[Federal Register Volume 63, Number 136 (Thursday, July 16, 1998)]
[Notices]
[Pages 38373-38382]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-18884]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-201-504]


Porcelain-on-Steel Cookware 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 January 9, 1998, the Department of Commerce published the 
preliminary results of the administrative review of the antidumping 
duty order on certain porcelain-on-steel cookware from Mexico (63 FR 
1430). The review, the tenth review of the underlying order, covers 
Cinsa, S.A. de C.V. and Esmaltaciones de Norte America, S.A. de C.V., 
manufacturers/exporters of the subject merchandise to the United States 
and the period December 1, 1995, through November 30, 1996. We gave 
interested parties an opportunity to comment on the preliminary 
results. Based on our analysis of the comments received and the 
correction of certain clerical and computer program errors, we have 
changed the preliminary results. The final results are listed below in 
the section ``Final Results of Review.''

EFFECTIVE DATE: July 16, 1998.

FOR FURTHER INFORMATION CONTACT:
Kate Johnson or David J. Goldberger, Office 5, AD/CVD Enforcement Group 
II, Import Administration, International Trade Administration, U.S. 
Department of Commerce, 14th Street and Constitution Avenue, N.W., 
Washington, D.C. 20230, telephone:

[[Page 38374]]

(202) 482-4929 or (202) 482-4136, respectively.

SUPPLEMENTARY INFORMATION: 

Background

    On January 9, 1998, the Department of Commerce (the Department) 
published in the Federal Register the preliminary results of the 1995-
96 administrative review of the antidumping duty order on certain 
porcelain-on-steel (POS) cookware from Mexico (63 FR 1430) (preliminary 
results). During February 3-4, 1998, the Department verified the 
respondents' submissions concerning the allegation of duty 
reimbursement. On February 25, 1998, and March 4, 1998, General 
Housewares Corp. (GHC) (the petitioner) and, Cinsa, S.A. de C.V. 
(Cinsa) and Esmaltaciones de Norte America, S.A. de C.V. (ENASA) 
submitted case and rebuttal briefs. The Department held a hearing on 
March 11, 1998. On April 9, 1998, Columbian Home Products, LLC (CHP) 
informed the Department that it is the legal successor-in-interest to 
GHC pursuant to the March 31, 1998, sale of all of GHC's porcelain-on-
steel cookware production assets, product lines, inventory, real 
estate, and brand names to CHP. The Department has now completed its 
administrative review in accordance with section 751 of the Tariff Act 
of 1930, as amended (the Act).

Applicable Statute

    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 Act by the Uruguay Round Agreements 
Act (URAA). In addition, unless otherwise indicated, all citations to 
the Department's regulations are to the provisions codified at 19 CFR 
Part 353 (April 1997). Where we cite the Department's new regulations 
(19 CFR Part 351, 62 FR 27926 (May 19, 1997) (New Regulations)) as an 
indication of current Department practice, we have so stated.

Scope of the Review

    Imports covered by this review are shipments of porcelain-on-steel 
cookware, including tea kettles, which do not have self-contained 
electric heating elements. All of the foregoing are constructed of 
steel and are enameled or glazed with vitreous glasses. This 
merchandise is currently classifiable under Harmonized Tariff Schedule 
of the United States (HTSUS) subheading 7323.94.00. Kitchenware 
currently classifiable under HTSUS subheading 7323.94.00.30 is not 
subject to the order. Although the HTSUS subheadings are provided for 
convenience and Customs purposes, our written description of the scope 
of this proceeding is dispositive.

Changes Since the Preliminary Results

    We have made the following changes in these final results for both 
Cinsa and ENASA:
    1. We deducted commissions from constructed export price (CEP) 
sales. The adjustment for commission expenses was inadvertently omitted 
from the preliminary margin calculations.
    2. We converted Mexican peso-denominated brokerage and inland 
freight expenses to U.S. dollars.
    3. We corrected the U.S. price calculation for export price (EP) 
sales by not deducting CEP profit and selling expenses, which were 
inadvertently deducted in the preliminary results.
    4. We increased direct materials costs to reflect adjustments to 
reported frit costs based on verification findings. See Comment 2, 
below.
    5. We used the Federal Reserve Bank's actual daily exchange rates 
for currency conversion purposes because Mexico experienced significant 
inflation during the period of review.
    6. We recalculated CIC's indirect selling expenses. See Comments 4 
and 9, below.
    7. We tested home market sales for below-cost prices before 
determining the most appropriate match for each U.S. model sold (we 
continued to match on a monthly basis). See Comment 6, below.
    8. We corrected a clerical error in calculating U.S. inland freight 
expenses. See Comment 8, below.
    9. We corrected a computer programming error associated with the 
cost test because some data were incorrectly replaced from the computer 
sales file when the summary cost file was merged back into the home 
market database.
    10. We applied the cost test on a period-wide as opposed to a 
monthly basis.

Interested Party Comments

Comment 1: Alleged Reimbursement of U.S. Affiliate CIC for Antidumping 
Duties

    The petitioner argues that the record of this review clearly 
demonstrates that Cinsa and ENASA are reimbursing Cinsa's and ENASA's 
U.S. affiliate, Cinsa International Corporation (CIC), for antidumping 
duties. The petitioner states that Cinsa and ENASA admit on the record 
that their affiliated holding company, Grupo Industrial Saltillo (GIS), 
which functions as corporate treasurer, transferred funds to CIC 
expressly to pay antidumping duties. In addition, the petitioner states 
that the Department confirmed that the holding company's payment to CIC 
was a grant and not a loan because CIC was not required to repay these 
funds.
    The petitioner further argues that the Department's preliminary 
results ignore long-standing principles that (1) money is fungible 
within a corporate family, and (2) expenses incurred by holding 
companies without operations are for the benefit of their affiliates 
with operations. Moreover, the petitioner states that the Department 
verified that the funds transferred to CIC contained monies to which 
Cinsa and ENASA contributed. Accordingly, the petitioner argues that 
the Department should find reimbursement of antidumping duties based on 
these facts and assess double the calculated antidumping margin upon 
liquidation of the entries subject to this review, pursuant to 19 CFR 
353.26(a).
    The respondents argue that, for purposes of the final results, the 
Department should continue to reject the proposition that a capital 
contribution to the importer of record by a corporate entity that is 
not the producer or exporter of the subject merchandise constitutes a 
reimbursement of antidumping duties within the meaning of the 
Department's regulations. Cinsa and ENASA contend that the Department's 
regulations require that, in order to trigger the reimbursement 
provision, the producer or reseller must have either (1) directly paid 
antidumping duties or deposits on behalf of the importer, or (2) 
reimbursed the importer for the payment of antidumping duties or 
deposits. In addition, Cinsa and ENASA argue that the Department 
verified that neither respondent reimbursed CIC for its payment of 
antidumping duty deposits or assessments to the U.S. Customs Service. 
Moreover, the respondents argue that the Department also verified that 
no written agreement exists for the reimbursement of antidumping duties 
between CIC and Cinsa or ENASA and that the funds transferred to CIC 
from GIS and GISSA Holding USA did not originate from Cinsa and ENASA.
    Furthermore, the respondents contend that the Department has 
consistently held that the mere existence of intercompany transfers of 
funds among affiliated parties does not constitute reimbursement of 
antidumping duties. Lastly, Cinsa and ENASA submit that the cases cited 
by the petitioner with regard to the principle of the ``fungibility of 
money'' relate to the calculation of cost of production (COP)

[[Page 38375]]

and are not relevant to the issue of reimbursement.

