[Federal Register Volume 63, Number 108 (Friday, June 5, 1998)] [Notices] [Pages 30706-30710] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 98-15040] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF COMMERCE International Trade Administration [A-588-823] Professional Electric Cutting Tools From Japan; Preliminary Results of Antidumping Duty Administrative Review AGENCY: Import Administration, International Trade Administration, Department of Commerce. ACTION: Notice of preliminary results of antidumping duty administrative review. ----------------------------------------------------------------------- SUMMARY: In response to a request by Black & Decker Inc., the petitioner in this case, and Makita Corporation, respondent, the Department of Commerce (the Department) is conducting an administrative review of the antidumping duty order on professional electric cutting tools (PECTs) from Japan. The period of review (POR) covers sales of the subject merchandise to the United States during the period July 1, 1996 through June 30, 1997. We have preliminarily determined that the respondent has not sold subject merchandise at less than normal value (NV) during the POR. If these preliminary results are adopted in our final results of this administrative review, we will instruct U.S. Customs not to assess antidumping duties based on the difference between the constructed export price (CEP) and the NV. We invite interested parties to comment on these preliminary results. Parties who submit argument in this proceeding should also submit with the argument (1) a statement of the issue, and (2) a brief summary of the argument. EFFECTIVE DATE: June 5, 1998. FOR FURTHER INFORMATION CONTACT: Lyn Baranowski or Stephen Jacques, AD/ CVD Enforcement Group III, Office 9, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 20230; telephone: (202) 482-1385 or (202) 482-1391, respectively. SUPPLEMENTARY INFORMATION: The Applicable Statute Unless otherwise indicated, all citations to the Tariff Act of 1930, as amended (the Act) are references to the provisions effective January 1, 1995, the effective date of the amendments made by the Uruguay Rounds Agreements Act (URAA). In addition, unless otherwise indicated, all citations to the Department's regulations are to the regulations codified at 19 CFR part 351 (62 FR 27296; May 19, 1997). Background On July 12, 1993, the Department published in the Federal Register the antidumping duty order on PECTs from Japan (58 FR 37461). On July 21, 1997, the Department published in the Federal Register a notice of opportunity to request an administrative review of this antidumping duty order (62 FR 38973). On July 29 and 31, respectively, respondent and petitioner requested that we conduct an administrative review in accordance with 19 CFR 351.213(b). We published the notice of initiation of this antidumping duty administrative review on August 28, 1997 (62 FR 45622). The Department is conducting this review in accordance with section 751 of the Act. Scope of the Review Imports covered by this review are shipments of PECTs from Japan. PECTs may be assembled or unassembled, and corded or cordless. The term ``electric'' encompasses electromechanical devices, including tools with electronic variable speed features. The term ``assembled'' includes unfinished or incomplete articles, which have the essential characteristics of the finished or complete tool. The term ``unassembled'' means components which, when taken as a whole, can be converted into the finished or unfinished or incomplete tool through simple assembly operations (e.g., kits). PECTs have blades or other cutting devices used for cutting wood, metal, [[Page 30707]] and other materials. PECTs include chop saws, circular saws, jig saws, reciprocating saws, miter saws, portable bank saws, cut-off machines, shears, nibblers, planers, routers, joiners, jointers, metal cutting saws, and similar cutting tools. The products subject to this order include all hand-held PECTs and certain bench-top, hand-operated PECTs. Hand-operated tools are designed so that only the functional or moving part is held and moved by hand while in use, the whole being designed to rest on a table top, bench, or other surface. Bench-top tools are small stationary tools that can be mounted or placed on a table or bench. The are generally distinguishable from other stationary tools by size and ease of movement. The scope of the PECT order includes only the following bench-top, hand-operated tools: cut-off saws; PVC saws; chop saws; cut-off machines, currently classifiable under subheading 8461 of the Harmonized Tariff Schedule of the United States (HTSUS); all types of miter saws, including slide compound miter saws and compound miter saws, currently classifiable under subheading 8465 of the HTSUS; and portable band saws with detachable bases, also currently classifiable under subheading 8465 of the HTSUS. This order does not include: professional sanding/grinding tools; professional electric drilling/fastening tools; lawn and garden tools; heat guns; paint and wallpaper