[Federal Register Volume 64, Number 6 (Monday, January 11, 1999)]
[Notices]
[Pages 1592-1598]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-435]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-201-504]


Porcelain-on-Steel Cookware From Mexico: Preliminary Results of 
Antidumping Duty Administrative Review

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

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

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SUMMARY: In response to a request by the petitioner, Columbian Home 
Products, LLC (formerly General Housewares Corporation), the Department 
of Commerce is conducting an administrative review of the antidumping 
duty order on porcelain-on-steel cookware from Mexico. This review 
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. The eleventh period of review is December 1, 1996, through 
November 30, 1997.
    We preliminarily determine that sales have been made below normal 
value. Interested parties are invited to comment on these preliminary 
results. If these preliminary results are adopted in our final results 
of administrative review, we will instruct the Customs Service to 
assess antidumping duties on all appropriate entries.

EFFECTIVE DATE: January 11, 1999.

FOR FURTHER INFORMATION CONTACT: Kate Johnson or David J. Goldberger, 
Office 5, AD/CVD Enforcement Group II, Import

[[Page 1593]]

Administration--Room B099, International Trade Administration, U.S. 
Department of Commerce, 14th Street and Constitution Avenue, NW., 
Washington, DC 20230; telephone: (202) 482-4929 or 482-4136, 
respectively.

SUPPLEMENTARY INFORMATION:

The Applicable Statute

    Unless otherwise indicated, all citations to the Tariff Act of 
1930, as amended (the Act), are references to the provisions effective 
January 1, 1995, the effective date of the amendments made 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 regulations at 19 CFR part 351 (April 1998).

Background

    On October 10, 1986, the Department published in the Federal 
Register, 51 FR 36435, the final affirmative antidumping duty 
determination on certain porcelain-on-steel (POS) cookware from Mexico. 
We published an antidumping duty order on December 2, 1986, 51 FR 
43415.
    On December 5, 1997, the Department published in the Federal 
Register a notice advising of the opportunity to request an 
administrative review of this order for the period December 1, 1996, 
through November 30, 1997 (the POR), 62 FR 64353. The Department 
received a request for an administrative review of Cinsa, S.A. de C.V. 
(Cinsa) and Esmaltaciones de Norte America, S.A. de C.V. (ENASA) from 
Columbian Home Products, LLC (CHP), formerly General Housewares 
Corporation (GHC) (hereinafter, the petitioner). We published a notice 
of initiation of the review on January 26, 1998, 63 FR 3702.
    On February 18, 1998, the petitioner requested that the Department 
determine whether antidumping duties have been absorbed by Cinsa and 
ENASA. On March 20, 1998, the Department requested proof that 
unaffiliated purchasers will ultimately pay the antidumping duties to 
be assessed on entries during the review period.
    On April 9, 1998, 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 POS cookware production assets, product lines, inventory, 
real estate, and brand names to CHP.
    On August 6, 1998, the Department extended the time limit for the 
preliminary results in this case until December 31, 1998. See Extension 
of Time Limit for Antidumping Duty Administrative Review, 63 FR 42001.
    The Department is conducting this review in accordance with section 
751(a) of the Act.

Scope of the Review

    The products covered by this review are 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, the written description of the scope 
of this proceeding is dispositive.

