[Federal Register Volume 64, Number 59 (Monday, March 29, 1999)]
[Notices]
[Pages 14872-14884]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-7527]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-201-821]


Notice of Final Determination of Sales at Less Than Fair Value: 
Emulsion Styrene-Butadiene Rubber From Mexico

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

EFFECTIVE DATE: March 29, 1999.

FOR FURTHER INFORMATION CONTACT: Sunkyu Kim or John Maloney, Import 
Administration: Group II, Office V, International Trade Administration, 
U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, 
Washington, D.C. 20230; telephone: (202) 482-2613 or (202) 482-1503, 
respectively.

Applicable Statute and Regulations

    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 of Commerce's (the 
Department's) regulations are to the regulations codified at 19 CFR 
part 351, 62 FR 27926 (May 19, 1997).

Final Determination

    We determine that emulsion styrene-butadiene rubber (ESBR) from 
Mexico is being sold in the United States at less than fair value 
(LTFV), as provided in section 735 of the Act. The estimated margins of 
sales at LTFV are shown in the ``Continuation of Suspension of

[[Page 14873]]

Liquidation'' section of this notice, below.

Case History

    Since the preliminary determination in this investigation on 
October 28, 1998 (see Notice of Preliminary Determination of Sales at 
Less Than Fair Value and Postponement of Final Determination: Emulsion 
Styrene-Butadiene Rubber from Mexico, 63 FR 59519 (November 4, 1998) 
(Preliminary Determination)), the following events have occurred:
    On November 23, 1998, we received revised factual information from 
Industrias Negromex, S.A. de C.V. (Negromex) regarding its sales 
responses. In December 1998 and January 1999, we conducted on-site 
verifications of questionnaire responses submitted by Negromex and its 
affiliated U.S. importer, GIRSA, Inc. (GIRSA). Also, in January and 
February 1999, we requested and received Negromex's revised home market 
and U.S. sales databases reflecting verification revisions. On February 
10, 1998, the petitioners (i.e., Ameripol Synpol Corporation and DSM 
Copolymer) and Negromex submitted case briefs. On February 17, 1999, 
the petitioners and Negromex submitted rebuttal briefs. We held a 
public hearing on February 22, 1999.

Scope of Investigation

    For purposes of this investigation, the product covered is ESBR. 
ESBR is a synthetic polymer made via free radical cold emulsion 
copolymerization of styrene and butadiene monomers in reactors. The 
reaction process involves combining styrene and butadiene monomers in 
water, with an initiator system, an emulsifier system, and molecular 
weight modifiers. ESBR consists of cold non-pigmented rubbers and cold 
oil extended non-pigmented rubbers that contain at least one percent of 
organic acids from the emulsion polymerization process.
    ESBR is produced and sold, both inside the United States and 
internationally, in accordance with a generally accepted set of product 
specifications issued by the International Institute of Synthetic 
Rubber Producers (IISRP). The universe of products subject to this 
investigation are grades of ESBR included in the IISRP 1500 series and 
IISRP 1700 series of synthetic rubbers. The 1500 grades are light in 
color and are often described as ``Clear'' or ``White Rubber.'' The 
1700 grades are oil-extended and thus darker in color, and are often 
called ``Brown Rubber.'' ESBR is used primarily in the production of 
tires. It is also used in a variety of other products, including 
conveyor belts, shoe soles, some kinds of hoses, roller coverings, and 
flooring.
    Products manufactured by blending ESBR with other polymers, high 
styrene resin master batch, carbon black master batch (i.e., IISRP 1600 
series and 1800 series) and latex (an intermediate product) are not 
included within the scope of this investigation.
    The products under investigation are currently classifiable under 
subheading 4002.19.0010 of the Harmonized Tariff Schedule of the United 
States (HTSUS). Although the HTSUS subheading is provided for 
convenience and Customs purposes, the written description of the scope 
of this investigation is dispositive.

Period of Investigation

    The period of investigation (POI) is April 1, 1997, through March 
31, 1998.

Product 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 in the 
ordinary course of trade for purposes of determining appropriate 
product comparisons to U.S. sales. Where there were no sales of 
identical merchandise in the home market made in the 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.

Fair Value Comparisons

    To determine whether sales of ESBR from Mexico to the United States 
were made at less than fair value, we compared the Constructed Export 
Price (CEP) to the Normal Value (NV). Our calculations followed the 
methodologies described in the preliminary determination except as 
noted in the Constructed Export Price and Normal Value sections of this 
notice, below.

Level of Trade

    In the preliminary determination, we conducted a level of trade 
analysis for Negromex. We determined that a level of trade adjustment 
was warranted in lieu of a CEP offset. See Department's October 28, 
1998, Level of Trade Analysis Memorandum to the File from The Team 
through James Maeder. Both Negromex and the petitioners commented on 
this issue. We have determined that it is appropriate to continue to 
make a level of trade adjustment in lieu of a CEP offset in this case. 
See Comment 2 in the ``Interested Party Comments'' section of this 
notice, below. Accordingly, for purposes of the final determination, we 
continue to hold that a level of trade adjustment, when appropriate, is 
warranted for Negromex.

Constructed Export Price

    As in the preliminary determination, we used CEP methodology for 
all sales by Negromex, in accordance with section 772(b) of the Act, 
because sales to the first unaffiliated purchaser took place after 
importation into the United States. We revised the U.S. indirect 
selling expense ratio of Negromex's affiliated importer, GIRSA, based 
on our findings at verification. See Comment 4 in the ``Interested 
Party Comments'' section of this notice, below. In addition, based on 
our findings at verification, we included a warranty expense in the 
United States in our calculation of CEP. Finally, we revised Negromex's 
reported date of sale, and we adjusted the quantity for one sale, for 
sales made under two long-term contracts consistent with our 
established date of sale methodology as discussed in Comment 3 in the 
``Interested Party Comments'' section of this notice, below. See also 
Department's March 19, 1999, Final Determination Calculation 
Memorandum.

Normal Value

    We used the same methodology to calculate NV as that described in 
the ``Normal Value'' section of the preliminary determination with the 
following exceptions:
    For home market sales invoiced and paid in U.S. dollars, we used 
the reported dollar amount for purposes of calculating NV.
    For one sale in the home market with no reported payment date, we 
used the last day of verification as the payment date.

Cost of Production

    We calculated the cost of production (COP) based on the sum of 
Negromex's cost of materials and fabrication for the foreign like 
product, plus amounts for home market selling, general and 
administrative (SG&A) and financial expenses and packing costs, in 
accordance with section 773(b)(3) of the Act. We relied on the 
submitted COPs, with the following exceptions: (1) Based on our 
findings at verification, as facts available, we adjusted the reported 
cost of direct materials by increasing the cost of the portion of 
styrene purchased from an affiliated party (see Comment 7, below); (2) 
we revised the G&A expense ratio based on changes resulting from 
verification; and (3) we included a

[[Page 14874]]

portion of the reported gains and losses on monetary position in our 
calculation of financial expenses (see Comment 6, below).

Constructed Value

    In accordance with section 773(e) of the Act, we calculated 
constructed value (CV) based on the sum of Negromex's cost of 
materials, fabrication, SG&A expenses, profit, and U.S. packing costs. 
We relied on Negromex's submitted CV except for the adjusted direct 
materials cost and G&A and financial expense ratios as noted in the 
``Cost of Production'' section above.

Currency Conversion

    As in the preliminary determination, we made currency conversions 
into U.S. dollars based on the exchange rates in effect on the dates of 
the U.S. sales, as certified by the Federal Reserve Bank in accordance 
with section 773A of the Act.