strippers; and chain saws, currently classifiable under subheading 8508 of the HTSUS. Parts or components of PECTs when they are imported as kits, or as accessories imported together with covered tools, are included within the scope of this order. ``Corded'' and ``cordless'' PECTs are included within the scope of this order. ``Corded'' PECTs, which are driven by electric current passed through a power cord, are, for purposes of this order, defined as power tools which have at least five of the following seven characteristics: 1. The predominate use of ball, needle, or roller bearings (i.e., a majority or greater number of the bearings in the tool are ball, needle, or roller bearings; 2. Helical, spiral bevel, or worm gearing; 3. Rubber (or some equivalent material which meets UL's specifications S or SJ) jacketed power supply cord with a length of 8 feet or more; 4. Power supply cord with a separate cord protector; 5. Externally accessible motor brushes; 6. The predominate use of heat treated transmission parts (i.e., a majority or greater number of the transmission parts in the tool are heat treated); and 7. The presence of more than one coil per slot armature. If only six of the above seven characteristics are applicable to a particular ``corded'' tool, then that tool must have at least four of the six characteristics to be considered a ``corded'' PECT. ``Cordless'' PECTs, for the purposes of this order, consist of those cordless electric power tools having a voltage greater than 7.2 volts and a battery recharge time of one hour or less. PECTs are currently classifiable under the following subheadings of the HTSUS: 8508.20.00.20, 8508.20.00.70, 8508.20.00.90, 8461.50.00.20, 8465.91.00.35, 85.80.00.55, 8508.80.00.65 and 8508.80.00.90. Although the HTSUS subheading is provided for convenience and customs purposes, the written description of the merchandise under review is dispositive. This review covers one company, Makita Corporation (Makita), and the period July 1, 1996 through June 30, 1997. Verification As provided in section 782(i) of the Act, we verified information provided by Makita (sales and cost), using standard verification procedures, including on-site inspection of the manufacturer's facilities, the examination of relevant sales and financial records, and selection of original documentation containing relevant information. Our verification results are outlined in the public version of the verification reports. Fair Value Comparisons To determine whether sales of subject merchandise to the United States were made at less than fair value, we compared the CEP to the NV, as described in the ``Constructed Export Price'' and ``Normal Value'' sections of this notice. In accordance with section 777A(d)(2), we calculated monthly weighted-average prices for NV and compared these to individual U.S. transactions. Constructed Export Price For Makita, we used CEP as defined in section 772(b) of the Act because the subject merchandise was first sold in the United States after importation into the United States by Makita U.S.A., a seller affiliated with Makita. We calculated CEP based on packed, delivered prices to the first unaffiliated purchaser in the United States. We made deductions for discounts and rebates. We deducted Japanese and U.S. inland freight, ocean freight, insurance, brokerage and handling pursuant to section 772(c)(2) of the Act. We also deducted an amount from the price for the following expenses in accordance with section 772(d)(1) of the Act, which related to economic activities in the United States: commissions, direct selling expenses, including credit expenses, and indirect selling expenses, including inventory carrying costs. Finally, we made an adjustment for profit allocated to these expenses in accordance with section 772(d)(3) of the Act. We found at verification that Makita could not provide documentation to support its contention concerning the company's calculation of spare parts cost for warranty services. Consequently, as facts available, we calculated a value using Makita's Parts List Price and Cost documents. As this issue involves proprietary information, please see the analysis memorandum for a more complete explanation. We also found at verification that Makita improperly included antidumping duty legal fees in the calculation of indirect selling expenses incurred in the United States. See Daewoo Elec. Co., Ltd. et al. v. United States, 13 CIT 253, 269 (1989), Federal Mogul Corp. v. United States, 17 CIT 88, __, vacated in part, on other grounds, 18 CIT 1027 (1994), Zenith Elec. Corp. v. United States, 15 CIT 394 (1991), Final Results of Antidumping Duty Administrative Review: AFBs and parts from France, 57 FR 28360, 28413 (June 24, 1992). As such, we have recalculated U.S. indirect selling expenses to exclude antidumping duty legal fees. As this issue involves business proprietary information, please see the analysis memorandum for a more complete explanation. Normal Value We compared the aggregate volume of Makita's home-market sales of the foreign like product and U.S. sales