[Federal Register Volume 63, Number 175 (Thursday, September 10, 1998)]
[Notices]
[Pages 48471-48477]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-24347]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-201-802]


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

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

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

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SUMMARY: In response to requests from interested parties, the 
Department of Commerce (the Department) is conducting an administrative 
review of the antidumping duty order on gray portland cement and 
clinker from Mexico. The review covers exports of subject merchandise 
to the United States during the period August 1, 1996 through July 31, 
1997 and one firm, CEMEX, S.A. de C.V. (CEMEX) and its affiliate 
Cementos de Chihuahua, S.A. de C.V. (CDC). See section below entitled 
``Collapsing.'' The results of this review indicate the existence of 
dumping margins for the period.
    We invite interested parties to comment on these preliminary 
results. Parties who submit arguments in this proceeding are requested 
to submit with the argument (1) a statement of the issue, and (2) a 
brief summary of the argument.

EFFECTIVE DATE: September 10, 1998.

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

SUPPLEMENTARY INFORMATION:

Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute are 
references to the provisions effective January 1, 1995, the effective 
date of the amendments made to the Tariff Act of 1930 (the Act) by the 
Uruguay Round Agreements Act (URAA). In addition, unless otherwise 
indicated, all citations to the Department's regulations are to the 
regulations at 19 CFR Part 351, published in the Federal Register on 
May 19, 1997. 62 FR 27296.

Background

    On August 4, 1997, the Department published in the Federal Register 
a Notice of Opportunity to Request Administrative Review of the 
antidumping duty order on gray portland cement and clinker from Mexico. 
61 FR 41925 (August 4, 1997). In accordance with 19 CFR 351.213, CEMEX, 
and the petitioner, the Southern Tier Cement Committee (``STCC''), 
requested a review of CEMEX and its affiliate, CDC. On September 25, 
1997, the Department published a Notice of Initiation of Antidumping 
Review. 62 FR 50292 (September 25, 1997). The Department is now 
conducting a review of these companies pursuant to section 751 of the 
Act.

Scope of Review

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

Verification

    As provided in Section 782(i) of the Act, we verified information 
provided by the CEMEX and CDC using standard verification procedures, 
including on-site inspection of manufacturing facilities, the 
examination of relevant

[[Page 48472]]

sales and financial records, and selection of original documentation 
containing relevant information. Our verification results are outlined 
in public versions of the verification reports.

Collapsing

    Section 351.401(f) of the Department's new regulations, 62 FR at 
27410, describes when the Department will treat two or more producers 
as a single entity (i.e., ``collapse'' the firms) for purposes of 
calculating a dumping margin. See also Gray Portland Cement and Clinker 
from Mexico; Final Results of Antidumping Duty Administrative Review, 
63 FR 12764, 12773 (March 16, 1998). The regulations provide that the 
Department will treat two or more producers as a single entity where 
(1) the producers are affiliated; (2) the producers have production 
facilities that are sufficiently similar so that a shift in production 
would not require substantial retooling; and (3) there is a significant 
potential for the manipulation of price or production. For this last 
criterion, the Department may consider (a) the level of common 
ownership; (b) whether managerial employees or board members of one of 
the affiliated producers sit on the board of the other affiliated 
producer; and (c) whether operations are intertwined, such as through 
the sharing of sales information, involvement in production and pricing 
decisions, the sharing of facilities or employees, or significant 
transactions between affiliated producers. In the current review, 
CEMEX's equity ownership in CDC exceeded 5 percent; therefore, we have 
preliminarily found that the two companies are affiliated. In addition, 
CDC and CEMEX have production processes and facilities sufficiently 
similar so that a shift in production would not require substantial 
retooling. Finally in regards to the last criterion, the Department 
reviewed levels of common ownership, shared board members, and 
intertwined business relations, and found a significant potential for 
the manipulation of price or production. As a result, the Department 
has preliminarily concluded that these affiliated producers should be 
treated as a single entity and that a single, weighted-average margin 
should be calculated for these companies. (A complete analysis of this 
issue is contained in the Memorandum from Roland L. MacDonald to Joseph 
A. Spetrini, (August 31, 1998), located in the official file of this 
case (``collapsing memorandum''). Therefore, throughout this notice, 
references to ``respondent'' should be read to mean the collapsed 
entity.