DOC Position

    We do not believe that it is appropriate to apply the reimbursement 
regulation for purposes of this administrative review. Pursuant to its 
regulations, the Department will deduct from export price ``the amount 
of any antidumping duty which the producer or reseller: (1) Paid 
directly on behalf of the importer; or (2) reimbursed to the 
importer.'' 19 CFR 353.26(a).
    The Department verified during the instant review and previous 
administrative review periods that CIC or its predecessor company, 
Global Imports, Inc. (Global), paid all antidumping duty deposits and 
antidumping duty assessments. The petitioner's claim for a deduction 
rests on the April 1997 capital contribution by GISSA Holding USA to 
CIC. The monies at issue were paid by GIS (the ultimate parent company 
of Cinsa, ENASA, and several other producing entities, as well as of 
the importer, CIC) to GISSA Holding USA (which is a holding company for 
CIC but not for Cinsa or ENASA). GISSA Holding USA then provided these 
funds to CIC for purposes that included payment of antidumping duties 
assessed on entries imported by Global during the 5th and 7th review 
periods, which were liquidated during 1996.
    The Department preliminarily determined not to apply the 
reimbursement regulation based on a literal construction of that 
regulation and the fact that the transfer in question was not provided 
directly by a producer or exporter. Therefore, it took no position on 
whether a finding of reimbursement as to the 5th and 7th review entries 
could serve as the basis for application of the reimbursement 
regulation as to 10th review entries. As a result, the parties have not 
had an opportunity to comment on and provide evidence in connection 
with any new policy that might involve a finding of reimbursement as to 
either the 5th and 7th review entries or as to subsequent entries. Even 
if the Department were to agree with petitioners that Cinsa and ENASA 
reimbursed CIC for antidumping duties paid on 5th and 7th review 
entries, it could not apply the reimbursement regulation to these 10th 
review entries. To do so would be equivalent to imposing an 
irrebuttable (in this review) presumption that a pattern of 
reimbursement of duties paid on entries from earlier periods would be 
continued as to entries in later periods. This issue was not raised 
during the 10th review. It is well established that potentially 
affected parties must be given an opportunity to submit evidence 
specifically to rebut a presumption established by the Department, 
especially when, as in this case, the Department took a position in the 
preliminary results that made the submission of such evidence 
unnecessary during the administrative proceeding. See, e.g., British 
Steel plc v. United States, 879 F. Supp. 1254, 1316-17 (CIT 1995), 
Sigma Corp. v. United States, 841 F. Supp. 1255, 1267 (CIT 1993). The 
facts underlying this issue have not changed from the 9th review final 
results in which we determined that the reimbursement regulation did 
not apply. Therefore, the Department will maintain, for purposes of 
this review, the position taken in the 9th review and in the 10th 
review preliminary results based on the rationale given therein.
    The Department has concerns about the nature of the cash transfer 
at issue in this case and intends to reconsider, in future reviews, 
whether reimbursement by Cinsa's and ENASA's corporate parent would 
constitute reimbursement under the Department's regulations. In the 
future, the Department may find it appropriate to apply the 
reimbursement regulation in instances in which a parent or other 
affiliate of a producer or exporter provided funds specifically for the 
payment of antidumping duties. Thus, the Department will examine 
closely transfers of funds between the producer/exporter, its 
affiliates, and the importer, made for the purpose of paying 
antidumping duties and cash deposits.
    Further, we disagree with petitioner's arguments that we should 
find reimbursement based on (1) the principle of the fungibility of 
money and (2) the idea that expenses incurred by holding companies 
without operations are for the benefit of their subsidiaries with 
operations. See ``Issues Memo for the Final Results'' dated July 8, 
1998, for additional information. In antidumping cases, the Department 
uses both of these concepts to deal with allocation of expenses 
associated with a parent company to the COP and constructed value (CV) 
of the company producing subject merchandise. In antidumping cases, the 
so-called ``fungibility principle'' is an aspect of the Department's 
methodology for calculating financial costs incurred in producing and 
selling subject merchandise based on an interest expense ratio 
reflecting the overall corporate borrowing experience. E.g., Final 
Determination of Sales at Less than Fair Value: New Minivans from 
Japan, 57 FR 21937, 21946 (Comment 18) (May 26, 1992). Just as the 
``fungibility principle'' is used in dealing with interest expense, the 
holding company rule relates to the allocation of a portion of the 
general and administrative (G&A) expenses incurred by a non-producing 
parent company to the cost calculations for a firm producing subject 
merchandise that benefits from the activities/services generating such 
expenses. In the Final Determination of Sales at Less Than Fair Value: 
Certain Hot-Rolled Carbon Steel Flat Products * * * From Canada, 58 FR 
37099, 37114 (Comment 47) (July 9, 1993), the Department expressed this 
principle as follows: ``The general expenses incurred by a parent 
company, without operations, relate to all of its subsidiaries with 
operations.'' This simply allows the Department to allocate a portion 
of general costs to the cost of producing subject merchandise.

Comment 2: Enamel Frit Cost

    For purposes of the final results, respondents Cinsa and ENASA 
argue that the Department should use the transfer prices reported for 
enamel frit obtained from their affiliated supplier, ESVIMEX, without 
adjustment. However, the respondents state that, if the Department 
decides to adjust materials costs to reflect an ``adjusted market 
price,'' both the respondents and the petitioner agree that the 
Department erred in calculating the amount of the differential between 
market price and adjusted market price. The respondents believe that 
the Department improperly focused solely on the price difference 
between ESVIMEX's prices to Cinsa and ENASA, and ESVIMEX's prices to 
unaffiliated customers, rather than comparing the price paid by Cinsa 
and ENASA for ESVIMEX's frit, and the price paid by those producers for 
the enamel frit purchased from an unaffiliated producer, in order to 
determine whether ESVIMEX's prices to Cinsa and ENASA reflect fair 
market prices.
    The respondents argue that the Department improperly concluded that 
the difference between ESVIMEX's prices to affiliated parties and those 
to unaffiliated parties was not attributable entirely to cost savings 
to ESVIMEX on its sales to affiliated parties, because the preliminary 
results failed to take into account prompt payment discounts, the 
existence of which was verified by the Department. Furthermore, the 
respondents argue that, even if prompt payment discounts are not taken 
into consideration, any remaining portion of the price differential not 
accounted for by verified cost savings represented a quantity discount 
granted to affiliated

