences.
(C) Comparison of Indirect Selling Expenses
    Petitioner argues that differences in the amount of indirect 
selling expenses do not measure the differences in levels of trade. 
Petitioner contends that the fact that selling expenses in the home 
market are similar does not mean that the levels of trade are the same.
(D) Differences in Volumes
    Petitioner asserts that Makita's comparison of units per invoice is 
of little evidentiary value as distributors normally purchase in larger 
quantities than retailers. Petitioner contends that this is 
insufficient to show a difference in marketing stages.
(E) Differences in Intensity of Selling Functions
    Petitioner alleges that the Department considered differences in 
intensity but decided that such differences were not sufficient to 
constitute a difference in the level of trade. Petitioner claims that 
the Department considered all of the arguments advanced by Makita, 
including its arguments concerning the different intensities and the 
different selling functions performed. Petitioner contends that the 
Department did not ignore the intensity of the selling functions but 
found that it was insufficient. Furthermore, petitioner claims that the 
Department has previously rejected claims that mere differences in 
intensity of selling efforts create differences in levels of trade. 
See, Certain Cut-to-Length Carbon Steel Plate from Finland, 62 FR 
37866, 37867 (July 15, 1997).
(F) Quantification of Price Differences in Selling Functions
    Petitioner argues that the fact that differences in selling 
functions and activities between CEP sales and home market sales cannot 
be quantified is irrelevant in qualifying for a CEP offset. Petitioner 
claims that section 351.412(d) of the Department's new regulations 
describes the manner in which the Department must determine whether a 
difference in levels of trade has an effect on price comparability. 
Petitioner argues that Makita failed to provide any of the broad 
category of information under section 351.412(d) that could be useful 
for the Department in making the determination in granting the CEP 
offset. Rather, petitioner argues Makita has provided reams of 
insufficient information regarding selling expenses. Therefore, 
petitioner argues that the Department should reject the Makita's 
request for the CEP offset.
(G) Results of Previous Administrative Review
    Petitioner argues that the results of the previous administrative 
review clearly have a bearing on the present administrative review with 
respect to granting the CEP offset. Petitioner contends that the 
Department has previously found in both the LTFV investigation and the 
1994-5 administrative review, based on verified information, that the 
wholesale level of trade in Japan should be compared to the CEP level 
in the United States and that Makita has not alleged any change in 
circumstances. In addition, petitioner asserts that none of the 
information in this review has been verified, despite repeated requests 
by petitioner that verification is not only necessary but essential. 
Consequently, they contend that the Department should not reverse the 
decisions from these earlier determinations based on unverified 
information.

Department's Position

    We agree with Makita in part. We have reexamined our position in 
the preliminary results and determined, based on the record evidence, 
that granting Makita a CEP offset is appropriate in this review. The 
Department determines for the final results that (1) significant 
differences exist in the selling functions associated with each of the 
two home market levels of trade and the CEP level of trade, (2) the CEP 
level of trade is at a less advanced stage of distribution than either 
home market level of trade; and (3) the data available do not provide 
an appropriate basis for a level-of-trade adjustment for any 
comparisons to CEP. Consequently, we have granted a CEP offset for the 
final results.
    Makita listed selling functions associated with the CEP and two 
home market levels of trade in Exhibit B-20 of its November 26, 1996 
questionnaire response. Our analysis and comparison of the selling 
functions indicates that the differences between the home market 
wholesale level of trade and the CEP level of trade are as significant 
as, if not more significant than, the differences between the home 
market wholesale level of trade and the home market retail level of 
trade. Moreover, the chain of distribution within the

[[Page 6895]]