Interested Party Comments

Comment 1: Treatment of Additional Matching Criteria Proposed by 
Negromex
    The petitioners argue that Negromex's proposal for the addition of 
five matching criteria (ash content, free soap content, styrene content 
variance, mooney viscosity variance, and vulcanization time tolerance) 
to the Department's model match was untimely. According to the 
petitioners, Negromex had the opportunity to suggest matching criteria 
from the onset of this investigation and, in fact, was requested to do 
so by the Department in a May 4, 1998, letter. Because Negromex did not 
respond to that request and, instead, proposed the five additional 
criteria after the issuance of the questionnaire, the petitioners 
assert that the Department must reject Negromex's argument for the 
additional criteria as late.
    If the Department accepts Negromex's proposal as timely, the 
petitioners argue that any minor variations in ESBR resulting from 
customers' specifications should not lead the Department to treat ESBR 
with the same IISRP grade as distinct products. According to the 
petitioners, even though Negromex may make minor adjustments to its 
production process to meet customers' specifications, Negromex has not 
shown that such minor adjustments result in products different from the 
products produced within the same IISRP grade. The petitioners assert 
that the Department's practice is to consider physical characteristics 
of the final product, as opposed to minor adjustments to the production 
process, in selecting model matching criteria. See Notice of Final 
Determination of Sales at Less than Fair Value: Stainless Steel Wire 
Rod from Japan, 63 FR 40434, 40445 (July 29, 1998) (SSWR from Japan). 
The petitioners claim that a customer's specifications often call for a 
narrower range than Negromex's general specifications for the 
percentage content of a specific input of ESBR. However, the 
petitioners argue, it is likely that all ESBR produced by Negromex 
falls within that narrower range. As a result, the petitioners contend 
that ESBR with the same physical properties would be treated by the 
Department as different products and would lead the Department to 
improperly compare products based on customer specifications instead of 
comparing products according to significant physical properties.
    The petitioners also argue that Negromex has not demonstrated any 
cost differences between ESBR produced for a customer's specifications 
and other ESBR with the same IISRP grade. According to the petitioners, 
the absence of cost differences distinguishes this case from Notice of 
Final Determination of Sales at Less than Fair Value: Certain Pasta 
from Italy, 61 FR 30326 (June 14, 1996) (Pasta from Italy), where the 
Department accepted an additional physical characteristic as a matching 
criterion because it materially affected the cost of production.
    The petitioners further contend that, contrary to Negromex's claim, 
ESBR produced according to a customer's specifications is not different 
from general-specification ESBR simply because a customer will reject 
ESBR not meeting its specifications. According to the petitioners, 
differences between customer-specific and general-specification ESBR 
are only due to varying ranges of refinement that different customers 
require within the same IISRP grade and are insufficient to create 
different products for purposes of model matching. The petitioners 
assert that Negromex misinterpreted section 771(16)(A) of the Act, 
defining ``identical'' merchandise, when it argued that ESBR products 
are not identical unless they have identical chemical contents rather 
than allowable ranges of content within a grade. According to the 
petitioners, the Department determined that steel products with 
different widths were still identical if they were within the same 
width range set out in the Department's matching criteria. See Certain 
Cold-Rolled Carbon Steel Flat Products from Germany; Final Results of 
Antidumping Duty Administrative Review, 60 FR 65264, 65270 (December 
19, 1995) (Carbon Steel Germany). The petitioners also assert that the 
Department has found that customer preferences should not be considered 
in determining identical merchandise. See Certain Cold-Rolled and 
Corrosion-Resistant Carbon Steel Flat Products from Korea: Final 
Results of Antidumping Duty Administrative Reviews, 62 FR 18404, 18446 
(April 15, 1997) (Carbon Steel Korea).
    Negromex argues that it included additional product characteristics 
in response to the Department's questionnaire requesting inclusion of 
any characteristics relevant to identifying home market sales of 
identical merchandise. See Department's May 21, 1998, questionnaire at 
B6 and C6. Thus, Negromex asserts that its proposal for the inclusion 
of the five additional characteristics as matching criteria was timely 
and, furthermore, that the Department did not treat the information as 
untimely because the Department requested more information on those 
characteristics in the August 13, 1998, supplemental questionnaire and 
considered the inclusion of the characteristics as matching criteria 
for purposes of the preliminary determination.
    According to Negromex, the Department's rejection of the five 
additional product characteristics in the preliminary determination 
resulted in all ESBR within an IISRP grade being treated as identical 
merchandise. Negromex asserts that such a result does not reflect 
commercial reality because each of the five additional product 
characteristics proposed by Negromex is essential in order to meet 
particular specifications of its customers. Negromex alleges that the 
record demonstrates that Negromex produces ESBR either according to 
general IISRP specifications or according to customers' proprietary 
specifications, and that its customers will reject merchandise if it 
does not meet specifications, even if the product meets the 
specifications of an IISRP grade. Negromex argues that the Department 
improperly treated proprietary-specification ESBR and general-
specification ESBR as identical merchandise. Negromex contends that 
such a result is precluded by section 771(16)(A) of the Act and 
Department precedent that it is inconsistent to consider products sold 
according to different specifications as identical. See Certain Cut-to-
Length Carbon Steel Plate from Finland; Final Results of Antidumping 
Duty Administrative

[[Page 14875]]

Review, 62 FR 18468, 18470-71 (April 15, 1997) (Carbon Steel Finland).
    Negromex argues that, in order to compare only sales of physically 
identical merchandise, the Department's model matching criteria must 
incorporate all commercially significant physical characteristics of 
the products subject to investigation. See Certain Hot-Rolled Lead and 
Bismuth Carbon Steel Products from the United Kingdom; Final Results of 
Antidumping Duty Administrative Review, 63 FR 18879, 18881 (April 16, 
1998) (Lead and Bismuth). Negromex further argues that Department 
precedent establishes that the creation of a product concordance relies 
on the matching of significant physical characteristics. Notice of 
Final Results and Partial Recission of Antidumping Duty Administrative 
Review: Roller Chain, Other Than Bicycle, from Japan, 62 FR 60472, 
60475 (November 10, 1997) (Roller Chain).
    Negromex asserts that physical characteristics, as opposed to 
production costs, govern the identification of identical merchandise. 
On that issue, Negromex alleges that the Department has held that a 
common production process with identical production costs may produce 
distinct products with differing physical characteristics. See, e.g., 
Notice of Final Determination of Sales at Less Than Fair Value: Certain 
Preserved Mushrooms from India, 63 FR 72246, 72250 (December 31, 1998); 
Polyethylene Terephthalate Film, Sheet, and Strip From the Republic of 
Korea; Final Results of Antidumping Duty Administrative Review, 63 FR 
37334, 37335 (July 10, 1998) (PET Film from Korea); Notice of Final 
Determination of Sales at Less Than Fair Value: Fresh Atlantic Salmon 
from Chile, 63 FR 31411, 31416 (June 9, 1998). Additionally, Negromex 
asserts that the Department has accepted the principle by treating off-
specification ESBR and on-specification ESBR as non-identical products 
in the preliminary determination, even though Negromex shows the same 
costs for those two product types.
    Negromex argues that the five additional product characteristics 
are commercially significant and should be included in the Department's 
model match because each characteristic is critical to the manufacture 
of ESBR, the sale of ESBR, and the use of ESBR by Negromex's customers. 
See Negromex's September 3, 1998, submission at page B22. In addition, 
Negromex states that the Synthetic Rubber Manual, included in the 
petition, recognizes both styrene content variance and mooney viscosity 
as important physical characteristics of ESBR. Furthermore, Negromex 
argues that the record in this case establishes that it sells ESBR as 
either ``off-specification,'' ``general (IISRP) specification,'' or 
``proprietary specification,'' and that sales of proprietary-
specification ESBR require it to produce several types of ESBR 1502 and 
1712, which the Department verified. See December 22, 1998, Sales 
Verification Report at 10.
    Negromex finally argues that the record shows that it must alter 
its production inputs and processes in order to meet customers' 
specifications, including specifications for the five proposed 
characteristics. In addition, Negromex asserts that the record shows 
that quality checks are made to ensure that a customer's specifications 
are met. All of this, Negromex urges, shows that the proposed five 
additional characteristics are commercially relevant and should be 
included by the Department's as model matching criteria for purposes of 
the final determination.
DOC Position
    We agree with the petitioners that the addition of the five 
matching criteria proposed by Negromex (ash content, free soap content, 
styrene content variance, mooney viscosity variance, and vulcanization 
time tolerance) is not necessary to identify identical merchandise for 
model matching purposes in this case. As discussed in the preliminary 
determination, we determined that the ten product characteristics 
included in our questionnaire designate the IISRP ESBR grade and 
sufficiently defined identical products for matching purposes. See 
Preliminary Determination at 59522. After a review of Negromex's 
comments, we are not persuaded that their proposed criteria are 
necessary to appropriately match sales of subject merchandise in the 
United States with identical merchandise in the home market.
    The Department has broad authority to determine model matching 
criteria and necessarily selects criteria on a case-by-case basis. The 
selection of appropriate matching criteria to define identical 
merchandise under section 771(16)(A) of the Act is based on meaningful 
physical characteristics and interested parties' comments. The 
Department does not attempt to account for every conceivable physical 
characteristic and may rely upon product standards when selecting 
matching criteria. The criteria selection process allows the Department 
to ``draw reasonable distinctions between products for matching 
purposes, without attempting to account for every possible difference 
inherent in the merchandise.'' Notice of Final Determination of Sales 
at Less Than Fair Value: Steel Wire Rod from Canada, 63 FR 9182, 9197 
(February 24, 1998) (Wire Rod from Canada). In this process, the 
Department matches products as ``identical,'' consistent with section 
771(16)(A) of the Act, even though they may contain minor physical 
differences. Wire Rod from Canada at 9197. Additionally, the Department 
has determined that a range of products can be treated as identical 
within the meaning of section 771(16)(A) of the Act. Carbon Steel 
Germany at 65271 (where the Department determined that steel products 
falling within the same width and thickness ranges were identical); see 
also Carbon Steel Korea at 18446 (where the Department treated products 
with distinct paint coatings as identical and noted that products do 
not have to be ``technically substitutable, purchased by the same types 
of customers, or applied to the same end use'' in order to be treated 
as ``identical'' merchandise within the meaning of section 771(16)(A) 
of the Act (citation omitted)).
    In order to determine ``meaningful physical characteristics'' for 
selection in identifying identical merchandise, the Department has 
looked to both price differences in the marketplace and cost 
differences that may reflect different production processes. In Pasta 
from Italy, the Department found an additional proposed matching 
criterion, wheat quality, to be ``commercially significant and an 
appropriate criterion for product matching'' after finding that 
differences in wheat quality were reflected in wheat costs and pasta 
prices. Pasta from Italy at 30346; see also Extruded Rubber Thread from 
Malaysia; Final Results of Antidumping Duty Administrative Review, 62 
FR 62547 (November 24, 1997) (where color was accepted as an 
appropriate matching criterion because it materially affected cost). 
However, costs are not always indicative of whether two products are 
identical, and we recognize that the same production process and costs 
can result in different products. For example, in PET Film from Korea, 
the Department found that the same costs and production process 
produced different products, but there the two products at issue were 
physically different grades of film of markedly different levels of 
quality and value. PET Film from Korea at 37335. Cases where the 
Department has found non-identical products with the same production 
process and costs usually involve seconds or other differences in