Transactions Reviewed

    In accordance with section 751 of the Act, the Department is 
required to determine the normal value (NV) and export price (EP) or 
constructed export price (CEP) of each entry of subject merchandise. 
Because there can be a significant lag between entry date and sale date 
for CEP sales, it has been the Department's practice to examine CEP 
sales during the period of review (POR). See Gray Portland Cement and 
Clinker from Japan; Final Results of Antidumping Duty Administrative 
Review, 58 FR 48826 (September 20, 1993) (Department did not consider 
ESP (now CEP) entries which were sold after the POR). The Court of 
International Trade (CIT) has upheld the Department's practice in this 
regard. See The Ad Hoc Committee of Southern California Producers of 
Gray Portland Cement v. United States, 914 F. Supp. 535 (CIT 1995.)

Fair Value Comparisons

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

Export Price and Constructed Export Price

    We used EP, in accordance with subsections 772(a) and (c) of the 
Act, where the subject merchandise was sold directly or indirectly to 
the first unaffiliated purchaser in the United States prior to 
importation and CEP was not otherwise warranted based on the facts in 
the record. In addition, we used CEP in accordance with subsections 
772(b), (c), and (d) of the Act, for those sales to the first 
unaffiliated purchaser that took place after importation into the 
United States.
    We calculated EP based on delivered prices to unaffiliated 
customers in the United States. Where appropriate, we made adjustments 
from the starting price for early payment discounts, foreign inland 
freight, foreign brokerage and handling, international freight, U.S. 
inland freight, U.S. brokerage and handling, and U.S. customs duties. 
We also adjusted the starting price for billing adjustments to the 
invoice price.
    We calculated CEP sales based on delivered prices to unaffiliated 
customers. Where appropriate, we made adjustments for early payment 
discounts, credit expenses, and direct selling expenses. We deducted 
those selling expenses, including inventory carrying costs, that were 
related to economic activity in the United States. We also made 
deductions for foreign brokerage and handling, foreign inland freight, 
international freight, U.S. inland freight, U.S. brokerage and 
handling, and U.S. duty. We adjusted the starting price for billing 
adjustments to the invoice price. Finally, we made an adjustment for 
CEP profit in accordance with section 772(d)(3) of the Act.

Further Manufacturing

    With respect to subject merchandise to which value was added in the 
United States prior to sale to unaffiliated U.S. customers (e.g., 
cement that was imported and further processed into finished concrete 
by U.S. affiliates of foreign exporters), we preliminarily determined 
that the special rule for merchandise with value added after 
importation under section 772(e) of the Act was applicable.
    Section 772(e) of the Act provides that, where the subject 
merchandise is imported by an affiliated person and the value added in 
the United States by the affiliated person is likely to exceed 
substantially the value of the subject merchandise, we shall determine 
the CEP for such merchandise using the price of identical or other 
subject merchandise if there is a sufficient quantity of sales to 
provide a reasonable basis for comparison and we determine that the use 
of such sales is appropriate. If there is not a sufficient quantity of 
such sales or if we determine that using the price of identical or 
other subject merchandise is not appropriate, we may use any other 
reasonable basis to determine the CEP.
    To determine whether the value added is likely to exceed 
substantially the value of the subject merchandise, we estimated the 
value added based on the difference between the averages of the prices 
charged to the first unaffiliated purchaser for the merchandise as sold 
in the United States and the averages of the prices paid for subject 
merchandise by the affiliated person. Based on this analysis, we 
estimate that the value added was at least 65 percent of the price 
charged to the first unaffiliated purchaser for the merchandise as sold 
in the United States. Therefore, we have preliminarily determined that 
the value added is likely to exceed substantially the value of the 
subject merchandise. Accordingly, for purposes of

[[Page 48473]]

determining dumping margins for these sales, we have used the weighted-
average CEP calculated on sales of identical or other subject 
merchandise sold to unaffiliated persons. No other adjustments to EP or 
CEP were claimed or allowed.