Allegation of Reimbursement

    For the reasons discussed below, the Department has preliminarily 
determined that the producer/exporters, Cinsa and ENASA, reimbursed 
their affiliated importer Cinsa International Corporation (CIC) for 
antidumping duties assessed during this POR in connection with the 
liquidation of entries made during the 5th and 7th review periods of 
the antidumping duty order of POS cookware from Mexico. This 
determination is based on the April 1997 cash transfer from Cinsa and 
ENASA's corporate parent, Grupo Industrial Saltillo, S.A. de C.V. (GIS) 
through its subsidiary GISSA Holding USA (GISSA Holding) to CIC.
    The Department's reimbursement regulation, 19 C.F.R. section 
351.402 (1998) provides for the Department to deduct from the export 
price or constructed export price the amount of any antidumping duty 
which the ``exporter or producer'' reimbursed to the importer. Cinsa 
and ENASA have acknowledged that the April 1997 transfer was intended, 
inter alia, to cover antidumping duties on 5th and 7th review entries 
liquidated during the 11th review period.
In a June 2, 1997, submission in an earlier review which has been added 
to the record of this review, respondents state: ``[t]o ensure that CIC 
would have enough funds to cover anticipated antidumping duty deposits 
and assessment liability subsequent to the liquidation of fifth and 
seventh administrative review entries during the POR, on April 28, 
1997, GISSA Holding, USA, the corporate owner of CIC, increased its 
capital contribution to CIC.''
    In the two prior reviews of this order, the Department declined to 
find that this transaction involved reimbursement within the terms of 
its regulation because it deemed that the transfer had not been made by 
Cinsa or ENASA, i.e., it had not been made by an ``exporter or 
producer.'' However, upon reconsideration, the Department finds that, 
in making this transfer of funds dedicated to the payment of 
antidumping duties, GIS acted on behalf of Cinsa and ENASA, such that 
the transfer may be attributed to those two firms.
    At the Department's February 3, 1998, verification in the tenth 
review with respect to the reimbursement issue (the public version of 
the report has been placed on the record of this review), company 
officials explained that GIS handles all corporate treasury functions. 
In essence, GIS ``sweeps'' all funds from all its subsidiary companies 
on a daily basis into GIS' cash accounts. The primary purposes of this 
cash management system include investing the funds available from the 
various subsidiaries at preferential rates of return and providing 
funds to subsidiaries at lower rates than they could obtain outside the 
corporation. For example, GIS also pays out dividends to shareholders, 
makes principal and interest loan repayments to banks, and pays taxes.
    As necessary, GIS deposits funds into the individual bank accounts 
of its subsidiaries so that they can pay suppliers. Charges are also 
made between subsidiaries via the GIS corporate treasury department. 
For example, when Cifunsa (foundry for engine blocks, automotive parts) 
purchases scrap from Cinsa, GIS debits its Cifunsa inter-company 
account and credits its Cinsa inter-company account. (There was no 
record of a debit to the Cinsa inter-company account corresponding to 
the April 1997 transfer by GIS.) GIS's cash from its subsidiaries is 
comingled. Therefore, GIS does not monitor what portion of any specific 
investment or disbursement was funded by what specific subsidiaries, 
except as indicated above.
    In short, GIS manages funds on behalf of its subsidiaries, 
including Cinsa and ENASA. In making the transfer in question, GIS 
acted for the direct benefit of Cinsa and ENASA and their U.S. 
importation arm, CIC. CIC markets only products manufactured by Cinsa 
and ENASA; it does not market products for any other member of the 
corporate family. Thus, Cinsa and ENASA have a direct interest in 
assisting CIC in paying antidumping duties on the POS cookware 
products.
    Given these facts, we find that GIS (through GISSA Holding) acted 
on

[[Page 1594]]

behalf of Cinsa and ENASA in providing funds to CIC during the POR to 
pay antidumping duties on prior entries. Therefore, those funds 
constitute reimbursement within the meaning of the regulation.
    In Certain Cold-Rolled Carbon Steel Flat Products From the 
Netherlands: Final Results of Antidumping Duty Administrative Review, 
63 FR 13204, 13214 (March 18, 1998), the Department concluded that, 
where a respondent was previously found to have engaged in 
reimbursement activities, the Department had the authority to establish 
a rebuttable presumption that the importer must continue to rely on 
reimbursements in order to meet its obligations to pay antidumping 
duties. Thus, based on our finding that Cinsa and ENASA, through GIS, 
reimbursed CIC for antidumping duties assessed on 5th and 7th review 
entries, the Department has preliminarily determined that the 
reimbursement regulation applies to entries made during the current 
POR.
    We will give Cinsa and ENASA an opportunity to submit factual 
information to rebut the presumption. To rebut the presumption and 
avoid a finding of reimbursement as to the entries being reviewed in 
this review, or a subsequent review, respondents normally must 
demonstrate that, during the POR (in this case the 11th POR), 
antidumping duties were assessed against the affiliated importer and 
the affiliated importer did in fact pay all antidumping duties assessed 
during that POR, without reimbursement, directly or indirectly, by the 
exporter/producer. In the alternative, failing such a demonstration, or 
if circumstances indicate that this approach does not provide a 
reasonable rebuttal (e.g., the volume or value of entries assessed was 
insufficient; the impact of a financial windfall during the period), 
respondents must demonstrate by clear and convincing evidence that 
there are changed circumstances (e.g., completed corporate 
restructuring) sufficient to obviate the need for reimbursement of 
antidumping duties to be assessed on the entries under review. 
Information seeking to rebut this presumption must be submitted no 
later than February 1, 1999. Factual information in response to 
respondents' submissions must be submitted by February 16, 1999.