[[Page 14876]]

quality that affect value. See Notice of Final Determination of Sales 
at Less Than Fair Value: Fresh Atlantic Salmon From Chile, 63 FR 31411, 
31416 (June 9, 1998) (where the Department found different grades of 
salmon from the same production process and with identical costs).
    Even though product matching issues are decided on a case-by-case 
basis, we can take guidance from cases where the Department has 
addressed product matching issues involving products classified 
according to standardized grades. In such cases, the Department will 
typically match by grade, based on the appropriate physical 
characteristics describing the grade, but normally will not choose 
criteria to account for minor differences within a grade. For example, 
in SSWR from Japan, we selected the American Iron and Steel Institute 
(AISI) grade as a matching criterion in place of actual chemical 
content. In that case, we found that grade sufficiently defined the 
physical characteristics for matching purposes and decided that a type 
of steel with unique manufacturing processes was not a different 
product because the chemical content of that steel ``falls within the 
ranges of established standard AISI steel grades.'' SSWR from Japan at 
40445; see also Notice of Final Determination of Sales at Less Than 
Fair Value: Stainless Steel Wire Rod from Taiwan, 63 FR 40461 (July 29, 
1998) (where the Department matched products as identical based on the 
grades of the product). However, where a product's characteristics are 
outside the permissible range of chemical content established by a 
defining grade or specification, we may reflect such a difference in 
our criteria if the difference is significant. In SSWR from Japan, we 
found that the respondents had appropriately reported their internal 
grades, in lieu of AISI grades, only when the chemical compositions of 
those internal products went beyond the range established by the 
standard AISI grade specifications. SSWR from Japan at 40436.
    In this case, the ten matching criteria used by the Department in 
the preliminary determination, which are based on the IISRP standard 
grades, sufficiently take account of all the commercially meaningful 
physical characteristics for model matching. The five additional 
matching criteria proposed by Negromex are not necessary in this case 
to define identical products because they represent minor differences 
within ESBR grades. Rather, we find that the internationally-recognized 
grade classifications set forth by the IISRP provide an objective basis 
for appropriately distinguishing between different ESBR products.
    We do not agree that subject merchandise produced according to 
proprietary specifications is a different product than merchandise 
produced according to Negromex's general specifications, which comport 
with an internationally-recognized IISRP standard grade. The record 
indicates that proprietary specifications only further refine the 
chemical ranges already defined by the general specifications for the 
ESBR grade. We found no cases where a customer's proprietary 
specifications for a characteristic went beyond the permissible range 
for that physical input (e.g., styrene content variance) in Negromex's 
general specifications. The evidence on the record shows that 
proprietary-specification ESBR falls within permissible ranges for the 
percentage and variance of material inputs and finished product 
physical properties of general-specification ESBR. See Department's 
December 22, 1998, Sales Verification Report at verification exhibit 9; 
Department's February 2, 1999, Sales Verification Report at 
verification exhibit 10; and Negromex's June 18, 1998, submission at 
Exhibit 7. The facts on the record indicate that ESBR meeting a 
customer's proprietary specifications would also meet Negromex's 
general specifications. See December 22 Report at 10 and verification 
exhibit 9 and February 2 Report at verification exhibit 10.
    We recognize that the exact measure of all chemical properties will 
differ among Negromex's various ESBR sales, even though ESBR with 
varying levels of those properties fall within one IISRP grade. The 
additional matching criteria proposed by Negromex would serve only to 
subdivide several ESBR sales falling within one IISRP standard grade 
into several ``different'' products for matching purposes. This would 
cause the Department to recognize ``different'' products based on the 
exactness of the chemical contents in customers' proprietary 
specifications, even though these chemical contents are within the 
range of the industry standard specification for a grade. Therefore, 
there is no reason to depart from the industry standard and accept 
criteria based on these minor differences reflected in customers' 
specifications.
    We also disagree with Negromex that the ``significance'' of the 
additional criteria is undeniable based on the fact that its customers 
can reject merchandise for not meeting customer specifications 
(including the specifications for the proposed additional criteria). 
Although we recognize that customers can reject merchandise if it is 
not to their specifications, this fact, standing alone, is not a 
sufficient basis to determined that physical characteristics are 
``commercially significant.''
    Moreover, the proposed additional criteria are not meaningful 
physical characteristics because the minor differences that they 
represent within a grade have no cost effect. Negromex has reported the 
same cost for ESBR grade 1502, and the same cost for grade 1712, 
regardless of whether a particular sale of either grade is designated 
as general specification or proprietary specification. See Pasta from 
Italy. In addition, although, as discussed above, identical processes 
and costs may produce different products, such products are normally 
seconds or have a different quality level reflected in their value. 
While we have distinguished off-specification merchandise, i.e., 
seconds, in our model matching, the record indicates that proprietary-
specification ESBR is not a second and does not have a unique quality 
level demonstrated by a difference in value, and there are no cost 
differences. Therefore, we see no compelling reason to treat it as a 
different product. See PET Film from Korea.
    Notably, Negromex has not argued any price differences for 
proprietary-specification ESBR that it alleges is a different product. 
As stated, a demonstration of price differences would have supported 
Negromex's argument that its additional criteria are meaningful 
physical characteristics. See Pasta from Italy.
    Negromex asserts that Roller Chain supports acceptance of the 
additional matching criteria because they are ``commercially 
significant.'' Negromex's reliance on Roller Chain, however, is 
misplaced because that case did not involve industry product standards 
or making distinctions between products that meet one industry grade. 
Rather, it involved making distinctions between physically diverse 
products. The minor variations at issue here are merely variations 
within an industry grade and do not result in physically diverse 
products.
    Negromex also relies on Lead and Bismuth in its argument. In Lead 
and Bismuth, the Department determined that the impurity level in the 
steel (i.e., residual value) was a significant physical characteristic 
even though there were no cost differences. As already stated, we 
necessarily choose matching criteria on a case-by-case basis because of 
myriad different products in antidumping investigations. The steel 
product in Lead and Bismuth was