[[Page 38376]]

purchasers because such purchasers accounted for a large majority of 
ESVIMEX's sales of enamel frit. Therefore, the transfer prices paid by 
Cinsa and ENASA to ESVIMEX would be fair market prices, according to 
the respondents.
    Finally, Cinsa and ENASA contend that, even if it were appropriate 
for the Department to adjust Cinsa's and ENASA's reported raw material 
costs, the preliminary results overstated the adjustment. The 
respondents argue that, rather than corresponding to the percent of 
list price that is not documented by cost savings, the Department's 
adjustment incorrectly corresponds to the percent of list price that is 
documented by verified cost savings.
    The petitioner maintains that Cinsa's and ENASA's cost of enamel 
frit purchased from its affiliate, ESVIMEX, should be based on 
unadjusted market prices, defined as the prices that unrelated parties 
paid ESVIMEX for frit, which is equivalent to the list prices less only 
the general discount given to all unrelated parties. The petitioner 
contends that the Department cannot conclude that Cinsa's and ENASA's 
transfer prices reflect market value, as claimed by the respondents, 
because the record demonstrates that ESVIMEX's prices for frit to Cinsa 
and ENASA were lower than the prices charged to unaffiliated customers. 
Moreover, the petitioner claims that the respondents base their claim 
on a comparison with a de minimis volume purchased from an unaffiliated 
supplier.
    Alternatively, the petitioner argues that the Department should 
correct its preliminary calculation for purposes of the final results 
so that it adjusts Cinsa's and ENASA's material costs upward by what it 
terms the full difference between the market prices for frit and the 
adjusted market prices for frit, and provides a calculation which it 
claims will have this effect.
    Furthermore, the petitioner asserts that regarding discounts (1) 
the Department should disregard the prompt payment discount because the 
respondents did not even allege the existence of such a discount prior 
to verification and provided no evidence indicating how often ESVIMEX 
granted this discount, and (2) there is no evidence to support the 
respondents' claimed quantity discount.
    Finally, the petitioner contends that the Department should reject 
Cinsa's and ENASA's alternate calculation of the adjustment to 
materials costs because it calculates the percentage difference between 
market prices and theoretical transfer prices, not actual transfer 
prices, and therefore understates the appropriate percentage increase 
to Cinsa's and ENASA's materials costs.

DOC Position

    For purposes of the preliminary results, we intended to increase 
the frit portion of the direct materials cost to account for difference 
between market prices and reported transfer prices that is not 
accounted for by documented cost savings. However, we agree with the 
respondents that we inadvertently overstated the amount necessary to 
increase the transfer price to equal an ``adjusted market price'' 
corresponding to the situation in which ESVIMEX sells to Cinsa and 
ENASA. Accordingly, for purposes of the final results, we have used in 
our calculation the percent of list price that is not documented by 
cost savings, as opposed to the percent of list price that is 
documented by verified cost savings, which we incorrectly used in our 
preliminary calculations.
    We disagree with the petitioner's suggestion that the Department 
should make an adjustment to material costs based on the difference 
between the market prices for frit and the Department's calculation of 
an ``adjusted market price'' (i.e., a price that the Department 
believes Cinsa and ENASA would have paid had they been unaffiliated 
purchasers). The adjustment made by the Department is intended to 
increase Cinsa's and ENASA's submitted frit costs (i.e., transfer 
prices) so that they include the portion of the ``affiliates'' discount 
off list price which was not supported at verification as being 
attributable to cost savings. Therefore, the appropriate calculation 
measures the difference between the reported transfer price and the 
Department's adjusted market price.
    With regard to the petitioner's argument that the reported prices 
are ``theoretical'' prices as opposed to ``actual prices,'' we verified 
invoices showing that the reported transfer prices (prices from ESVIMEX 
to Cinsa and ENASA) correspond to list prices minus the standard 
discount to affiliated parties.
    In addition, we do not agree with Cinsa's and ENASA's argument that 
the Department must accept ESVIMEX's frit transfer prices as reported 
on the theory that the transfer price sales were made at a fair market 
value. Pursuant to section 773(f)(2) of the Act, a transaction between 
affiliated parties is considered an appropriate source of ascertaining 
the value of an input if it fairly represents the amount usually 
reflected in sales of subject merchandise in the relevant market. Based 
on the documents examined at verification, we have determined that, 
although the respondents adequately supported their claim with respect 
to all cost efficiencies listed on the schedule submitted at 
verification, these costs efficiencies did not account for the full 
extent of the discount accorded only to affiliated parties. Although 
Cinsa and ENASA then claimed that the unaccounted for portion of the 
affiliated party discount should be attributed to a volume discount, 
they were unable to quantify and support how the volume of their 
purchases resulted in market-based savings equivalent to that 
unaccounted for portion. Therefore, in accordance with the Department's 
longstanding policy of considering that transactions between affiliated 
parties are not at arm's length in the absence of sufficient evidence 
to the contrary, the Department reasonably determined that this 
standard had not been met with respect to ESVIMEX's frit transfer 
prices to Cinsa and ENASA, and based its cost calculations instead upon 
the ``adjusted market price'' described above.
    We have also rejected Cinsa's and ENASA's suggestion that, in 
measuring the extent to which market forces do not account for the 
difference between the discount off list price given to affiliates and 
the discount off list price given to unaffiliated parties, we should 
take into account prompt payment discounts. Although the Department 
verified that such discounts are offered, Cinsa and ENASA have not 
provided any information on the frequency with which such discounts are 
actually given. In addition, such discounts constitute a recognition 
that a limited number of customers will require a lesser extension of 
credit by Cinsa and ENASA, not a general adjustment to price. Thus, the 
Department reasonably did not assume the existence of such a discount 
in calculating the normal market price for unaffiliated purchasers of 
frit.
    Similarly, we decline to find that the prices for Cinsa's minimal 
purchases of enamel frit from an unaffiliated producer are an 
appropriate basis for determining whether their purchases from ESVIMEX 
reflect fair market prices. Because certain information regarding these 
transactions is business proprietary, see the Issues Memo.
    Moreover, we do not agree with the respondents that it is 
sufficient to show that ESVIMEX's frit prices to affiliates are above 
ESVIMEX's COP. The respondents' argument to this effect ignores the 
provisions of section 773(f)(2) of the Act, which requires a comparison 
of transfer prices and market prices when the latter are available, and 
permits the use of the

[[Page 38377]]

higher of those prices. Thus, we compared the transfer prices Cinsa and 
ENASA paid to prices charged to unaffiliated customers. We noted that 
the prices charged to unaffiliated customers were greater than both the 
affiliated transfer prices and the actual costs incurred to produce the 
frit supplied to Cinsa and ENASA. Because the prices charged to 
unaffiliated customers did not reflect certain market-based savings 
unique to ESVIMEX's affiliates, however, we constructed an ``adjusted 
market price'' which did reflect these elements. Because this price was 
higher than both ESVIMEX's COP and the transfer price, in conformity 
with section 773(f)(2) and (3) of the Act, we based Cinsa's and ENASA's 
frit cost on the ``adjusted market price.''