Duty Absorption

    On February 18, 1998, the petitioner requested that the Department 
determine whether antidumping duties had been absorbed during the POR. 
Section 751(a)(4) of the Act provides for the Department, if requested, 
to determine during an administrative review initiated two or four 
years after the publication of the order, whether antidumping duties 
have been absorbed by a foreign producer or exporter, if the subject 
merchandise is sold in the United States through an affiliated 
importer. In this case, both Cinsa and ENASA sold to the United States 
through an importer that is affiliated within the meaning of section 
751(a)(4) of the Act.
    Section 351.213(j)(2) of the Department's regulations provides that 
for transition orders (i.e., orders in effect on January 1, 1995), the 
Department will conduct duty absorption reviews, if requested, for 
administrative reviews initiated in 1996 or 1998. Because the order 
underlying this review was issued prior to January 1, 1995, and this 
review was initiated in 1998, we will make a duty absorption 
determination in this segment of the proceeding.
    On March 20, 1998, the Department requested proof that unaffiliated 
purchasers will ultimately pay the antidumping duties to be assessed on 
entries during the review period. Neither Cinsa nor ENASA responded to 
the Department's request for information. Accordingly, based on the 
record, we cannot conclude that the unaffiliated purchaser in the 
United States will pay the ultimately assessed duty. Therefore, we find 
that antidumping duties have been absorbed by the producer or exporter 
during the POR.

Fair Value Comparisons

    To determine whether sales of POS cookware by Cinsa and ENASA to 
the United States were made at less than normal value (NV), we compared 
export price (EP) or constructed export price (CEP) to the NV, as 
described in the ``Export Price and Constructed Export Price'' and 
``Normal Value'' sections of this notice.
    Pursuant to section 777A(d)(2), we compared the EPs or CEPs of 
individual U.S. transactions to the weighted-average NV of the foreign 
like product where there were sales made in the ordinary course of 
trade at prices above the cost of production (COP), as discussed in the 
``Cost of Production Analysis'' section, below.

Product Comparisons

    In accordance with section 771(16) of the Act, we considered all 
products produced by Cinsa and ENASA (as well as products produced by 
Acero Porcelanizado S.A. de C.V. (APSA) and sold by Cinsa--see 
discussion under ``Claim for Startup Cost Adjustment'' section, below) 
covered by the description in the ``Scope of the Review'' section, 
above, to be foreign like products for purposes of determining 
appropriate product comparisons to U.S. sales. We compared U.S. sales 
to sales made in the home market within the contemporaneous window 
period, which extends from three months prior to the U.S. sale until 
two months after the sale. Where there were no sales of identical 
merchandise in the home market made in the ordinary course of trade to 
compare to U.S. sales, we compared U.S. sales to the most similar 
foreign like product made in the ordinary course of trade. In making 
the product comparisons, we matched foreign like products based on the 
physical characteristics reported by the respondents in the following 
order: quality, gauge, cookware category, model, shape, wall shape, 
diameter, width, capacity, weight, interior coating, exterior coating, 
grade of frit (a material component of enamel), color, decoration, and 
cover, if any.

Use of Constructed Value

    On January 8, 1998, the Court of Appeals for the Federal Circuit 
issued a decision in CEMEX v. United States, 133 F.3d 897 (Fed. Cir. 
1998) (CEMEX). In that case, based on the pre-URAA version of the Act, 
the Court discussed the appropriateness of using CV as the basis for 
foreign market value when the Department finds home market sales to be 
outside the ``ordinary course of trade.'' This issue was not raised by 
any party in this proceeding. However, the URAA amended the definition 
of sales outside the ``ordinary course of trade'' to include sales 
below cost. See section 771(15) of the Act. Consequently, the 
Department has reconsidered its practice in accordance with the CEMEX 
decision and has determined that it would be inappropriate to resort 
directly to CV, in lieu of foreign market sales, as the basis for NV if 
the Department finds foreign market sales of merchandise identical or 
most similar to that sold in the United States to be outside the 
``ordinary course of trade.'' Instead, the Department will use sales of 
similar merchandise, if such sales exist. The Department will use CV as 
the basis for NV only when there are no above-cost sales that are 
otherwise suitable for comparison. Therefore, in this proceeding, when 
making comparisons in accordance with section 771(16) of the Act, we 
considered all products sold in the home market, as described in the 
``Scope of Investigation'' section of this notice, above, that were 
made in the ordinary course of trade for purposes of determining 
appropriate product comparisons to U.S. sales. Where there

[[Page 1595]]

were no sales of identical merchandise in the home market made in the 
ordinary course of trade to compare to U.S. sales, we compared U.S. 
sales to sales of the most similar foreign like product made in the 
ordinary course of trade, based on the characteristics listed in 
Sections B and C of our antidumping questionnaire, as described in the 
``Product Comparisons'' section of this notice.