Normal Value

    In order to determine whether there was a sufficient volume of 
sales in the home market to serve as a viable basis for calculating NV, 
we compared respondent's volume of home market sales of the foreign 
like product to the volume of U.S. sales of the subject merchandise in 
accordance with section 773(a)(1)(C) of the Act. Since respondent's 
aggregate volume of home market sales of the foreign like product was 
greater than five percent of its aggregate volume of U.S. sales for the 
subject merchandise, we determined the home market was viable. 
Therefore, we have based NV on home market sales.
    In particular, we based NV on home market sales of Type I cement by 
CEMEX and CDC. The statute expresses a preference for matching U.S. 
sales to identical merchandise in the home market. However, in 
situations where identical product types cannot be matched, the statute 
expresses a preference for basing NV on sales of similar merchandise. 
See section 773(a)(1)(B) and 771(16) of the Act. The history of this 
order demonstrates that, of the various types of cement subject to the 
order on Mexican cement, Type I cement is most similar to Type II and 
Type V cement, and pozzolanic cement is the least similar.
    During the POR, CDC only sold one type of cement in Mexico subject 
to the antidumping order--Type I cement. CEMEX, on the other hand, sold 
four basic types of cement in Mexico during the POR--Type I, Type II, 
Type V and pozzolanic. However, prior to the commencement of 
verification, CEMEX notified the Department that the merchandise 
produced at its Hidalgo plant was either Type V or Type I, although all 
data from this plant was reported as relating to sales or production of 
only Type I cement. See CEMEX's June 3, 1998, submission explaining the 
discovery of mis-reported sales at Hidalgo. In other words, a certain 
portion of the cement sold as Type I from this plant was actually Type 
V. CEMEX filed a submission on June 16, 1998, revising the home market 
sales database for sales of Type V cement from Hidalgo. The Department 
issued a letter on June 25, 1998, rejecting the filing as an untimely 
response to the Department's questionnaire under section 351.201(b)(2).
    Section 776(a) of the Act requires that the Department use facts 
otherwise available when necessary information is not on the record, or 
an interested party withholds requested information, fails to provide 
such information in a timely manner, significantly impedes a 
proceeding, or provides information that cannot be verified. Section 
776(b) of the Act authorizes the Department to use an adverse inference 
in determining the facts otherwise available whenever an interested 
party has failed to cooperate with the Department by not acting to the 
best of its ability to comply with requests for information.
    Since the Department was notified that the information on the 
record regarding sales of cement produced at Hidalgo is inaccurate, we 
determined that these sales do not provide an appropriate basis for 
calculating NV. In short, our sales and cost database for cement 
produced at Hidalgo is extremely flawed. Therefore, in accordance with 
section 776(b) of the statute, the Department, as facts available, is 
substituting the highest calculated NV in this review for all sales of 
cement produced at Hidalgo.
    As for CEMEX's home market sales of Type II and Type V cement, and 
certain home market sales of Type I cement, during the POR, the 
Department has preliminarily determined that they are outside the 
ordinary course of trade. As more fully described in the ``Ordinary 
Course of Trade'' section of this notice, these sales are not 
representative of CEMEX's home market sales. See also Memorandum from 
Roland L. MacDonald to Joseph A. Spetrini (August 31, 1998).
    Where appropriate, we adjusted home market sales of Type I cement 
for discounts, credit expenses, inland freight, and inland insurance. 
We also adjusted the starting price for billing adjustments to the 
invoice price. In addition, in accordance with section 773(a)(6), we 
deducted home market packing costs and added U.S. packing costs.
    We made adjustments, where appropriate, for physical differences in 
merchandise (DIFMER) in accordance with section 773(a)(6)(C)(ii) of the 
Act. For CDC's sales, we calculated a DIFMER adjustment using plant-
specific cost data reported by CDC. For sales made by CEMEX, we 
preliminarily determine, in accordance with section 776 of the Act, 
that the use of partial facts available for a DIFMER adjustment is 
appropriate. For the reasons discussed below we have preliminarily 
determined that the most appropriate basis for a facts available DIFMER 
is the actual cost differences in producing Type I cement sold in the 
home market and Type V cement sold in the U.S. market. As facts 
available, and in order to minimize the effect of varying plant 
efficiencies, the Department has compared CEMEX's variable costs of 
manufacturing (VCOM) to produce cement at the Hermosillo plants (sold 
as Types I, II, and V) with the lowest VCOM reported by a CEMEX Type I 
facility. This calculation is based upon the same methodology used to 
calculate a DIFMER adjustment for CEMEX in the sixth review (see Final 
Results of Administrative Review: Gray Portland Cement and Clinker from 
Mexico, 63 FR 12764, 12778 (March 16, 1998)), and results in an upward 
adjustment to home market prices.
    As stated above, section 776(a) of the Act authorizes the 
Department to use facts otherwise available when necessary information 
is not on the record, or an interested party withholds requested 
information, fails to provide such information in a timely manner, 
significantly impedes a proceeding, or provides information that cannot 
be verified. In the instant review, the Department first requested 
DIFMER information from CEMEX on September 25, 1997. CEMEX was asked to 
base its DIFMER calculations on differences in physical characteristics 
between Type I cement sold in Mexico and the type of cement being 
exported to the United States. CEMEX did not supply DIFMER information 
in response to this request. On February 17, 1998, in a supplemental 
questionnaire, the Department requested for the second time that CEMEX 
submit DIFMER information. On March 20, 1998, CEMEX reported the 
variable cost information for Type I cement at 11 plants, and 
information for Type V cement for the Campana and Yaqui facilities. On 
April 4, 1998, the Department requested interested parties to submit 
information to assist the Department in determining the most 
appropriate basis for a DIFMER adjustment in the instant review. In 
response, CEMEX stated that there were no physical differences between 
Types I and V cement produced in the home market; therefore, it 
withdrew its request for a DIFMER adjustment in the instant review. In 
addition, the Department did not receive any additional information 
from interested parties demonstrating the most appropriate basis for a 
DIFMER adjustment.
    The Department has determined that the DIFMER information filed by 
CEMEX on April 20, 1998, and April 27, 1998, (withdrawing its request 
for a DIFMER adjustment) is contrary to the