Comment 3: Cinsa's and ENASA's Classification of Certain U.S. Sales as 
EP Rather Than CEP

    The petitioner argues that Cinsa's and ENASA's classification of 
certain sales as EP is incorrect because, it claims, this 
classification is based only on the first of the three factors used by 
the Department for determining the classification of sales made through 
affiliated importers, i.e., the fact that the merchandise in question 
was shipped directly from the manufacturer to the unrelated buyer, 
without being introduced into the physical inventory of the related 
selling agent. The petitioner claims that, in order to classify U.S. 
sales through an affiliated importer as EP sales, the respondent must 
also provide evidence that EP was the customary commercial channel for 
sales of this merchandise between the parties involved, and that the 
affiliated importer acted only as a processor of documentation and a 
communication link with the unaffiliated U.S. buyer.
    With regard to the second criterion, the petitioner argues that the 
relative volumes and values of sales direct from Mexico are not high 
enough for EP sales channel to be considered customary. With regard to 
the third criterion, the petitioner asserts that CIC's level of 
activity with respect to all U.S. sales, including those sales 
classified as EP sales, was far beyond what would be undertaken by a 
mere ``processor of sales documentation.'' Accordingly, the petitioner 
believes that the Department should reclassify as CEP sales all sales 
reported as EP sales.
    Cinsa and ENASA argue that all three factors the Department uses to 
classify certain sales as EP were present with respect to the sales 
they classified as EP, claiming that the EP channel of trade with the 
participation of its U.S. affiliate is customary because it has been 
present since the initial investigation and in all subsequent reviews 
and that, although perhaps significant, the affiliate's activities 
consist of ministerial functions, such as the processing of purchase 
orders, collection of payment, arrangement of transportation, etc., as 
opposed to setting sales terms and prices and negotiating sales 
contracts.

DOC Position

    We agree with the respondents that the facts on the record of this 
review shows that the sales reported as EP sales in this review should 
continue to be classified as EP sales. Pursuant to section 772(a) and 
(b) of the Act, an EP sale is a sale of merchandise by a producer or 
exporter outside the United States for export to the United States that 
is made prior to importation. A CEP sale is a sale made in the United 
States, before or after importation, by or for the account of the 
producer or exporter or by an affiliate of the producer or exporter. In 
determining whether the sales activity in the United States warrants 
using the CEP methodology, the Department has examined the following 
criteria: (1) Whether the merchandise was shipped directly from the 
manufacturer to the unaffiliated U.S. customer, (2) whether this was 
the customary commercial channel between the parties involved, and (3) 
whether the function of the U.S. affiliate is limited to that of a 
``processor of sales-related documentation'' and a ``communication 
link'' with the unrelated U.S. buyer. See e.g., Final Results of 
Antidumping Duty Administrative Review: Certain Corrosion-Resistant 
Carbon Steel Flat Products and Certain Cut-to-Length Carbon Steel Plate 
From Canada (Canadian Steel) 63 FR 12725, 12738 (March 16, 1998). In 
the Canadian Steel case, the Department clarified its interpretation of 
the third prong of this test, as follows. ``Where the factors indicate 
that the activities of the U.S. affiliate are ancillary to the sale 
(e.g., arranging transportation or customs clearance, invoicing), we 
treat the transactions as EP sales. Where the U.S. affiliate has more 
than an incidental involvement in making sales (e.g., solicits sales, 
negotiates contracts or prices) or providing customer support, we treat 
the transactions as CEP sales.''
    With respect to the first prong, it is undisputed that the 
merchandise associated with these sales was shipped directly to the 
unaffiliated customer, without passing through the U.S. affiliate.
    With respect to the second prong, this is the customary commercial 
channel between the parties involved. We agree with the respondents 
that it is not necessary for EP sales to be the predominant channel of 
trade in a given review for it to be the customary channel between the 
parties involved. EP sales have been made, with the participation of a 
U.S. affiliate, in the investigation and in all subsequent reviews. 
Thus, this is clearly a customary channel of trade.
    With respect to the third prong, the verification report confirms 
that, for the sales classified as EP, prices are set by the Cinsa 
export office in Saltillo, Mexico. The participation of affiliate CIC 
in these sales relates primarily to: issuing payment invoices, 
accepting payment and forwarding it to Mexico, posting antidumping duty 
deposits, and clearing products through Customs. These services are 
clearly among those the Department considers ``ancillary'' to the sale. 
CIC does not solicit or negotiate these sales, does not set the price 
for these sales, and does not provide customer support in connection 
with these sales.
    Therefore, for the purposes of this review, we will continue to 
treat as EP those sales which Cinsa and ENASA reported as EP sales. For 
further details see the Issues Memo.

Comment 4: Reallocation of Indirect Selling Expenses

    The petitioner argues that, if the Department accepts Cinsa's and 
ENASA's designation of certain of their U.S. sales as EP sales, the 
Department should revise the indirect selling expense calculations and 
allocate CIC's total expenses over a sales value that excludes sales 
designated as EP based on the respondents' claim that CIC had no role 
in making EP sales. Otherwise, at a minimum, the petitioner maintains 
that the Department should not allocate to EP sales any of the indirect 
selling expenses incurred by CIC related to salesmen's salaries and 
benefits, travel expenses, warehouse lease, office rental, advertising, 
and any other expenses relating to functions that the respondents claim 
were not performed by CIC in support of EP sales.
    The respondents argue that they properly allocated these expenses 
to all U.S. sales because indirect selling expenses are incurred on 
overall operations, which necessarily include both EP and CEP sales.