Export Price and Constructed Export Price

    For certain sales made by Cinsa and ENASA, we calculated EP in 
accordance with section 772(a) of the Act, because the subject 
merchandise was sold directly to the first unaffiliated purchaser in 
the United States prior to importation and because CEP methodology was 
not otherwise indicated. We based EP on packed prices to unaffiliated 
purchasers in the United States. We made deductions from the starting 
price, where appropriate, for billing adjustments, rebates, U.S. and 
foreign inland freight, U.S. and Mexican brokerage and handling 
expenses, and U.S. duty. We also deducted the amount of antidumping 
duties reimbursed to CIC by Cinsa and ENASA, consistent with our 
reimbursement finding discussed above. (See, December 31, 1998, 
Calculation Memorandum) (Calculation Memo).
    For the remaining sales made by Cinsa and ENASA during the POR, we 
calculated CEP in accordance with section 772(b) of the Act, because 
the subject merchandise was first sold by CIC after having been 
imported into the United States. We based CEP on packed prices to 
unaffiliated purchasers in the United States. We made deductions from 
the starting price, where appropriate, for billing adjustments, 
rebates, U.S. and foreign inland freight, U.S. and Mexican brokerage 
and handling expenses, and U.S. duty. We also deducted the amount of 
antidumping duties reimbursed to CIC by Cinsa and ENASA, consistent 
with our reimbursement finding discussed above. (See Calculation Memo).
    We made further deductions, where appropriate, for credit, 
commissions, and indirect selling expenses that were associated with 
economic activities occurring in the United States. We recalculated 
CIC's indirect selling expenses to include bad debt expenses, financial 
expenses, marketing and research expenses, and depreciation expenses. 
Because CIC is a sales subsidiary and does not perform any further 
manufacturing, all CIC's expenses were deemed to be sales-related. For 
purposes of calculating the indirect selling expense ratio, we also 
reallocated CIC's total expenses over the total sales value excluding 
the value of EP sales. (See Calculation Memo). We performed this 
reallocation because CIC performs limited sales-related functions with 
respect to 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. Finally, we made an adjustment for 
profit in accordance with section 772(d)(3) of the Act.

Normal Value

    Based on a comparison of the aggregate quantity of home market and 
U.S. sales, we determined that the quantity of the foreign like product 
sold in the exporting country was sufficient to permit a proper 
comparison with the sales of the subject merchandise to the United 
States, pursuant to section 773(a) of the Act. Therefore, we based NV 
on either (1) the price (exclusive of value-added tax) at which the 
foreign like product was first sold for consumption in the home market, 
in accordance with section 773(a)(1)(B)(i) of the Act, or (2) 
constructed value (CV), in accordance with section 773(a)(4) of the 
Act, as noted in the ``Price-to-Price Comparisons'' and ``Price-to-CV 
Comparisons'' sections of this notice, respectively.

