[Federal Register Volume 63, Number 50 (Monday, March 16, 1998)]
[Notices]
[Pages 12764-12784]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-6714]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-201-802]


Gray Portland Cement and Clinker From Mexico: 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 September 10, 1997, the Department of Commerce (the 
Department) published the preliminary results of its administrative 
review of the antidumping duty order on gray portland cement and 
clinker from Mexico. The review covers one manufacturer/exporter, 
CEMEX, S.A. de C.V (CEMEX), and its affiliated party Cementos de 
Chihuahua, S.A. de C.V. (CDC), and the period August 1, 1995, through 
July 31, 1996. We gave interested parties an opportunity to comment on 
the preliminary results. We received comments from petitioner and 
respondent. We received rebuttal comments from the petitioner and 
respondent.

EFFECTIVE DATE: March 16, 1998.

FOR FURTHER INFORMATION CONTACT: Nithya Nagarajan, Kristen Stevens or 
John Totaro, Import Administration, International Trade Administration, 
U.S. Department of Commerce, 14th Street and Constitution Avenue, N.W., 
Washington, D.C. 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 September 10, 1997, the Department published in the Federal 
Register (62 FR 47626) the preliminary results of its administrative 
review of the antidumping duty order on gray portland cement and 
clinker from Mexico covering the period August 1, 1995 through July 31, 
1996. The Department has now completed this review in accordance with 
section 751(a) of the Act.

Scope of the 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 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 HTS item number 2523.10. 
Gray portland cement has also been entered under HTS item number 
2523.90 as ``other hydraulic cements.'' The HTS subheadings are 
provided for convenience and U.S. 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 of 
this case (public versions of these reports are on file in room B-099 
of the Department's main building).

Analysis of Comments Received

    The Southern Tier Cement Committee (petitioner), CEMEX, and CDC 
submitted case briefs on October 24, 1997. Petitioner and CEMEX 
submitted supplemental case briefs on December 5, 1997. All parties 
submitted rebuttal briefs on December 19, 1997. A public hearing was 
held on February 12, 1998.

Revocation of the Underlying Order

Comment 1

    CEMEX contends that the Department lacks the authority to assess 
antidumping duties pursuant to the final results of this review because 
at the time the original less-than-fair-value

[[Page 12765]]

(LTFV) investigation was initiated (October 16, 1989), the Department 
assumed that the petition was filed ``on behalf of'' a regional 
industry without measuring whether a majority of the industry actually 
supported the request. The Department should have measured industry 
support, CEMEX argues, because a GATT panel recommended in July of 1992 
that an antidumping petition filed ``on behalf of'' an industry must be 
supported by an appropriate majority of the industry, and such support 
must be ascertained prior to initiating an investigation. According to 
CEMEX, the panel's recommendation is applicable to the instant 
administrative review for two reasons.
    First, CEMEX claims that the Antidumping Agreement which resulted 
from the Uruguay Round of global trade talks ``adopted'' the 
requirement of industry support articulated by the GATT panel. 
Moreover, CEMEX asserts, the new standard regarding industry support 
for a petition is contained in the URAA and since this review is 
governed by the amendments to the antidumping law occasioned by the 
URAA, ``the new standard should be used in this case.''
    Second, even if the new requirement on standing does not apply 
retroactively to a determination the Department made over eight years 
ago, the antidumping statute that was in effect in 1989 did not define 
the term ``on behalf of.'' Faced with this lacuna in the statute, CEMEX 
asserts, the Department is compelled by the decision in Murray v. 
Schooner Charming Betsy, 6 U.S. 64, 2 Cranch 64 (1804) to reinterpret 
U.S. law in accordance with the international obligations of the United 
States. In the opinion of CEMEX, this means that the Department is 
required in the sixth review to revisit the issue of initiation in the 
original LTFV investigation and abide by the 1992 GATT panel ruling.
    CDC also argues that the Department must terminate this review and 
revoke the underlying antidumping duty order. According to CDC, the 
plain language of the antidumping statute requires petitions in 
regional industry cases to be filed on behalf of the producers who 
account for ``all or virtually all'' of the production in the region. 
Since the antidumping order covering cement from Mexico was based, CDC 
asserts, on a petition that was not supported by producers accounting 
for all or almost all of the region's production, the order was issued 
in violation of U.S. law.
    Finally, CDC argues that lack of standing to file an antidumping 
duty petition is a ``jurisdictional'' defect which parties may raise at 
any time. Citing Zenith Electronics Corp. v. United States, Gilmore 
Steel Corp.  v. United States, and Oregon Steel Mills, Inc. v. United 
States, CDC contends that the Department has the authority to revoke an 
order that never had the requisite level of industry support.
    Petitioner argues that the Department properly initiated the 
original antidumping investigation and that respondent's claim that the 
Department should revoke the antidumping order is barred because it has 
been previously adjudicated adversely to CEMEX and CDC. In this regard, 
petitioner notes that both parties tried to challenge the initiation of 
the original LTFV investigation before a binational panel convened 
under the auspices of Chapter 19 of the North American Free Trade 
Agreement (NAFTA) to review the final results of the third 
administrative review. In a unanimous opinion issued on September 13, 
1996, the panel rejected the very claims that CEMEX and CDC advance in 
the instant review. Thus, petitioner argues, the principle of ``issue 
preclusion'' (or ``collateral estoppel'') should prevent CEMEX and CDC 
from ``relitigating'' these claims before the Department in the sixth 
administrative review.
    Petitioner also contends that the respondent's claim lacks any 
legal basis because it is barred by the statute of limitations which 
requires ``any appeal of the decision to initiate the antidumping 
investigation to be filed within 30 days of the publication of the 
antidumping order.'' Additionally, petitioner asserts, CEMEX and CDC 
failed to ``exhaust available administrative remedies'' by not raising 
the issue before the Department in the original LTFV investigation . 
CEMEX and CDC also failed to raise this issue in the now-concluded 
litigation over the LTFV investigation and, therefore, the claim is 
barred by res judicata. Petitioner also contends that much of the basis 
for CEMEX's and CDC's claim is an unadopted GATT panel report which is 
not binding international law. Furthermore, petitioner claims that the 
Department ``lacks authority under the statute to rescind its 
initiation of the original investigation in the context of an 
administrative review.'' Finally, petitioner asserts, citing Suramerica 
de Aleaciones Laminada, C.A. v. United States, that the courts have 
upheld the Department's prior practice of presuming industry support 
for a petition in absence of ``any showing to the contrary.''

Department's Position

    For the following reasons, respondent's arguments are without 
merit. First, like the GATT itself, panel reports under the 1947 GATT 
were not self-executing and thus had no direct legal effect under U.S. 
law.
    Second, neither the 1947 GATT nor the 1979 GATT Antidumping Code 
obligated the United States to affirmatively establish prior to the 
initiation of a regional-industry case that all or almost all of the 
producers in the region supported the petition. There certainly was no 
suggestion in either instrument that the standing requirements in 
regional-industry cases were any more rigorous than the standing 
requirements in national-industry cases.
    Furthermore, GATT panel reports, such as the one issued in 1992, 
had no legal effect or formal status unless and until they were adopted 
by the GATT Council or, in the case of antidumping measures, the GATT 
Antidumping Code Committee. This followed from the fact that the 1947 
GATT operated, throughout its history, on the basis of consensus for 
purposes of decision-making in general and the resolution of disputes 
in particular. In the present case, it is undisputed that the GATT 
panel report was never adopted by the Antidumping Code Committee. Thus, 
the recommendations contained in the report were never binding, did not 
impose any international obligations upon the United States, and did 
not trigger the rule of statutory construction set forth in the 
Charming Betsy case.
    Third, the object of CEMEX's and CDC's comments is not the 
preliminary results of this review. Rather, they complain about the 
initiation of the original LTFV investigation--an event which occurred 
over eight years ago and over five years before the effective date of 
the URAA. The time to voice such objections before the Department was 
during the investigation. Instead, CEMEX and CDC, as well as the other 
Mexican cement producer that participated in the original investigation 
(Apasco, S.A. de C.V.), sat silent before the Department. See Final 
Determination of Sales at Less Than Fair Value; Gray Portland Cement 
and Clinker From Mexico, 55 FR 29244 (1990). Moreover, neither CEMEX 
nor any other party appealed the agency's final affirmative LTFV 
determination (including the decision to initiate) to the appropriate 
court, and the statute of limitations for doing so has long expired. 
See 19 U.S.C. 1516a(a)(2)(A).
    The only one who appealed the Department's final LTFV determination 
was the petitioner. It challenged certain aspects of the Department's 
final determination before the U.S. Court of International Trade 
(``CIT'') and the U.S. Court of Appeals for the Federal Circuit 
(Federal Circuit). See Ad Hoc

[[Page 12766]]

Committee Of AZ-NM-TX-FL Producers of Gray Portland Cement v. United 
States, Slip Op. 94-152 (CIT), aff'd, 68 F.3d 487 (Fed. Cir. 1995). 
CEMEX participated in that litigation as an intervenor on the side of 
the Department. On October 10, 1995, the Federal Circuit issued an 
opinion which disposed of the last issue in that case.
    Therefore, even if the Department, of its own volition, were to 
reinterpret U.S. law in light of the 1992 GATT panel report, it lacks 
the legal authority in this review to revoke the order or otherwise 
rescind the initiation of the underlying investigation. As we stated in 
the final results of the third administrative review and reaffirm here:

    * * * the Department has no authority to rescind its initiation 
of the LTFV investigation. Under sections 514(b) and 516A(c)(1) of 
the Act, a LTFV determination regarding initiation becomes final and 
binding unless a court challenge to that determination is timely 
initiated under 516A. Even if judicial review of a determination is 
timely sought, the Department's determination continues to control 
until there is a resulting court decision ``not in harmony with that 
determination.'' See 19 U.S.C. Sec. 1516a(c)(1). In this case, no 
one challenged the Department's determination on standing before the 
CIT. Therefore, that determination is final and binding on all 
persons, including the Department.

Gray Portland Cement and Clinker from Mexico; Final Results Of 
Antidumping Duty Administrative Review, 60 FR 26865 (1995) (emphasis 
added). See also Gray Portland Cement and Clinker from Mexico; Final 
Results of Antidumping Duty Administrative Review, 62 FR 17581 (1997) 
(final results of fourth administrative review); Gray Portland Cement 
and Clinker from Mexico; Final Results of Antidumping Duty 
Administrative Review, 62 FR 17148 (1997) (final results of five 
administrative review).
    Fourth, no court, including the court in Gilmore Steel, has ever 
held that the Department has the authority, in an administrative review 
under section 751(a) of the Act, to reach back more than eight years 
and reexamine the issue of industry support for the original petition. 
Gilmore Steel involved a challenge to the termination of a pending 
investigation based upon information obtained in the course of that 
investigation. In particular, the petitioner contended that the 
Department lacked the authority to rescind the investigation based upon 
insufficient industry support for the petition after the 20-day period 
provided for in section 732(c) of the Act had elapsed. 585 F. Supp. at 
673. In upholding the Department's determination, the court recognized 
that administrative officers have the authority to correct errors, such 
as ``jurisdictional defects,'' at anytime during the proceeding. Id. at 
674-75. The court did not state or imply that a change in legal 
interpretation (in this case a non-binding one) authorizes 
administrative officers to reopen prior agency decisions which are 
otherwise final. The court simply held that the administering authority 
may, in the context of the original investigation, rescind an ongoing 
proceeding after expiration of the 20-day initiation period.
    Although the Zenith Electronics case did involve an administrative 
review, it did not concern questions about industry support for a 
petition in the original investigation. Rather, the plaintiffs in 
Zenith Electronics alleged that the petitioner was no longer a domestic 
``interested party'' with standing to request an administrative review. 
872 F. Supp. at 994. As in Gilmore Steel, the court found that the 
Department had the authority to determine whether the proceeding from 
which the appeal was taken--the administrative review--was properly 
initiated. Nothing in Zenith Electronics or Gilmore Steel supports 
CDC's argument that a party may challenge industry support for a 
petition more than eight years after the fact in the context of an 
administrative review under section 751(a) of the Act.
    Lastly, CDC completely misapprehends the holding in Oregon Steel 
Mills. First, the case involved a challenge to the Department's 
authority to revoke an antidumping duty order based upon new facts, not 
upon a reexamination of the facts as they existed during the original 
LTFV investigation. Secondly, the new fact was the industry's 
affirmative expression of no further support for the antidumping order. 
Under these circumstances, the Federal Circuit held that it was lawful 
for the investigating authority, in the context of a ``changed 
circumstances'' review pursuant to section 751(b) of the Act, to revoke 
an order over the objection of one member of the industry. 862 F.2d at 
1544-46. The court did not state that industry support for an order 
must be affirmatively established throughout the life of an order. 
Indeed, the court went to lengths to explain that it was not ruling on 
the claim that ``loss of industry support for an existing order creates 
a 'jurisdictional defect.''' Id. at 1545 n. 4. As subsequent courts 
have explained, the holding in Oregon Steel Mills is limited to the 
proposition that the Department may, but need not, revoke an order when 
presented with record evidence which demonstrates a lack of industry 
support for the continuation of the order. See, e.g., Suramerica De 
Aleaciones Laminadas v. United States, 966 F.2d 660, 666 (Fed. Cir. 
1992); Citrosuco Paulista, S.A. v. United States, 704 F. Supp. 1075, 
1085 (CIT 1988).
    In short, the cases cited by CEMEX and CDC are inapposite. None of 
them support the argument that the Department has the authority, in an 
administrative review under section 751(a) of the Act, to reach back 
more than eight years and reexamine the issue of industry support for 
the original petition.
    Finally, we note, as we did in the final results of the third, 
fourth, and fifth administrative reviews, that numerous courts upheld 
the Department's prior practice of assuming, in the absence of evidence 
to the contrary, that a petition filed on behalf of a regional or 
national industry is supported by that industry. See, e.g., NTN Bearing 
Corp. v. United States, 757 F. Supp. 1425, 1427-30 (CIT 1991); 
Citrosuco, 704 F. Supp. at 1085; Comeau Seafoods v. United States, 724 
F. Supp. 1407, 1410-12 (CIT 1989).
    Indeed, the very issue raised by CEMEX and CDC was before the 
Federal Circuit in the Suramerica case. 966 F.2d at 665 & 667. In 
Suramerica the appellees challenged the Department's interpretation of 
the phrase ``on behalf of'' which applied to both national-and 
regional-industry cases. Specifically, the appellees argued that the 
Department's prior practice of presuming industry support for a 
petition was contrary to the statute and an unadopted GATT panel report 
involving the U.S. antidumping order on certain stainless steel hollow 
products from Sweden. In affirming the Department's practice, the 
Federal Circuit observed that the phrase ``on behalf of'' was not 
defined in the statute. Id. at 666-67. The statute was, in fact, open 
``to several possible interpretations.'' In the opinion of the court, 
the Department's practice with regard to standing and industry support 
for a petition reflected a reasonable ``middle position.'' 966 F.2d at 
667. While there was a gap in the statute, the court stated, ``Congress 
did make [one thing] clear--Commerce has broad discretion in deciding 
when to pursue an investigation, and when to terminate one.'' Id.
    The court then dismissed the argument that the gap in the statute 
must be interpreted in a manner that is consistent with the 1947 GATT 
or the GATT panel ruling:


[[Page 12767]]


    Appellees next argue that the statutory provisions should be 
interpreted to be consistent with the obligations of the United 
States as a signatory country of the GATT. Appellees argue that the 
legislative history of the statute demonstrates Congress's intent to 
comply with the GATT in formulating these provisions. Appellees 
refer also to a GATT panel--a group of experts convened under the 
GATT to resolve disputes--which ``recently rejected [Commerce's] 
views on the meaning of `on behalf of.' ''
    We reject this argument. First, the GATT panel itself 
acknowledged and declared that its examination and decision were 
limited in scope to the case before it. The panel also acknowledged 
that it was not faced with the issue of whether, even in the case 
before it, Commerce had acted in conformity with U.S. domestic 
legislation.
    Second, even if we were convinced that Commerce's interpretation 
conflicts with the GATT, which we are not, the GATT is not 
controlling. While we acknowledge Congress's interest in complying 
with U.S. responsibilities under the GATT, we are bound not by what 
we think Congress should or perhaps wanted to do, but by what 
Congress in fact did. The GATT does not trump domestic legislation; 
if the statutory provisions at issue here are inconsistent with the 
GATT, it is matter for Congress and not this court to decide and 
remedy. See 19 U.S.C. 2504(a); Algoma Steel Corp. v. United States, 
865 F.2d 240, 242 (Fed. Cir. 1989).