DOC Position

    We agree with the petitioner that, for purposes of calculating 
indirect selling expenses, CIC expenses are more properly allocated 
over a U.S. sales value that excludes the EP sales. We

[[Page 38378]]

verified Cinsa's and ENASA's claim that CIC performed very limited 
sales-related functions with respect to these EP sales, and equal 
allocation of all CIC expenses across all U.S. sales in which CIC is 
involved would disproportionately shift these costs from CEP to EP 
sales. However, we disagree with the petitioner's suggested allocation 
because it would allocate all EP expenses to CEP sales. The numerator 
proposed by the petitioner would include all of CIC's expenses, i.e., 
expenses for both EP and CEP sales, whereas the denominator would 
include the sales value of only CEP sales. We interpret the 
petitioner's alternative allocation methodology to mean we should, to 
the extent possible, allocate only to CEP sales (the only sales from 
which indirect selling expenses are deducted) the expenses that are 
only incurred on CEP sales. Accordingly, we have reallocated CIC's 
indirect selling expenses by including in the numerator the indirect 
selling expenses pertaining only to CEP sales (warehouse lease, 
advertising, forklift rental, salesmen's salaries and salesmen 
training) and a portion of the joint CEP and EP expenses (based on the 
percentage that CEP sales represent, by value, of total CIC sales). The 
new denominator is the value of only CEP sales. See also Final Results 
Calculation Memorandum. (Calculation Memo). Thus, we have excluded EP 
indirect selling expenses from the numerator and have excluded the 
value of EP sales from the denominator.
    We disagree with the respondents that (all) indirect selling 
expenses are incurred on ``overall operations.'' Certain of CIC's 
indirect selling expenses (see list above) are not incurred on EP 
sales.

Comment 5: CEP Offset Adjustment

    Cinsa and ENASA state they are entitled to a CEP offset because a 
comparison of the normal value (NV) level of trade to the CEP level of 
trade demonstrates that the NV level of trade is more advanced as well 
as at a different point in the chain of distribution because it 
includes a greater number of selling functions than the CEP level of 
trade. Cinsa and ENASA state that the Department's regulations require 
that when the CEP level of trade is determined, all economic activities 
in the United States and the indirect selling expenses attributable 
thereto are to be excluded. In contrast, when the normal value level of 
trade is determined it is inclusive of substantive selling functions 
and the indirect selling expenses necessary to execute a sale to 
unaffiliated customers. Accordingly, for purposes of comparison to the 
NV level of trade, Cinsa and ENASA argue that the selling functions and 
the indirect selling expenses of the CEP level of trade are limited to 
the initial sale by Cinsa's and ENASA's export department to CIC. Cinsa 
and ENASA further state that they are entitled to the CEP offset under 
the terms of the statute, 19 U.S.C. 1677b(a)(7)(B), because only one 
level of trade has been determined to exist in the home market, and 
Cinsa and ENASA are unable to quantify any pricing differential between 
the home market level of trade and the nonexistent CEP level of trade 
in the home market.
    The petitioner argues that the Department should reject the 
respondents' claim for a CEP offset adjustment in the final results, 
based on the respondents' failure to establish that home market and CEP 
sales are at different levels of trade. The petitioner states that the 
record shows that the respondents sold to wholesalers and distributors 
in both markets and that these customers are not at a more remote point 
in the chain of distribution than CIC. In addition, the petitioner 
concludes that the selling functions are the same in both markets.

DOC Position

    We agree with the petitioner. Section 773(a)(1)(B) of the Act 
requires that the Department establish NV, to the extent possible, 
based on home market sales at the same level of trade as the CEP or the 
EP sale. The SAA notes that if the Department is able to compare sales 
at the same level of trade, it will not make any level of trade 
adjustment or CEP offset in lieu of a level of trade adjustment. SAA at 
829. Further, section 773(a)(7) expressly requires a difference in 
level of trade between the U.S. and home market sales as a prerequisite 
to a CEP offset. Specifically, sales in the home market must be at a 
more advanced stage of distribution.
    In the home market, Cinsa and ENASA sell directly to wholesalers, 
distributors, large retailers and supermarkets. Cinsa and ENASA did not 
identify which of their home market customers fell into which of these 
categories and did not claim that there were differences in selling 
functions with respect to these designations. In short, the respondents 
treated these customers as being similarly situated for purposes of the 
LOT analysis. CIC is also a wholesaler/distributor of POS cookware. 
With regard to selling functions, Cinsa and ENASA reported in their 
April 28, 1997, questionnaire response that they performed the 
following selling functions for home market sales: freight and delivery 
services, inventory maintenance, and order processing and billing 
services. For sales to CIC, Cinsa's export department arranged freight 
and delivery services, incurred inventory maintenance, and provided 
sales support services such as invoice processing and billing. 
Therefore, Cinsa and ENASA have not demonstrated that their home market 
purchasers are at a different point in the chain of distribution than 
CIC and that the selling functions associated with Cinsa's and ENASA's 
sales to CIC were different from those associated with sales to 
customers in the home market. Thus, our analyses leads us to conclude 
that sales within each market and between markets are not made at 
different levels of trade.
    Finally, we disagree with Cinsa's and ENASA's argument that the 
preliminary results failed to account for the fact that home market 
indirect selling expenses are included in the price associated with the 
``NV level of trade'', whereas CIC's indirect selling expenses are 
excluded from the price associated with the ``CEP level of trade.'' 
First, the indirect selling expenses incurred in the United States by 
CIC's sales departments are, pursuant to section 772(d)(1)(D) of the 
statute, properly excluded from the price calculated for the U.S. CEP 
sales. Pursuant to this and other section 772(d) adjustments, CIC's 
price to its unaffiliated customer (the ``starting price'') is 
transformed into a constructed export price, i.e., a constructed 
equivalent of a market-based sale by Cinsa or ENASA to CIC. This is the 
point at which the level of trade comparison is made. See New 
Regulations, 62 FR at 27414.\1\ Second, Cinsa's and ENASA's itemized 
home market indirect selling expenses and itemized indirect selling 
expenses incurred in Mexico with respect to making sales to CIC are 
virtually the same. Therefore, the record reflects no difference 
between the functions performed by the respondents in selling to home 
market customers and the functions performed in selling to CIC.
---------------------------------------------------------------------------

    \1\ This approach was recently challenged in Borden, Inc. v. 
United States (Borden) Slip Op. 98-36 (March 26, 1998), at 55-59 
(rejecting the Department's practice of making 1677a(d) adjustments 
prior to making the level of trade comparisons). The Department 
intends to appeal this decision, and thus will continue to apply the 
methodology set forth in the New Regulations. We note, however, 
that, because the sales made by Cinsa and ENASA in the home market 
are not at a more advanced stage in the chain of distribution than 
either those made to CIC or those made by CIC (both are at a 
wholesale/distributor level of trade), implementation of the Borden 
decision would not affect the outcome in this case.
---------------------------------------------------------------------------

    Accordingly, we can compare sales in the home market and the U.S. 
market at

[[Page 38379]]

the same level of trade. Therefore, a CEP offset is not warranted.