[[Page 48474]]

data reported by CEMEX in its December 8, 1997, and March 20, 1998, 
submissions in the reported VCOMH and VCOMU fields. The existing data 
and product information on the record indicates that there are 
differences in the physical characteristics of Type I cement and Type V 
cement. These physical differences were originally made apparent in 
CEMEX's reported variable manufacturing costs of producing Type I and 
Type V cement in the home market. In addition, CEMEX's statement on 
April 20, 1998, is contrary to the facts placed on the record of prior 
reviews (currently on the record of the instant review), wherein CEMEX 
states that there are differences in the physical characteristics of 
Type I and V cement which contribute to a difference in the production 
costs of the two types of cement. Based on the fact that record 
evidence indicates that there are physical differences between Type I 
and Type V cement and the fact that interested parties did not submit 
viable bases for a DIFMER adjustment, the Department has calculated a 
DIFMER adjustment based upon facts otherwise available.
    The Department preliminarily determines that CEMEX's reported 
DIFMER information, which is flawed and inconsistent with other facts 
on the record of this case, is unusable. Furthermore, it is not 
appropriate to use other information on the record as a basis for a 
DIFMER adjustment. We determined in the fifth administrative review 
that it is not appropriate to use the weighted-average VCOM of all 
plants producing Type I and the VCOM of the U.S. merchandise due to 
efficiency differences between plants. Thus, we relied in that review 
on the purported VCOM differences for merchandise produced at Yaqui, 
under the assumption that Yaqui produced both physically Type I and 
physically Type II cement. In the final results of the sixth 
administrative review, we determined that Yaqui and Campana only 
produced a physically Type V cement and not other types of cement. 
Therefore, we calculated a DIFMER utilizing the most efficient plant 
producing Type I cement as compared to the plants producing solely Type 
V. However, in the current review the evidence on the record indicates 
that any differences in the variable cost of manufacturing cement is 
attributable, at least in a large part, to differences in plant 
efficiencies. See Home Market Sales Verification Report dated August 
21, 1998. In addition, the record evidence indicates, and CEMEX has 
argued in various submissions, that differences in costs due to plant 
efficiencies cannot be isolated from other variable costs to calculate 
a DIFMER consistent with section 773(a)(6) of the statute. Because of 
different plant efficiencies, the Department is unable to compare the 
variable costs at the Yaqui and Campana facilities with the average 
variable costs at CEMEX's numerous facilities producing Type I cement. 
Therefore, as facts available, and in order to minimize the effect of 
varying plant efficiencies, the Department has compared CEMEX's VCOM to 
produce cement at the Hermosillo plants (sold as Types I, II, and V but 
are physically Type V) with the lowest variable costs reported by a 
CEMEX Type I facility. This calculation is based upon the same 
methodology used to calculate a DIFMER adjustment for CEMEX in the 
sixth review and results in an upward adjustment to home market prices. 
Additionally, consistent with our prior practice, we have applied to 
CDC's home market sales a calculated DIFMER based upon plant-specific 
reported data.