Id. at 667-68 (emphasis added).

Produced As vs. Sold As

Comment 2

    CEMEX argues that the Department's methodology for calculating 
normal value (NV) has been fundamentally flawed since the original LTFV 
investigation. CEMEX claims that the Department has matched U.S. sales 
to home market sales using a ``sold as'' methodology which matches U.S. 
sales to home market sales on the basis of how the cement is sold 
(e.g., according to the cement type listed on the invoice.) CEMEX 
asserts that since the original investigation, it has argued that the 
Department should use a ``produced as'' methodology which matches U.S. 
sales to home market sales based on the physical characteristics of the 
cement being sold.
    CEMEX asserts that in the original LTFV investigation, the 
Department learned that cement is differentiated according to standards 
established by the American Society for Testing and Materials (ASTM). 
According to these standards, the physical and performance 
specifications for a Type II cement are more exacting than the 
specifications for a Type I cement. Similarly, the specifications for 
Type V cement are more exacting than for Type II. A cement that meets 
the physical and performance specifications for a higher grade cement 
also meets the specifications for a lower grade cement.
    During the POR, CEMEX sold cement invoiced as Type I, Type II, and 
Type V in Mexico and cement invoiced as Type II in the United States. 
However, all cement invoiced as Type II or Type V (and a small amount 
invoiced as Type I) contains the physical and performance 
specifications of Type V cement. CEMEX states that customers requiring 
a lower grade of cement can use the higher grade cement for their 
applications. Thus, CEMEX asserts that cement producers will sell a 
higher grade cement to a customer needing only a lower level ASTM 
cement when it is commercially sensible to do so.
    CEMEX argues that according to 19 U.S.C. 1677(b)(A)(1)(B)(i), the 
Department must base NV on the price at which the ``foreign like 
product'' is sold in the home market. CEMEX contends that the foreign 
like product can only be merchandise ``identical in physical 
characteristics with'' the cement sold in the United States. 
Furthermore, CEMEX argues that the dumping law requires the inclusion 
of all sales having identical physical characteristics, including those 
invoiced as another product. CEMEX argues that the ``sold-as'' 
methodology would not include all of the appropriate home market sales 
during the POR (i.e., ``Type I and V'' produced at the Hermosillo 
plants).
    Petitioner argues that CEMEX waived its objection to the 
Department's matching methodology by not appealing the Department's 
final determination in the original LTFV investigation and not raising 
the issue in any of the previous reviews. Petitioner further argues 
that the Department's questionnaire instructed CEMEX to ``assign a 
control number to each unique product reported in the Section B sales 
data file'' and to assign an identical control number to identical 
merchandise sold in the home market and in the United States. 
Petitioner asserts that CEMEX assigned unique control numbers to 
merchandise that was invoiced as Type I, Type II, and Type V cement, 
even though it may have been the same cement from the same plant. Thus, 
CEMEX reported its sales on an ``as invoiced'' basis, rather than on an 
``as produced'' basis. Petitioner argues that CEMEX only raised this 
issue after the Department discovered that all cement produced at the 
Hermosillo plants and sold as Type I, Type II, or Type V cement was 
basically identical in physical characteristics.
    Additionally, petitioner asserts that CEMEX altered its production 
and shipping arrangements for Type II cement to artificially lower the 
dumping margin. Petitioner argues that the statute does not direct the 
Department to ``blindly compare the merchandise exported to the United 
States with all identical merchandise sold in the home market.'' 
Rather, the Department must recognize the commercial reality that 
prices can vary based on the specifications to which a product is sold, 
even though the products in question are physically identical. 
Furthermore, petitioner asserts that in this case it is impossible to 
match Type II cement exported by CEMEX to the United States with all 
home market sales of cement produced at the Hermosillo plants because 
CEMEX did not report a plant code to identify its home market sales 
with the producing plant.

Department's Position

    We agree, in part, with CEMEX. Section 771(16)(A) of the Act 
expresses a clear preference for matching sales in the United States 
with sales in the home market of merchandise that is ``identical in 
physical characteristics.'' See CEMEX, S.A. v. United States, 1998 U.S. 
App. LEXIS 163 (Fed. Cir.). When circumstances require the Department 
to compare non-identical merchandise, the statute, at section 
773(a)(6)(C)(ii) of the Act, provides for a ``difference-in-
merchandise'' adjustment (DIFMER) which is normally equal to the 
difference in cost of production attributable to differences in 
physical characteristics. 19 CFR 353.57.
    Since the inception of this proceeding, we have seen that all 
cement generally conforms to the standards established by the ASTM. 
These standards tend to classify cement according to its physical 
characteristics, dimensional characteristics, and/or performance 
properties. Also from the outset, interested parties and the Department 
have used ASTM standards to identify merchandise subject to this 
antidumping order and to inform how, and on what basis, we match sales 
of identical or similar merchandise. Specifically, the Department has 
sought, wherever possible, to match sales of ASTM standard Type II to 
Type II, ASTM standard Type V to Type V, and so forth.
    During the period covered by the original investigation, the 
Department discovered one or more instances where Mexican producers 
sold cement meeting one ASTM standard on the basis of cement meeting a 
lower (included) ASTM standard. However, in the final determination, 
the Department described these sales as a mistake and not ``the 
ordinary practice in the

[[Page 12768]]

industry.'' Final Determination of Sales at Less Than Fair Value, Gray 
Portland Cement and Clinker from Mexico, 55 FR 29244, 29248 (1990). 
Therefore, based on the fact that it was the normal industry practice 
to produce and sell on the same basis, the Department accepted that 
``matching by ASTM standard was the most reasonable basis for making 
equitable identical merchandise comparisons.'' Id. at 29248.
    Devising a methodology for matching sales is often a difficult task 
and the courts have recognized that the Department has broad discretion 
``to choose the manner in which * * * merchandise shall be selected.'' 
Koyo Seiko Co. v. United States, 66 F.3d 1204, 1209 (Fed. Cir. 1995). 
In the instant proceeding, we have sought, throughout each of the past 
six reviews, including the present one, to (i) match based on physical 
characteristics, (ii) rely on ASTM standards to distinguish one type of 
cement from another, and (iii) rely on sales documentation as a 
convenient surrogate for more direct evidence (e.g., mill test 
certificates) of cement type. In general, this methodology has not 
generated much controversy. Indeed, as petitioner notes in its comments 
on the preliminary results, this issue has not been in dispute since 
the original LTFV investigation.
    In the instant review, the Department repeatedly requested CEMEX to 
provide information on whether home market sales of Type I, Type II, 
and Type V cement were produced to meet other specifications or whether 
merchandise is produced and sold on the same basis. CEMEX consistently 
reported that it sold cement in the home market as either Type I, Type 
II, or Type V although these products may meet other ASTM standards. 
Not until the conclusion of verification did the Department discover 
that the practice of producing one type of cement and selling it as 
another type was not an isolated incident or mistake. In fact, the 
record now demonstrates that all U.S. sales and all home market sales 
from the Hermosillo plants during the POR met the ASTM standard for 
Type V cement, but were sold as meeting the specifications for Type I, 
II, and/or V.
    Under these circumstances, we believe it would be unreasonable to 
match merchandise on a ``sold as'' basis. For one thing, it would make 
any cost of production or DIFMER calculations more difficult, if not 
impossible. Secondly, such an approach would not address any sales that 
were merely labeled ``gray portland cement'' or ``cement.'' Finally, a 
``sold as'' approach would lend itself to the type of product 
manipulation about which petitioner has so often expressed concern. 
Therefore, for purposes of the instant review, the Department will 
apply the matching methodology applied in the preliminary results of 
the instant review. Petitioner has expressed concerns that matching 
using physical characteristics will enable CEMEX to manipulate home 
market sales to conform to certain specifications, thereby limiting the 
Department's ability to properly review sales of merchandise in the 
comparison markets. In order to properly address these concerns, the 
Department will continue to closely review and monitor sales of both 
identical and similar merchandise in the home market to ensure that, in 
subsequent reviews, an accurate and reliable database of home market 
and U.S. sales are reported. For example, in the next administrative 
review, the Department has requested CEMEX to report its home market 
sales on both an ``as sold'' and ``as produced'' basis.
    The Department disagrees with petitioner's comment that we cannot 
match sales on a ``produced as'' basis because CEMEX did not report 
plant codes. In the current review, the record demonstrates that CEMEX 
only produced cement meeting the ASTM specifications for Type V at its 
plants in Hermosillo. Additionally, CEMEX has stated that all cement 
invoiced as Type II or V was produced at the Hermosillo plants, and 
thus meets the ASTM specifications for Type V. Finally, the Department 
has isolated sales of cement produced at the Hermosillo plants and sold 
as Type I through Cementos del Yaqui at the Campana and Yaqui plants.

Ordinary Course of Trade

Comment 3

    CEMEX contends that the Department improperly concluded that its 
home market sales of Type II and Type V cement produced at the 
Hermosillo plants were outside the ordinary course of trade. CEMEX 
argues that the Department's analysis only relied on facts which 
indicate that sales were outside the ordinary course of trade. CEMEX 
asserts that the Department must evaluate all evidence on the record of 
the review, including any evidence that indicates that sales are made 
within the ordinary course of trade. CEMEX believes that the Department 
ignored legally relevant factors which indicate that these sales were 
made within the ordinary course of trade.
    First, CEMEX asserts that the Department failed to recognize that a 
bona fide home market demand existed for Type II and Type V cement 
produced at the Hermosillo plants. Second, CEMEX contends that the 
Department failed to recognize that these sales were of first-quality, 
non-defective merchandise. Finally, CEMEX argues that the Department 
failed to acknowledge that rebate, discount, and payment terms varied 
by customer, not by cement type.
    CEMEX claims that additional aspects of the administrative record 
demonstrate that its home market sales of Type II and V cement were 
made within the ordinary course of trade during the sixth 
administrative review. To support this argument, CEMEX maintains that 
the Department should focus on the actual sale terms and practices 
surrounding the sales of Type II and Type V cement as compared to other 
cement types subject to the order (i.e., Type I cement). In this 
regard, CEMEX notes that shipping terms for all cement types were 
identical (C.I.F. or F.O.B.) which is ``indicative'' of sales in the 
ordinary course of trade. Moreover, CEMEX notes that all pre-sale 
freight expenses absorbed by CEMEX for Type II and V sales were 
incurred in precisely the same manner as pre-sale freight expenses for 
all other cement types, including Type I.
    CEMEX further argues that the Department should not have focused on 
shipping distances to the customer. Shipping distances and freight 
costs, CEMEX asserts, are the result of geographic locality, rather 
than differences in sales practices, and thus should not affect the 
Department's ordinary-course-of-trade determination. Finally, CEMEX 
argues that shipping distances have never been a consideration in any 
other ordinary-course-of-trade determination
    Next, CEMEX contends that the difference in profitability between 
sales of Type II/V cement and Type I cement is not of sufficient 
magnitude to be indicative of sales outside the ordinary course of 
trade. CEMEX argues that the profitability of Type II sales is 
substantial in absolute terms and significantly higher than in prior 
reviews. According to CEMEX, the preamble to the Department's new 
regulations defines ``abnormally low profits'' indicative of sales 
outside the ordinary course of trade as ``negative profitability.'' 
CEMEX argues that by regarding differences in magnitude of 
profitability as a factor indicative of sales outside the ordinary 
course of trade, the Department is requiring companies to earn 
virtually equal profits on all different products in order for sales to 
be considered within the ordinary course of trade.
    CEMEX maintains that the profit differential is not caused by price