Comment 6: Whether to Limit NV Comparisons to Sales Made in Same Month

    Cinsa and ENASA argue that the Department's high inflation margin 
calculation methodology, which limits NV comparisons to the month of 
the U.S. sale, results in unduly high margins in the instant review 
because the Department based NV on CV when there were no home market 
sales of the most comparable model in the same month as the U.S. sale. 
Cinsa and ENASA suggest that, in order to obtain more price-to-price 
matches, the Department should use home market matches within the full 
90/60 window period surrounding each U.S. sale, but index prices when 
it is necessary to compare a U.S. sale to a home market sale during a 
different month.
    Alternatively, Cinsa and ENASA argue that the Department should 
expand the one-month window forward and use prices for identical 
merchandise in one of the two months subsequent to the date of the U.S. 
sales, without price adjustment.
    The petitioner states that Cinsa's and ENASA's proposed methodology 
is not in accordance with the Department's policy regarding high 
inflation comparisons. In short, according to the petitioner, Cinsa and 
ENASA have not demonstrated that there is anything in the way they 
manufacture and sell subject merchandise that makes application of the 
Department's high inflation price comparison methodology inappropriate 
or unfair.
    Finally, the petitioner believes the Department should reject 
Cinsa's and ENASA's alternative request to expand the price comparison 
window by two months because the further away from the same month the 
Department looks for a comparable home market sale in a high inflation 
case, the more likely it is that there would be distortion caused by 
inflation.

DOC Position

    We agree with the petitioner. As in our preliminary results, we 
have limited our comparisons to sales in the same month rather than 
applying the Department's 90/60 rule, whereby the Department may use as 
NV comparison market prices from the three months prior to and the two 
months after the month in which the U.S. sale was made. The same month 
comparison rule accords with the Department's current practice in cases 
involving high inflation.
    We disagree with the respondents' claim that the Department's high 
inflation methodology creates unduly high margins in this review. The 
Department's inflation methodology is designed to eliminate distortion 
caused by high inflation. It is neutral in purpose and is not designed 
to punish or benefit anyone. However, as a result of a recent court 
decision, the respondents' concerns have been addressed at least in 
part, albeit indirectly. On January 8, 1998, the Court of Appeals for 
the Federal Circuit issued a decision in CEMEX v. United States, 133 
F.3d 897 (CEMEX). In that case, based on the pre-URAA version of the 
Act, the Court addressed the appropriateness of using CV (rather than 
similar merchandise) as the basis for foreign market value when the 
Department finds home market sales of the most similar merchandise to 
be outside the ``ordinary course of trade.'' This issue was not raised 
by any party in this proceeding. However, in response to the Court's 
decision in Cemex, the Department has revised its application of the 
cost test and has determined that it would be inappropriate to resort 
directly to CV, in lieu of foreign market sales, as the basis for NV 
upon finding 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 we will match a given U.S. sale to foreign 
market sales of the next most similar model sold during the same month 
when all sales of the most comparable model are below cost. The 
Department will use CV as the basis for NV only when there are no 
above-cost sales in the appropriate comparison period that are 
otherwise suitable for comparison.
    Therefore, for the final results 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 above in 
the ``Scope of Review'' section of this notice, that were in the 
ordinary course of trade during the same month 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 
ordinary course of trade during the same month to compare with U.S. 
sales, we compared U.S. sales to sales of the most similar foreign like 
product made in the ordinary course of trade during the same month, 
based on the characteristics listed in Sections B and C of our 
antidumping questionnaire.
    With regard to comparisons involving sets, where there were no 
sales of identical merchandise in the home market in the same month to 
compare to U.S. sales of subject merchandise sold in sets, we compared 
U.S. sales of sets to the CV of the set as we do not have the 
appropriate data in this review to compare non-identical sets. We will, 
however, request such information for purposes of future reviews.
    In a few instances involving comparisons of open stock merchandise, 
we have still resorted to the use of CV due to the absence of 
comparable above-cost matches in the same month for certain U.S. sales.
    Finally, the respondent's suggestion that we account for the 
effects of inflation by indexing prices for POS cookware is contrary to 
the Department's high inflation methodology. Although it is necessary 
to use cost indexing in high-inflation cases in order to calculate 
meaningful POR-average costs, the Department has rejected the use of 
indexed prices. It is the Department's position that price-to-price 
margin calculations should be made based only on actual, rather than 
indexed, prices, as using indexed prices would yield less accurate 
results.

Comment 7: Home Market Freight Expense Allocation

    The petitioner argues that Cinsa's and ENASA's claim for an 
adjustment to NV for freight expenses incurred to ship subject 
merchandise from the factories in Saltillo to (1) the remote warehouses 
in Mexico City and Guadalajara, and (2) unaffiliated customers in the 
Monterrey region is distortive and should be rejected because these 
shipments contained both Cinsa- and ENASA-produced merchandise, as well 
as both subject and non-subject merchandise. The petitioner further 
argues that Cinsa billed ENASA for its share of the freight expenses 
based on the number of boxes of ENASA merchandise in each shipment, as 
opposed to the weight of the ENASA merchandise, which is heavier gauge 
that Cinsa's merchandise, thus incorrectly shifting expense from ENASA 
to Cinsa and artificially reducing Cinsa's NV.
    In addition, with regard to post-sale freight expenses, the 
petitioner contends that allocating the total expense over subject and 
non-subject merchandise could inappropriately shift expense to subject 
merchandise if non-subject merchandise customers are located farther 
from the factories, on average, than customers of subject merchandise. 
The petitioner urges the Department to either reject Cinsa's and 
ENASA's claim for a freight adjustment or require them to revise their 
freight expense allocation.

[[Page 38380]]

    The respondents argue that they were unable to report transaction-
specific freight expenses because they received freight bills on a 
monthly basis, rather than a shipment-by-shipment basis. According to 
the respondents, the allocation of mixed-shipment freight expenses 
between the companies was reasonable because the packing list generated 
by the freight company indicated the number of boxes but not the weight 
of boxes. Moreover, the respondents argue that, because the freight 
expense was incurred on the basis of weight and the freight rate did 
not vary by the type of merchandise shipped, inclusion of sales of non-
subject merchandise was not distortive to the calculation. Finally, the 
respondents note that not only has the Department accepted Cinsa's and 
ENASA's comparable allocations in all previous proceedings, but that 
the respondents' reporting of warehouse-specific freight factors 
represents a refinement in their reporting of pre- and post-sale 
freight expenses.