United States (beyond the affiliated importer) is similar to that in 
the home market. Consequently, we determine that there are significant 
differences in selling functions between each of the two home market 
levels of trade and the CEP level of trade and that these differences 
are sufficient to determine that the CEP level of trade is not 
equivalent to either home market level of trade.
    In comparing the two home market levels of trade to each other, we 
note the following selling functions are identical in both function and 
intensity: market research, after-sales service and warranties, 
technical advice, advertising, R & D/product development, procurement/
sourcing, and pricing/discounts/rebates. The remaining functions (e.g, 
inventory maintenance, freight/delivery arrangements, arranging freight 
to customer, collection expenses, losses, credit risk, collection 
activities, payment processing/accounts receivable maintenance that 
differ only in intensity. There are no functions that are entirely 
different between the two home market levels of trade.
    When we compare the home market wholesale level of trade and the 
CEP level, we note that there are only several selling functions that 
are identical in both function and intensity (e.g., R&D/product 
development, collection activities and payment processing/accounts 
receivable maintenance). The following selling functions differ only in 
intensity: inventory maintenance, technical advice and procurement/
sourcing. However, there are certain selling functions performed at the 
wholesale level of trade but not at all at the CEP level of trade. 
These functions include market research, after-sales service and 
warranties, advertising, freight delivery arrangements and pricing/
discounts/rebates.
    Based on the analysis of the selling functions, we determine that 
the home market retail (direct) level of trade was at a more advanced 
stage of marketing, and hence a different level of trade, than the 
wholesale home market level of trade. Similarly, we find that both home 
market levels of trade are at a more advanced stage of distribution 
than the CEP.
    With respect to Makita's arguments concerning the differences in 
the amount of indirect selling expenses, we note that the record 
evidence indicates that the amount of indirect expenses for CEP sales 
is significantly less than the amount of expenses for sales in either 
home market level of trade. While differences in selling expenses are 
not necessarily a sufficient basis for determining levels of trade, the 
differences in Makita's indirect selling expenses along with the 
differences in selling functions support Makita's contention that the 
CEP level of trade is substantially different from the home market 
levels of trade and not as far developed or advanced as either home 
market level of trade.
    We agree with Makita's assertion that the differences in selling 
functions (i.e., price differences between levels of trade) can not be 
quantified. We determine in these final results that the differences 
between the CEP level of trade and the home market wholesale and retail 
levels of trade are sufficient to constitute different levels of trade. 
We found that Makita cooperated to the best of its ability but the data 
on the record did not allow the Department to determine whether the 
differences in levels of trade affects price comparability. Since there 
is no home market level of trade equivalent to the CEP level of trade, 
price differences between the relevant levels of trade can not be 
quantified as there is no home market level of trade equivalent to the 
CEP level of trade.
    We disagree with petitioners' assertion that three recent cases 
where the Department rejected respondents' request for a CEP offset are 
analogous to this review. Unlike this review, in Roller Chain, 
respondents' did not state that there were differences in selling 
functions. In Canned Pineapple, the selling functions in both market 
were essentially the same. In Collated Roofing Nails, respondents did 
not request a CEP offset.
    With respect to Makita's assertion that we relied on the results of 
the previous administrative review in making our determination in this 
review, these comments are not applicable as we have changed our 
determination with respect to Makita's request for a CEP offset.