[[Page 12769]]

disparities, but rather by the higher average freight costs associated 
with sales of Type II cement. CEMEX asserts that it has maximized 
profits by supplying its home market Type II customers from Hermosillo; 
therefore, the profit differential is the result of a legitimate 
business decision, indicating that home market sales of Type II cement 
are within the ordinary course of trade.
    CEMEX argues that sales of Type II and Type V cement are made in 
the same manner and for the same reasons as sales of Type I cement. 
Thus, CEMEX questions the Department's comments about the 
``promotional'' nature of its Type II and V sales. According to CEMEX, 
if the Department's reasoning for this factor is taken literally, any 
attempt by a producer to diversify a product line outside of the mass 
market would be indicative of those sales being outside the ordinary 
course of trade. CEMEX claims that there has been no proceeding at the 
Department since the second review of this case which has relied on 
this factor in an ordinary-course-of-trade-determination.
    CEMEX further asserts that in the first review the Department found 
CEMEX's consolidation of Type II cement production in northwestern 
Mexico to be based on legitimate business reasons (i.e., maximization 
of company profitability). Therefore, if the Department finds a 
company's motivation to sell cement in a profitable manner irrelevant 
to the ordinary course of trade argument, then the company's possible 
motivation for selling specific cement types must also not be relevant.
    CEMEX also argues that the relative sales volume of Type II and 
Type V sales (as compared to other cement types) is not indicative of 
sales outside the ordinary course of trade. In particular, CEMEX 
argues, Department precedent establishes that low relative sales volume 
is a factor indicative of sales outside the ordinary course trade only 
in situations where there is no bona fide demand or ready market for 
the product. For example, in Thai Pipe and Tube, CEMEX asserts that the 
Department found certain sales to be within the ordinary course of 
trade notwithstanding low relative sales volume as there was a bona 
fide demand for the product in the home market. CEMEX maintains that 
the administrative record in this case establishes both a significant 
volume of home market sales for Type II and Type V cement, in absolute 
terms, and the existence of a bona fide home market demand for these 
products. In addition, CEMEX argues that information on the record of 
this review shows that sales volumes for Type II and Type V cement have 
been increasing from review to review and that it now exceeds 5% of 
U.S. sales.
    Likewise, CEMEX argues that historical sales trends support its 
view that home market sales of Type II and Type V cement have been made 
within the ordinary course of trade. According to CEMEX, home market 
customers have been purchasing Type II cement for ten years, including 
the five years that preceded the antidumping order. Additionally, CEMEX 
asserts that with regard to Type V cement, the Department's analysis of 
historical sales trends is factually incorrect because the Department 
ignores the fact that CEMEX's subsidiary, Tolteca, has made continuous 
sales of Type V cement since 1964. Finally, CEMEX asserts that the 
incorporation of the fictitious market verification report from the 
second review into the record of this review eliminates any need to 
rely on facts available regarding historical sales patterns.
    Lastly, CEMEX contends that the number and type of Type II and Type 
V customers are not indicative of sales outside the ordinary course of 
trade. According to CEMEX, it is the existence of customers, not the 
number of customers, that is relevant to this issue. CEMEX asserts that 
the Department has found a small number of home market customers to be 
indicative of sales outside the ordinary course of trade only when the 
sales have been limited to home market sales of export overrun 
merchandise or non-specification merchandise. When the subject 
merchandise has been sold to satisfy a bona fide home market demand, 
sales to a small number of customers have been found inside the 
ordinary course of trade.
    Petitioner contends that the Department correctly applied the 
statute by excluding all home market sales of Type II and Type V cement 
from the calculation of NV. Petitioner maintains that the Department 
properly considered the totality of the circumstances, including all 
factors expressly considered by the Department in prior reviews, and 
several of the ``alleged'' factors relied upon by CEMEX. In particular, 
petitioner asserts that in this review (similar to the second and fifth 
reviews) the Department has not found an absence of bona fide demand, 
but the existence of limited home market demand.
    Petitioner also argues that the Department correctly found that 
CEMEX's home market shipping arrangements for Type II and Type V cement 
were unusual compared to its arrangements for other types of cement. In 
particular, petitioner argues that during the POR, CEMEX shipped Type 
II and Type V cement greater distances and absorbed the freight 
expense. To support its claim, petitioner points out that prior to the 
antidumping order, CEMEX produced Type II cement at 11 plants 
throughout Mexico. In direct response to the antidumping order; 
however, petitioner claims that CEMEX radically altered its production 
and distribution arrangements for Type II cement by consolidating 
production at Hermosillo despite the fact that home market demand for 
this cement type is centered in the Mexico City area.
    Petitioner asserts that CEMEX's claim that shipping terms were 
identical for all cement types is misleading, noting that Type I sales 
terms were ``either FOB CEMEX plant or terminal or CIF at customer's 
delivery point'' while Type II and Type V cement were never sold using 
the plant as point of shipment. Furthermore, Petitioner asserts that 
CEMEX's treatment of handling revenue and freight adjustment rebates 
differed between sales of Type I cement and sales of Types II and V. 
Additionally, petitioner argues that CEMEX's statement that shipping 
distances are not relevant to the ordinary course of trade 
determination is both factually and legally wrong.
    Petitioner contends that the record demonstrates that CEMEX 
consolidated production of Type II and Type V at Hermosillo in direct 
response to the antidumping order with the intention of circumventing 
the order. Petitioner further claims that CEMEX sold cement meeting 
Type II specifications from plants closer to Mexico City than the 
Hermosillo plants using product designations such as ``Type I,'' ``Type 
I Modified,'' ``Type I plus'' and ``Type I special cement.'' Petitioner 
supports this claim by referencing quality tests certificates submitted 
on the record of this review by petitioner and chemical analysis 
spreadsheets located in Exhibit 46 of the Department's July 21, 1997 
home market sales verification report. Petitioner points out that CEMEX 
has made several contradictory statements regarding sales of cement 
under these alternative descriptions. Furthermore, petitioner asserts 
that CEMEX concedes it can produce Type II cement at its plants 
producing Type I cement, but that it would not be economically feasible 
to produce Type II low alkali cement at such plants.
    As further evidence that sales of Type II and V are outside the 
ordinary course of trade, petitioner claims that CEMEX restricted its 
sales volume of Type II cement after the antidumping order by

[[Page 12770]]

ceasing to promote and offer Type II for sale as a general purpose 
cement, and selling it only as a specialty cement to those customers 
demonstrating a specific need for Type II in order to diminish the 
impact of absorbing the higher transportation costs. Petitioner asserts 
that Type II and Type V cement are now sold to a ``niche'' market. 
Prior to the order, CEMEX sold Type II as interchangeable with Type I 
and pozzolanic cement. In addition, petitioner asserts that CEMEX 
restricted its sales according to ``customer need'' by selling Type II 
cement only to customers demanding optional specifications of Type II 
low-alkali cement and actively discouraging Type II sales by reviewing 
with the customer whether there is a need for low-alkali cement.
    Petitioner contends that the Department correctly considered 
relative sales volume as a factor in its ordinary-course-of-trade 
analysis. Petitioner argues that CEMEX does not explain the probative 
value of ``absolute-term'' analysis of sales volumes and, in fact, the 
statute requires the type of comparative analysis between cement types 
used by the Department. CEMEX's assertion that small sales volumes are 
only indicative of sales outside the ordinary course of trade when 
there is not a bona fide home market demand would not be consistent 
with the Department's principle of considering ``each case on its own 
facts, not according to some set of preconceived factors.'' In 
addition, petitioner points out that only a small percentage of CEMEX's 
Type II and V cement production are sold in the home market; thus, 
petitioner likens these sales to ``'overrun'' merchandise designed for 
export.''
    Petitioner further asserts that the number, type, and geographic 
location of customers for CEMEX's Type II and Type V sales are unusual 
relative to Type I. In contrast to the broad range of customers and 
uses for Type I cement, Type II and Type V cement was principally sold 
only to certain types of customers (usually large industrial 
contractors) for particular projects. Petitioner states that the courts 
have upheld the use of a limited number of customers as a factor in the 
ordinary course of trade analysis. See, e.g., Mantex, 841 F. Supp. At 
1307; Laclede Steel, 18 CIT at 967. Petitioner cites differences in 
presentation types (bag or bulk) between the different cement types as 
additional evidence of different customer types. Moreover, CEMEX's 
customers for Type II and Type V cement are concentrated in the Mexico 
City area, while its customers for Type I and pozzolanic cement are 
dispersed throughout Mexico. Furthermore, from the Hermosillo plants, 
CEMEX sells cement invoiced as Type II and Type V only to distant 
customers, while it artificially sells the identical cement to nearby 
customers as Type I.
    Petitioner asserts that CEMEX's profit on Type II sales is 
unusually small in comparison to its profits on all cement types, with 
an even greater difference if there is an ``apples to apples'' 
comparison for sales from the Yaqui plant. Petitioner asserts that this 
difference is further magnified by a ``before freight'' and after 
freight'' comparison of Yaqui sales. Petitioner asserts that CEMEX only 
began selling Type II and Type V cement in the home market when it 
began production for export in the mid-1980s. Then, after the 
antidumping order, CEMEX was able ``to drastically change its 
production and distribution for those cement types without disturbing 
its profitability on sales of Type I and pozzolanic cement.''
    Petitioner agrees with the Department's determination that CEMEX 
sold Type II and Type V cement for reasons other than profit as CEMEX 
failed to address this factor in the sixth review. Petitioner points to 
CEMEX's admission in earlier reviews (which are now part of the record 
of the instant review) that CEMEX's sales of Type II cement exhibit a 
promotional quality not evidenced in ordinary sales of cement.
    Petitioner argues that CEMEX's contention that consolidation of 
production at Hermosillo was a legitimate business decision is 
irrelevant to the ordinary course of trade determination. Moreover, 
petitioner claims that CEMEX has failed to preserve this issue for the 
final results by not including it in its case brief.

Department's Position

    Consistent with our preliminary results, the Department has 
determined that CEMEX's home market sales of Type II and Type V cement 
produced at the Hermosillo plants were outside the ordinary course of 
trade during the sixth review. Section 773(a)(1)(B) of the Act states, 
in part, that NV is ``the price at which the foreign like product is 
first sold (or, in absence of a sale, offered for sale) for consumption 
in the exporting country, in the usual commercial quantities and in the 
ordinary course of trade * * *'' The term ``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 Statement of Administrative Action (SAA) 
which accompanied the passage of the URAA further clarifies this 
portion of the statute, when it states: ``Commerce may consider other 
types of sales or transactions to be outside the ordinary course of 
trade when such sales or transactions have characteristics that are not 
ordinary as compared to sales or transactions generally made in the 
same market.'' SAA, at 164. Thus, the statute and the SAA are clear 
that a determination of whether sales (other than those specifically 
addressed in section 771(15)) are in the ordinary course of trade must 
be based on an analysis comparing the sales in question with sales of 
merchandise of the same class or kind generally made in the home market 
(i.e., the Department must consider whether certain home market sales 
of cement are ordinary in comparison with other home market sales of 
cement).
    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 ensures that the comparison between 
NV and sales to the United States is done on an ``apples-to-apples'' 
basis. However, Congress has not specified any criteria that the agency 
should use in determining the appropriate ``conditions and practices.'' 
Thus, the Department, ``in its discretion, chooses how best to analyze 
the many factors involved in a determination of whether sales are made 
with in the ordinary course of trade.' '' Thai Pineapple Public Co. v. 
United States, 946 F. Supp. 11, 14-17 (CIT 1996) (quoting Laclede Steel 
Co. v. United States, Slip Op. 95-144 at 6 (CIT Aug. 11, 1995).
    In the instant review, the Department's decision to exclude sales 
of Type II and Type V cement from the calculation of NV centered around 
the unusual nature and characteristics of these sales compared to the 
vast bulk of CEMEX's other home market sales. Based upon these 
differences, the Department concluded that they were not representative 
of CEMEX's home market sales. Stated differently, these sales were not 
within CEMEX's ordinary course of trade.
    The Department's ordinary-course-of-trade inquiry is far-reaching. 
The agency must evaluate not just ``one factor taken in isolation but 
rather * * * all the circumstances particular to the sales in 
question.'' Murata Mfg. Co.  v. United

[[Page 12771]]

States, 820 F. Supp. 603, 607 (CIT 1993) (quoting Certain Welded Carbon 
Steel Standard Pipes and Tubes from India, Final Results of Antidumping 
Duty Administrative Review, 56 FR 64753, 64755 (1991). This broad 
approach recognizes that each company has its own conditions and 
practices particular to its trade. For example, it might be a normal 
practice for one company to sell samples in its line of business; for 
other companies, that might be an abnormal practice. In short, the 
Department examines 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).
    A full discussion of our conclusions, requiring reference to 
proprietary information, is contained in several Department memoranda 
in the official file for this case (public versions of these memoranda 
are on file in room B-099 of the Department's main building). 
Generally, however, we have found, with respect to Type II cement: (1) 
the volume of Type II home market sales is extremely small compared to 
sales of other cement types; (2) the number and type of customers 
purchasing Type II cement is substantially different from other cement 
types; (3) Type II is a speciality cement sold to a niche market; (4) 
shipping distances and freight costs for Type II cement sold in the 
home market is significantly greater than for sales of other cement 
types; and (5) CEMEX's profit on Type II sales is small in comparison 
to its profits on all cement types.
    In addition, there are two items, historical sales trends and the 
``promotional quality'' of CEMEX's Type II cement sales, which were 
cited previously as factors in the second review ordinary-course 
analysis, but which are not discussed above. On March 10, 1997, the 
Department issued a questionnaire requesting CEMEX to support its 
position that home market sales of Type II cement were within 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, 
the Department assumes 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.
    With respect to CEMEX's home market sales of Type V cement produced 
at the Hermosillo plants, we note that these sales are less unusual 
than its home market sales of Type II cement. For example, CEMEX's 
profit rate on Type V sales is slightly closer to its profit rate on 
Type I sales than is true of its Type II sales. Notwithstanding this 
distinction, the Department has determined, after considering the 
totality of circumstances surrounding these sales, that CEMEX's home 
market sales of Type V cement are also outside the ordinary course of 
trade.
    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. Secondly, the number and type of customers 
purchasing Type V cement is substantially different from those 
purchasing Type I. As is true of Type II, Type V is a speciality cement 
that CEMEX sells to a niche market. Finally, shipping distances and 
freight costs for sales of Type V cement are significantly greater than 
for sales of Type I. Like its sales of Type II cement, CEMEX's sales of 
Type V cement are shipped over unusually long distances.
    Consistent with our preliminary results, we have also determined, 
based upon the facts otherwise available, that: (1) 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 (2) 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 continue to 
believe, for reasons expressed in our preliminary results, that this 
use of facts available is warranted and appropriate.
    In sum, the Department has determined that CEMEX's home market 
sales of Type II and Type V cement produced at the Hermosillo plants 
are not representative of its sales in Mexico of the class or kind of 
merchandise under investigation. We note that while our decision is 
based solely upon the facts established in the record of the sixth 
review, those facts are very similar to the facts which led the 
department to determine in the second review that home market sales of 
Type II cement were outside the ordinary course of trade. This 
determination was recently affirmed by the Federal Circuit in the CEMEX 
case (1998 U.S. App. LEXIS 163) (`` * * * Commerce's decision that the 
sales of Types II and V cements were outside the ordinary course of 
trade was supported by substantial evidence.'').
    The Department disagrees with CEMEX's contention that (i) low sales 
volume is only relevant to the ordinary-course-of-trade issue if there 
is no bona fide home market demand, and (ii) the presence of home 
market demand is indicative of sales inside the ordinary course of 
trade. First, the Department verified in the second review that there 
was a small, but apparently legitimate, home market demand for Type II 
and Type V cements. However, that finding did not lead to a 
determination that the subject sales were made within the ordinary 
course of trade. As we note above, the Federal Circuit, in the CEMEX 
case, affirmed the Department's determination that CEMEX's home market 
sales of Types II and V were outside the ordinary course of trade. 
Secondly, the Department has often found sales to be outside the 
ordinary course of trade where volume was considered with other, non-
demand-related, factors. For example, in Final Determination of Sales 
at Less Than Fair Value; Sulfur Dyes Including Sulfur Vat Dyes, from 
the United Kingdom, 58 FR 3253, 3256 (1993), the Department concluded 
that sales were outside the ordinary course of trade based upon 
abnormally high volume, low price, and the existence of a ``special 
agreement'' to promote the product at issue. In Tapered Roller Bearings 
and Parts Thereof, Finished and Unfinished, from Japan, 52 FR 30700, 
30704 (1987), the Department determined that sales were outside the 
ordinary course of trade because the sales in question were of small 
volume and high prices, most of the sales were canceled prior to 
invoice, and there were no comparable sales in the United States. We 
have also excluded transactions from the calculation of NV based upon 
sales made to employees and negligible volume. See, e.g., New Minivans 
from Japan, 57 FR 43, 46 (1992). In short, the Department's consistent 
and longstanding practice has been to consider sales volume along with 
numerous other factors, depending upon the specific product involved.
    The Department also disagrees with CEMEX's claim that instead of 
considering shipping distances and freight costs, we should focus on 
shipping terms and practices. First, the normal practice in Mexico is 
to ship cement, a heavy material, over relatively short distances. 
Indeed, over 95% of all cement shipments in Mexico cover less than 150 
miles. While CEMEX's home

[[Page 12772]]

market shipments of Type I cement conformed to this norm, its shipments 
of Type II and V occurred over substantially greater distances. CEMEX's 
claim that these ``differences in shipping distances is simply a 
geographic fact'' and the result of a ``legitimate business decision'' 
missed their mark. A company may have sound business reasons for 
changing its methods of operation; but, if sales resulting from this 
new business practice are not normal for the company (for a reasonable 
time prior to exportation), then they cannot be said to be within that 
company's ordinary course of trade. As the CIT succinctly stated in its 
examination of the second administrative review:

    Whatever the real strategy behind the consolidation in the 
North, the result was an abnormal shipping arrangement for Types II 
and V cement, which weighs heavily in favor of a finding of sales 
made outside the ordinary course of trade.