Level of Trade

    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 (LOT) as the EP or CEP transaction. The NV LOT 
is that of the starting-price sales in the comparison market or, when 
NV is based on CV, that of the sales from which we derive selling, 
general and administrative (SG&A) expenses and profit. For EP, the U.S. 
LOT is also the level of the starting-price sale, which is usually from 
the exporter to an unaffiliated U.S. customer. For CEP, it is the level 
of the constructed sale from the exporter to an affiliated importer, 
after the deductions required under section 772(d) of the Act. To 
determine whether NV sales are at a different LOT 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 LOT, 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 LOT of the export transaction, we 
make an LOT adjustment under section 773(a)(7)(A) of the Act. Finally, 
for CEP sales, if the NV level is more remote from the factory than the 
CEP level and there is no basis for determining whether the difference 
in the levels between NV and CEP affects price comparability, we adjust 
NV under section 773(a)(7)(B) of the Act (the CEP offset provision). 
See Notice of Final Determination of Sales at Less Than Fair Value: 
Certain Cut-to-Length Carbon Steel Plate from South Africa, 62 FR 61731 
(November 19, 1997). In this review, Cinsa and ENASA reported three 
channels of distribution in the home market: (1) direct sales to 
customers from the Saltillo plant, (2) sales shipped from their Mexico 
City warehouse, and (3) sales shipped from their Guadalajara warehouse. 
In analyzing the data in the home market sales listing by distribution 
channel and sales function, we found that the three home market 
channels did not differ significantly with respect to selling 
activities. Similar services, such as freight and delivery services and 
inventory maintenance, were offered to all or some portion of customers 
in each channel. Based on this analysis, we find that the three home 
market channels of distribution comprise a single level of trade.
    Cinsa and ENASA reported both EP and CEP sales in the U.S. market. 
The EP sales were made by the exporter to the unaffiliated customer, 
who received the merchandise at the border between Mexico and the 
United States (FOB Laredo, Texas). We noted that EP sales involved 
basically the same selling functions associated with the home market 
level of trade described above. Therefore, based upon this information, 
we have determined that the level of trade for all EP sales is the same 
as that in the home market.
    The CEP sales were based on sales made by the exporter to CIC, the 
U.S. affiliated reseller, who then sold the merchandise directly to 
unaffiliated purchasers in the United States from its San Antonio 
warehouse. Based on our analysis, after making the appropriate 
deductions under section 772(d) of the Act, there are two selling 
activities associated with Cinsa's and ENASA's sales to CIC reflected 
in the CEP: (1) freight and other movement expenses from the plant to 
the affiliated reseller's San Antonio warehouse, and (2) freight and 
delivery services (excluding actual freight charges), and inventory 
maintenance, and other support services (such as sales personnel, order 
processing personnel, and billing

[[Page 1596]]

personnel), which are the same functions found in the home market. 
Therefore, we determine that Cinsa's and ENASA's CEP sales and their 
home market sales are made at the same level of trade. Accordingly, 
because we find the U.S. sales and home market sales to be at the same 
level of trade, no level of trade adjustments under section 
773(a)(7)(A) of the Act are warranted.

CEP Offset

    Section 773(a)(7)(B) of the Act provides for an adjustment to NV 
when NV is based on a level of trade different from that of the CEP, if 
the NV level is more remote from the factory than the CEP and if we are 
unable to determine whether the difference in levels of trade between 
CEP and NV affects the comparability of their prices. This latter 
situation can occur where there is no home market level of trade 
equivalent to the U.S. sales level or where there is a different home 
market level of trade but the data are insufficient to support a 
conclusion on price effect. This adjustment, the CEP offset, is 
identified in section 773(a)(7)(B) of the Act and is the lesser of the 
following:
     The indirect selling expenses on the home market sale, or
     The indirect selling expenses deducted from the starting 
price in calculating CEP.
    The CEP offset is not automatic each time we use CEP.
    In their questionnaire responses, Cinsa and ENASA claimed that the 
sales support activities (such as freight and delivery services, 
excluding actual freight charges, and inventory maintenance), and other 
support services (such as sales personnel, order processing personnel, 
and billing personnel) provided to home market and to U.S. customers 
are generally the same. The respondents nevertheless requested an 
adjustment to NV when NV is compared to U.S. CEP sales because they 
claim that home market sales are made at a more advanced level of trade 
than CEP sales because the NV sales price includes indirect selling 
expenses attributable to sales support activities and other support 
services noted above, while the CEP sales price is exclusive of all 
indirect selling expenses and the selling functions attributable 
thereto.
    However, as discussed above, we find that the selling functions 
performed at the CEP level are essentially the same as those performed 
in the home market. Accordingly, we consider the home market and CEP 
levels of trade comparable. We disagree with respondents' assertion 
that differences in indirect selling expenses reflect a difference in 
level of trade. Because we find the CEP and home market levels of trade 
are the same, an adjustment to NV is not warranted.

Cost of Production Analysis

    The Department disregarded certain sales made by Cinsa and ENASA 
for the period December 1, 1995, through November 30, 1996 (the most 
recently completed review of Cinsa and ENASA), pursuant to a finding in 
that review that sales were made below cost. Thus, in accordance with 
section 773(b)(2)(A)(ii) of the Act, there are reasonable grounds to 
believe or suspect that respondents Cinsa and ENASA made sales in the 
home market at prices below the cost of producing the merchandise in 
the current review period. As a result, the Department initiated 
investigations to determine whether the respondents made home market 
sales during the POR at prices below their COP within the meaning of 
section 773(b) of the Act.