Comment 2

    Makita argues that under the U.S. antidumping law pursuant to the 
World Trade Organization's Agreement on Implementation of Article VI of 
the General Agreement on Tariffs and Trade (``WTO Antidumping 
Agreement'') and the Department's own practice, the Department has used 
average-to-average price comparisons in investigations. Makita contends 
that although the new law does not specifically provide for the use of 
average-to-average price comparisons in calculating a margin in 
administrative reviews, the Department is also authorized to average-
to-average price comparisons in reviews. See 19 U.S.C. 1677f-1(d)(2).
    Although the new law does not specifically except administrative 
reviews from the requirement of using average-to-average price 
comparisons during administrative reviews, Makita argues that the 
Department is required to use this methodology in reviews for the 
following reasons: (1) administrative reviews and investigations are 
identical proceedings, different in name only; (2) there is no legal or 
other justification for the application of different standards to 
investigations and reviews and (3) logic, common sense and 
considerations of government convenience and efficiency mandate that a 
consistent and uniform methodology be applied across the board to all 
``investigations'' and to all ``administrative reviews'' arising out 
these ``investigations.''
    Makita notes that the Department requested the same type of price 
and cost data in this administrative review as it did in the LTFV 
investigation. Furthermore, Makita asserts that the Department to this 
day uses the same ``investigation'' number (i.e., A-588-823) that it 
uses in the current administrative review. Makita argues that the use 
of the same ``investigation'' number suggests that (1) the Department 
considers this review to be exactly what the original investigation was 
(i.e., an investigation) and (2) the Department ascribes no particular 
significance to the term ``review.''
    Respondent argues that it would be highly prejudicial to Makita if 
the Department justified the existing antidumping order based solely on 
amount of positive margins calculated using an average-to-transaction 
methodology. When no margins would be found in an investigation using 
an average-to-average price comparison methodology.
    Makita further states that it has a right to rely on the consistent 
and fair application of methodologies from one proceeding to the next. 
Makita notes that under the new law, the Department regularly uses 
average-to-average price comparison in investigations. Makita argues 
that it has every reason to expect that the Department should also use 
the same methodology in administrative reviews after the new law came 
into effect.
    Lastly, Makita argues that the current weighted average margin in 
the preliminary results of 0.5 percent is so close to being de minimus 
that it is statistically as likely to be indicative of an absence of 
LTFV sales as it is likely to be indicative of the existence of LTFV 
sales. Makita argues that this is precisely the type of situation where 
the rigid application of the average-to-transaction methodology is

[[Page 6896]]

inappropriate, and application of the average-to-average price 
comparison methodology is proper because it would produce less biased 
and more representative and fair results.
    Consequently, Makita argues that the Department should use the 
average-to-average price comparison methodology in the calculation of 
the margin for these final results.
    Petitioner contend that Makita made the same argument in the second 
administrative review and that this issue was fully briefed and 
rejected by the Department. Petitioner contends the Department should 
summarily dismiss this argument for the same reasons it was rejected 
before.
    First, petitioner contends that the URAA contains different 
provisions for investigations and reviews: section 771(A)(d)(1) deals 
with investigations, and requires the Department to compare weighted 
average normal values (NVs) to weighted-average export prices, with the 
alternative of comparing transaction-by-transaction prices on both 
sides of the equation, while section 771(A)(d)(2) deals with reviews, 
and requires the Department to compare weighted average NVs to 
individual export prices, as the Department did in this case.
    Second, petitioner argues that the circumstances of this case do 
not warrant the application of the average-to-average price comparison 
methodology for the following reasons: (1) Congress clearly intended 
export prices of individual transactions to be compared to the weighted 
average prices in the home market; (2) administrative reviews and 
investigations are different and the Department has a long-standing 
practice of treating them differently and (3) that respondents should 
be held to higher, stricter standards in reviews, since by the time of 
the administrative review, they are on notice that further dumping will 
be penalized. Petitioner argues that Makita's case confirms this 
proposition, since Makita should have monitored its sales and taken 
steps to correct the past dumping practices.