CEMEX, Slip Op. 95-72 at 11 (CIT 1995), aff'd, 1998 U.S. App. LEXIS 
163.
    Secondly, while it is true, as CEMEX points out, that shipping 
terms (e.g., CIF or FOB plant) for Types II and V are in some respects 
similar to Type I, we believe this contention proceeds from an 
incorrect premise. In an ordinary-course-of-trade inquiry, the 
pertinent issue is whether the conditions and practices are ``normal'' 
for the company in question. For the years preceding the antidumping 
order, it was CEMEX's normal business practice to pass along the cost 
of pre-sale freight to purchasers of its Type II and V cement. For 
CEMEX to absorb freight costs after the issuance of the order is an 
``unusual circumstance,'' particularly given the high freight costs for 
Type II and V cement.
    Finally, we disagree with CEMEX's contention that our analysis of 
historical sales trends is factually incorrect. CEMEX's production of 
Type II and Type V cement is a relatively recent phenomenon for a 
company producing cement in Mexico for nearly nine decades. CEMEX did 
not produce Type V cement for the home market until March 1989, when it 
purchased Tolteca. Company officials conceded at verification in the 
second review that CEMEX did not produce Type II cement for the home 
market until the mid-1980s when it was required for export to other 
countries. CEMEX's argument that it should somehow receive credit for 
having acquired Tolteca fails to focus upon the pertinent ordinary 
course of trade issue `` that is, whether the sale of Type II and V 
cement was a normal condition or practice for CEMEX, not whether it was 
a normal condition or practice for another company in Mexico. 
Therefore, the fact that Tolteca (as an independent company) produced 
Type V cement is unpersuasive.

Comment 4

    CEMEX asserts that home market sales of cement produced at 
Hermosillo to customers needing only Type I cement should be used in 
the calculation of NV. CEMEX claims that the Department should have 
been able to make an ordinary course of trade determination in 
connection with these sales because its January 29, 1997 submission 
informed the Department that these sales met the physical 
specifications for Type V cement. CEMEX further claims that the 
Department could have determined whether these sales were below cost 
because the Department could have used the submitted cost databases to 
perform this analysis.
    According to CEMEX, sales of Type I cement produced at the 
Hermosillo plants were, in fact, not outside the ordinary course of 
trade since sales volumes were significant in absolute terms, sales 
were to the same types of customers as other Type I sales, and the 
shipping distances and freight costs for cement sold as Type I out of 
Hermosillo were not unlike all other sales of Type I. Additionally, the 
profitability for the Hermosillo-produced sales to Type I customers is 
not significantly different than the profitability for all other Type I 
sales. Finally, CEMEX argues that the ``promotional quality'' factor 
cannot apply since customers perceive this cement to be the same type 
of cement as all other Type I cement.
    Petitioner argues that the Department properly relied upon facts 
available to exclude sales of Type I cement produced at Hermosillo from 
its dumping calculations. Petitioner argues that the Department was 
only prepared to verify whether sales of Type II cement were outside 
the ordinary course trade. The Department did not learn until 
verification that cement produced at the Hermosillo plants and invoiced 
as Type I was, in fact, physically identical to the cement labeled as 
Type II and Type V. Because neither party raised the ordinary course of 
trade issue with respect to Type I sales, the Department was not 
prepared, nor able, to verify this issue. Petitioner asserts that if 
CEMEX had revealed the true nature of these sales prior to 
verification, the Department could have performed an ordinary course of 
trade analysis on these sales.
    Petitioner asserts that it is not possible in this review to 
determine exactly which sales of Type I cement in the home market were 
produced at the Hermosillo plants because CEMEX did not report a plant 
code for its sales. Additionally, the reported costs for cement 
produced at the Hermosillo plants were based on an allocation of costs 
for Type V cement according to how the cement was sold. Therefore, it 
is impossible to conduct a product-specific cost test. Petitioner 
asserts that the home market database is ``extremely flawed'' with 
regard to these sales. Petitioner states that the statute provides the 
Department with the authority to use facts available whenever (1) 
necessary information is not on the record, (2) an interested party 
withholds information that is requested, (3) an interested party 
significantly impedes a proceeding, or (4) the information submitted 
cannot be verified. 19 U.S.C. 1677e(a). According to petitioner, each 
one of these prerequisites to using facts available is satisfied in the 
instant review.

Department's Position

    Pursuant to section 776(a) of the Act, we have continued to 
exclude, as facts available, sales of Type I cement produced at the 
Hermosillo plants from our calculation of NV. As stated in our 
preliminary results of review, home market sales of Type I, Type II, 
and Type V cement produced at Hermosillo actually satisfy the ASTM 
specifications for Type V cement. Because the Department only received 
this information at verification, the Department was unable to 
determine whether these sales provided an appropriate basis for 
calculating NV. In particular, the Department lacked information which 
would allow it to determine whether these sales were made above cost or 
within the ordinary course of trade. For example, the Department 
discovered at verification that the reported production costs for the 
different types of cement supposedly produced at Hermosillo were, in 
fact, based upon an allocation of costs for Type V that was tied to 
sales ratios.
    The Department has not received any information between our 
preliminary results of review and these final results which would 
warrant the inclusion of these sales in our calculation of NV. 
Therefore, the Department is continuing to exclude home market sales of 
Type I cement produced at the Hermosillo plants from our dumping 
calculations in this review.

Comment 5

    CEMEX contends that even if all of its home market sales of 
identical

[[Page 12773]]

merchandise were properly excluded from the calculation of NV, the 
statute requires the Department to base NV upon constructed value (CV), 
not home market sales of similar merchandise (i.e., Type I). In support 
of its position, CEMEX cites DRAMs from the Republic of Korea in which 
the Department resorted to CV when all sales of comparison merchandise 
were excluded from the calculation of NV because they failed the arm's 
length test. CEMEX argues that in the instant review, all sales to the 
United States were of Type II cement; therefore, if all home market 
sales of this type are excluded, Commerce must base NV on CV, not on 
home market sales of the next most similar merchandise, Type I.
    Petitioner argues that, having excluded home market sales of Type 
II and Type V from the calculation of NV, the Department correctly 
based NV on sales of the next most similar merchandise, not CV. 
According to petitioner, the cases relied upon by CEMEX in its brief 
are those where the Department is required by the statute to exclude 
sales of the identical or most similar merchandise because they were 
below the cost of production. In any event, petitioner asserts that 
CEMEX's reported costs for the Hermosillo plants are extremely flawed 
and cannot be used to calculate CV.

Department's Position

    Subsequent to the preparation of case and rebuttal briefs in this 
review, the Federal Circuit issued its opinion in the CEMEX case. In 
that case, the appellate court affirmed the Department's use of Type I 
cement (as opposed to CV) to calculate NV when CEMEX's home market 
sales of identical merchandise (Type II and V) were found to be outside 
the ordinary course of trade in the second administrative review of 
this order. 1998 U.S. App. LEXIS 163. Indeed, the Federal Circuit 
declared that this result was required by ``the plain language of the 
statute * * * when sales of identical merchandise have been found to be 
outside the ordinary course of trade.''
    Although the court did not have before it the statutory amendments 
occasioned by the URAA, the specific provision at issue (section 
771(16) of the Act) was not changed in any meaningful sense. 
Accordingly, our determination on this issue has not changed from the 
preliminary results.

Fictitious Market

Comment 6

    Petitioner claims that CEMEX established a fictitious niche market 
for home market sales of Type II cement. In particular, petitioner 
argues that CEMEX, in reaction to the antidumping order, created an 
artificial and highly restricted market for Type II cement with the 
intention of manipulating the calculation of NV for identical 
merchandise ``to mask the fact that the average home market price of 
the entire class of subject merchandise covered by the order (including 
Type I, Type V, and pozzolanic cement) continued to greatly exceed the 
U.S. price of the imported merchandise.'' As a result, petitioner 
believes a price comparison that is based on home market sales of Type 
II cement would disguise CEMEX's dumping. Petitioner states that the 
evidence on the record in this review continues to demonstrate, as it 
has in prior reviews, that CEMEX established a separate and 
artificially limited home market distribution channel for sales of Type 
II cement in order to circumvent the antidumping order and to lower its 
margin.
    CEMEX counters that the Department has correctly rejected 
petitioner's fictitious market allegation in prior administrative 
reviews of this antidumping order, and should reject the same argument 
in this review. CEMEX states that in past reviews the Department 
accepted CEMEX's business reasons for consolidating production of Type 
II cement in northwest Mexico, and for not passing on freight costs for 
Type II cement to its customers. According to CEMEX, the Department 
also determined in prior reviews that CEMEX provided sufficient 
evidence of genuine demand for Type II cement in Mexico.

Department's Position

    Since the sales in question have 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 final results.

Collapsing

Comment 7

    CDC argues that the Department's decision to ``collapse'' CDC with 
CEMEX is contrary to its established practice and is not justified by 
the facts on the record of this review. CDC cites the Department's 
determination in Antifriction Bearings (Other Than Tapered Rolling 
Bearings) and Parts Thereof From the From the Federal Republic of 
Germany, Final Determination of Sales at Less Than Fair Value, 54 FR 
18992 (1989) in which the Department states the ``it is the 
Department's general practice not to collapse related parties except in 
relatively unusual situations, where the type and degree of 
relationship is so significant that we find that there is strong 
possibility of price manipulation. The Department has refused to 
collapse firms in situations where the facts suggest that such a 
possibility does not exist.'' CDC asserts that the new regulations 
support this interpretation by strongly rejecting a recommendation that 
the Department collapse upon finding ``any potential for price 
manipulation.'' CDC asserts that the potential for price and product 
manipulation is the primary rationale for collapsing two related 
companies. CDC believes that the facts in this review are similar to 
those in the Nihon case where the court found that cross ownership and 
overlapping boards of directors were not sufficient grounds to warrant 
collapsing two entities. CDC asserts that a company's liability under 
the antidumping law should be based on that company's own pricing 
decisions, not those of an affiliated party.
    CDC asserts that the Department's decision to collapse CDC and 
CEMEX is based on an insufficient legal analysis and ignores record 
evidence. According to CDC, the Department should apply a two-step test 
for collapsing, and show (1) that the two companies are affiliated 
parties with production facilities that would not require substantial 
retooling, and (2) that there exists between the two companies a 
significant potential for manipulation of price or production. CDC 
concedes that it is affiliated with CEMEX, but argues that the 
``significant potential'' element of the test is not met. CDC argues 
that there are three elements to be considered in determining 
``significant potential': level of common ownership, overlapping boards 
of directors, and intertwined operations. CDC contends that the 
Department only addressed the first two factors, but does not provide 
any analysis as to whether operations are intertwined.
    As to common ownership, CDC argues that CEMEX is only a minority 
shareholder in CAMSA (CDC's parent company) and the majority of shares 
are still retained by CDC. CDC asserts that its sale of stock to CEMEX 
was purely a business decision made for financial reasons and CEMEX's 
share does not constitute a controlling interest under Mexican law.
    As far as management overlap, CDC acknowledges that members of 
CEMEX's management sit on the boards of directors of CDC and its 
affiliated companies. However, CDC asserts that (1) CEMEX's 
representatives are in the minority on all of these boards, (2) the

[[Page 12774]]