A. Calculation of COP

    We calculated the COP on a product-specific basis, based on the sum 
of Cinsa's and ENASA's cost of materials and fabrication costs for the 
foreign like product, plus amounts for home market SG&A and packing 
costs in accordance with section 773(b)(3) of the Act. Because Cinsa 
and ENASA reported monthly costs, we created an annual average COP on a 
product-specific basis.
    We relied on COP information submitted by Cinsa and ENASA, except 
in the following instances where it was not appropriately quantified or 
valued: (1) frit prices from an affiliated supplier did not approximate 
fair market value prices; therefore, we increased frit prices by the 
amount of the undocumented discount given by the affiliated supplier; 
(2) we included the APSA acquisition costs in Cinsa's general and 
administrative expenses (see, Calculation Memo); and (3) we revised 
Cinsa's and ENASA's submitted interest costs to exclude the calculation 
of negative interest expense.

B. Claim for Startup Cost Adjustment

    The information submitted by Cinsa and ENASA in this review fails 
to demonstrate entitlement to a startup cost adjustment under section 
773(f)(1)(C) for the additional production costs incurred in connection 
with the July 1977 acquisition of APSA. Under the definition of a 
startup cost adjustment, two conditions must both be satisfied: (1) a 
company is using new production facilities or producing a new product 
that requires substantial additional investment, and (2) production 
levels are limited by technical factors associated with the initial 
phase of commercial production. Since the claim for a startup cost 
adjustment is not being made for the production of a new product, the 
first condition must be satisfied through evidence of either a new 
plant or the substantially complete retooling of the existing plant. 
This substantial retooling must involve the replacement of nearly all 
production equipment and a complete revamping of existing machinery.
    The Department has addressed the issue of what constitutes a ``new 
production facility'' within the meaning of section 773(f)(1)(C) in 
several recent cases. See, Stainless Steel Wire Rod from Spain, 63 FR 
40391, 40401 (July 29, 1998), Small Diameter Circular Seamless Carbon 
and Alloy Steel Standard, Line and Pressure Pipe from Germany, 63 FR 
13170, 13199 (March 18, 1998), and Final Determination of Sales at Less 
Than Fair Value: Collated Roofing Nails from Korea, 62 FR 51420, 51426 
(October 1, 1997) (Roofing Nails from Korea). In order for an existing 
facility to be considered a new production facility within the meaning 
of section 773(f)(1)(C) of the Act, the Statement of Administrative 
Action (SAA) at 836 provides that it must be retooled to the extent 
that it becomes a brand new facility in virtually all respects. The SAA 
and the Department's regulations define new production facilities as 
including ``the substantially complete retooling of an existing plant'' 
during the period of investigation or review (SAA at 836; 19 CFR 
351.407(d)(1)(i)). This substantial retooling must involve the 
replacement of nearly all production equipment and a complete revamping 
of existing machinery (SAA at 836). Thus, the SAA makes clear that, in 
analyzing these situations, an adjustment for startup costs is 
warranted only in those circumstances wherein the renovations result in 
a nearly-new facility.
    In Roofing Nails from Korea, the Department rejected respondent 
Kabool's startup claim noting that Kabool had not replaced or rebuilt 
existing machinery and equipment but, instead, had merely moved these 
assets to a new site. The Department also stated that, because the 
first condition of startup-- a new production facility or product--had 
not been met, it was not required to address whether Kabool's 
production levels had been limited during the POR.
    In this review, we do not consider Cinsa's installation of new 
equipment and adaptation of existing kilns to handle increased 
production volume a new plant or a substantially complete

[[Page 1597]]

retooling of the existing plant. We consider the situation in the 
instant review to be parallel to that in Roofing Nails from Korea where 
respondent Kabool moved equipment from one location to another. The 
partial retooling of Cinsa's plant to incorporate machinery acquired 
from APSA and to begin commercial production of APSA-designed cookware 
did not have a substantial effect on virtually all of the assets at 
Cinsa's facility.
    With regard to the second factor--whether production levels were 
limited by technical factors associated with the initial phase of 
commercial production--it need not be addressed because the first 
factor of the test has not been satisfied. This finding that Cinsa did 
not use new production facilities or produce a new product during the 
POR is sufficient to deny Cinsa's claim. See Final Determination of 
Sales at Less Than Fair Value: Certain Preserved Mushrooms from Chile, 
63 FR 56613, 56618 (October 22, 1998), and Roofing Nails from Korea. 
Therefore, we have denied respondents' claim for a startup cost 
adjustment. See the Calculation Memo for an explanation of how the 
aforementioned acquisition costs were included in Cinsa's costs.