Department's Position

    We agree with petitioner. As we stated in the final results of the 
second administrative review of this antidumping order, the Act, as 
amended by the URAA, distinguishes between price comparison 
methodologies in investigations and reviews. Section 777A(d)(1) states 
that in investigations, generally the Department will make price 
comparisons on an average-to-average or transaction-to-transaction-
specific basis. See also SAA at 842-43; Proposed Regulations at 7348-49 
and Proposed Rule 351.414.
    However, the language of 777A(d)(2) reflects Congress' 
understanding that the Department would continue to use a monthly 
average NV to a transaction-specific EP or CEP methodology during 
reviews, in keeping with the Department's past practice. Both the SAA 
and the Department's proposed regulations expressly state that the 
monthly average-to-individual transaction comparison is the preferred 
methodology in reviews. See SAA at 843; Proposed Regulations at 7348-
49. Hence, the Department is under no legal obligation to apply an 
average-to-average approach in a review merely because 777A(d)(1) 
permits such a comparison in investigations. However, in appropriate 
circumstances, such as in the case of highly perishable products, for 
example, average-to-average price comparisons may be used. See Floral 
Trade Council of Davis v. United States, 606 F. Supp. 695, 703 (Ct. 
Int'l Trade 1991). Makita has not demonstrated that similar 
circumstances exist with respect to the sale of PECTs that would 
warrant a departure from our stated preference of making monthly 
average-to-transaction-specific price comparisons in reviews.
    In addition, contrary to Makita's assertion, an LTFV investigation 
and an administrative review are not ``identical proceedings,'' but are 
two distinct segments of a single antidumping proceeding. The Act 
expressly distinguishes between investigations and reviews. See 
Sec. 733; 735; 751 of the Act; 19 CFR 353.2(l). They differ in several 
respects, such as initiation requirements and outcome--an investigation 
may or may not end upon the issuance of an antidumping duty order, 
while only a review will result in the actual assessment of duties. 
Further, investigations and reviews are based on different sets of 
sales, and both are subject to separate judicial review.
    The WTO Antidumping Agreement also distinguishes between 
investigations and reviews in antidumping matters. Article 2.4.2 of the 
WTO Antidumping Agreement explicitly requires that an average-to-
average price comparison be used in the ``investigation phase'' of an 
antidumping proceeding. The SAA elucidates the intent of the WTO 
Antidumping Agreement that the Department continue to treat 
investigations and reviews differently with respect to price 
comparisons. As the SAA states:

    The Agreement reflects the express intent of the negotiators 
that the preference for the use of an average-to-average or 
transaction-to-transaction comparison be limited to the 
``investigation phase'' of an antidumping proceeding. Therefore, as 
permitted by Article 2.4.2, the preferred methodology in reviews 
will be to compare average to individual export prices.

SAA at 843.
    Finally, Makita claims that it has a right to rely on the 
consistent and fair application of methodologies from one segment of a 
proceeding to the next. Makita argues that by not applying an average-
to-average comparison in this review, the Department is not consistent 
with what it is required to do under the new law for investigations--
make average-to-average price comparisons. Hence, following Makita's 
logic, the Department must now apply an average-to-average methodology 
in this review to be consistent with the new methodology used in 
investigations. Makita is incorrect in two respects. The law now 
requires the Department to apply an average-to-average price comparison 
in investigations only. Secondly, by comparing monthly average NVs to 
individual U.S. prices in this review, we are being consistent with our 
longstanding practice, which was not changed by the passage of the 
URAA, as discussed above. Moreover, during the investigation of this 
order, which occurred under the old law, we did compare average foreign 
market values (FMVs) to transaction-specific U.S. prices. Thus, we are 
applying this consistent methodology from one segment of the proceeding 
to another.

Comment 3

    Makita argues that, if the Department had used average-to-average 
price comparisons in the preliminary results, Makita's margin would 
have been de minimis pursuant to the two percent de minimis standard 
mandated by Article 5.8 of the WTO Antidumping Agreement (see 19 U.S.C. 
Secs. 1673b(b)(3) and 1673(a)(4)). Since the WTO Antidumping Agreement 
makes no distinction between investigations and administrative reviews, 
Makita argues, the 2 percent de minimis standard should also apply to 
reviews, for the same reasons Makita discussed with respect to using 
average-to-average price comparisons in reviews.
    Makita argues that no basis can be found in either the WTO 
Antidumping Agreement, or in U.S. law or policy, for using the 
Department's earlier adopted regulatory number of 0.5 percent as the de 
minimis standard for reviews, since there is no mention of this 
particular figure in any of the relevant documents. Makita asserts in a 
footnote that using a stricter standard for reviews than for