Terrazas/Marquez families are in the majority on all boards, (3) CDC's 
pricing and production are not discussed at the board meetings of CDC 
or any of the groups's companies, and (4) that CEMEX's interest in CDC 
is only that of a passive investor. Therefore, CDC contends that this 
management/director overlap does not, and will not, result in a 
significant potential for manipulation of price or production.
    CDC argues that the third element of the significant potential test 
is not established by the facts on the record. CDC argues that the 
record shows that: (1) the daily operations of CDC are controlled 
strictly by management, which is appointed by the majority shareholder; 
(2) CDC and CEMEX do not coordinate pricing strategies in the U.S. 
market or the Mexican market; (3) the natural markets of CDC and CEMEX 
do not overlap; (4) CDC and CEMEX do not share sales, distribution, or 
marketing systems in either the U.S. or Mexico; and (5) there were no 
commercial transactions between CDC and CEMEX during the sixth review. 
In addition, CDC argues that CEMEX's role as an engineering consultant 
during the construction of the Samalayuca plant does not indicate 
``significant potential for affecting CDC's production and pricing 
decisions.'' CDC states that it has shown that this consulting advice 
was provided by CEMEX on an arm's length basis. Furthermore, CDC 
asserts that CEMEX's statement at verification that it provided these 
consulting services to CDC as a result of its ownership interest in CDC 
does not indicate that CEMEX can coerce CDC to choose it for consulting 
advice or affect CDC's decisions with respect to any pricing or 
production issue. Also, CDC does not dispute that CDC and CEMEX have 
similar production processes and equipment, but the record facts do not 
demonstrate significant potential for manipulation.
    Finally, CDC asserts that there is no policy reason in this case to 
collapse CDC and CEMEX. CDC distinguishes the facts in this case from 
those in Queen's Flowers de Colombia v. United States (97-120 Slip. Op. 
at 9). Unlike the two collapsed entities in that case, CDC argues, 
CEMEX and CDC do not constitute a single producer of cement and are 
separate legal entities. Additionally, CDC asserts that collapsing is 
not needed to prevent circumvention because CDC submitted all of its 
own questionnaire responses and participated in verification. CDC 
asserts that collapsing does not satisfy the purpose of the statute 
which is to determine dumping margins as accurately as possible. CDC 
argues that in the cement industry, high inland freight costs limit 
CDC's natural market; therefore, regardless of the antidumping margin, 
CDC cannot increase its market beyond these geographic constraints. CDC 
states that there is no incentive for the owners or management of CDC 
to agree to any plan that could give rise to an unpredictable monetary 
liability for CDC's imports. CDC sees no reason why CDC's liability for 
antidumping duties should be determined by cost, pricing, and sales 
decisions made by a minority shareholder.
    Petitioner argues that, as in the original LTFV investigation and 
every administrative review conducted to date, the Department should 
collapse CDC and CEMEX, and that CDC has provided no justification for 
the Department to depart from this approach. Petitioner asserts that 
CDC's argument that collapsing CEMEX and CDC is contrary to the 
Department's established practice is refuted by the history of this 
proceeding. The Department has always collapsed in this proceeding and 
circumstances have not changed. The Department has the authority to 
collapse affiliated producers.
    Petitioner argues that all of the factors normally considered by 
the Department support collapsing CEMEX and CDC. First, petitioner 
argues that the Department has collapsed in numerous cases where one 
party holds less than a majority interest in another party. In this 
review, petitioner contends, CEMEX is in a position to exercise 
restraint or direction over CDC, though not through majority voting 
rights. Petitioner claims that this degree of control is not even 
required for the Department to collapse affiliated parties--as long as 
similar production processes and significant potential for price or 
production manipulation are evidenced.
    Second, petitioner argues that the existence of interlocking 
directors between CDC and CEMEX is evidence of significant potential 
for the manipulation of price and production if these companies are not 
collapsed.
    Third, petitioner argues that the following facts demonstrate that 
CEMEX and CDC have intertwined business operations that demonstrate a 
``significant potential'' for price and production manipulation: (1) 
CEMEX and CDC formerly shipped to the U.S. through the same channel of 
distribution--an affiliated importer; (2) CEMEX provides CDC with 
consulting services and assistance in marketing and exports; and (3) 
CEMEX provided engineering and technical assistance to CDC in building 
the Samalayuca plant, services which CEMEX stated that it does not 
provide to non-affiliated parties.
    Finally, petitioner states that there are no valid ``policy'' 
reasons not to collapse CEMEX and CDC in this review. Petitioner argues 
that despite CDC's assertion that the ``type of manipulation the 
Department has cited in other cases simply cannot occur in the cement 
industry'' because ``each producer has a limited geographic market'' 
and that the parties ``cannot increase [their] market beyond these 
natural and geographic limitations,'' the Department must only consider 
the existence of a significant potential for manipulation. According to 
petitioner, the record evidence demonstrates that there is a natural 
overlap in the U.S. market for imports from CDC and CEMEX. Petitioner 
states that the two producers could also reallocate their geographic 
shares of the Mexican market in a manner that manipulates the dumping 
margin and circumvents the order.

Department's Position

    The Department agrees with CDC that it must consider all relevant 
factors when collapsing two affiliated parties. Section 351.401(f) of 
the Department's new regulations (Antidumping Duties; Final Rule, 62 FR 
27296, 27410 (May 19, 1997)), describes the Department's current policy 
regarding when it will treat two or more affiliated producers as a 
single entity (i.e., ``collapse'') for purposes of calculating a 
dumping margin. In order for the Department to treat two or more 
producers as a single entity (1) the producers must be affiliated, (2) 
the producers must have production facilities that are sufficiently 
similar so that a shift in production would not require substantial 
retooling, and (3) there must be a significant potential for the 
manipulation of price or production.
    First, because CEMEX indirectly owns more than five percent of the 
outstanding voting shares of CDC, the Department considers CEMEX and 
CDC to be affiliated within the meaning of section 771(33)(F) of the 
Act. In addition, both CEMEX and CDC manufactured Type I and Type II 
cement during the period of review. Second, as CDC and CEMEX have 
similar production processes and facilities, a shift in production 
would not require substantial retooling. Record evidence for the sixth 
administrative review also reveals intertwined business operations 
between CDC and CEMEX. (A complete analysis surrounding the 
Department's decision to collapse CDC and CEMEX, requiring reference to

[[Page 12775]]

proprietary information, is contained in the Department's Memorandum 
from Roland L. MacDonald to Joseph A. Spetrini, dated September 2, 
1997, located 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.)
    Third, given the level of common ownership and cross board members, 
which provides a mechanism for the two parties to share pertinent 
pricing and production information, similar production facilities that 
would not require substantial retooling, as well as intertwined 
business operations, the Department finds that if CDC and CEMEX are not 
collapsed, there is a significant potential for price manipulation 
which could undermine the effectiveness of the order.

Level of Trade (LOT)/ CEP Offset

Comment 8

    Petitioner argues that the Department erroneously determined that 
CEMEX's and CDC's home market sales were at a different level of trade 
than their sales to the United States, and on that basis granted CEMEX 
and CDC a constructed export price (CEP) offset adjustment to NV. 
According to petitioner, the Department found no differences in level 
of trade in the previous (fifth) review and the facts in this review 
are virtually identical to the facts in that review. Petitioner claims 
that the Department's methodology for analyzing the level of trade and 
CEP offset issues has not changed since the fifth review and, 
therefore, no basis exists for a different result with respect to the 
level of trade and CEP offset issues in this review.
    Specifically, petitioner argues that, in the preliminary results of 
this review, the Department found that 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. 
Petitioner argues that the Department must find more than the fact that 
selling functions in the home market and the United States differ in 
intensity to find a difference in level of trade.
    Petitioner also argues that if the Department grants a CEP offset 
to CEMEX and CDC, it should modify the methodology employed in the 
preliminary results. Petitioner first argues that if the Department 
grants a CEP offset adjustment, the Department should classify CEMEX 
and CDC's U.S. terminal expenses as movement expenses, not indirect 
selling expenses. Second, petitioner argues that if the Department 
grants a CEP offset adjustment, the Department should modify its 
treatment of U.S. indirect selling expenses incurred in Mexico. 
Petitioner states that by not deducting from CEP the indirect selling 
expenses incurred in Mexico that supported U.S. sales, the Department 
in the preliminary results in effect calculated an ex-U.S. border 
price, not an ex-factory price, while the deductions made for home 
market sales calculate an ex-factory price. According to petitioner, 
comparison of these two prices is unfair, and runs counter to the 
apples-to-apples price comparison required by the statute. Finally, 
petitioner argues that the Department should base its identification of 
levels of trade on the starting price for both EP and CEP sales, not 
the CEP price adjusted for selling expenses and profit. Petitioner 
claims that the CEP level of trade, as with the home market, should be 
based on the price paid by the first unaffiliated customer prior to 
deductions for expenses and profit. In addition, petitioner argues that 
if the Department grants a CEP offset adjustment, we should reclassify 
CEMEX and CDC's U.S. terminal expenses from U.S. indirect selling 
expenses to movement expenses.
    CDC argues that the Department properly granted CDC a CEP offset. 
CDC argues that the Department's regulations direct the Department to 
determine NV at the level of trade of the CEP, which includes any CEP 
deductions under section 772(d) of the Act. In light of this 
interpretation of the statute, argues CDC, any comparison of selling 
functions for the purpose of determining CDC's eligibility for a CEP 
offset must focus on CDC's activities in selling to the two markets, 
not on the activities of its U.S. affiliate. CDC argues that the record 
demonstrates that its home market sales were made at a more advanced 
level of trade than its U.S. sales, thus satisfying the level of trade 
standard.
    CEMEX agrees with the Department's preliminary results which 
granted CEMEX a CEP offset based on the law and on verified 
information. First, CEMEX concurs with the Department's determination 
that the sales to Sunbelt Cement, CEMEX's affiliated U.S. distributor, 
were at a less advanced level of trade than the level of trade of home 
market sales. CEMEX notes that the CEP adjustments made under section 
772(d) of the Act remove all the marketing and distribution activities 
of Sunbelt Cement thereby altering the level of trade of the starting 
price to a less remote link in the chain of distribution. CEMEX 
contends that the appropriate comparison is based on the selling 
functions performed by CEMEX with respect to its sales in Mexico and 
its sales to the U.S. (``[f]or 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'' 62 FR 47632).
    Third, CEMEX argues that the Department appropriately determined 
that CEMEX performed significantly different selling functions for CEP 
and home market sales and the home market level of trade was more 
advanced. CEMEX rejects petitioner's implication that because the 
Department reached a different determination in from the fifth review, 
that the sixth review preliminary results must be wrong. CEMEX also 
rejects petitioner's hypothesis that because the U.S. market is 
important to CEMEX's business, CEMEX's centralized strategic planning 
in Mexico must support exports to the United States. CEMEX states that 
activities with respect to procuring/sourcing materials and other 
assets for U.S. operations are performed by CEMEX's U.S. affiliate. 
Finally, CEMEX disagrees with petitioner's argument that market 
research, advertising, after-sales service, and technical advice are 
all insignificant in selling cement. CEMEX notes that the list of 
selling activities that CEMEX included in the responses are 
representative of the activities that the Department has included in 
level of trade questionnaires issued to companies in other cases.

Department's Position

    In accordance with section 773(a)(1)(B) of the Act, to the extent 
practicable, we determine NV based on sales in the comparison market at 
the same level of trade as the export price (EP) or CEP. The NV level 
of trade is that of the starting-price sales in the comparison market, 
or, when NV is based on constructed value (CV), that of sales from 
which we derive selling, general and administrative (SG&A) expenses and 
profit. For EP, the U.S. level of trade is also the level of the 
starting-price sale, which is usually from exporter to importer. For 
CEP, it is the level of the constructed sales from the exporter to the 
importer.
    To determine whether NV sales are at a different level of trade 
than EP or CEP, we examine stages in the marketing process and selling 
functions along the chain of distribution between the producer and the 
unaffiliated customer. If the comparison-market sales are at a 
different level of trade, and the difference affects price 
comparability, as manifested in a pattern of consistent price 
differences between the sales on which NV is based and comparison-
market sales at the level of trade of the

[[Page 12776]]

export transaction, we make a level of trade adjustment under section 
773(a)(7)(A) of the Act. Finally, for CEP sales, if the NV level is 
more remote from the factory than the CEP level and there is no basis 
for determining whether the difference in the levels between NV and CEP 
affects price comparability, we adjust NV under section 773(a)(7)(B) of 
the Act (the CEP offset provision). See Notice of Final Determination 
of Sales at Less Than Fair Value: Certain Cut-to-Length Carbon Steel 
Plate from South Africa, 62 FR 61971 (November 19, 1997).
    Although CEMEX and CDC are collapsed for purposes of determining 
the weighted-average dumping margin, the Department has determined that 
CEMEX and CDC's home market sales are at different levels of trade 
based upon a review of the selling functions performed by CEMEX and CDC 
to their respective customers. Therefore, for purposes of this 
administrative review, we are performing separate level of trade 
analyses for CEMEX's sales and CDC's sales in the home market.
    CEMEX claimed that it has three levels of trade in the home 
market--sales to end-users concrete manufacturers, and distributors 
through two channels of distribution, bulk and bagged cement. It also 
reported two levels of trade in the U.S. market--sales of bulk cement 
to end-users and ready-mixers. We disagree with CEMEX that there are 
three levels of trade in the home market and two levels of trade in the 
U.S. market. We have determined that CEMEX sells to one level in the 
home market and one level of trade in the U.S. market.
    Based on our analysis, we concluded the following: (1) there is one 
level of trade in the home market and one level of trade in the U.S.; 
(2) there is a quantitative and qualitative difference in the selling 
functions performed by CEMEX in the home market and the United States; 
(3) there are two distinct and separate levels of trade; (4) we do not 
have information which would allow us to examine pricing patterns based 
on respondent's sales of other products at the same level as the U.S. 
CEP; and (5) we have determined that NV is at a more advanced level of 
trade than the CEP. Therefore, we granted a CEP offset consistent with 
the aforementioned statutory provision. For a complete discussion of 
the Department's analysis, see the Level of Trade Memorandum, dated 
March 9, 1998.
    CDC claimed that it has two levels of trade in the home market--
sales to end-users and concrete manufacturers through two channels of 
distribution, bulk and bagged cement. It also reported two CEP levels 
of trade in the U.S. market--sales of bulk cement to end-users and 
ready-mixers. We disagree with CDC that there are two levels of trade 
in the home market and two levels of trade in the U.S. market. We have 
determined that CDC sells to one level of trade in the home market and 
one level of trade in the U.S. market. Finally, we found no record 
evidence to suggest that EP and CEP sales by CDC are at the same level 
of trade, nor is there evidence to suggest that EP and home market 
sales are at different trades of trade. Therefore, based on the 
information on the record, we have determined that CDC's home market 
sales and EP sales are at the same level of trade and no LOT adjustment 
has been granted.
    Based on our analysis of CDC's CEP sales, we concluded the 
following: (1) there is one level of trade in the home market and one 
level of trade in the U.S.; (2) there is a quantitative and qualitative 
difference in the selling functions performed by CDC in the home market 
and the United States; (3) these are two distinct and separate levels 
of trade; (4) we do not have information which would allow us to 
examine pricing patterns based on respondent's sales of other products 
at the same level as the U.S. CEP; and (5) we have determined that NV 
is at a more advanced level of trade than the CEP. Therefore, we 
granted a CEP offset consistent with the aforementioned statutory 
provision. For a complete discussion of the Department's analysis, see 
the Level of Trade Memorandum, dated March 9, 1998.
    Finally, in response to petitioner's argument that CEMEX and CDC's 
U.S. terminal expenses should be considered movement expenses, we 
confirmed at verification (see U.S. Sales Verification Report dated 
July 21, 1997), that the reported terminal expenses are the expenses 
associated with making sales in the United States from the various 
sales offices/terminals. The evidence on the record does not indicate 
that these are expenses associated with the storage or movement of the 
subject merchandise prior to, or subsequent to the final sale. The 
Department reviewed the methodology employed by CEMEX and CDC to 
determine if the reported expenses were in accordance with Departmental 
practice. We found no discrepancies with respondent's reporting of U.S. 
indirect selling expenses and, consistent with our final determination 
in the fifth administrative review, we continue to treat the reported 
terminal expenses as U.S. indirect selling expenses.