of the subject merchandise to determine whether the volume of the foreign like product Makita sold in Japan was sufficient, pursuant to section 773(a)(1)(C) of the Act, to form a basis for NV. Because Makita's volume of home-market sales of foreign like product was greater than five percent of its U.S. sales of subject merchandise, in accordance with section 773(a)(1)(B)(i) of the Act, we based NV on the prices at which the foreign like products were first sold for consumption in Japan. [[Page 30708]] In calculating NV, we disregarded sales of the foreign like product to affiliated customers in the home market where we determined that such sales were not made at arm's length. To test whether these sales were made at arm's length, we compared the prices, net of all movement charges, direct selling expenses, discounts and packing, of sales of the foreign like product to affiliated and unaffiliated customers. Where the price to the affiliated party was on average 99.5 percent or more of the price to unaffiliated parties, we determined that the sales made to the affiliated party was at arm's-length. Where no affiliated customer ratio could be constructed because identical merchandise was not sold to unaffiliated customers, we were unable to determine that these sales were made at arm's length and, therefore, excluded them from our analysis. See Final Determination of Sales at Less Than Fair Value: Certain Cold-Rolled Carbon Steel Flat Products from Argentina, (58 FR 37062, 37077 (July 9, 1993)). Where the exclusion of such sales eliminated all sales of the most appropriate comparison product based on our model-matching hierarchy, we made comparisons to the next most similar model. We based home-market prices on the packed, delivered prices to affiliated or unaffiliated purchasers in the home market. We made adjustments for discounts and rebates. Where applicable, we made adjustments for differences in packing and for movement expenses in accordance with section 773(a)(6)(A) and (B) of the Act. In accordance with section 773(a)(6)(C)(iii) of the Act and 19 CFR 351.410, if appropriate, we made circumstance of sale adjustments by deducting home-market direct selling expenses and adding U.S. direct selling expenses, except those deducted from the starting price in calculating CEP pursuant to section 772(d) of the Act. For the reasons stated in the ``Level of Trade'' section below, we have allowed a CEP offset for comparisons made at different levels of trade. To calculate the CEP offset, we deducted from normal value the indirect selling expenses on home market sales which were compared to CEP sales. We limited the home market indirect selling expense deduction by the amount of the indirect selling expenses deducted in calculating the CEP under section 772(d)(1)(D) of the Act. Level of Trade/CEP Offset In accordance with section 773(a)(7) of the Act, to the extent practicable, we determine NV based on sales in the comparison market at the same level of trade (LOT) as the EP or CEP transaction. The NV LOT is that of the starting-price sales in the comparison market or, when NV is based on CV, that of the sales from which we derive selling, general, and administrative (SG&A) expenses and profit. For EP sales, the U.S. level of trade is also the level of the starting-price sale, which is usually from exporter to importer. For CEP sales, it is the level of the constructed sale from the exporter to the importer. To determine whether NV sales are at a different level of trade than EP or CEP sales, we examine the 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 export transaction, we make a LOT 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 61731 (November 19, 1997). In order to determine whether a LOT adjustment or CEP offset was warranted for Makita, we compared the CEP sales to the HM sales in accordance with the principles discussed above. For purposes of our analysis, we examined information regarding the distribution systems in both the United States and Japanese markets, including the selling functions, classes of customer, and selling expenses for the company. In this review, Makita reported two levels of trade in the home market: (1) Sales made at the wholesale/distributor price level; and (2) sales made at the retail level. Makita also reported twelve channels of distribution covering the two levels of trade in the home market. Makita based the channels of distribution on which entity (i.e., wholesaler, subwholesaler or retailers) in the distribution chain Makita had billed or shipped the merchandise to. Although Makita described twelve channels of distribution, upon review we found that channels 1 through 7 were sales to the wholesale LOT, and channels 8 through 12 were at the retail LOT. Makita reported only CEP sales in the U.S. market. The CEP sales were based on sales made by Makita to its wholly-owned U.S. subsidiary, Makita U.S.A. (MUSA). We determined that these sales constitute a single level of trade in the United States. Because Makita's sales to the United States were all CEP sales made by an