DOC Position

    We have accepted the respondents' methodology for the calculation 
of home market freight expenses, including their allocation of such 
expenses (1) between Cinsa and ENASA and (2) between subject and non-
subject merchandise.
    The Department's preference is that, wherever possible, freight 
adjustments should be reported on a sale-by-sale basis rather than 
allocated over all sales. See Final Results of Antidumping Duty 
Administrative Review: Replacement Parts for Self-Propelled Bituminous 
Paving Equipment from Canada, 56 FR 47451 (September 19, 1991). If the 
respondent does not maintain freight records on a sale-by-sale basis, 
then our preference is to apply an allocation methodology at the most 
specific level permitted by the respondent's records kept in the normal 
course of business. See Final Determination of Sales at Less Than Fair 
Value: Melamine Institutional Dinnerware Products from Indonesia, 62 FR 
1719, 1724 (January 13, 1997).
    Cinsa and ENASA stated in their June 2, 1997, supplemental response 
that they do not maintain freight records on a sale-by-sale basis 
because Cinsa, which handles freight arrangements for both itself and 
ENASA, is billed only on a weight-per-truckload basis by its 
unaffiliated freight carrier. The freight company does not provide a 
weight-based breakout between Cinsa merchandise and ENASA merchandise. 
However, the packing list for each shipment indicates how many boxes 
contain Cinsa merchandise and how many boxes contain ENASA merchandise.
    We disagree with the petitioner's claim that allocating the cost 
for each truckload between the two companies on the basis of number of 
boxes shifts freight expense to Cinsa. Although ENASA's products are 
heavy gauge steel and Cinsa's are light and medium gauge steel, a Cinsa 
``box'' is not necessarily lighter than an ENASA ``box''; different 
boxes may contain different cookware items (i.e., different models and 
sizes), and some boxes contain multiple items. In the absence of 
weight-based data, the box-based comparison is the most reasonable 
overall.
    Likewise, we disagree with the petitioner's claim that the 
respondents' allocation of freight costs between subject and non-
subject merchandise is distortive since the June 2, 1997, response 
shows that subject and non-subject merchandise destined for the same 
delivery point are charged the same weight-based rate. Further, the 
record shows that the respondents reported warehouse-specific freight 
factors. Thus, calculation of a weight-based factor based upon the 
freight expense and shipping weight for all merchandise and application 
of the resulting factor to the weight of subject merchandise yields a 
non-distortive allocation of the freight expense attributable only to 
subject merchandise. Finally, Cinsa and ENASA have used comparable 
allocation methodologies in each of the previous segments of this 
proceeding, in each of which the Department has determined that they 
are reasonable in light of the objectives of the antidumping law. 
Accordingly, we accepted Cinsa's and ENASA's freight calculations as 
submitted in their sales databases in this review as reasonable and 
non-distortive.

Comment 8: Freight Expenses on U.S. Sales

    The petitioner states that Cinsa and ENASA reported freight 
expenses incurred to ship subject merchandise to the United States by 
allocating total freight expenses incurred over the weight of all 
merchandise shipped. These freight expenses were reported in two steps: 
(1) expenses incurred to ship merchandise from Saltillo to the U.S. 
border (for EP and CEP sales), and (2) expenses incurred to ship 
merchandise from the U.S. border to CIC's warehouse in San Antonio, 
Texas (CEP sales only). The petitioner argues that the denominators in 
the above-referenced calculations are incorrect because the weight of 
the merchandise shipped in Step 1, which should contain both EP and CEP 
sales, is significantly lower than the weight of the merchandise 
shipped in Step 2, which should contain only CEP sales. Furthermore, 
according to the petitioner, the weights used in these calculations do 
not correspond to the weights of merchandise sold as reported on the 
respondents' sales tapes. Accordingly, for purposes of the final 
results, the petitioner maintains that the Department should reject 
Cinsa's and ENASA's U.S. freight calculations and, as facts available, 
recalculate the per kilogram expenses based on the weight of 
merchandise sold as reported on the sales tapes.
    Cinsa and ENASA concede that the weight amount reported by CIC for 
shipment from Laredo to San Antonio was inadvertently overstated, but 
state that the error can be corrected using information already in the 
record. The respondents disagree with the petitioner's suggestion that 
the weight of EP and CEP sales from the sale tape be used as the 
denominator for Mexican inland freight because that freight factor was 
calculated on the basis of expenses incurred upon sales of both subject 
and non-subject merchandise, which were shipped together. Therefore, 
according to the respondents, the reported weight of the merchandise 
shipped must include both subject and non-subject merchandise. 
Likewise, the respondents also disagree with using the weight of CEP 
sales from the sales tape as the denominator for the U.S. inland 
freight factor because in addition to the inclusion of non-subject 
merchandise, the U.S. inland freight factor was calculated based on 
freight expenses incurred on all merchandise shipped from Laredo to San 
Antonio, regardless of whether it was resold to unrelated U.S. 
customers during the period of review (POR) or whether it remained in 
inventory in San Antonio.

DOC Position

    The Department agrees that the denominator of the U.S. inland 
freight ratio (Step 2, above) should be recalculated by subtracting the 
weight of the merchandise shipped from Saltillo to Laredo, which was 
inadvertently also included in the Step 2 weight calculation. The 
petitioner's suggestion that the weight of CEP sales, as derived from 
the sales tape, be used as the denominator for U.S. inland freight is 
incorrect because it fails to take into consideration two important 
details. First, the numerator in the calculation (freight expenses) 
includes both subject and non-subject merchandise. Second, the 
numerator also includes expenses incurred on all merchandise shipped 
from Laredo to San Antonio, Texas,

[[Page 38381]]

regardless of whether it was resold to unrelated U.S. customers or 
whether it remained in inventory in San Antonio. Accordingly, in order 
to obtain a proper ratio, the denominator (weight shipped) must be 
based correspondingly upon the weight of all subject and non-subject 
merchandise as well as on the weight of both merchandise sold and that 
remaining in inventory in San Antonio. The weight on the sales tapes 
represents total CEP sales; thus this figure does not include non-
subject merchandise or merchandise remaining in inventory in San 
Antonio. Therefore, for purposes of the final results, we have deducted 
freight expenses, corrected as noted above, from U.S. price. See 
Calculation Memo.

Comment 9: Calculation of Indirect Selling Expenses and CEP Profit

    The petitioner argues that the Department's preliminary results 
calculation of U.S. indirect selling expenses and CEP profit for Cinsa 
and ENASA are understated because they do not include (1) all of CIC's 
reported indirect selling expenses (depreciation, financial and bad 
debt expenses were excluded), (2) expenses incurred by CIC to finance 
antidumping duty cash deposits and assessments, and (3) indirect 
selling expenses incurred in Mexico in support of sales to the United 
States. The petitioner believes that the Department should include the 
above-mentioned expenses in the calculation of U.S. indirect selling 
expenses and CEP profit for purposes of the final results.
    Cinsa and ENASA disagree with the petitioner's claim that the 
Department should have deducted the above-referenced expenses from CEP. 
The respondents claim that: (1) Depreciation, financial and bad debt 
expenses are financial and operating expenses and do not involve 
expenses related to the sale of the subject merchandise or overhead 
expenses of the U.S. affiliate and, according to the statute, only 
direct selling expenses, indirect selling expenses and general and 
administrative expenses are to be deducted from CEP; (2) expenses 
incurred in the payment of antidumping duties are not indirect selling 
expenses that benefit U.S. sales of subject merchandise; and (3) 
indirect selling expenses of Cinsa's export department and the 
inventory carrying costs for the period in which the exported 
merchandise was in Mexican inventory do not relate to economic activity 
in the United States.