C. Test of Home Market Prices

    We compared the weight-averaged, per-unit COP figures for the 
period December 1996 to November 1997, to home market sales of the 
foreign like product as required under section 773(b) of the Act, in 
order to determine whether these sales were made at prices below the 
COP. In determining whether to disregard home market sales made at 
prices below the COP, we examined whether: (1) within an extended 
period of time, such sales were made in substantial quantities; and (2) 
such sales were made at prices which permitted the recovery of all 
costs within a reasonable period of time. On a product-specific basis, 
we compared the COP (net of selling expenses) to the home market 
prices, less any applicable movement charges, rebates, discounts, and 
direct and indirect selling expenses.

D. Results of COP Test

    Pursuant to section 773(b)(2)(C), where less than 20 percent of the 
respondent's sales of a given product were at prices less than the COP, 
we did not disregard any below-cost sales of that product because we 
determined that the below-cost sales were not made in ``substantial 
quantities.'' Where 20 percent or more of the respondent's sales of a 
given product during the POR were at prices less than the COP, we 
disregarded the below-cost sales where such sales were found to be made 
at prices which would not permit the recovery of all costs within a 
reasonable period of time (in accordance with section 773(b)(2)(D) of 
the Act).
    The results of our cost tests for both Cinsa and ENASA indicated 
that for certain home market models less than twenty percent of the 
sales of the model were at prices below COP. We therefore retained all 
sales of these models in our analysis and used them as the basis for 
determining NV. Our cost tests also indicated that for certain other 
home market models more than twenty percent of home market sales within 
an extended period of time were at prices below COP and would not 
permit the full recovery of all costs within a reasonable period of 
time. In accordance with section 773(b)(1) of the Act, we therefore 
excluded the below-cost sales of these models from our analysis and 
used the remaining above-cost sales as the basis for determining NV. 
Finally, our cost tests also indicated that for certain home market 
models all contemporaneous sales of comparable products were made at 
prices below the COP. Therefore, we calculated NV based on CV, in 
accordance with section 773(a)(4) of the Act.

E. Calculation of CV

    For Cinsa's and ENASA's products for which we could not determine 
the NV based on comparison market sales because there were no 
contemporaneous sales of a comparable product, we compared U.S. prices 
to CV, in accordance with CEMEX, as discussed above.
    In accordance with section 773(e)(1) of the Act, we calculated a CV 
based on the sum of the respondents' cost of materials, fabrication, 
SG&A, and U.S. packing costs as reported in the U.S. sales listing. We 
calculated CV based on the methodology described in the ``Calculation 
of COP'' section, above.
    In accordance with section 773(e)(2)A), we based SG&A and profit on 
the actual amounts incurred and realized by Cinsa and ENASA in 
connection with the production and sale of the foreign like product in 
the ordinary course of trade, for consumption in the foreign country. 
For selling expenses, we used the weighted-average home market selling 
expenses.

F. Price-to-Price Comparisons

    For those comparison products for which there were sales at prices 
above the COP, we based the respondents' NV on home market prices. For 
both of the respondents, we calculated NV based on the VAT-exclusive 
gross unit price and deducted, where appropriate, inland freight, 
rebates, and early payment discounts.
    For comparisons to Cinsa's and ENASA's EP sales, we made a 
circumstance-of-sale adjustment, where appropriate, for differences in 
credit expenses and commissions. We offset home market commissions with 
U.S. indirect selling expenses capped by the amount of home market 
commissions (no commissions were incurred on EP sales). For comparisons 
to Cinsa's and ENASA's CEP sales, we also deducted credit expenses and 
commissions from NV. We made adjustments for differences in packing 
expenses for both Cinsa and ENASA. We also made adjustments to NV, 
where appropriate, for differences in costs attributable to differences 
in the physical characteristics of the merchandise, pursuant to section 
773(a)(6)(C)(ii) of the Act.

G. Price-to-CV

    Where we compared EP or CEP to CV, we made circumstance-of-sale 
adjustments by deducting from CV the weighted-average home market 
direct selling expenses and adding the U.S. direct selling expenses 
(except those deducted in calculating CEP), in accordance with section 
773(a)(8) of the Act and section 351.410(c) of the Department's 
regulations.