affiliated company, we considered only the parent company's selling activities reflected in the price after the deduction of expenses and profit, pursuant to section 772(d) of the Act. To determine whether sales in the comparison market were at a different level of trade than CEP sales, we first compare the relevant selling functions made at both home market levels of trade and we then examine the relevant selling functions made at the CEP level and compare them to the selling functions performed in each home market level of trade. Overall, Makita listed fourteen separate selling functions which it performed in making sales in both markets in its chart in Addendum 1 to Section A of Makita's October 27, 1997 questionnaire response. Based on our analysis of the reported selling functions (see sales verification report dated April 10, 1998), we have determined that there is no qualitative difference between the functions listed as freight/delivery arrangement and arranging freight to customers. Therefore, in our level of trade analysis, we have treated these two reported selling functions as one, freight/delivery arrangement to customers. In comparing the two home market levels of trade to each other, we note that there are nine selling functions that are identical in both function and intensity. These functions are market research, after sales service and warranties, technical advice, advertising, R&D/ product development, procurement and sourcing, competitive pricing (offering discounts, rebates, and other price incentives), pricing negotiations with customers, and processing daily order updates. The following 4 selling activities only have different levels of intensity between the two home market levels of trade: Inventory maintenance, freight/delivery arrangement to customers, sales calls and demonstrations, and interaction with end-users. There are no instances where the functions are entirely different between the two home market levels of trade. Based on the analysis of the selling functions and corresponding levels of intensity, we determine that the home [[Page 30709]] market retail level of trade is at a more advanced stage of marketing, and hence a different level of trade, than the wholesale home market level of trade. When we compare the CEP level of trade to the home market wholesale level of trade, we note that there is only one selling function which is identical in both function and intensity: R&D/product development. There are 4 instances in which the selling functions differ only in intensity: Inventory maintenance, technical advice, procurement and sourcing, and processing daily order updates. There are 8 selling functions which exist in the home market but which either are not performed for CEP transactions or are negligible: Market research, after-sales service and warranties, advertising, freight/delivery arrangement to customer, competitive pricing, pricing negotiations with customers, sales calls and demonstrations, and interaction with end- users. When we compare the CEP level of trade to the home market retail level of trade, we again note that there is only one selling function which is identical in both function and intensity: R&D/product development. Similarly, there are 4 instances in which the selling functions differ only in intensity: Inventory maintenance, technical advice, procurement and sourcing, and processing daily order updates. There are 8 selling functions which exist in the home market retail level but which either are not performed for CEP sales or are negligible. These functions are: Market research, after-sales service and warranties, advertising, freight/delivery arrangement to customer, competitive pricing, pricing negotiations with customers, sales calls and demonstrations, and interaction with end-users. Based on our analysis of the selling functions, which include differences in levels of intensities, we find that both home market levels of trade are at a more advanced stage of distribution than that of the CEP level. Therefore, we agree with Makita's assertion that there is no home market level equivalent to the CEP level of trade. Therefore, the Department determines for the preliminary results that (1) significant differences exist in the selling functions associated with each of the two home market levels of trade and the CEP level of trade, (2) the CEP level of trade is at a less advanced stage of distribution than either home market level of trade; and (3) the data available do not provide an appropriate basis for a level-of-trade adjustment for any comparisons to CEP. Consequently, we have granted Makita's request for a CEP offset for this review. We therefore made a CEP offset in our calculation of NV. We applied the CEP offset to normal value or constructed value, where appropriate. Cost of Production Analysis On January 3, 1997, the Department published the final results of the second administrative review on Professional Electric Cutting Tools from Japan (62 FR 386). In that most recently completed review of Makita, the Department disregarded sales by Makita