A. Arm's-Length Sales

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

B. Cost of Production Analysis

    Petitioner alleged, on January 9, 1998, that CEMEX and its 
affiliate, CDC, sold gray portland cement and clinker in the home 
market at prices below their cost of production (COP.) Based on these 
allegations, the Department determined, on February 3, 1998, that it 
had reasonable grounds to believe or suspect that CEMEX had sold the 
subject merchandise in the home market at prices below the COP. 
Therefore, pursuant to section 773(b)(1) of the Act, we initiated a COP 
investigation in order to determine whether CEMEX and CDC made home 
market sales during the POR at prices below their COP.
    In accordance with section 773(b)(3) of the Act, we calculated an 
average monthly COP based on the sum of the costs of materials and 
fabrication employed in producing the foreign like product plus 
selling, general and administrative (SG&A) expenses and all costs and 
expenses incidental to placing the foreign like product in condition 
ready for shipment. In our COP analysis, we used the home market sales 
and COP information provided by the respondent in its questionnaire 
responses.
    After calculating an average monthly COP, we tested whether home 
market sales of cement were made at prices below COP within an extended 
period of time in substantial quantities and whether such prices permit 
recovery of all costs within a reasonable period of time. We compared 
model-specific average monthly COPs to the reported home market prices 
less any applicable movement charges, discounts and rebates. In 
determining whether to disregard home market sales made at prices below 
the average COP, we examined (1) whether, within an extended period of 
time, such sales were made in substantial quantities, and (2) whether 
such sales were made at prices which permitted the recovery of all 
costs within a reasonable period of time in the normal course of trade.
    Pursuant to section 773(b)(2)(C) of the Act, because less than 20 
percent of the respondent's sales of the foreign like product under 
consideration for the determination of NV were at prices less than COP, 
we did not disregard any below-cost sales of the product.

C. Inflation

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

[[Page 48475]]

D. Currency Conversion

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

E. Produced As vs. Sold As

    Section 771(16)(A) of the Act expresses a clear preference for 
matching sales in the United States with sales in the home market of 
merchandise that is ``identical in physical characteristics.'' See 
CEMEX, S.A. v. United States, 133 F.3d 897 (Fed. Cir. 1998). When 
circumstances require the Department to compare non-identical 
merchandise, the statute, at section 773(a)(6)(C)(ii) of the Act, 
provides for an adjustment for price differences attributable to 
differences in physical characteristics.
    Since the inception of this proceeding, we have seen that all 
cement generally conforms to the standards established by the ASTM. 
These standards tend to classify cement according to its physical 
characteristics, dimensional characteristics, and/or performance 
properties. Also from the outset, interested parties and the Department 
have used ASTM standards to identify merchandise subject to this 
antidumping order and to inform how, and on what basis, we match sales 
of identical or similar merchandise. Specifically, the Department has 
sought, wherever possible, to match sales of ASTM standard Type II to 
Type II, ASTM standard Type V to Type V, and so forth.
    During the period covered by the original investigation, the 
Department discovered one or more instances where Mexican producers 
sold cement meeting one ASTM standard as if it were cement meeting a 
lower (included) ASTM standard. However, in the final determination, 
the Department described these sales as a mistake and not ``the 
ordinary practice in the industry.'' Final Determination of Sales at 
Less Than Fair Value, Gray Portland Cement and Clinker from Mexico, 55 
FR 29244, 29248 (1990). Therefore, based on the fact that it was the 
normal industry practice to produce and sell on the same basis, the 
Department accepted that ``matching by ASTM standard was the most 
reasonable basis for making equitable identical merchandise 
comparisons.'' Id. at 29248.
    Devising a methodology for matching sales is often a difficult task 
and the courts have recognized that the Department has broad discretion 
``to choose the manner in which * * * merchandise shall be selected.'' 
Koyo Seiko Co. v. United States, 66 F.3d 1204, 1209 (Fed. Cir. 1995). 
We have sought, throughout each of the past seven reviews, including 
the present one, to (i) match based on physical characteristics, (ii) 
rely on ASTM standards to distinguish one type of cement from another, 
and (iii) rely on sales documentation as a convenient surrogate for 
more direct evidence (e.g., mill test certificates) of cement type.
    In the instant review, the Department requested CEMEX to report 
home market and U.S. sales data on both an ``as produced'' basis (i.e., 
reporting the physical properties of each product sold), and on an ``as 
sold'' basis. CEMEX reported that it produced cement meeting the 
physical specifications of Type V cement, and sold this cement in the 
home market as Types I, II, and V cement. This Type V cement was 
produced by CEMEX's Yaqui and Campana plants, which are located in the 
Hermosillo region. CEMEX noted, and the record reflects, that Yaqui and 
Campana are the only two CEMEX plants which, on a consistent basis, 
produce cement meeting the physical requirements of one type of cement 
and sell that cement as another type of cement.
    Under these circumstances, we believe it would be unreasonable to 
match merchandise on a ``sold as'' basis. First, it would make any cost 
of production or DIFMER calculations more difficult, if not impossible. 
Moreover, such an approach would not address any sales that were merely 
labeled ``gray portland cement'' or ``cement.'' Finally, a ``sold as'' 
approach would lend itself to the type of product manipulation about 
which petitioner has so often expressed concern. Therefore, for 
purposes of the instant review, the Department has matched based on the 
products as produced.