[[Page 6897]]

investigations is illogical if the underlying purpose is to punish 
exporters who are caught dumping, since it would make more sense to 
apply a stricter standard in the investigation phase. Moreover, not to 
appear contradictory to its prior comments, Makita asserts that the 
inconsistency of applying the two percent margin rule in this review 
with the application of the 0.5 percent margin standard in the 
investigation is irrelevant. Finally, Makita claims that this practice 
could by itself result in increased dumping liability for exporters, 
and is a possible violation of the WTO by the United States.
    Petitioner argues that Makita misreads the law, which requires that 
the new de minimis level of two percent be applied in investigations 
only. Petitioner disagrees with Makita's assertion that the margin in 
the preliminary results is so close to de minimis that it would be 
unfair for the Department to use average-to-price methodology. 
Petitioner notes that the rationale behind this argument would require 
the Department to change its methodology every time a determination was 
close to the de minimis level.
    Lastly, petitioner argues that the Department has no authority to 
apply the new two percent de minimis standard in a review. Petitioner 
asserts that the law is clear that the two percent de minimis standard 
applies to investigations only. See, 19 U.S.C. 1673b(b)(3) and 19 
U.S.C. 1673(d)(a)(4). Petitioner contends that the Department must 
continue to apply the de minimis standard of 0.5 percent in review 
proceedings.

Department's Position

    We disagree with respondent that the 0.5 percent de minimis 
standard set forth in 19 CFR 353.6 should not continue to apply to 
reviews. Article 5.8 of the WTO Antidumping Agreement explicitly only 
requires signatories to apply the two percent de minimis standard in 
antidumping investigations. See Article 5.8. There is no such 
requirement regarding reviews. Moreover, Makita is incorrect in 
claiming that the WTO Antidumping Agreement makes no distinction 
between investigations and administrative reviews. See e.g., Article 5; 
Article 11 of the WTO Antidumping Agreement.
    In conformity with Article 5.8 of the WTO Antidumping Agreement, 
sections 733(b) and 735(a) of the Act were amended by the URAA to 
require that, in investigations, the Department treat the weighted-
average dumping margin of any producer or exporter which is below two 
percent ad valorem as de minimis. Hence, pursuant to this change, the 
Department is now required to apply a two percent de minimis standard 
during investigations initiated after January 1, 1995, the effective 
date of the URAA (see sections 733(b)(3) and 735(a)(4)). However, the 
Act does not mandate a change to the Department's regulatory practice 
of using a 0.5 percent de minimis standard during administrative 
reviews. As discussed above, the WTO Antidumping Agreement, the Act, 
the SAA and the Department's regulations recognize investigations and 
reviews to be two distinct segments of an antidumping proceeding.
    The SAA also clarifies that ``[t]he requirements of Article 5.8 
apply only to investigations, not to reviews of antidumping duty orders 
or suspended investigations.'' See SAA at 845. The SAA further states 
``in antidumping investigations, Commerce [shall] treat the weighted-
average dumping margin of any producer or exporter which is below two 
percent ad valorem as de minimis.'' SAA at 844. Likewise, ``[t]he 
Administration intends that Commerce will continue its present practice 
in reviews of waiving the collection of estimated cash deposits if the 
deposit rate is below 0.5 percent ad valorem, the existing regulatory 
standard for de minimis.'' SAA at 845 (emphasis added). See Proposed 
Regulations at 7355, Proposed Rule 351.106; see also High-Tenacity 
Rayon Filament Yarn from Germany; Final Results of Antidumping Duty 
Administrative Review, 61 FR 51421 (October 2, 1996).

Comment 4

    Makita alleges that the Department's preliminary margin calculation 
program incorrectly assigns constructed value (CV) matches to certain 
U.S. sales that have contemporaneous home market matches. Respondent 
contends that the incorrect use of CV-based normal values is the result 
of a clerical error in the model match program that results in 
incorrect month indicators being assigned to both the home market and 
U.S. transactions. Makita alleges that the error in the model match 
program results in the program finding no sales matches for any 1996 
U.S. sales transactions. Makita urges the Department to correct the 
error for the final results.
    Petitioner had no comment on this issue.