at prices below cost, pursuant to section 773(b)(1) of the Act. Because the Department disregarded sales below the COP in the last completed review, we have reasonable grounds to believe or suspect that sales of the foreign like product under consideration for the determination of NV in this review may have been made at prices below the COP as provided by section 773(b)(2)(A)(ii) of the Act. Therefore, pursuant to section 773(b)(1) of the Act, we initiated an investigation to determine whether Makita made home market sales during the POR at prices below its COP. A. Calculation of COP We calculated the COP based on the sum of the costs of materials and fabrication employed in producing the foreign like product, plus amounts for home market selling, general and administrative (SG&A) expenses and packing costs in accordance with section 773(b)(3) of the Act. We relied on the home market sales and COP information provided by Makita in their questionnaire responses. We found at verification that Makita had incorrectly reported the amount for fixed factory overhead. Makita had incorrectly reclassified certain costs that resulted in the fixed factory overhead being overstated. As facts available, we have used the costs reported by Makita. As this issue involves proprietary information, please see the analysis memorandum and the verification report dated April 10, 1998 for a more complete explanation. B. Test of Home Market Prices After calculating COP, we tested whether home market sales of the subject merchandise were made at prices below COP within an extended period of time in substantial quantities and whether such prices permitted recovery of all costs within a reasonable period of time. We compared model-specific COPs to the reported home market prices less any applicable movement charges, discounts, rebates and direct selling expenses. C. Results of COP Test Pursuant to section 773(b)(2)(C)(i) of the Act, where less than 20 percent of a respondent's sales of a given product are at prices less than COP, we do not disregard any below-cost sales of that product because we determine that the below-cost sales are not made in substantial quantities within an extended period of time. Where 20 percent or more of a respondent's sales of a given product during the POR are at prices less than the COP, we disregard the below-cost sales because we find such sales to be made in substantial quantities within an extended period and were at prices which would not permit the recovery of all costs within a reasonable period of time (see section 773(b)(2)(D) of the Act). Based on this test, for these preliminary results, we disregarded all below-cost sales made by Makita (see the Analysis Memorandum dated June 1, 1998). On January 8, 1998, the U.S. Court of Appeals for the Federal Circuit issued a decision in Cemex v. United States, WL 3626 (Fed. Cir.). In that case, based on the pre-URAA version of the Act, the Court discussed the appropriateness of using CV as the basis for foreign market value when the Department finds foreign market sales to be outside ``the ordinary course of trade.'' This issue was not raised by any party in this proceeding. However, the URAA amended the definition of sales outside the ``ordinary course of trade'' to include sales below cost. See section 771(15) of the Act. Consequently, the Department has reconsidered its practice in accordance with this court decision and has determined that it would be inappropriate to resort directly to CV, in lieu of foreign market sales, as the basis for NV if the Department finds foreign market sales of merchandise identical or most similar to that sold in the United States to be outside the ``ordinary course of trade.'' Instead, the Department will use sales of similar merchandise, if such sales exist. The Department will use CV as the basis for NV only when there are no above-cost sales that are otherwise suitable for comparison. Therefore, in this proceeding, when making comparisons in accordance with section 771(16) of the Act, we considered all products sold in the home market as described in the ``Scope of the Review'' section of this notice, above, that were in the ordinary course of trade for purposes of determining appropriate product comparisons to U.S. sales. Where there were no sales of identical merchandise in the home market made in the [[Page 30710]] ordinary course of trade to compare to U.S. sales, we compared U.S. sales to sales of the most similar foreign like product made in the ordinary course of trade, based on the information provided by Makita in response to our antidumping questionnaire. We have implemented the Court's decision in this case to the extent that the data on the record permitted. Constructed Value In accordance with section 773(a)(4) of the Act, we used CV as the basis for NV when there were no usable sales of the foreign like product in Japan. We calculated CV in accordance with section 773(e) of the Act. We included the cost of materials and fabrication, SG&A expenses, and profit. In accordance with section 773(e)(2)(A) of the Act, we