F. Ordinary Course of Trade

    Section 773(a)(1)(B) of the Act requires the Department to base NV 
on ``the price at which the foreign like product is first sold (or in 
the absence of sales, offered for sale) for consumption in the 
exporting country, in the usual commercial quantities and in the 
ordinary course of trade.'' Ordinary course of trade is defined as 
``the conditions and practices which, for a reasonable time prior to 
the exportation of the subject merchandise, have been normal in the 
trade under consideration with respect to merchandise of the same class 
or kind.''
    The purpose of the ordinary course of trade provision ``is to 
prevent dumping margins from being based on sales which are not 
representative'' of the home market. Monsanto Co. v. United States, 698 
F. Supp. 275, 278 (CIT 1988). By basing the determination of NV upon 
representative sales, the provision helps to ensure that the comparison 
between NV and U.S. sales is done on an ``apples to apples'' basis.
    Apart from identifying certain sales that are below cost (section 
773(b)(1)) or between affiliated persons (section 773(f)(2)), Congress 
has not specified any criteria that the Department should use in 
determining the appropriate ``conditions and practices'' which are 
``normal in the trade under consideration.'' Therefore, ``Commerce, in 
its discretion, chooses how best to analyze the many factors involved 
in a determination of whether sales are made within the ordinary course 
of trade.'' Thai Pineapple Public Co. v. United States, 946 F. Supp. 
11, 14-17 (CIT 1996).
    The Department's ordinary course of trade inquiry is far-reaching. 
It evaluates not just `` `one factor taken in isolation but rather * * 
* all the circumstances particular to the sales in question.' '' Murata 
Mfg. Co. v. United States, 820 F. Supp. 603, 607 (CIT 1993). In short, 
we examine the totality of the facts in each case to determine if sales 
are being made for ``unusual reasons'' or under ``unusual 
circumstances.'' Electrolytic Manganese Dioxide from Japan; Final 
Results of Antidumping Duty Administrative Review, 58 FR 28551, 28552 
(1993).
    In the second administrative review of this order, the Department 
determined that CEMEX's sales of Type II and Type V cement were outside 
the ordinary course of trade and, therefore, could not be used in the 
calculation of NV (then referred to as ``foreign market value''). See 
Gray Portland Cement and Clinker

[[Page 48476]]