Currency Conversion

    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. Section 773A(a) of the Act directs the 
Department to use a daily exchange rate in order to convert foreign 
currencies into U.S. dollars, unless the daily rate involves a 
``fluctuation.'' In accordance with the Department's practice, we have 
determined as a general matter that a fluctuation exists when the daily 
exchange rate differs from a benchmark by 2.25 percent. See, e.g., 
Certain Stainless Steel Wire Rods from France: Preliminary Results of 
Antidumping Duty Administrative Review, 61 FR 8915, 8918, March 6, 
1998, and Policy Bulletin 96-1: Currency Conversions, 61 FR 9434, March 
8, 1996. The benchmark is defined as the rolling average of rates for 
the past 40 business days. When we determine a fluctuation exists, we 
substitute the benchmark for the daily rate.

Preliminary Results of Review

    As a result of this review, we preliminarily determine that the 
weighted-average dumping margins for

[[Page 1598]]

the period December 1, 1996, through November 30, 1997, are as follows:

------------------------------------------------------------------------
        Manufacturer/exporter                 Period            Margin
------------------------------------------------------------------------
Cinsa................................      12/1/96-11/30/97        64.02
ENASA................................      12/1/96-11/30/97       124.69
------------------------------------------------------------------------

Cash Deposit Requirements

    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 this administrative review, as provided by section 
751(a)(1) of the Act: (1) the cash deposit rates for the reviewed 
companies will be those established in the final results of this 
review; (2) for previously reviewed or investigated companies not 
listed above, the cash deposit rate will continue to be the company-
specific rate published for the most recent period; (3) if the exporter 
is not a firm covered in this review, a prior review, or the original 
less than fair value (LTFV) investigation, but the manufacturer is, the 
cash deposit rate will be the rate established for the most recent 
period for the manufacturer of the merchandise; and (4) the cash 
deposit rate for all other manufactures or exporters will continue to 
be 29.52 percent, the ``All Others'' rate made effective by the LTFV 
investigation. These requirements, when imposed, shall remain in effect 
until publication of the final results of the next administrative 
review.

Assessment Rates

    The Department shall determine, and the Customs Service shall 
assess, antidumping duties on all appropriate entries. The Department 
will issue appraisement instructions directly to the U.S. 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 final results of this review and 
for future deposits of estimated duties. For assessment purposes, we 
intend to calculate importer-specific assessment rates for the subject 
merchandise. In calculating these importer-specific assessment rates, 
we will take into account the amount of the reimbursement calculated on 
sales during the POR. See Calculation Memorandum for details. For both 
EP and CEP sales, we will divide the total dumping margins (calculated 
as the difference between NV and EP (or CEP) for each importer) by the 
entered value of the merchandise. Upon the completion of this review, 
we will direct the U.S. Customs Service to assess the resulting ad 
valorem rates against the entered value of each entry of the subject 
merchandise made by the importer during the POR.
    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 antidumping duties.
    Parties to the proceeding may request disclosure within five days 
of the date of publication of this notice. Any interested party may 
request a hearing within 30 days of publication. Any hearing, if 
requested, will be held 44 days after the date of publication or the 
first business day thereafter.
    Issues raised in the hearing will be limited to those raised in the 
respective case briefs and rebuttal briefs. Case briefs from interested 
parties and rebuttal briefs, limited to the issues raised in the 
respective case briefs, may be submitted not later than 30 days and 37 
days, respectively, from the date of publication of these preliminary 
results. Parties who submit case briefs or rebuttal briefs in this 
proceeding are requested to submit with each argument (1) a statement 
of the issue and (2) a brief summary of the argument.
    The Department will subsequently issue the final results of this 
administrative review, including the results of its analysis of issues 
raised in any such written briefs or at the hearing, if held, not later 
than 120 days after the date of publication of this notice.
    Interested parties who wish to request a hearing or to participate 
if one is requested, must submit a written request to the Assistant 
Secretary for Import Administration, Room B-099, within 30 days of the 
date of publication of this notice. Requests should contain: (1) The 
party's name, address and telephone number; (2) the number of 
participants; and (3) a list of issues to be discussed. Issues raised 
in the hearing will be limited to those raised in the respective case 
briefs and rebuttal briefs.
    This administrative review and notice are published in accordance 
with section 751(a)(1) of the Act and 19 CFR 351.221.

    Dated: December 31, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-435 Filed 1-8-99; 8:45 am]
BILLING CODE 3510-DS-P