based SG&A expenses and profit on the actual amounts incurred and realized by Makita in connection with the production and sale of the foreign like product in the ordinary course of trade for consumption in Japan. We used the weighted-average home market selling expenses. Where appropriate, we made adjustments to CV in accordance with section 773(a)(6)(C)(iii) of the Act for differences in the circumstances of sale (COS). We made COS adjustments by deducting home direct selling expenses and adding U.S. direct selling expenses, except those deducted from the starting price in calculating CEP pursuant to section 772(d) of the Act. Preliminary Results of Review As a result of our review, we preliminarily determine that the following weighted-average dumping margin exists for the period June 30, 1996, through July 1, 1997: ------------------------------------------------------------------------ Margin Manufacturer/exporter (percent) ------------------------------------------------------------------------ Makita Corporation......................................... 0.09 ------------------------------------------------------------------------ Parties to the proceeding may request disclosure within five days of the date of publication of this notice. Any interested party may request a hearing within 30 days of publication. Any hearing, if requested, will be held 44 days after the date of publication or the first business day thereafter. Issues raised in the hearing will be limited to those raised in the case briefs. Case briefs from interested parties may be submitted not later than 30 days after the date of publication of this notice in the Federal Register; rebuttal briefs may be submitted not later than 5 days thereafter. The Department will publish the final results of this administrative review, including its analysis of issues raised in any written comments or at a hearing, not later than 120 days after the date of publication of this notice. The Department shall determine, and the U.S. Customs Service shall assess, antidumping duties on all appropriate entries. If these preliminary results are adopted in our final results, we will instruct the Customs Service not to assess antidumping duties on the merchandise subject to review. Upon completion of this review, the Department will issue appraisement instructions directly to the Customs Service. Upon issuance of the final results of this review, the Department shall determine, and the U.S. Customs Service shall assess antidumping duties on all appropriate entries. We will calculate an importer- specific ad valorem duty assessment rate based on the ratio of the total amount of antidumping duties calculated for the examined sales made during the POR to the total customs value of the sales used to calculate those duties. This rate will be assessed uniformly on all entries of that particular importer made during the POR. This is equivalent to dividing the total amount of antidumping duties, which are calculated by taking the difference between statutory NV and statutory CEP, by the total statutory CEP value of the sales compared, and adjusting the result by the average difference between CEP and customs value for all merchandise examined during the POR. Furthermore, the following deposit requirements will be effective for all shipments of the subject merchandise entered, or withdrawn from warehouse, for consumption on or after the publication date of the final results of these administrative reviews, as provided by section 751(a)(1) of the Act: (1) The cash deposit rate for Makita will be the rate established in the final results of this review, except that no deposit will be required for Makita if we find zero or de minimis margins, i.e., margins less than 0.5 percent; (2) for previously reviewed or investigated companies not listed above, the cash deposit rate will continue to be the company-specific rate published for the most recent period; (3) if the exporter is not a firm covered in this review, a prior review, or the original LTFV investigation, but the manufacturer is, the cash deposit rate will be the rate established for the most recent period for the manufacturer of the merchandise; and (4) the cash deposit rate for all other manufacturers or exporters will continue to be 54.52 percent, the ``All Others'' rate made effective by the LTFV investigation. These deposit requirements, when imposed, shall remain in effect until publication of the final results of the next administrative review. This notice also serves as a preliminary reminder to importers of their responsibility under 19 CFR 351.402(f)(2) 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 administrative review and notice are in accordance with section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)), 19 CFR 351.213, and 19 CFR 351.221. This determination is issued and published in accordance with sections 751(a)(1) and 777(i)(1) of the Act. Dated: June 1, 1998. Robert S. LaRussa, Assistant Secretary for Import Administration. [FR Doc. 98-15040 Filed 6-4-98; 8:45 am] BILLING CODE 3510-DS-P