[[Page 14877]]

highly specialized and, as a result, we found that impurities were a 
significant characteristic in that case despite the lack of cost 
differences. In this case, the proposed criteria represent only minor 
differences within grade specifications and are not meaningful physical 
characteristics. As a result, our decision is not inconsistent with 
Lead and Bismuth.
    Additionally, Negromex argues that the decision in Carbon Steel 
Finland supports acceptance of their proposed criteria. However, in 
that case, the Department made identical matches based on national 
specifications which are analogous to industry standards such as IISRP 
ESBR grades. Carbon Steel Finland at 18470. The Department did not 
match in that case based on customer-specific specifications. Thus, we 
are not persuaded that we should accept criteria for matching based on 
customers' proprietary specifications.
    We note that, as discussed in the companion case to this 
investigation on ESBR from the Republic of Korea, the Department 
determined that an additional physical characteristic, mooney 
viscosity, should be added as a model matching criterion because, in 
that case, mooney viscosity was the sole physical property that 
distinguished ESBR grades 1502 and 1507. In this case, we do not need 
any of the five additional criteria, including mooney viscosity, to 
differentiate ESBR grades. We will add mooney viscosity as a model 
matching criterion, if necessary, in any future administrative review.
    For the reasons stated above, we find that the ten matching 
criteria included in our questionnaire are sufficient to identify 
identical ESBR for matching purposes in this investigation.
    Finally, we disagree with the petitioners that Negromex's proposal 
for the addition of five matching criteria was untimely. The 
Department's May 21, 1998, questionnaire states, ``[y]ou may add 
additional product characteristics.'' See the Department's May 21, 
1998, questionnaire at pages B-6 and C-6. Negromex first provided 
information on the five proposed additional matching criteria in its 
July 13, 1998, response to the Department's questionnaire. As a result, 
Negromex's proposal for the addition of the five matching criteria was 
not untimely and was considered for purposes of the final determination 
in this investigation.
Comment 2: Negromex's Claim for a CEP Offset
    Negromex asserts that there is no LOT in the home market comparable 
to the CEP level of trade and that the levels of trade in the home 
market are more advanced in the distribution chain than the CEP level 
of trade. Consequently, Negromex argues that the Department must grant 
a CEP offset under section 773(a)(7)(B) of the Act and 19 CFR 
351.412(f).
    Negromex claims that the record establishes that the home market 
end user and distributor levels of trade each constitutes a more 
advanced LOT than the CEP level of trade. Negromex states that it sells 
directly to unaffiliated distributors and end users in the home market. 
Negromex also states that GIRSA resells to both unaffiliated 
distributors and unaffiliated end users in the United States. According 
to Negromex, its sales to GIRSA (CEP sales) must be at a less advanced 
market stage than home market sales because GIRSA resells to the same 
types of customers that Negromex sells directly to in the home market. 
Negromex asserts that sales in the home market to distributors or end 
users cannot be at the same LOT as sales to GIRSA (CEP sales) because 
GIRSA resells to distributors and end users.
    Negromex also argues that verified information on the record 
establishes that the home market levels of trade are more advanced than 
the CEP level of trade. According to Negromex, there are eighteen 
separate selling functions performed in support of ESBR sales in the 
home market and in the United States. Negromex asserts that sixteen of 
those eighteen functions were performed in support of sales to 
unaffiliated distributors and all eighteen were performed in support of 
sales to end users. Negromex claims that its submissions, and the 
Department's verification reports, confirm its claims. Negromex next 
asserts that, in contrast, it performs only four of the eighteen 
selling functions in support of its sales to GIRSA. See Negromex's 
November 23, 1998, submission at Exhibit 6. The remainder of the 
selling functions, argues Negromex, are performed by GIRSA on behalf of 
its U.S. customers. For selling functions shared by Negromex and GIRSA 
(i.e., technical services, application advice, advertising and sales 
promotion), Negromex claims that such functions are not performed on 
sales to GIRSA. Further, Negromex argues that its advertising expenses 
in the United States should not be included within the CEP selling 
functions because those expenses are attributable to U.S. economic 
activity. See section 772(d) of the Act and 19 CFR 351.402(b). Finally, 
Negromex asserts that technical service and application advice by 
Negromex is rare. Thus, because of the limited number of selling 
functions performed at the CEP level of trade and the greater number 
performed by Negromex in the home market, Negromex argues that both 
home market levels of trade are at a more advance stage of distribution 
than the CEP level of trade. As a result, Negromex asserts that section 
773(a)(7)(B) of the Act requires that the Department grant a CEP offset 
in this investigation.
    The petitioners argue that the Department properly denied Negromex 
a CEP offset in the preliminary determination and should continue to do 
so for purposes of the final determination. According to the 
petitioners, under section 773(a)(7)(B) of the Act, a CEP offset may be 
made only when two conditions are satisfied. First, NV must be 
established at a level of trade that is more advanced than the level of 
trade of the CEP. Second, the information available does not provide 
the Department with a basis to quantify a LOT adjustment. The 
petitioners argue that neither condition has been met and, thus, no CEP 
offset should be granted.
    The petitioners assert that, in the preliminary determination, the 
Department properly concluded that home markets sales made at the 
unaffiliated distributor level of trade were comparable to U.S. sales 
at the CEP level of trade. As a result, the petitioners claim that the 
first statutory condition for a CEP offset has not been met because 
there is a comparable level of trade in the home market to the CEP 
level of trade. In addition, the petitioners argue that the second 
statutory condition for a CEP offset was not met because, according to 
the petitioners, there is sufficient data on the record to determine 
the basis for a LOT adjustment.
    The petitioners argue that Negromex performs the same types of 
selling activities at the same quality and intensity for both home 
market sales to unaffiliated distributors and CEP sales. According to 
the petitioners, Negromex has tried to change this ``fact'' by 
downplaying the extent of its selling activities supporting its CEP 
sales. The petitioners assert that, in general, Negromex understates 
its selling functions in support of CEP sales by portraying selling 
functions performed by Negromex as selling functions performed by 
GIRSA. Regarding technical service support specifically, the 
petitioners allege that, even if GIRSA handles some routine technical 
questions, the most important technical support comes from experts in 
Mexico.
    The petitioners further assert that, contrary to Negromex's 
argument, Negromex's affiliation with GIRSA does not preclude 
comparability between