Comment 9

    CEMEX argues that Commerce included sales made by its affiliated 
reseller PROMEXMA, a retailer of cement and building materials. CEMEX 
argues that the sales functions provided by PROMEXMA differ 
substantially from those provided by the other CEMEX sales offices. 
CEMEX argues that sales made to retailers, such as PROMEXMA, are 
different than those made to distributors and end users. CEMEX asserts 
that the preliminary results of this review fail to analyze the role of 
PROMEXMA within ``the seller's whole scheme of marking.'' CEMEX also 
argues that the Department did not conduct a complete comparison of 
PROMEXMA sale prices with all other sale prices. CEMEX argues that 
individual sale quantities and prices by PROMEXMA were significantly 
different than all other home market sales.
    Petitioner asserts that CEMEX has failed to establish that home 
market sales made by its affiliated distributor, PROMEXMA, were at a 
different level of trade. Establishing that PROMEXMA is a different 
class of customer (a retailer) is not sufficient--CEMEX has failed to 
demonstrate that PROMEXMA performs selling functions that are 
qualitatively or quantitatively different than the functions CEMEX 
performs with respect to all other home market sales. Therefore, it 
would be contrary to the statute and the Department's practice to 
determine that sales by PROMEXMA were at a different level of trade. 
Petitioner maintains that the Department correctly determined in the 
preliminary result that all of CEMEX's home market sales, including 
sales by PROMEXMA, were made at the same level of trade. Therefore, 
these sales should be included in the calculation of NV.

Department's Position

    We agree with petitioner. As we stated in the preliminary results 
of this review ``[c]ustomer 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.'' As stated above in our discussion of level of trade, the 
Department has determined that based on the facts placed on the record 
of this review, that all of CEMEX's home market sales of Type I cement 
were made at the same level of trade. Therefore, consistent with our 
decision in the preliminary results of review, the

[[Page 12777]]

Department has continued to weight-average all home market sales on a 
monthly basis and has compared these sales to CEP sales in the U.S. 
market.

Comment 10

    CEMEX asserts that the Department failed to limit price comparisons 
to sales at the same level of trade. Specifically, CEMEX argues that 
sales of bagged cement are made at a different level of trade than 
sales of cement in bulk. CEMEX asserts that there is a consistent 
pattern of differences in the price of cement sold in bulk and in bags. 
CEMEX argues that consumers are willing to pay a premium for the 
convenience of buying a bag of cement. Additionally, CEMEX argues that 
sales of cement in bags involve far more selling functions that sales 
in bulk.
    Petitioner maintains that CEMEX has failed to establish that its 
home market sales of bagged cement were at a different level of trade 
than its home market sales of bulk cement.
    Petitioner asserts that the preliminary results correctly included 
both in the calculation of NV because the merchandise is identical, the 
only difference being packaging. Petitioner argues that consistent with 
the statute the net prices for identical merchandise need not be 
equivalent (i.e., taking into account an adjustment for packaging) to 
be averaged together in the calculation of NV.

Department's Position

    We agree with petitioner. The Department has included the entire 
universe of Type I sales in its calculation of NV because bulk and 
bagged sales constitute identical merchandise. The only difference 
between these products is the packaging; therefore, the Department has 
made an adjustment for packaging differences. In addition, as stated in 
the level of trade section of this notice (see Comment 8, above), the 
Department has determined that CEMEX sold at one level of trade in the 
home market; therefore, comparing by discreet channels of distribution 
is not warranted as there is only one level of trade. Therefore, we 
have not calculated NV for each channel of distribution as requested by 
CEMEX and have used our standard methodology for comparing NV to U.S. 
sales for purposes of these final results of review.

Comment 11

    CEMEX argues that Commerce failed to limit sales comparisons to the 
same customer category. CEMEX asserts that although all customers 
negotiate sales prices starting at the same base price, the discount 
offered in each market differs according to customer category (i.e., 
distributors, end-users, and ready mixers.) CEMEX argues that it has 
established distinct customer classifications in both markets and thus 
Commerce should compare prices by customer category.
    Petitioner argues that all cases by CEMEX in support of price 
comparisons by customer category are original investigations. In 
addition, petitioner asserts that there is no basis in the statute for 
averaging prices by customer category in administrative reviews. 
Petitioner maintains that the statute says nothing about averaging 
prices based on customer category, only that the Department ``shall 
limit its averaging of prices to a period not exceeding the calendar 
month that corresponds most closely to the calendar month of the 
individual export sale.'' 19 U.S.C. 1677f-1(d)(2).
    In addition, petitioner asserts the CEMEX has not demonstrated that 
it is necessary to compare prices by customer category. CEMEX claims 
that its prices/discounts vary by customer class, but provides no 
evidence to support this claim. Petitioner argues that the evidence on 
the record of this review does not support the claim that there is a 
pattern of price differences between customer categories.

Department's Position

    We agree with petitioner. Section 773(a)(1)(B) of the Act does not 
direct the Department to make comparisons on the basis of customer 
categories. It merely directs us to compare U.S. sales to the price at 
which the foreign like product is first sold for consumption in the 
exporting country, in the usual commercial quantities, and in the 
ordinary course of trade. Moreover, section 777A(d)(2) states a 
preference for ``average-to-individual'' price comparisons in 
administrative reviews under section 751(a) of the Act. ``With the 
exception of the contemporaneity rule in section 777A(d)(2), neither 
the statute nor the SAA provides any guidance of what, if any, factors 
should be considered when averaging in reviews.'' Certain Stainless 
Wire Rods From France, 61 FR 47874, 47879 (1996).
    As stated in the level of trade section of this notice (see Comment 
8, above), the Department has determined that CEMEX sold at one level 
of trade in the home market. Therefore, we have not calculated NV for 
each customer category as requested by CEMEX and have used our standard 
methodology for comparing NV to U.S. sales for purposes of these final 
results of review.

Differences in Merchandise (DIFMER)

Comment 12

    CEMEX claims that the Department improperly made a DIFMER 
adjustment based on facts available equal to 20 percent of total cost 
of manufacturing. CEMEX claims that it has established that there were 
physical differences between Type I and Type II by providing all 
supporting documentation for the reported weight-averaged VCOM for Type 
I and Type II for each plant, which the Department then verified. CEMEX 
also claims that the Department's own reporting requirements for COP 
and CV require the weight-averaged costs incurred at all facilities to 
be reported, and that the Department has granted claimed DIFMER 
adjustments in other cases when such adjustments were based on 
weighted-average costs at several facilities. Therefore, CEMEX should 
not be penalized for not being able to exclude from its DIFMER data 
costs associated with differences in production efficiencies at the 
different plants. CEMEX cites Gray Portland Cement and Clinker from 
Japan, 60 FR 43761, 762-763 (1995), in which the Department granted the 
respondent a DIFMER adjustment, as the Department was satisfied that 
the respondent reasonably tied cost differences to physical differences 
in merchandise, not withstanding reported differences in plant 
efficiencies.
    Furthermore, CEMEX claims that government verifiers should have 
known prior to verification that all of CEMEX's cement produced at 
Hermosillo met the Type V specifications. CEMEX asserts that Commerce 
should have known that it could not strip out, for DIFMER purposes, the 
effects of ``plant efficiencies.'' CEMEX asserts that even if the 
Department were justified in foregoing the use of CEMEX's plant cost of 
production data, it was not legally justified in immediately leaping to 
``facts available because there is cost of production data on the 
record of the sixth review for two plants of CEMEX's affiliated party 
CDC.'' CEMEX argues that if the Department collapses the two entities, 
it must do so for all purposes, not just for purposes which 
``artificially serve to increase antidumping duty liability.''
    CEMEX argues that the Department does not have carte blanche in 
arriving at a ``facts available'' number. CEMEX argues that the 20% 
adverse DIFMER chosen by the Department constitutes ``secondary 
information'' within the meaning of 19 U.S.C. 1677(C) which can only be 
used as facts available if it can

[[Page 12778]]

be corroborated with outside information or can otherwise be supported 
by substantial evidence in the administrative record. CEMEX claims that 
the 20% DIFMER adjustment cannot be corroborated because it vastly 
overstates any possible DIFMER adjustment needed to account for actual 
physical differences in the cost of producing Type I and Type II 
cement. CEMEX points to CDC's DIFMER adjustment which is substantially 
less than 20% and to an affidavit submitted by petitioner in its 
submission of July 12, 1995 which concludes that the cost-of-production 
differential between Type I and Type II cement is ``negligible.'' CEMEX 
cites Rhone Poulenc, Inc v. United States, in which the Court of 
Appeals for the Federal Circuit determined that it would be improper 
for the DOC to reject low margin information in favor of high margin 
information that was clearly less probative of current conditions. 
CEMEX also cites Saha Thai Steel Pipe Co. Ltd. v. United States, in 
which the CIT determined that the Department must ``seek to avoid the 
use of unrepresentative or extraordinary high surrogate data as BIA.'' 
CEMEX argues that the application of a 20% DIFMER adjustment would be 
punitive and has no basis in the administrative record or commercial 
reality.
    CEMEX maintains that reliance on a 20% DIFMER adjustment simply 
because it was upheld by the CIT in the second review is unjustified. 
CEMEX argues that each administrative review is different and, 
furthermore, the 20% BIA rate used in the second review was based on 
the fact that CEMEX had refused to respond to specific requests for 
information from the Department. In this case, CEMEX argues that it has 
fully responded to the Department's requests and the agency has 
verified the accuracy of CEMEX's reported cost information.
    Petitioner argues that the Department correctly applied a 20 
percent DIFMER adjustment adverse to CEMEX as facts available. 
Petitioner asserts that as a result of its belated disclosure regarding 
the types of cement produced at the Yaqui and Campana plants, CEMEX 
impeded the review, failed verification, and prevented the Department 
from obtaining and evaluating other information that could have been 
used to calculate a DIFMER adjustment for CEMEX. Additionally, 
petitioner claims that CEMEX failed to report information tying the 
differences in variable costs of production of Type I and Type II 
cement to the physical differences in the merchandise.
    Petitioner argues that the Department did not learn until 
verification that CEMEX's claimed DIFMER adjustment was not based on 
differences in the physical characteristics between Type I and Type II 
cement, but rather on an allocation of costs between Type I and Type II 
sales for the same physical product--Type V cement. Furthermore, at 
verification, CEMEX admitted that the reported difference in variable 
cost for Type I cement produced at Yaqui and Type I produced at its 
other plants related to plant efficiency. CEMEX should have provided 
this information earlier. The Department was similarly misled in the 
fifth review, petitioner asserts, but these revelations were not made 
in that review. CEMEX repeatedly asserted in questionnaire responses 
that it was entitled to a DIFMER adjustment simply because there were 
differences in the variable production costs for Type I and Type II 
cement, and argued in its case brief that is variable production costs 
were usable for determining DIFMER. At verification, however, CEMEX 
stated that it was not entitled to a DIFMER adjustment. CEMEX's 
disclosure at verification that there were in fact no differences in 
physical characteristics between the cement types produced at Yaqui 
prevented the Department from collecting and analyzing other 
information that could have been used to calculate the DIFMER 
adjustment.
    Petitioner disagrees with CEMEX's suggestion that the Department 
should have applied CDC's DIFMER rather than using facts available as 
this would allow CEMEX to avoid responsibility for misleading the 
Department and would reward CEMEX for its non-compliance with the 
Department's requests for information and impending of the review. 
Petitioner argues that CEMEX repeatedly failed to provide requested 
information tying the differences in variable production costs to 
differences in physical characteristics. In this review, the facts show 
that there are physical differences between Type I and Type II cement, 
and that these differences result in different variable costs of 
production. CEMEX, however, despite the Department's explicit and 
repeated requests, provided no information to isolate and quantify the 
cost differences that are specifically attributable to the physical 
differences. Petitioner states that this is CEMEX's burden under the 
regulations and the Department's practice. Thus, CEMEX is not entitled 
to its claimed DIFMER adjustment.
    Petitioner also argues that CEMEX's own information contradicts its 
claim for a DIFMER adjustment. This data shows that Type II has tighter 
specifications than Type I which result in it being more expensive to 
produce. It requires additional raw materials and additional grinding 
time. Data submitted by CDC corroborates this information.
    Petitioner rebuts CEMEX's assertion that the Department should 
instead use data that is subject to corroboration for facts available. 
Petitioner argues that in this case the 20 percent adjustment is 
appropriate but corroboration of that percentage is impracticable. 
CEMEX's argument that the DIFMER should be lower is based on 
information that the Department was unable to verify. In this review, 
facts available DIFMER from the second review is the appropriate model 
for the Department's treatment of CEMEX's claimed DIFMER adjustment in 
this review.
    Petitioner argues that there is no basis in the record or the 
Department's practices for calculating CEMEX's DIFMER adjustment from 
costs incurred at a single plant. In the fifth review, the Department 
departed from its longstanding practice and granted CEMEX a favorable 
DIFMER adjustment based solely on CEMEX's reported costs of producing 
Type I and Type II cement at a single facility, the Yaqui plant. 
Petitioner asserts that in this review, the Department should use 
weighted-average costs for all of CEMEX's plants. However, this will be 
impossible because CEMEX impeded the review by not providing 
information requested by the Department and failed verification. 
Furthermore, the adjustment will necessarily be distorted if the 
Department uses costs for the identical merchandise sold as different 
products.

Department's Position

    Pursuant to section 773(a)(6)(C)(ii) of the Act, the Department 
will make adjustments to NV for physical differences in merchandise 
sold in the foreign market as compared to sales in the U.S. market. 
Pursuant to Section 353.57 of the Department's regulations, we will 
only adjust for differences in variable costs which correspond to 
physical differences in producing the merchandise, not due to 
differences in plant efficiencies. However, CEMEX has failed to report 
DIFMER information based solely on physical differences in merchandise.
    In the preliminary determination, the Department determined that it 
was appropriate to use adverse facts available. The Department reached 
this conclusion because CEMEX did not make clear until verification 
that it only produced Type V cement at its Yaqui and Campana 
facilities. Therefore, the DIFMER reported for cement sold as Types I 
and II at these facilities did not

[[Page 12779]]

reflect differences in merchandise and was not a proper basis for a 
DIFMER adjustment. Given the late stage of the proceeding at which 
these facts came to light, the Department was not able to collect and 
analyze other DIFMER data and made a twenty percent upward adjustment 
to CEMEX's home market prices.
    The Department continues to believe that CEMEX could and should 
have made clear the circumstances surrounding its reported DIFMER. In 
light of the comments received, the Department has evaluated possible 
alternatives to the twenty percent upward adjustment using the limited 
information on the record. Because of different plant efficiencies, the 
Department could not compare the variable costs at the Yaqui and 
Campana facilities with the variable costs at CEMEX's numerous 
facilities producing Type I cement. Therefore, as facts available and 
in order to minimize the effect of varying plant efficiencies, the 
Department has compared CEMEX's variable costs to produce cement at the 
Hermosillo plants (sold as Types I, II, and V) with the lowest variable 
costs reported by a CEMEX Type I facility. This calculation results in 
an upward adjustment to home market prices that in this case is 
sufficiently adverse, but is based on CEMEX's actual cost information.
    We disagree with the assertion that CEMEX's adjustment should be 
based upon CDC's data. As stated in our preliminary determination, 
CDC's DIFMER is based on the differences in physical characteristics 
between Type I and Type II cement, whereas CEMEX's DIFMER adjustment 
would have to be based on differences in physical characteristics 
between Type I and Type V cement. The record evidence indicates that 
there are significant differences between the various types of cement 
produced at the various facilities. These are primarily due to 
different grinding and heating treatments and other factors. Therefore, 
we have determined that it would not be appropriate to apply CDC's Type 
I--Type II DIFMER adjustment to CEMEX's sales of Type I-V cement. 
Consistent with our findings in the preliminary results of review,we 
have applied a calculated DIFMER to CDC's home market sales based upon 
plant-specific reported data.