DOC Position

    For purposes of the final results, we have deducted from CEP 
depreciation, financial and bad debt expenses, as well as commissions. 
We did not deduct the indirect selling expenses of Cinsa's export 
department or the inventory carrying costs for the period in which the 
exported merchandise was in Mexican inventory.
    CIC's sole function is to sell merchandise produced by Cinsa, 
ENASA, and their affiliates in the U.S. market. In such circumstances, 
the Department's practice is to deduct CIC's selling, general, and 
administrative expenses from CEP. See Notice of Final Determination of 
Sales at Less Than Fair Value: Large Newspaper Printing Presses and 
Components Thereof, Whether Assembled or Unassembled, from Germany, 61 
FR 38166, 38176 (July 23, 1996). This includes CIC's depreciation, 
financial and bad debt expenses, which are considered related to CIC 
sales of the subject merchandise and thus deducted from CEP pursuant to 
section 772(d)(1)(D). With regard to CIC's expenses to finance loans 
from Cinsa used for payment of antidumping cash deposits, although we 
have long maintained, and continue to maintain, that antidumping duties 
and cash deposits of antidumping duties are not expenses that we should 
deduct from U.S. price, it is also the Department's position that, 
unlike the duties and cash deposits themselves, financial expenses 
associated with cash deposits are not a direct, inevitable consequence 
of an antidumping duty order. Therefore, we agree with the petitioner 
that it is reasonable to include such financing expenses in the 
indirect selling expense calculation for the CEP sales made by CIC. See 
Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, 
from Japan, and Tapered Roller Bearings, Four Inches or Less in Outside 
Diameter, and Components Thereof, from Japan, 63 FR 2558, 2571 (January 
15, 1998). However, the record of this review does not indicate whether 
CIC's interest expenses with respect to intracorporate loans to pay 
antidumping duties and cash deposits that were either incurred or 
accrued during the POR were included in CIC's reported U.S. indirect 
selling expense calculation. Therefore, the Department made no 
adjustment to U.S. indirect selling expenses, which may already include 
CIC's interest expenses to finance loans from Cinsa. We will, however, 
request clarification of this issue on the record of future reviews.
    With regard to indirect selling expenses incurred in Mexico in 
support of sales to the United States, we agree with the respondents 
that such expenses do not relate to economic activity in the United 
States. The Department's current practice, as indicated by the preamble 
to the Department's New Regulations, is to deduct indirect selling 
expenses incurred in Mexico from the CEP calculation only if they 
relate to sales to the unaffiliated purchaser in the United States. We 
do not deduct from the CEP calculation indirect selling expenses 
incurred in Mexico on the sale to the affiliated purchaser. 
Accordingly, because Cinsa and ENASA reported that certain indirect 
expenses incurred in Mexico are not associated with selling activity 
occurring in the United States, but are limited to selling activities 
associated with the sale of merchandise in Mexico to the affiliated 
party, CIC, we have not deducted these Mexican indirect selling 
expenses from the CEP calculation.

Comment 10: Calculation of U.S. Imputed Credit Expenses

    According to the respondents, although the Department's analysis 
memorandum for the preliminary results (see Antidumping Duty 
Administrative Review of Porcelain-on-Steel Cookware from Mexico (95-
96): Adjustments to Submitted Data) stated that the Department modified 
the calculation of reported credit cost to reflect U.S. imputed credit 
cost based on unit prices net of discounts, the computer program used 
for the preliminary results failed to reflect this intent. Therefore, 
credit cost was overstated because imputed credit on U.S. sales was 
based on gross price rather than net price.
    The petitioner argues that the Department did not deduct any values 
from gross unit price in its calculation of U.S. credit expense because 
Cinsa and ENASA reported that they did not grant any discounts or 
rebates on U.S. sales during the POR. According to the petitioner, the 
values identified as rebates by Cinsa and ENASA are actually warranty 
expenses and the calculation of U.S. credit expenses net of warranty or 
any other direct selling expenses would be contrary to the Department's 
policy.

DOC Position

    We agree with Cinsa and ENASA that discounts should be deducted 
from the U.S. imputed credit calculation. However, for purposes of this 
review, the issue is moot because no discounts were reported in the 
U.S. market. We also agree with the respondents that the rebates 
reported by Cinsa and ENASA are not warranties, as claimed by the

[[Page 38382]]

petitioner. The respondents have characterized these rebates as ``post-
sale price adjustments to account for short-shipments or returned 
merchandise.'' There is no information on the record to indicate that 
the returned merchandise is defective--a prerequisite for a warranty 
expense. However, this issue is also moot since we did not deduct 
rebates or warranties from the price on which imputed credit is based.

Final Results of Review

    As a result of this review, we have determined that the following 
margins exist for the period December 1, 1995 through November 30, 
1996:

------------------------------------------------------------------------
                                                                Margin  
                   Manufacturer/Exporter                      (percent) 
------------------------------------------------------------------------
Cinsa......................................................        17.33
ENASA......................................................        62.75
------------------------------------------------------------------------

    The Department shall determine, and the U.S. Customs Service shall 
assess, antidumping duties on all appropriate entries. We have 
calculated an importer-specific assessment rate based on the ratio of 
the total amount of antidumping duties calculated for the examined 
sales to the total value of those same sales. This rate will be 
assessed uniformly on all entries of that particular importer made 
during the POR. The Department will issue appraisement instructions 
directly to the Customs Service.
    Furthermore, the following deposit requirements shall be effective, 
upon publication of this notice of final results of administrative 
review, for all shipments of the subject merchandise from Mexico that 
are 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 rates for Cinsa and ENASA will be the 
rates established 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 this review, or the original 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 of this merchandise will continue to be 29.52 percent, the 
all others rate established in the final results of the less than fair 
value investigation (51 FR 36435, October 10, 1986). The cash deposit 
rate has been determined on the basis of the selling price to the first 
unaffiliated customer in the United States. For appraisement purposes, 
where information is available, the Department will use the entered 
value of the merchandise to determine the assessment rate.
    The deposit requirements, when imposed, shall remain in effect 
until publication of the final results of the next administrative 
review.
    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 serves as the only reminder to parties subject to 
administrative protective order (APO) of their responsibility 
concerning the disposition of proprietary information disclosed under 
APO in accordance with 19 CFR 353.34(d). Timely written notification of 
return/destruction of APO materials or conversion to judicial 
protective order is hereby requested. Failure to comply with the 
regulation and the terms of an APO is a sanctionable violation.
    This administrative review and notice are in accordance with 
sections 751(a)(1) and 777(i)(1) of the Act and 19 CFR 353.22.

    Dated: July 8, 1998.
Richard W. Moreland,
Acting Assistant Secretary for Import Administration.
[FR Doc. 98-18884 Filed 7-15-98; 8:45 am]
BILLING CODE 3510-DS-M