[[Page 14878]]

those sales and sales to unaffiliated customers in the home market. 
According to the petitioners, the affiliation of a purchaser is not 
relevant to whether the same LOT can be found. In addition, the 
petitioners claim that Negromex has not demonstrated any real 
differences between the home market unaffiliated distributor LOT and 
the CEP LOT. The petitioners argue that the Department's regulations 
require, at the minimum, ``substantial differences'' in selling 
activities to find a different LOT. See 19 CFR 351.412(c)(2). In 
addition, the petitioners assert that the Department requires 
purchasers at different places in the distribution chain and sellers 
performing qualitatively or quantitatively different functions in 
selling to them to find a different LOT. 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, 61732 (November 19, 
1997) (Carbon Steel South Africa). According to the petitioners, 
Negromex has not shown that its purchasers in the home and U.S. markets 
occupy different places in the distribution chain, nor has Negromex 
shown substantially different selling functions between sales to 
unaffiliated distributors and sales to GIRSA. As a result, the 
petitioners urge the Department to continue to find that the same LOT 
exists in both markets.
DOC Position
    We disagree with Negromex. As we stated in our preliminary 
determination, 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 SG&A expenses and profit. For EP, the LOT is also that 
of the starting-price sale, which is usually from exporter to importer. 
For CEP, it is the level of the constructed sale from the exporter to 
the importer.
    To determine whether NV sales are at a different LOT than EP or CEP 
sales, we examine stages in the marketing process and selling functions 
along the chain of distribution between the producer and the 
unaffiliated customer in the comparison market. 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 a LOT 
adjustment under section 773(a)(7)(A) of the Act. Finally, for CEP 
sales, if the NV level is more remote from the factory than the CEP 
level and there is no basis for determining whether the difference in 
the levels between NV and CEP affects price comparability, we adjust NV 
under section 773(a)(7)(B) of the Act (the CEP-offset provision). See 
Carbon Steel South Africa.
    Negromex requested a CEP offset prior to our preliminary 
determination in this investigation. See Negromex's June 18, 1998, 
response at A13. We examined Negromex's claim based on the analysis 
described above. We compared the selling functions performed for home 
market sales with those performed with respect to the CEP transaction, 
exclusive of economic activities occurring in the United States, 
pursuant to section 772(d) of the Act, to determine if the home market 
levels of trade constituted more advanced stages of distribution than 
the CEP level of trade. See Department's October 28, 1998, Level of 
Trade Analysis Memorandum to the File from The Team through James 
Maeder. We found that ``one of the levels of trade in the home market, 
sales to unaffiliated distributors, was comparable to the CEP level of 
trade because of the similarities between the class of customer and 
distribution channel.'' Preliminary Determination at 59521. Negromex 
asserts that information placed on the record subsequent to the 
preliminary determination demonstrates that its home market sales were 
made at more advanced levels of trade than its sales to GIRSA. In light 
of the additional information on the record, we have revisited our LOT 
analysis.
    We continue to find that Negromex sold to two levels of trade in 
the home market, the end user level of trade and the unaffiliated 
distributor level of trade. We find two distinct levels of trade in the 
home market because Negromex's sales to end users are at a more 
advanced stage in the chain of distribution and involve quantitatively 
and qualitatively more selling functions than its sales to unaffiliated 
distributors. In addition, we continue to find that Negromex's home 
market sales to unaffiliated distributors are made at a level of trade 
comparable to the CEP level of trade. Although Negromex may perform 
nominally more selling functions in support of its sales to the 
unaffiliated distributor LOT than it does in support of its sales to 
the CEP LOT, we are not persuaded that these differences in selling 
functions are so substantial as to result in two distinct levels of 
trade.
    Differences in selling activities do not require us to find two 
distinct levels of trade. See, e.g., Carbon Steel South Africa at 61732 
(where the Department found that differences in selling functions, even 
substantial differences, do not alone sufficiently establish a 
difference in the level of trade); see also 19 CFR 351.412(c)(2) 
(``substantial differences in selling activities are a necessary, but 
not sufficient, condition for determining that there is a difference in 
the stage of marketing'').
    In reexamining this issue, we find that both Negromex's 
unaffiliated distributors and GIRSA are resellers of ESBR to 
unaffiliated end users and both occupy the same place along the chain 
of distribution. In fact, Negromex stated that GIRSA ``is akin to that 
of a master distributor.'' Negromex's June 18, 1998, response at A18. 
Thus, we disagree with Negromex's argument that its sales to GIRSA are 
at a less advanced marketing stage because GIRSA, in turn, sells to the 
same types of customers as Negromex. Moreover, both Negromex's home 
market distributors and GIRSA provide significant services to their 
ESBR customers and both function at the same place in the chain of 
distribution for sales of ESBR in their respective markets.
    Regarding the selling functions performed in support of Negromex's 
home market and CEP sales, for purposes of the preliminary 
determination, we found that Negromex performed analogous levels of 
selling functions in support of its home market sales to unaffiliated 
distributors and its CEP sales to GIRSA. See Preliminary Determination 
at 59521; see also the Department's October 28, 1998, Level of Trade 
Analysis Memorandum to the File through James Maeder. Our analysis of 
selling functions, both for the preliminary determination and for the 
final determination, focused specifically on home market sales to 
unaffiliated distributors for comparison to CEP sales. Negromex's 
arguments that its home market selling functions are not comparable to 
its CEP selling functions did not clearly distinguish between selling 
functions in support of sales to unaffiliated distributors as opposed 
to selling functions in support of sales to end users. In its case 
brief, Negromex argues that the levels of trade are not comparable 
``[w]hen the very limited number of selling functions performed by 
Negromex at the CEP level of trade on its sales to GIRSA, Inc. are 
compared to the full range of selling functions performed by Negromex 
on its sales to unaffiliated endusers and unaffiliated distributors in 
the home market.'' Negromex's February 10, 1999, Case Brief at 29. 
Selling functions performed in support of sales to end users,

[[Page 14879]]