Department's Position

    We agree with Makita and have corrected the model match program for 
the final results. We also note that on January 8, 1998, the Court of 
Appeals of the Federal Circuit issued a decision in Cimex v. United 
States, 1998 WL 3626 (Fed. Cir.). In that case, based on the pre-URA 
version of the Tariff Act of 1930 (the Act), the Court discussed the 
appropriateness of using constructed value (CV) as the basis for 
foreign market value when the Department finds home market sales to be 
outside the ordinary course of trade. This issue was not raised by any 
party in this proceeding. However, the Uruguay Round Agreements Act 
(URA) amended the definition of sales outside the ``ordinary course of 
trade'' to include sales below cost. See Section 771(15) of the Act. 
Because the Court's decision was issued so close to the deadline for 
completing this administrative review, we have not had sufficient time 
to evaluate and apply (if appropriate and if there are adequate facts 
on the record) the decision to the facts of this ``post-URA'' case. For 
these reasons, we have determined to continue to apply our policy 
regarding the use of CV when we have disregarded below-cost sales from 
the calculation of normal value.

Comment 5

    Makita notes that the Department stated in its preliminary results 
that it intended to first match the U.S. CEP sales with home market 
sales to wholesalers. Only if no sales to wholesalers are available 
will the CEP sales be matched with home market sales to retailers. 
However, Makita contends that due to an error in the Department's 
margin calculation computer program, U.S. CEP sales were not first 
matched to the wholesale level of trade. Makita urges that the error be 
corrected for the final results.
    Petitioner had no comment on this issue.

Department's Position

    For the final results, we have determined that the CEP level of 
trade is not equivalent to either home market level of trade (see 
Comment 1). Furthermore, both home market levels of trade are at a more 
advanced stage of distribution than the level of trade of the CEP. 
Consequently, we could not match to sales at the same level of trade in 
the home market. Nor do we have appropriate information to provide a 
basis for a level of trade adjustment. Therefore, to the extent 
possible, we determined normal value based on sales at the same level 
of trade as the U.S. sales to the unaffiliated customer and made a CEP 
offset adjustment in accordance 773(a)(7)(B) of the Act.

[[Page 6898]]

Comment 6

    Makita contends that the Department incorrectly deducted indirect 
selling expenses incurred in Japan from U.S. price. Makita notes that 
it is the Department's practice not to deduct these expenses in the 
calculation of the CEP net price.
    Petitioner had no comment on this issue.

Department's Position

    We agree with respondents and have corrected the error for the 
final determination.

Comment 7

    Makita argues that the Department incorrectly calculated the 
product liability expense in the preliminary results by applying the 
expense percentage to the gross unit price instead of the net price, 
which was the basis derived by Makita. As a result, Makita alleges that 
the amount calculated by the Department overstates the actual product 
liability expenses and overstates the margin.
    Petitioner had no comment on this issue.

Department's Position

    We agree with Makita and have corrected the calculation for product 
liability expenses for the final results.

Comment 8

    Makita contends that the Department failed to add to the U.S. price 
certain charges billed to the customer by Makita. Specifically, Makita 
argues that it reported certain miscellaneous charges and drop ship 
fees for a small number customers. Makita asserts that failure to 
include these charges results in an understatement of the revenues 
generated by these sales, and an overstatement of the margin. Makita 
urges the Department to correct the error for the final results.
    Petitioner argue that these charges are applicable to accessories, 
not tools. Furthermore, petitioner assert that these charges are for 
repairs and, as such, these charges have nothing to do with the selling 
prices of the tools, and Makita has not demonstrated that these charges 
can be directly related to specific tool sales. Consequently, 
petitioner argues that these charges should not be added to the U.S. 
price.

Department's Position

    We agree with Makita. As these are revenues generated by sales (and 
subsequent repairs) of the subject merchandise and are separate from 
Makita's warranty expenses, we have added miscellaneous charges and 
drop ship charges to U.S. price for the final results. We note that the 
drop ship charge represents Makita's fee for billing a customer at one 
location but delivering the tools to a different location according to 
the customer's direction. We disagree with petitioner's contention that 
we should disallow these charges since Makita reported these charges on 
a customer-specific basis and the revenues for drop ship charges and 
repairs are applicable to the sales.