from Mexico: Final Results of Antidumping Duty Administrative Review, 
58 FR 47253, 27254 (Sept. 8, 1993). In making this determination, the 
Department considered, inter alia, shipping distances and costs, sales 
volume, profit levels, sales history, home market demand and the 
promotional aspect of sales. See Decision Memorandum to Joseph A. 
Spetrini, August 31, 1994; see also Memorandum from Holly A. Kuga to 
Joseph A. Spetrini, August 31, 1993 (public versions of these memoranda 
are on file in Room B-099 of the Department's main building). Based 
upon similar facts and using a similar analysis, the Department reached 
the same conclusion in the final results of the fifth and sixth 
administrative reviews for certain sales of Type II and Type V cement 
by CEMEX in Mexico. Gray Portland Cement and Clinker from Mexico: Final 
Results of Antidumping Duty Administrative Review, 62 FR 17148, 17151 
(April 9 1997); Gray Portland Cement and Clinker from Mexico: Final 
Results of Antidumping Duty Administrative Review 63 FR 12764, 12768 
(March 16, 1998).
    In the instant review, the petitioner alleged, as it did in the 
second, fifth, and sixth reviews, that CEMEX's sales of Type II and V 
(produced solely as Type V from the Hermosillo region) cement in Mexico 
were outside the ordinary course of trade. Pursuant to section 
773(a)(1)(B) of the Act, the Department has examined the totality of 
the circumstances surrounding CEMEX's sales of cement in Mexico that 
are produced as Type V cement and marketed as Types I, II, and V (which 
are identical in physical characteristics to the cement that CEMEX 
sells in the United States). Therefore, based on petitioner's 
allegation and the relevant findings in the prior review, the 
Department determined that it had reasonable grounds to believe or 
suspect that CEMEX's home market sales of cement meeting the physical 
specifications of Type V cement were outside the ordinary course of 
trade.
    A full discussion of our preliminary conclusions, requiring 
reference to proprietary information, is contained in a Departmental 
memorandum in the official file for this case (a public version of this 
memorandum is on file in room B-099 of the Department's main building). 
Generally, however, we have found: (i) the volume of Type V home market 
sales is extremely small compared to sales of other cement types, (ii) 
the number and type of customers purchasing Type V cement is 
substantially different from other cement types, (iii) shipping 
distances and freight costs for Type V home market sales tends to be 
significantly greater than for sales of other cement types, and (iv) 
CEMEX's profit on Type V sales tends to be small in comparison to its 
profits on other cement types.
    There are two other factors, historical sales trends and the 
``promotional quality'' of Type V cement sales, which were considered 
by the Department in the second administrative review. On September 25, 
1997, the Department issued a questionnaire requesting CEMEX to support 
its position that home market sales of Type V cement were in the 
ordinary course of trade by addressing, among other things, 
``historical sales trends'' and ``marketing reasons for sales other 
than profit.'' CEMEX's response (copies of its submission from the 
fifth and sixth administrative reviews) failed to address these two 
items. Thus, as facts available, the Department finds that the facts 
regarding these items have not changed since the second review and 
that: (i) CEMEX did not sell Type V cement until it began production 
for export in the mid-eighties, despite the fact that a small domestic 
demand for such existed prior to that time; and (ii) sales of Type V 
cement continue to exhibit a promotional quality that is not evidenced 
in CEMEX's ordinary sales of cement (see memorandum from Holy A. Kuga 
to Joseph A. Spetrini, dated August 31, 1993). A public version of this 
memorandum is on file in room B-099 of the Department's main building.
    For the reasons stated above, the Department has preliminarily 
determined that CEMEX's home market sales of Type V cement during the 
review period were outside the ordinary course of trade. We note that 
the facts established in the record of this review are very similar to 
the facts which led the Department to determine in the second, fifth 
and sixth reviews that home market sales of Type V cement were outside 
the ordinary course of trade. The determination involving the second 
review, as noted above, was affirmed by the CIT in the CEMEX case. Slip 
Op. 95-72 at 14.
    In conclusion, the decision to exclude sales of Type V cement from 
the calculation of NV centers around the unusual nature and 
characteristics of these sales compared to the vast majority of CEMEX's 
other home market sales. Based upon these differences, the Department 
has preliminarily determined that they are not representative of 
CEMEX's home market sales. Stated differently, these sales were not 
within CEMEX's ordinary course of trade.

F. Fictitious Market

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

G. Level of Trade/CEP Offset

    In accordance with section 773(a)(1)(B) of the Act, to the extent 
practicable, we determine NV based on sales in the comparison market at 
the same level of trade as the EP or CEP. The NV level of trade is that 
of the starting-price sales in the comparison market, or, when NV is 
based on constructed value (CV), that of sales from which we derive 
selling, general and administrative (SG&A) expenses and profit. For EP, 
the U.S. level of trade is also the level of the starting-price sale, 
which is usually from exporter to importer. For CEP, it is the level of 
the constructed sales from the exporter to the importer.
    To determine whether NV sales are at a different level of trade 
than EP or CEP, we examine stages in the marketing process and selling 
functions along the chain of distribution between the producer and the 
unaffiliated customer. If the comparison-market sales are at a 
different level of trade, and the difference affects price 
comparability, as manifested in a pattern of consistent price 
differences between the sales on which NV is based and comparison-
market sales at the level of trade of the export transaction, we make a 
level of trade adjustment under section 773(a)(7)(A) of the Act. 
Finally, for CEP sales, if the NV level is more remote from the factory 
than the CEP level and there is no basis for determining whether the 
difference in the levels between NV and CEP affects price 
comparability, we adjust NV under section 773(a)(7)(B) of the Act (the 
CEP offset provision). See Notice of Final Determination of Sales at 
Less Than Fair Value: Certain Cut-to-Length Carbon Steel Plate from 
South Africa, 62 FR 61971 (November 19, 1997).
    First, based upon a review of the selling functions performed by 
CEMEX and CDC along the chain of distribution, we have determined that 
CEMEX's and CDC's Type I home market sales are at different levels of 
trade. Second, we determined that CEMEX's and CDC's Type I home market 
sales are also at different levels of trade from CEMEX's CEP sales and 
CDC's CEP and EP sales.