however, are not relevant to our comparisons between the unaffiliated 
distributor LOT and the CEP LOT. We have focused our analysis on a 
comparison between the unaffiliated distributor LOT and the CEP level 
of trade.
    Negromex reported revised selling functions information in its 
November 23, 1998, submission. The revised selling functions 
information differed from the information relied on for the preliminary 
determination (see Negromex's June 18, 1998, Section A response at 
Exhibit A-5) in two significant ways. First, in its November 23 
submission, Negromex reports either ``Yes'' or ``No'' for a selling 
function, rather than the degree of a selling function (i.e., High, 
Medium, Low) as it had for some selling functions in its Section A 
response. Second, in its latter submission, Negromex reports eighteen 
selling functions instead of the eight reported in its Section A 
response. See Negromex's November 23, 1998, submission at pages 7-12 
and Exhibit 6. We find, however, that, of the ten ``additional'' 
selling functions reported by Negromex, six out of the ten merely 
reflect subdivisions of selling functions already reported by Negromex 
in its June 18 response. For example, the ``Inventory Maintenance'' 
selling function originally reported became ``Immediate Post Production 
Storage'' and ``Inventory Maintenance at Negromex Facilities.''
    Negromex argues that it performs fourteen selling functions in 
support of unaffiliated distributor sales but only four selling 
functions in support of CEP sales. However, our analysis of the 
information on the record indicates that the numerical disparity in the 
selling functions has been substantially overstated. For example, 
Negromex reports that it performs inventory maintenance at its 
facilities for sales to distributors, but not for sales to GIRSA. 
However, the Department learned at verification that ``Negromex 
provides inventory maintenance at its plant for U.S. sales.'' 
Department's December 22, 1998, Sales Verification Report at 7-8. In 
addition, we found at verification that Negromex also performs 
technical service and application support functions from Mexico for its 
U.S. sales. See Department's February 2, 1999, Sales Verification 
Report at 7. As stated, a substantial difference in selling functions, 
inter alia, must exist in order for the Department to find a different 
LOT; a difference in the number of selling functions alone is not 
sufficient. Although there are some differences in selling functions 
between sales to distributors and sales to GIRSA, the differences are 
not substantial. For example, the degree of the selling function 
labeled ``Collection,'' performed for distributors, was originally 
reported as ``Low'' and subsequently has been reported as ``Yes.'' 
Negromex reports this as ``No'' for sales to GIRSA and relies on this 
as one of the differences between the selling functions, but we find 
that a small difference in collection levels is not a significant 
difference in selling activities. At verification, Negromex provided no 
evidence of substantial differences in these selling functions.
    Finally, the four new selling functions claimed by Negromex (credit 
analysis, sales administration, post-sale customer service, and 
contract/purchase order negotiation), reported as performed in support 
of sales to distributors but not to GIRSA, are not significant selling 
activities and Negromex has not supplied any information to indicate 
otherwise.
    We find that Negromex's sales to unaffiliated distributors in the 
home market and to GIRSA in the United States are made at the same 
point in the chain of distribution and involve selling functions that 
are not substantially different. As a result, we continue to find that 
the unaffiliated distributor LOT in the home market is comparable to 
the CEP level of trade. Consequently, we made a LOT adjustment if we 
compared sales in the United States to sales at the end user LOT in the 
home market based on the established pattern of price differences 
between the two levels of trade in the home market. Because we matched 
sales at the comparable home market LOT and made a LOT adjustment, if 
necessary, we did not make a CEP offset to NV.
Comment 3: Date of Sale for Long-Term Contracts
    As found in the preliminary determination, Negromex's affiliated 
U.S. importer, GIRSA, sold ESBR during the POI to one U.S. customer 
under two long-term contracts. The terms of each year-long contract 
provided that the U.S. customer was obligated to purchase a minimum 
amount of ESBR during the contract's year-long duration. Prices for the 
minimum required annual quantities were established in the contracts 
based on a mathematical formula incorporating the published monthly 
monomer prices and prices of butadiene and styrene, two major inputs of 
ESBR.
    Although Negromex originally acknowledged that these were long-term 
contracts and thus reported the contract date as the date of sale for 
the two contracts at issue, Negromex now argues that the Department 
should not use the contract date as the date of sale, but refers to 
these contracts as ``consignment inventory contracts'' and argues that 
these are not long-term contracts, but rather monthly sales based on 
the consignment terms of the contracts. Negromex contends that the 
Department's practice regarding consignment sales is to treat the date 
on which the customer withdraws inventory from consignment as the date 
of sale. See Notice of Preliminary Results of Antidumping Duty 
Administrative Review: Ferrosilicon from Brazil, 62 FR 16763, 16767 
(April 8, 1997) (Ferrosilicon from Brazil); Final Determination of 
Sales at Less Than Fair Value: Certain Stainless Steel Wire Rods from 
France, 58 FR 68865, 68870 (December 29, 1993) (Rods from France). 
Under the contract terms, a monthly quantity (1/12th of the annual 
minimum quantity requirement) was set to be purchased and withdrawn 
from consignment with an allowable variance of plus or minus twenty 
percent each month. According to Negromex, the Department's precedent 
regarding consignment contracts should be followed in this case because 
the quantity under the contracts was not fixed on the dates of contract 
but on the dates when the customer removed merchandise from its 
consignment inventory. Negromex imputes the fifteenth of each month as 
the average date for all of the U.S. customer's withdrawals from 
consignment during every month and urges the Department to adopt the 
fifteenth of each POI month as the dates of sale for each of the 
contracts at issue.
    Alternatively, if the Department determines that the date of sale 
was not governed by the contracts' monthly consignment inventory terms, 
Negromex argues that the Department should use the invoice dates as the 
dates of sale. Because GIRSA's U.S. customer often failed to meet the 
contracts' monthly purchase requirements, Negromex asserts that the 
contract date did not establish the quantity term and thus it was not a 
long-term contract. Therefore, according to Negromex, the contract date 
should not be used as the date of sale. In support of its position, 
Negromex references a case in which, because the customer's monthly 
purchases exceeded the contract's monthly quantity requirements, the 
Department determined that the date of sale was the invoice date. See 
Certain Welded Carbon Steel Pipes and Tubes from Thailand: Final 
Results of Antidumping Duty Administrative

[[Page 14880]]

Review, 63 FR 55578 (October 16, 1998) (Tubes from Thailand).
    The petitioners urge the Department to continue to use the contract 
date as the date of sale for the two long-term contracts. In support of 
their position, the petitioners refer to the Department's statutory 
provisions which allow the Secretary to choose a date other than 
invoice date as the date of sale when another date more accurately 
reflects the final determination of a sale's material terms by an 
exporter or producer. See 19 CFR 351.402. The petitioners assert that 
the Department should use the contract date as the date of sale because 
that was the date on which the parties legally bound themselves to the 
essential terms of sale, i.e., price and quantity.
    The petitioners assert that the Department's policy in deciding 
date of sale for long-term contracts with minimum quantity requirements 
has been to recognize the contract date as the date of sale for all 
merchandise sold up to the minimum quantity requirement. See Final 
Determination of Sales at Less Than Fair Value: Gray Portland Cement 
and Clinker from Japan, 56 FR 12156 (March 22, 1991); Titanium Sponge 
From Japan: Final Results of Antidumping Duty Administrative Review and 
Tentative Determination To Revoke in Part, 54 FR 13403, 13404 (April 3, 
1989). See also Toho Titanium Co., Ltd. v. U.S., 743 F. Supp. 888, 890-
91 (CIT 1990). The petitioners argue that Negromex recognized that 
these were long-term contracts and therefore properly included sales 
made under the two long-term contracts invoiced after the POI in its 
response to the Department's Section C questionnaire. See Negromex's 
July 13, 1998, response at C14-C15.
    According to the petitioners, Tubes from Thailand is unpersuasive 
because the facts of that case involved neither a long-term contract 
nor a minimum quantity requirement. Similarly, the petitioners assert 
that cases cited by Negromex dealing with consignment sales contracts 
are also irrelevant in this case because those cases did not involve 
long-term contracts with minimum quantity requirements, but rather were 
merely sales made on consignment. See Ferrosilicon from Brazil; Rods 
from France. The petitioners conclude that Negromex was unable to 
demonstrate why the Department should deviate from its practice of 
using contract date as the date of sale for long-term contracts and 
argue that the Department should continue using the contract date as 
the date of sale in this case.
DOC Position
    We disagree with Negromex. As discussed in the preliminary 
determination, we followed our practice of using contract dates as the 
dates of sale for these two U.S. long-term contracts because we 
determined that price and quantity were fixed on the contract dates. We 
are not persuaded by Negromex's arguments that the quantity terms in 
the two contracts were not fixed and, consequently, these are not long-
term contracts. Therefore, the average day of release from consignment 
each month is not the appropriate date of sale for sales under the two 
contracts.
    Pursuant to 19 CFR 351.401(i), the date of sale is normally the 
date of invoice unless satisfactory evidence is presented that the 
material terms of sale, price and quantity, are established on some 
other date. See also Final Determination of Sales at Less Than Fair 
Value: Polyvinyl Alcohol from Taiwan, 61 FR 14067 (March 29, 1996). The 
Department has determined that a long-term contract's price term is 
fixed if it is established by a published source outside of the control 
of either party to the contract, such that there is nothing more that 
the parties need to negotiate concerning the price of the goods sold. 
See Final Determination of Sales of Less Than Fair Value: Brass Sheet 
and Strip From France, 52 FR 812, 814 (January 9, 1987). In addition, 
the Department has determined that, for a long-term contract with a 
minimum quantity requirement, the contract date is the date of sale for 
the minimum quantity specified in the contract. However, for situations 
in which a customer has not yet agreed to purchase quantities above the 
minimum requirement, the Department will use the date of invoice (or 
other appropriate date) as the date of sale for all amounts sold in 
excess of the minimum requirement. See Titanium Sponge From Japan; 
Final Results of Antidumping Duty Administrative Review and Tentative 
Determination To Revoke in Part, 54 FR 13403, 13404 (April 3, 1989); 
see also Toho Titanium Co., Ltd. v. U.S., 743 F. Supp. 888, 890-91 (CIT 
1990).
    Because the price terms of the long-term contracts in this 
investigation were based on a set formula of published monthly prices 
for major inputs which were outside either contracting party's control, 
we continue to find that the price was fixed on the contract dates. It 
was on the dates of contract, therefore, that Negromex, as the price 
discriminator, set the prices for these sales. Moreover, we are also 
unpersuaded that the minimum quantity was not fixed at the time of the 
contracts. Negromex points to the fact that the contracts indicate 1/
12th of the annual quantity is to be purchased each month, with an 
acceptable variance of plus or minus twenty percent. However, although 
monthly quantities to be withdrawn under the year-long contracts 
deviated more than twenty percent for some months, the annual 
quantities set by the contracts were not subject to any variation and 
the full amount was required to be purchased during the contract year. 
Thus, the fact that any minimum monthly amount was not withdrawn from 
inventory does not negate the fact that the annual quantity term was 
fixed by the parties on the contract date, regardless of the actual 
terms of delivery thereafter. We disagree with Negromex that these are 
``consignment inventory contracts,'' and find that the monthly 
withdrawal terms are merely delivery terms which provide stability for 
both parties throughout the duration of these long-term contracts.
    Moreover, Negromex's attempt to equate the types of consignment 
sales found in Ferrosilicon from Brazil and Rods from France is without 
merit given our facts because those cases did not deal with long-term 
contracts with established fixed minimum annual quantity requirements, 
but were merely sales from consignment, as pointed out by the 
petitioners. Finally, regarding Negromex's alternative argument if the 
Department does not find these to be merely consignment sales, Tubes 
from Thailand did not deal with a long-term contract, and the short-
term contract at issue did not actually fix the quantity term. Thus, 
the Department appropriately used the invoice date as the date of sale 
in that case. Based on the evidence before us, we are not persuaded to 
change our practice on the date of sale issue in this case and, thus, 
have continued to use the contract dates as the dates of sale for the 
minimum quantity requirements of the two U.S. long-term contracts. 
However, as in the preliminary determination, for any quantity sold 
above the minimum contract requirements, we used the reported average 
day of withdrawal from consignment (the fifteenth day of the month 
preceding the invoice date) as the date of sale.
Comment 4: Calculation of Negromex's U.S. Indirect Selling Expense 
Factor
    The petitioners contend that the Department should adjust GIRSA's 
indirect selling expense allocation because the Department was unable 
to verify GIRSA's allocation of indirect expenses between subject and 
non-subject merchandise. The petitioners