Normal Value

Comment 13

    Petitioner argues that the Department should deny CEMEX a freight 
deduction for home market sales of Type I cement because, contrary to 
the Department's practice and regulations, CEMEX has not demonstrated 
that (i) it is not feasible to provide freight expense data on home 
market sales on a transaction-specific basis, and (ii) company-specific 
reporting of average freight expenses does not create inaccuracies.
    CEMEX argues that the Department's preliminary results correctly 
adjusted NV for CEMEX's verified freight expenses. CEMEX contends that 
it reported pre-sale and post-sale freight expenses broken down on a 
monthly basis based on (i) the selling company, (ii) the type of cement 
shown on the invoice, and (iii) the method of presentation (bulk or 
bagged). CEMEX first notes that the Department verified the accuracy of 
these factors for five separate cement plants and found no 
discrepancies. CEMEX also notes that the methodology employed in the 
instant review is identical to the methodology CEMEX used in the fifth 
review, which was accepted by the Department. CEMEX states that the 
Department's regulations authorize the use of a reasonable allocation 
methodology when transaction specific reporting is not feasible, 
provided that the methodology used is not distortive. CEMEX notes that 
transaction-specific reporting was not feasible due to the extremely 
large number of sales. CEMEX also notes that in its ordinary course of 
business, CEMEX cumulates transaction-specific freight expenses on a 
company basis; thus reallocation of freight expenses on a point-of 
sale, plant, or customer basis would not be feasible.
    Finally, CEMEX rejects petitioner's argument that CEMEX's 
allocation is distortive. First, CEMEX states that it used a weight-
based allocation methodology, matching the manner in which CEMEX's 
freight expenses were incurred. Second, CEMEX calculated its freight 
expenses on a cement-type and presentation-specific basis, without 
reference to out-of-scope merchandise, further reducing the possibility 
for distortion. Third, CEMEX calculated monthly, rather than annual (or 
period-wide) factors. Fourth, CEMEX's allocation used the most specific 
methodology permitted by company records. Finally, CEMEX rejects 
petitioner's argument that freight expenses were distortive because 
CEMEX did not take into account differing delivery distances between 
the point of sale and the customer. CEMEX counters that in cases where 
the company records cumulate freight charges and it is not possible to 
tie the destination of each shipment to cumulated expenses, the use of 
an overall, weight-based factor has been found by the Department to be 
reasonable (Certain Circular Welded Carbon Steel Pipes and Tubes from 
Thailand, 61 FR 1328, 1333 (1996)).

Department's Position

    We agree with CEMEX. The Department has allowed a deduction for 
freight expenses for Type I sales because the reported expenses 
provided are in accordance with Departmental methodology, consistent 
with the company's accounting practices, and were substantiated at 
verification. (see July 21, 1997 Verification Report at 9.) CEMEX has 
reported home market Type I freight in accordance with its accounting 
system and provided the data on a company, cement-type, and 
presentation-specific, basis. Based on our findings at verification, 
the Department determined that respondent's reported freight costs for 
sales of Type I cement are not distortive and provide a reasonable 
estimate of actual transaction-specific freight expenses. Therefore, we 
are granting CEMEX a home market freight adjustment for sales of Type I 
cement.

Commment 14

    Petitioner argues that CDC's reported freight expenses between two 
of its plants, Samalayuca and Chihuahua, are distortive because: (1) 
the expenses are not calculated on a transaction-specific basis, (2) 
the reported freight expenses for Type I cement may include freight 
expenses for clinker, and (3) freight expenses charged to CDC by 
affiliated parties may not be at arm's length. Petitioner argues, 
therefore, that these expenses should not be allowed.
    CDC asserts that the Department properly deducted from NV its home 
market inland freight expenses from plant to distribution warehouse. 
CDC asserts that although the Department prefers transaction-specific 
reporting, it does permit the use of allocations where transaction-
specific reporting is impossible. In this case, CDC argues that 
transaction-specific reporting is impossible because bagged cement 
produced at the Samalayuca plant was shipped to the Chihuahua plant 
warehouse where it was commingled with cement produced at Chihuahua. 
CDC asserts that it provided two allocation methodologies to the 
Department, and the Department did not request further information on 
this issue. CDC further argues that it provided evidence on the record 
that the reported freight expenses (INLFTWH) include freight for cement 
only and that affiliated party freight expenses were at arm's length. 
This

[[Page 12780]]

evidence included freight invoices from affiliated and unaffiliated 
parties.

Department's Position

    We agree with CDC. The Department has allowed a deduction for home 
market freight expenses due to the fact that CDC reported its freight 
expenses in accordance with Departmental methodology. CDC provided 
invoices from affiliated and unaffiliated transportation companies 
demonstrating that the reported freight costs were at arm's length. 
Based on this information, the Department determined that the reported 
freight was accurate and non-distortive. Therefore, for the instant 
review, we have utilized all reported home market freight expenses in 
our final results of review.

Comment 15

    Petitioner argues that the methodology for calculating freight 
expenses incurred by a CDC affiliate, Construcentro commingles costs 
related to cement with various other hardware items. Petitioner argues 
that this commingling distorts the reported freight costs for cement 
only, and that the Department should disallow CDC a freight adjustment 
for sales through Construcentro.
    CDC argues that because other lighter products are commingled with 
cement, it is not possible to calculate a product-specific, sale-
specific, per-unit freight cost for sales by Construcentro to its 
customers. CDC argues that is methodology of calculating the total cost 
of freight by the total sales value is non-distortive, and is the 
identical methodology accepted by the Department in the fifth review.

Department's Position

    We agree with CDC. The Department has allowed a deduction for home 
market freight expenses incurred by CDC's downstream affiliate, 
Construcentro, due to the fact that CDC reported its freight expenses 
in accordance with Departmental methodology. After reviewing CDC's 
methodology for allocating freight costs, the Department has determined 
that the reported freight costs were accurate and non-distortive. 
Although in certain instances, non-subject merchandise accompanies 
shipments of subject merchandise, CDC's allocation methodology is a 
conservative means of calculating freight costs. Allocating based on 
sales value results in a total freight deduction that is less than if 
freight costs were calculated based on weight. In addition, record 
evidence indicates the CDC would be unable, in the normal course of 
business, to isolate the freight costs associated with subject and non-
subject merchandise in these particular cases. Therefore, for the 
instant review, we have utilized all reported home market freight 
expenses in our final results of review.

Comment 16

    According to petitioner, CEMEX is not entitled to a deduction for 
either allocated or transaction-specific price rebates. Petitioner 
argues that the allocation methodology used by CEMEX for reporting 
certain rebates is distortive, because the allocated rebates may 
include rebates on sales of non-subject merchandise. For transaction-
specific rebates, petitioner argues that CEMEX failed to establish that 
(1) its customers were aware, prior to the sale, of the conditions of 
the rebate and the amount of the rebate, and (2) the rebates was 
granted pursuant to a standard business practice or established 
program.
    CEMEX argues that the Department's preliminary results correctly 
adjusted NV for CEMEX's verified rebates. CEMEX notes that it provided 
adequate sample documentation for its rebate programs, and that the 
Department verified this information. CEMEX rejects petitioner's claim 
that CEMEX's customers were not aware of its rebate policies at the 
time they were purchasing cement from CEMEX. According to CEMEX, as all 
rebates were negotiated on a customer-specific basis and customers were 
aware of the discounts for which they were eligible. CEMEX also notes 
that petitioner made the same argument in the fifth administrative 
review, which the Department rejected.
    Next, CEMEX rebuts petitioner's argument that it was wrong for the 
Department to adjust NV because CEMEX failed to establish that it was 
not feasible for CEMEX to report all rebates on a transaction specific 
basis. Next, CEMEX argues that in fact the majority of rebates reported 
were transaction-specific. CEMEX also notes that the use of an 
allocation methodology for one specific rebate program is required, as 
this post-sale quantity discount is tied to total customer purchases 
over a stated period of time and is applied to the customer's 
outstanding accounts receivable, not to an individual transaction or 
invoice. CEMEX notes that the Department has long recognized that 
rebates which are not granted on a transaction-specific basis cannot be 
reported on a transaction-specific basis (Corrosion Resistant Carbon 
Steel Flat Products from Canada, 61 FR 13815, 13821 (1996)).
    Finally, CEMEX rejects petitioner's allegation that CEMEX's rebate 
calculations included rebates paid on sales of out-of-scope 
merchandise. CEMEX contends that the Department verified that only 
rebates and sales of the subject merchandise during the appropriate 
time period were included in the rebate allocations.

Department's Position

    We agree with CEMEX. The Department has allowed CEMEX's claimed 
rebate adjustments because the data was submitted in accordance with 
the Department's methodology and was substantiated at verification. 
While the Department prefers that discounts, rebates, and other price 
adjustments be reported on a transaction-specific basis, the Department 
has long recognized that some price adjustments are not granted to 
customers on that basis, and thus cannot be reported on that basis. 
Generally, ``we have accepted claims for discounts, rebates, and other 
billing adjustments as direct adjustments to price if we determined 
that the respondent, in reporting these adjustments, acted to the best 
of its ability and that its reporting methodology was not unreasonably 
distortive.'' See Antifriction Bearings (Other than Tapered Roller 
Bearings) and Parts Thereof from France, et al., Final Results of 
Antidumping Duty Administrative Reviews, 62 FR 2081 (1997).
    Furthermore, the Department disagrees with petitioner's argument 
that the rebates at issue were not granted on a transaction-specific 
basis. These rebates were reported on a customer-specific basis for 
cement sold in a specific form, bag or bulk, and applied equally (as a 
fixed percentage of price) to all invoices for a given month. The 
Department does not agree with petitioner that respondent's methodology 
is sufficient to warrant treatment of the adjustments as indirect 
expenses in the home market. In this case, the amount of the 
``allocation'' is limited to a few specific transactions, all to the 
same customer, and typically within a very limited period of time. 
Thus, the danger of unreasonable distortions, which is the averaging 
effect on prices, is extremely limited in this case. This case is 
similar to situations, permitted by the Department as direct 
adjustments, in which a rebate is granted on a limited number of 
purchases by a single customer. Because CEMEX's method of reporting its 
rebate is reasonable, the Department has allowed it as a direct 
adjustment.

[[Page 12781]]

Comment 17

    Petitioner argues that CDC is not entitled to a deduction for 
certain other price adjustments combined in the OTHADJH and OTHDISH 
fields in its home market sales database. Petitioner argues that (1) 
the adjustments are distortive because they result in a negative net 
price for certain sales, (2) CDC did not establish that the adjustments 
were granted pursuant to a standard business practice or under a pre-
established program, (3) CDC did not establish that the adjustments 
were made in proportionate amounts with respect to sales of out-of-
scope merchandise, and (4) CDC has commingled price adjustments 
benefitting sales of products other than cement. For these reasons, the 
other price adjustments should be denied.
    CDC rebuts petitioner's argument that the Department should deny 
its other adjustments. CDC acknowledges that for a very few sales this 
deduction results in a negative price, but CDC states that it made the 
Department aware of this in the first supplemental response. CDC 
provides language for the computer program to delete these negative 
sales. CDC also argues that it provided evidence to the Department in 
its April 7, 1997 submission demonstrating that customers are aware of 
the terms of the other adjustments and that CDC maintains records of 
these terms. CDC also argues that these discounts are restricted to the 
subject merchandise because they are recorded on a product-specific 
basis, by product code, and by presentation (bag or bulk). Finally, CDC 
argues that the petitioner misinterpreted the ``concrete pavement 
discount.'' CDC asserts that this is a discount on the cement used for 
concrete paving projects, not for sales of concrete. CDC states that 
the methodology used in the sixth review for this discount is identical 
to the methodology accepted by the Department in the fifth review.

Department's Position

    We agree with CDC. The Department has allowed CDC's claimed 
adjustments because these adjustments were reported in accordance with 
Departmental methodology. Based on the information placed on the record 
of this review, the Department has determined that CDC was able to 
allocate these adjustments on a product-specific, customer-specific 
basis for the month in which the sale occurred, thereby not creating a 
distortive effect on NV. Therefore, we are granting CDC these 
adjustments. However, we have disregarded those sales which result in 
negative prices due to these adjustments and have not included these in 
the calculation of NV.

Comment 18

    Petitioner argues in its case brief that the Department erred in 
basing CEMEX's short-term interest rate on CDC's short-term interest 
rate. In the preliminary results, the Department found that CEMEX 
improperly used its interest rate for long-term loans in calculating 
imputed expenses, and substituted CDC's short-term interest rate. 
Petitioner argues that because CEMEX affirmatively misrepresented the 
fact that it had short-term, peso-denominated debt during the sixth 
review period, the Department should apply adverse facts available. The 
effect of the adverse facts available, according to petitioner, should 
be to (1) completely deny CEMEX's claimed imputed credit expenses and 
inventory carrying costs, (2) revise the calculation of these expenses 
using IMF rates instead of CDC's rates, or (3) substitute an interest 
rate for borrowing by CEMEX based on the shortest period available.
    CEMEX argues that it accurately reported its interest rate 
experience. CEMEX claims that the factual record shows that it fully 
and accurately described its debt position, providing the interest 
rates applicable to the current portion of its long-term loans as a 
benchmark for short-term, peso-loan interest rates, and that this 
description was verified and accepted by the Department. CEMEX also 
rejects petitioner's argument that the Department should not have used 
the verified short-term interest rate from CDC. CEMEX argues that the 
Department was correct to use this data since it has determined that 
CDC and CEMEX constitute a ``single entity.''

Department's Position

    We agree with CEMEX. CEMEX incorrectly included the long-term 
interest rate in its reported calculation. However, consistent with our 
decision in the final results of review in the fifth administrative 
review and in the preliminary results of the instant review, the 
Department has continued to use the interest rate reported by CDC as a 
surrogate value for CEMEX's interest rate as facts available because it 
is the short-term market interest rate of CEMEX's collapsed affiliate.