[[Page 48477]]

For a complete discussion of the Department's LOT analysis, see 
Memorandum to the File regarding Level of Trade, dated August 31, 1998. 
In summary, we found that: (1) there are quantitative and qualitative 
differences in the selling functions performed by CEMEX in the home 
market as compared to CEMEX's CEP sales, CDC's CEP sales, and CDC's EP 
sales; (2) there are also quantitative and qualitative differences in 
the selling functions performed by CDC in the home market as compared 
to CEMEX's CEP sales, CDC's CEP sales, and CDC's EP sales; (3) each of 
the above-mentioned levels of trade are separate and distinct levels; 
(4) we do not have information which would allow us to examine pricing 
patterns based on CEMEX's or CDC's sales of other products at the same 
level as the U.S. CEP sales (CEMEX and CDC) or U.S. EP sales (CDC) to 
make a level of trade adjustment; and (5) we have determined that 
CEMEX's NV and CDC's NV are at more advanced levels of trade than 
CEMEX's CEP and CDC's CEP level of trade. Therefore, in accordance with 
section 773(a)(7)(B) of the Act, we granted a CEP offset for CEP sales 
made by CEMEX and CDC. As stated above in point (2) we determined that 
CDC's EP sales are at a different level of trade as compared to CEMEX's 
home market and CDC's home market sales, however we made no similar 
offset, since neither the Act nor the regulations envision this type of 
adjustment for EP sales. Finally, record evidence indicates that CEMEX 
and CDC sell physically different products in the U.S. market. In other 
words, CEMEX sells physically Type V cement in the U.S., whereas CDC 
sells physically Type II cement. Therefore, for purposes of this 
administrative review, we have determined that the most accurate means 
of comparison would be on a company-specific basis. For purposes of our 
margin calculation, we compared CEMEX's home market sales to CEMEX's 
CEP sales, and we compared CDC's home market sales to CDC's CEP and EP 
sales. This approach allows us to calculate the most accurate DIFMER 
adjustment. See DIFMER section of notice above.

Preliminary Results of Review

    As a result of our review, we preliminarily determine the dumping 
margin for CEMEX for the period August 1, 1996, through July 31, 1997, 
to be 56.89 percent. Interested parties may request disclosure within 
five days of the date of publication of this notice. Any interested 
party may request a hearing within 30 days of publication. Any hearing, 
if requested, will be held 44 days after the date of publication or the 
first business day thereafter. Case briefs and/or other written 
comments from interested parties may be submitted not later than 30 
days after the date of publication. Rebuttal briefs and rebuttals to 
written comments, limited to issues raised in those comments, may be 
filed not later than 37 days after the date of publication of this 
notice. The Department will publish its final results of this 
administrative review, including its analysis of issues raised in any 
written comments or at a hearing, not later than 180 days after the 
date of publication of this notice.
    Upon completion of this review, the Department shall determine, and 
the Customs Service shall assess, antidumping duties on all appropriate 
entries. The Department will issue appropriate appraisement 
instructions directly to the Customs Service upon completion of this 
review. The final results of this review shall be the basis for the 
assessment of antidumping duties on entries of merchandise covered by 
the determination and for future deposits of estimated duties. We will 
base the assessment of antidumping duties on the entered value of the 
covered merchandise.
    Furthermore, the following deposit requirements will be effective 
for all shipments of the subject merchandise entered, or withdrawn from 
warehouse, for consumption on or after the publication date of the 
final results of review, as provided by section 751(a)(1) of the Act: 
(1) The cash deposit rate for the reviewed company will be the rate 
determined in the final results of review; (2) for previously reviewed 
or investigated companies not mentioned above, the cash deposit rate 
will continue to be the company-specific rate published for the most 
recent period; (3) if the exporter is not a firm covered in this 
review, a prior review, or in the original LTFV investigation, but the 
manufacturer is, the cash deposit rate will be the rate established for 
the most recent period for the manufacture of the merchandise; and (4) 
the cash deposit rate for all other manufacturers or exporters will be 
61.85 percent, the all others rate from the LTFV investigation.
    These deposit requirements, when imposed, shall remain in effect 
until publication of the final results of the next administrative 
review. This notice also serves as a preliminary reminder to importers 
of their responsibility under 19 CFR 351.402(f) to file a certificate 
regarding the reimbursement of antidumping duties prior to liquidation 
of the relevant entries during this review period. Failure to comply 
with this requirement could result in the Secretary's presumption that 
reimbursement of antidumping duties occurred and the subsequent 
assessment of double dumping duties.
    This administrative review and notice are in accordance with 
sections 751(a)(1) and 777(i)(1) of the Act.

    Dated: August 31, 1998.
Joseph A. Spetrini,
Acting Assistant Secretary for Import Administration.
[FR Doc. 98-24347 Filed 9-9-98; 8:45 am]
BILLING CODE 3510-DS-P