[[Page 14881]]

urge the Department to reallocate GIRSA's indirect selling expenses in 
accordance with the petitioners' calculation methodology as provided in 
their February 17, 1999, rebuttal brief.
    Negromex contends that it correctly allocated the indirect selling 
expenses of GIRSA and that the Department should continue to use the 
reported allocation of indirect selling expenses in the final margin 
calculation. In its response, Negromex allocated GIRSA's indirect 
selling expenses among sales of all rubber products, including ESBR and 
non-subject merchandise. See Department's February 2, 1999, Sales 
Verification Report at 13. Negromex asserts that it correctly allocated 
GIRSA's indirect selling expenses attributable to all rubber sales 
based on GIRSA's accounting records and that the Department should not 
reallocate these indirect selling expenses.
DOC Position
    We agree with the petitioners that we should reallocate Negromex's 
indirect selling expenses. At verification, GIRSA did not provide 
documentation supporting its allocation of indirect selling expenses. 
For example, GIRSA was unable to justify its allocation of all supplies 
and furniture depreciation expenses to sales of rubber products, 
including ESBR, and it could not support its allocation of no indirect 
selling expenses to certain non-subject merchandise. See Department's 
February 2, 1999, Sales Verification Report at 13. Therefore, because 
GIRSA was unable to substantiate its indirect selling expense 
allocation between rubber products and non-subject merchandise, we 
reallocated the total amount of indirect selling expenses for all GIRSA 
products over the total amount of GIRSA's POI sales for all products. 
See Department's February 2, 1999, Sales Verification Report at 14; see 
also Department's March 19, 1999, Final Determination Calculation 
Memorandum.
    We note that the petitioners, in their rebuttal brief, recalculated 
GIRSA's indirect selling expense allocation using the same methodology 
as outlined by the Department in its verification report. However, upon 
reviewing the petitioners' calculation, we found clerical errors. 
Accordingly, we did not adopt the calculation provided by the 
petitioners. Instead, we applied the amount as calculated in our 
verification report. See Department's February 2, 1999, Sales 
Verification Report at 15.
Comment 5: Adjusting Normal Value for Export Rebates
    Negromex grants rebates on ESBR sales to home market customers who 
incorporate the purchased ESBR into exported non-subject merchandise. 
Negromex's ESBR customers certify amounts of ESBR used in their 
exported finished goods, calculate their respective ESBR rebates, and 
submit rebate documentation for Negromex's approval. See Department's 
December 22, 1999, Sales Verification Report at 17. After approving a 
customer's export rebate calculation, Negromex applies an export rebate 
to the customer's next invoice and issues a credit note for the rebate 
upon the customer's request. See Department's December 22, 1999, Sales 
Verification Report at 17; see also Negromex's September 3, 1998, 
response at Exhibit SB-8.
    The petitioners argue that the Department should not deduct these 
rebates from normal value, arguing that to do so would wrongly 
encourage ``input dumping,'' a practice which promotes lower export 
prices in that raw material suppliers charge their customers less for 
raw materials incorporated into exported products. See Petitioners' 
February 10, 1999, Case Brief at 11. In this case, the petitioners 
assert that because Negromex's export rebates provide Negromex's 
customers opportunities to sell their goods at prices lower in foreign 
markets than in the Mexican market, the Department should follow its 
practice of denying price adjustments for export rebates, as the 
Department views these rebates as ``input dumping.'' See Notice of 
Final Determination of Sales at Less than Fair Value: Open-End Spun 
Rayon Singles Yarn from Austria, 62 FR 43701, 43708 (Aug. 15, 1997) 
(Rayon Singles Yarn); Final Results of Antidumping Duty Administrative 
Review: Light-Walled Welded Rectangular Carbon Steel Tubing from 
Taiwan, 56 FR 26382, 26383 (June 7, 1991) (Carbon Steel Tubing Taiwan).
    Negromex asserts that the Department correctly adjusted normal 
value for the export rebates which Negromex grants its customers who 
incorporate ESBR into their exported products. According to Negromex, 
the petitioners are mistaken in analogizing their export rebates to 
``input dumping'' because the Department has only applied the ``input 
dumping'' principle to deny a manufacturer's claim to normal value 
adjustments for export rebates it receives from suppliers. The Act, 
argues Negromex, mandates an adjustment of normal value for all price 
adjustments, including export-based rebates, in order to correctly 
compare normal value with prices at which ESBR is first sold in the 
United States. See Section 773(a)(1)(B) of the Act. Negromex notes that 
the Department has upheld adjustments for similar export-based rebates 
in recent decisions and maintains that the Department should follow its 
precedent of allowing export rebates in this case. See Circular Welded 
Non-Alloy Steel Pipe and Tube from Mexico: Final Results of Antidumping 
Duty Administrative Review, 63 FR 33041, 33045-46 (June 17, 1998) (Tube 
from Mexico).
DOC Position
    We agree with Negromex. Section 773(a)(1)(B)(i) of the Act requires 
the Department to calculate normal value in a manner which most closely 
approximates ``the price at which the foreign like product is first 
sold * * * for consumption in the exporting country. * * * '' In order 
to accurately reflect the foreign like product's price, the Department 
must account for all price adjustments in calculating the home market 
product's normal value. See 19 CFR 351.401(c). Because rebates affect 
the price of subject merchandise in the home market, we agree that the 
export rebates should be deducted in the calculation of Negromex's 
normal value price in this case. See 19 CFR 351.401.
    The petitioners' application of the ``input dumping'' concept to 
the circumstances of this case is misplaced. The Department has 
acknowledged that the practice by which raw materials suppliers price 
their raw materials differently based on whether customers incorporate 
the raw material into domestic or export products constitutes ``input 
dumping.'' Carbon Steel Tubing Taiwan at 26383. The Department's policy 
consistently has been to deny finished goods manufacturers an 
adjustment to normal value for export rebates received from upstream 
raw material suppliers. Carbon Steel Tubing Taiwan at 26383; Rayon 
Singles Yarn at 43708. The issue facing the Department in this case, 
however, is not a finished goods manufacturer's claim for an adjustment 
to NV for export rebates granted by its raw material supplier. Instead, 
Negromex is claiming an adjustment to NV for an export rebate granted 
to its home market customers. Therefore, in keeping with our policy to 
allow respondents an adjustment to normal value for export rebates 
granted to downstream customers who incorporate the material into their 
exported products (see Tube from Mexico at 33045-46), for purposes of 
the final determination, we have continued