Comment 9

    Petitioner asserts that the Department's computer program 
calculated the difference in merchandise adjustment (``DIFMER'') as the 
difference between the variable manufacturing cost of the home market 
tool (``VCOMH'') and the variable manufacturing cost of the U.S. tool 
(``VCOMU''). Petitioner further notes that the Department's computer 
program adjusts for the differences in merchandise by adding the DIFMER 
value to normal value.
    Consequently, petitioner argues that the computer program requires 
the Department to reduce the normal value when the DIFMER value is 
negative (U.S. variable costs higher than home market cost), and 
increase the normal value when the DIFMER is positive (U.S. variable 
costs lower than home market costs). Petitioner asserts that this is 
backwards and inconsistent with the Department's antidumping manual. 
See, Department of Commerce, International Trade Administration, 
Antidumping Manual, Import Administration, Revised 07/93, Chapter 8, 
page 44. Petitioner requests that the Department correct the error by 
subtracting the DIFMER value from normal value for the final results.
    Makita had no comment on this issue.

Department's Position

     We agree with petitioner and have corrected the error for the 
final results.

Comment 10

    Petitioner alleges that the Department should correct its cost test 
to determine sales below the cost of production by deducting selling 
expenses from the gross unit price and make no adjustment for selling 
expenses to the total cost of production. Petitioner contends that the 
computer program in the preliminary results indicated that selling 
expenses (variable SELLCOP) were added to COP instead of deducting 
these expenses from the gross unit prices. Petitioner argues that this 
correction will result in the gross unit prices and the COP will be net 
of selling expenses as required by Import Administration Policy 
Bulletin, No. 94.6.
    Makita argues that the Department's cost test is correct and the 
methodology has been used by the Department in its most recent margin 
calculations, in spite of the 1994 policy memorandum cited by 
petitioner. Consequently, Makita contends that the cost test as applied 
by the Department in the preliminary results is consistent with the 
Department's current practice, and no change is necessary.

Department's Position

    We agree with Makita. The cost test applied by the Department in 
the preliminary results is consistent with the Department's current 
practice. As part of the cost test, we calculate COP (variable TOTCOP) 
where we add selling expenses (variable SELLCOP) to derive the COP 
which is compared to adjusted price for selling expenses of the home 
market product.
Final Results of Review
    As a result of our review, we have determined that the following 
margins exist:

------------------------------------------------------------------------
                                                                Margin  
           Manfacturer/exporter               Time period      (percent)
------------------------------------------------------------------------
Makita Corporation.......................     7/1/95-6/30/96        0.03
------------------------------------------------------------------------

    The Department shall determine, and the Customs service shall 
assess, antidumping duties on all appropriate entries. Individual 
differences between United States price and NV may vary from the 
percentage stated above. The Department will issue appraisement 
instructions directly to the Customs Service.
    Furthermore, the following deposit requirements will be effective 
upon publication of this notice of final results of review for all 
shipments of PECTs from Japan entered, or withdrawn from warehouse, for 
consumption on or after the publication date, as provided by section 
751(a)(1) of the Act: (1) The cash deposit rate for the reviewed 
company

[[Page 6899]]

will be that established in these final results of this administrative 
review; (2) for previously reviewed or investigated companies not 
listed 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 or a previous review or the LTFV 
investigation, but the manufacturer is, the cash deposit rate will be 
the most recent rate established for the manufacturer of the 
merchandise; and (4) the cash deposit rate for all other manufacturers 
or exporters will be the ``all others'' rate of 54.52 percent, the all 
others rate established in 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 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 a 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 the terms of an APO is a sanctionable violation.
    This administrative review and notice are in accordance with 
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and section 353.22 
of the Department's regulations.

    Dated: February 4, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-3482 Filed 2-10-98; 8:45 am]
BILLING CODE 3510-DS-P