Comment 19

    CDC argues that the expenses reported in the field ADVERTH should 
be considered direct expenses because they reflect advertising directed 
at the customer's customer. Furthermore, CDC cites the verification 
report which notes that ``Company officials indicated that in Mexico, 
CDC performs significant direct advertising.''

Department's Position

    We disagree with CDC. The Department normally considers direct 
expenses as expenses that result from, and bear a direct relationship 
to, the particular sale in question. In the instant review, the 
advertising at issue is associated with sales of subject and non-
subject cement and promotes the overall corporate image of CDC. 
Therefore, consistent with prior Departmental practice, we have treated 
these expenses as indirect selling expenses in the home market and have 
not adjusted NV for these expenses except to the extent that these 
expenses are included in the CEP offset.

Calculation of Export Price and Constructed Export Price

CEP Profit Calculation

Comment 20

    Petitioner argues that the Department failed to include home market 
indirect selling expenses and inventory carrying costs that were 
incurred on sales to the United States in ``total United States 
expenses'' for purposes of calculating CEP profit. Petitioner argues 
that these expenses (DINDIRSU and DINVCARU) should be deducted from the 
CEP. (See Comment 8). Therefore, any expense properly deducted from CEP 
should also be included in ``total United States expenses'' for the 
calculation of CEP profit.
    CEMEX and CDC rebut petitioner's argument that DINDIRSU and 
DINVCARU should be included in total U.S. expenses to calculate CEP 
profit. They argue that because these expenses are not deducted from 
CEP, they should not be included in the total U.S. expenses when 
calculating CEP profit. Furthermore, CDC and CEMEX argue that the 
Department made an error in creating a formula for calculating the CEP 
ratio. Specifically, they argue that the Department should not have 
subtracted Foreign Inventory Carrying Costs (DINVCARU) from U.S. direct 
selling expenses (DIREXPU) for the CEP ratio calculation because the 
direct selling expenses did not originally include these expenses.

Department's Position

    The Department agrees in part with petitioner. As these expenses 
are not associated with economic activities in the United States, they 
have not been deducted from CEP and they should not be included in 
``total United States expenses'' for purposes of calculating

[[Page 12782]]

CEP profit. CEP profit is calculated based on the total revenue and 
total actual expenses incurred in making the sale to the unaffiliated 
purchaser in the U.S. market. Therefore, consistent with recent 
developments in the Department's methodology, we have included the 
variable DINDIRSU in the calculation of CEP profit. However, neither 
inventory carrying costs (DINVCARU), nor U.S. imputed credit (CREDITU) 
are included in the calculation, as these are imputed expenses and by 
definition not actual expense. We additionally agree that DINVCARU 
should not be subtracted from DIREXPU in the CEP ratio calculation and 
have corrected this in the final results.

Comment 21

    CEMEX and CDC further argue that the Department should include the 
costs associated with further manufactured sales in the CEP ratio 
calculation. They argue that the Department calculated total U.S. 
revenue using all U.S. sales, including further manufactured sales. 
However, in calculating total U.S. expenses, the Department did not 
include the costs associated with further manufacturing (FURMANU, 
INDIRS2U and USOTREU). CEMEX additionally argues that the Department 
should have included sales to affiliated parties that failed the arm's 
length test in the calculation of CEP profit. CEMEX argues that the SAA 
directs the Department to include all production and selling expenses 
incurred for sales of subject merchandise in the U.S. and sales of the 
foreign like product in the exporting country.
    Petitioner counters that the Department's treatment of further 
manufacturing expenses for purposes of calculating CEP profit was 
correct. Despite CEMEX's and CDC's argument that the Department should 
have included transportation expenses and indirect selling expenses 
related to further manufactured sales in calculating CEP profit, 
petitioner argues that the Department made a reasonable choice in this 
matter. Petitioner also argues that the Department need not consider 
respondent's argument that the Department should have included further 
manufacturing costs in the CEP ratio calculation. In response to 
CEMEX's argument that sales failing the arm's length test should be 
included in the calculation of CEP profit, petitioner notes that the 
Department rejected CEMEX's argument in the final results of the prior 
administrative review. Gray Portland Cement and Clinker From Mexico, 62 
FR 24414, 24414-15 (1997).

Department's Position

    We agree with CEMEX and CDC. Consistent with the Department's 
discussion of CEP profit above, we have included those CEP expenses 
associated with further manufactured sales in our calculation of CEP 
profit. The variable FURMANU has been included in the calculation of 
CEP profit in the variable SELLEXPU. However, we disagree that sales 
failing the arm's length test should be included in the calculation of 
CEP profit. See Gray Portland Cement and Clinker from Mexico, 62 FR 
244414, 244415 (1997).

Financing Cash Deposits

Comment 22

    Petitioner argues that the Department erroneously allowed CDC an 
offset to U.S. indirect selling expenses for the cost of financing 
antidumping cash deposits. CDC's claimed offset should be denied 
because (1) while the Department has allowed limited exemptions for 
cash deposits themselves, ``[f]inancing expenses allegedly associated 
with cash deposits are not a direct, inevitable consequence of an 
antidumping order,'' and (2) CDC's claim is based on imputed, not 
actual, financing expenses.
    CDC counters that the Department's allowance of an offset for the 
cost of financing antidumping cash deposits is in accordance with past 
practice and judicial precedence. CDC cites AFBs from Japan, and the 
December 3, 1997 CIT decision in which the court remanded to the 
Department a decision to deny the offset (Timken Co. v. United States). 
CDC further argues that the Department has in the past allowed the 
adjustment regardless of how it is financed.

Department's Position

    We agree with petitioner that we should deny an adjustment to CDC's 
U.S. indirect selling expenses for imputed expenses which CDC claims 
are related to financing of cash deposits. The statute does not contain 
a precise definition of what constitutes a selling expense. Instead, 
Congress has given the Department discretion in this area. It is a 
matter of policy whether we consider there to be any financing expenses 
associated with cash deposits.
    The Department has long maintained, and continues to maintain, that 
antidumping duties, and cash deposits of antidumping duties, are not 
expenses that should be deducted from U.S. price. To do so would 
involve a circular logic that could result in an unending spiral of 
deductions for an amount that is intended to represent the actual 
offset for the dumping. See, e.g., Antifriction Bearings (Other than 
Tapered Roller Bearings) & Parts from France, et al., 62 FR 54043 
(1997). We have also declined to deduct legal fees associated with 
participation in an antidumping case, reasoning that such expenses are 
incurred solely as a result of the existence of the antidumping duty 
order. Id. Underlying the logic in both these instances is an attempt 
to distinguish between business expenses that arise from economic 
activities in the United States and business expenses that are direct, 
inevitable consequences of the dumping order. Financial expenses 
allegedly associated with cash deposits are not a direct, inevitable 
consequence of an antidumping order.
    Money is fungible. If an importer acquires a loan to cover one 
operating cost, that may simply mean that it will not be necessary to 
borrow money to cover a different operating cost. Companies may choose 
to meet obligations for cash deposits in a variety of ways that rely on 
existing capital resources or that require raising new resources 
through debt or equity. For example, companies may choose to pay 
deposits by using cash on hand, obtaining loans, increasing sales 
revenues, or raising capital through the sale of equity shares. In 
fact, companies face these choices every day regarding all their 
expenses and financial obligations. There is nothing inevitable about a 
company having to finance cash deposits and there is no way for the 
Department to trace the motivation or use of such funds, even if it 
were.
    In a different context, we have made similar observations. For 
example, we stated that ``debt is fungible and corporations can shift 
debt and its related expenses toward or away from subsidiaries in order 
to manage profit'' (see Ferrosilicon from Brazil, 61 FR 59407, 59412 
(1996) (regarding whether the Department should allocate debt to 
specific divisions of a corporation)).
    So, while under the statute we may allow a limited exemption from 
deductions from U.S. price for cash deposits themselves and legal fees 
associated with participation in dumping cases, we do not see a sound 
basis for extending this exemption to financing expenses allegedly 
associated with financing cash deposits. By the same token, for the 
reasons stated above, we would not allow an offset for financing the 
payment of legal fees associated with participation in a dumping case.
    We see no merit to the argument that, since we do not deduct cash 
deposits from U.S. price, we should also not deduct financing expenses 
that are

[[Page 12783]]

arbitrarily associated with cash deposits. To draw an analogy as to why 
this logic is flawed, we also do not deduct corporate taxes from U.S. 
price; however, we would not consider a reduction in selling expenses 
to reflect financing alleged to be associated with payment of such 
taxes.
    Finally, we also determine that we should not use an imputed amount 
that would theoretically be associated with financing of cash deposits. 
There is no real opportunity cost associated with cash deposits when 
the paying of such deposits is a precondition for doing business in the 
United States. Like taxes, rent, and salaries, cash deposits are simply 
a financial obligation of doing business. Companies cannot choose not 
to pay cash deposits if they want to import nor can they dictate the 
terms, conditions, or timing of such payments. By contrast, we impute 
credit and inventory carrying costs when companies do not show an 
actual expense in their records because companies have it within their 
discretion to provide different payment terms to different customers 
and to hold different inventory balances for different markets. We 
impute costs in these circumstances as a means of comparing different 
conditions of sale in different markets. Thus, our policy on imputed 
expenses is consistent; under this policy, the imputation of financing 
costs to actual expenses is inappropriate.

Other Issues

Comment 23

    CEMEX argues that the Department failed to use the actual daily 
exchange rates as published by the Federal Reserve Board in New York, 
but rather used the rates from the Department's exchange rate model. 
CEMEX argues that this is inconsistent with the determination in the 
final results of the fifth review which stated that the exchange rate 
model is not suitable for use with hyper inflationary economies, and 
the daily rate should be used unless there is compelling evidence that 
a fluctuation or sustained movement in the currencies value has 
occurred.
    Petitioner maintains that the Department did not err in its choice 
of exchange rates. Use of the exchange rate model was correct since the 
Mexican economy was not hyper-inflationary during the sixth review POR.

Department's Position

    We agree with CEMEX that the Department should use actual daily 
exchange rates. For the final results of review, we have used the daily 
exchange rates as provided by Dow Jones Business Information Services. 
The Department's new regulations at section 351.415 state: ``this 
exchange rate model is not suitable for use with hyper-inflationary 
currencies. In these cases, we intend to use the daily rate absent 
compelling evidence that a fluctuation or sustained movement in the 
currency's value has occurred.'' As stated in our preliminary results 
of review, the Department found that based on the information on the 
record of this review, the annual inflation rate in Mexico during the 
POR exceeded 40 percent. Therefore, consistent with our prior practice, 
we limited our comparisons to sales in the same month, to avoid any 
distortions caused by the effects of inflation in the reported prices. 
However, in our preliminary results of review, the Department 
inadvertently failed to use the actual daily exchange rates as directed 
by the Department's exchange rate methodology (see Change in Policy 
Regarding Currency Conversions (61 FR 9434, March 8, 1996)). Thus, the 
actual daily exchange rate has been used in the final results for all 
currency conversion during the POR.

Comment 24

    Petitioner claims that the Department made a programming error 
which granted a CEP offset to NV on EP sales.
    CDC rebuts this argument by pointing out that although the margin 
calculation program appears to deduct OFFSETH from EP sale, the program 
has defined this value as zero for EP sales.

Department's Position

    We agree with CDC that the variable OFFSETH was set to zero for EP 
sales in the preliminary results. Therefore, no CEP offset was granted 
on EP sales. However, in order to ensure that the final programming is 
more transparent, the Department has removed this language from the 
final results of review.

Comment 25

    Petitioner claims that the Department made the following errors in 
the computer program: (1) the Department failed to exclude sales of 
Type I cement produced by the CEMEX plant at Campana from the 
calculation of NV by referencing an incorrect plant code in the arm's 
length test and the margin calculation program; (2) the Department 
failed to exclude non-arm's length sales to affiliated parties in the 
margin calculation program due to a programming error; and (3) the 
Department incorrectly calculated CEMEX's U.S. credit expense by 
misplacing a decimal point in the calculation.

Department's Position

    The Department agrees with these contentions and has included the 
appropriate corrections in the final results. See Final Analysis 
Memorandum dated March 9, 1998 located in room B099 of the Department's 
main building. In addition, the Federal Register notice for the 
preliminary results of this review (62 FR 47626) stated that indirect 
selling expenses incurred in the home market were deducted from gross 
unit price to determine net prices in the arm's length test. In fact, 
these were not deducted from the calculation.

Final Results of Review

    As a result of this review, we have determined that the following 
margins exist for the period August 1, 1995, through July 31, 1996:

------------------------------------------------------------------------
                                                                Margin  
                          Company                             percentage
------------------------------------------------------------------------
CEMEX, S.A.................................................        36.30
------------------------------------------------------------------------

The Department shall determine, and the U.S. Customs Service shall 
assess, antidumping duties on all appropriate entries. The Department 
shall issue appraisement instructions directly to the Customs Service. 
For assessment purposes, we have calculated importer-specific duty 
assessment rates for the merchandise based on the ratio of the total 
amount of antidumping duties calculated for the examined sales during 
the POR to the total entered value of sales examined during the POR. 
Individual differences between U.S. price and normal value may vary 
from the percentages stated above. As a result of this review, we have 
determined that the importer-specific duty assessments rates are 
necessary.
    Furthermore, the following deposit requirements shall be effective 
upon publication of this notice of final results of review for all 
shipments of gray portland cement and clinker from Mexico, entered, or 
withdrawn from warehouse, for consumption on or after the publication 
date, as provided for by section 751(a)(1) of the Tariff Act: (1) the 
cash deposit rate for the reviewed company will be the rate stated 
above; (2) for previously 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 these reviews, or the original LTFV investigations, but the 
manufacturer is, the cash deposit rate

[[Page 12784]]

will be the rate established for the most recent period for the 
manufacturer of the merchandise; and (4) if neither the exporter nor 
the manufacturer is a firm covered in these reviews, the cash deposit 
rate for this case will continue to be 61.85 percent, which was the 
``all others'' rates in the LTFV investigations. See Final 
Determination of Sales at Less Than Fair Value: Gray Portland Cement 
and Clinker from Mexico, 55 FR 29244, (1990).
    The deposit requirements, when imposed, shall remain in effect 
until publication of the final results of the next administrative 
reviews.
    This notice serves as a final reminder to importers of their 
responsibility under 19 CFR 353.26 to file a certificate regarding the 
reimbursement of antidumping duties prior to liquidation of the 
relevant entries during this review period. Failure to comply with this 
requirement could result in the Secretary's presumption that 
reimbursement of antidumping duties occurred and the subsequent 
assessment of double antidumping duties.
    This notice also serves as 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 section 353.34(d) of the Department's 
regulations. Timely 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: March 9, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-6714 Filed 3-13-98; 8:45 am]
BILLING CODE 3510-DS-P