[[Page 14882]]

to adjust for export rebates in our calculation of normal value.
Comment 6: Gains and Losses on Monetary Position
    Negromex contends that the Department should include the full 
amount of reported net gain on monetary position in its calculation of 
financial expenses. Negromex explains that these adjustments reflect 
the gain on holding net monetary liabilities against reduction in the 
value of the peso. According to Negromex, these inflation adjustments 
are required by Mexican generally accepted accounting principles 
(GAAP), and the Department's practice in Mexican cases is to include 
these adjustments in the calculation of financial expenses. See Gray 
Portland Cement and Clinker from Mexico: Final Results of Antidumping 
Duty Administrative Review, 62 FR 17148, 17160 (April 9, 1997) (Cement 
from Mexico).
    The petitioners did not comment on this issue.
DOC Position
    We agree with Negromex, in part. We agree that the gain on monetary 
position should be included in the financial expense calculation, but 
we disagree that it should be included in full. In accordance with 
section 773(f)(1)(A) of the Act, the Department's practice is to rely 
on costs derived from the respondent's books and records, as long as 
they: (1) Are prepared in accordance with the home country's generally 
accepted accounting principles (``GAAP''); (2) are based on allocations 
that have been historically used by the company; and (3) do not result 
in distorted production costs. Negromex has historically computed a net 
gain or loss on monetary position for financial reporting purposes in 
accordance with Mexican GAAP. This gain or loss reflects the impact of 
Mexican inflation during the year on holding monetary assets and 
liabilities.
    In this instance, due to the inflation experienced in Mexico during 
the POI, we consider it reasonable to include in the interest expense 
computation the impact of holding monetary assets and liabilities 
throughout the year. Even though Negromex normally computes its net 
gain or loss on monetary position using all monetary assets and 
liabilities (both current and long-term), we computed the net gain 
amount using only Negromex's current monetary assets and liabilities. 
The gain on monetary position and the foreign exchange loss, in this 
case, are directly linked. That is, the same foreign-denominated debt 
caused both a foreign exchange loss and a gain on monetary position. 
The foreign exchange loss is driven by the devaluation of the peso as 
compared to other currencies whereas the gain on monetary position is 
driven by high inflation during the year. Consistent with our current 
practice of including in the interest expense calculation only a 
portion of the foreign exchange gains and losses related to foreign-
denominated debt (see, e.g., Notice of Final Determination of Sales at 
Less Than Fair Value: Static Random Access Memory Semiconductors from 
the Republic of Korea, 63 FR 8934, 8940 (February 23, 1998)), we only 
included a portion of the gain on monetary position related to 
Negromex's monetary assets and liabilities.
    Our preferred method for computing the portion of foreign exchange 
gains and losses related to debt is to amortize the gains or losses 
over the remaining life of the foreign-denominated loans. 
Alternatively, the Department may, as was done in this case, determine 
the portion of the exchange gains or losses to include in the financing 
expense computation based on the ratio of the current portion of the 
foreign-denominated debt to total foreign denominated-debt, provided 
that it reasonably approximates the result of using the remaining life 
of the debt. See Wire Rod from Canada at 9187. Following this approach, 
we consider it appropriate to include in the net monetary gain or loss 
computation only those asset and liability amounts classified as 
current. To only include the current portion of the foreign exchange 
gains or losses related to debt but to include the entire gain or loss 
on monetary position would be unreasonable and distortive. We note 
that, in Cement from Mexico, we used both current and long-term 
monetary assets and liabilities to compute the gain on monetary 
position. However, we also included the foreign exchange gains and 
losses on both the current and long-term foreign denominated debt. Our 
practice has developed since that case in that we now only include a 
portion of the foreign exchange gains and losses related to foreign-
denominated debt and thus we will only include a comparable portion of 
the gains or losses on monetary position.
Comment 7: Purchase of Styrene From an Affiliated Party
    At verification, the Department discovered that Negromex purchased 
styrene, a major input in the production of ESBR, from an affiliated 
party, Resirene S.A. de C.V. (Resirene). This information was not 
reported to the Department in the company's questionnaire responses. 
The petitioners argue that Negromex failed to make timely disclosure of 
its purchases of styrene from Resirene, denying the Department and the 
petitioners a reasonable opportunity to analyze and address the costs 
of this input. The petitioners, citing to 19 CFR 351.407(b) (the major 
input rule), point out that, in dealing with transactions between 
affiliated companies, it is the Department's practice to value major 
inputs at the highest of the transfer price, market price, or actual 
production cost. However, the petitioners contend, lack of verifiable 
evidence from Negromex in this instance precludes an application of the 
major input rule.
    According to the petitioners, the Department's attempt at 
verification to examine the nature of Negromex's transaction with 
Resirene and test the transfer price between the two companies does not 
establish an adequate basis for application of the major input rule. 
Specifically, the petitioners claim that the Department relied 
primarily upon oral explanations by Negromex's materials manager and 
faxed documents from Resirene (i.e., Resirene's financial statements 
and a schedule of its purchases of styrene from unaffiliated suppliers 
during the POI). The petitioners note that the Department did not speak 
to anyone at Resirene and did not inspect any original documentation at 
that company, rendering the faxed documents obtained at verification 
unverified.
    Furthermore, the petitioners assert that the transfer price between 
Negromex and Resirene, which according to Negromex's official 
represents Resirene's purchase price and cost of freight, does not 
cover Resirene's entire cost of obtaining the material, such as general 
and administrative expenses. Absent verified data concerning Resirene's 
full cost of purchasing styrene, the petitioners argue that Negromex's 
reported costs of styrene cannot be analyzed properly under the major 
input rule. Therefore, the petitioners urge the Department to use facts 
otherwise available in determining Negromex's costs of styrene for 
purposes of the final determination.
    Negromex contends that it properly reported its styrene costs in 
its questionnaire response. Negromex notes that the cost of styrene 
recorded in the company's accounting system and included in the COP and 
CV data reported to the Department consists of two items: (1) The costs 
of styrene purchased from an unaffiliated company; and (2) the costs of 
styrene

[[Page 14883]]

purchased from its affiliate, Resirene. Negromex explains that it 
engages in a joint purchasing arrangement with Resirene under which 
Resirene purchases styrene from unaffiliated suppliers and resells it 
to Negromex. According to Negromex, Resirene's sales of styrene to 
Negromex are not included in Resirene's total sales and the costs are 
not included in the company's cost of sales, as they are merely pass-
through transactions. Accordingly, Negromex contends that it would be 
inappropriate to include G&A expenses of Resirene to Negromex's 
purchases of styrene from Resirene.
DOC Position
    We agree with the petitioners. In Section D of the Department's 
questionnaire, we instructed Negromex to identify inputs that the 
company receives from affiliated parties. See the Department's May 21, 
1998, questionnaire at D-3. In its questionnaire response, Negromex 
stated that ``[a]ll raw materials, service (water, electricity, and 
natural gas) and subcontractor inputs are purchased from non-affiliated 
parties. There were no purchases of any inputs used in the production 
or manufacture of ESBR 1502 or 1712 from affiliated parties'' See 
Negromex's September 22, 1998, Section D response at D6. However, as 
noted above, we found at verification that Negromex purchased a portion 
of styrene used in the production of ESBR from Resirene.
    Section 773(f)(3) of the Act provides that, if transactions between 
affiliated parties involve a major input, then the Department may value 
the major input based on cost of production if the cost is greater than 
the amount (higher of transfer price or market price) that would be 
determined under section 773(f)(2). Under this provision, the 
Department is required to review purchases from affiliated parties of 
major inputs in order to determine that they reasonably reflect a fair 
market value. In this instance, Negromex failed to provide information 
regarding its purchases of styrene from Resirene in its questionnaire 
responses, thus precluding the Department from adequately addressing 
this issue prior to verification. Furthermore, at verification, the 
information Negromex presented to the Department was insufficient to 
verify that Negromex's purchases of styrene from Resirene were at fair 
market value. Specifically, we were unable to review source 
documentation substantiating Negromex's claim that its styrene 
purchases from Resirene are merely ``pass-through'' transactions.
    Section 776(a)(2) of the Act provides that, if an interested party: 
(A) Withholds information that has been requested by the Department; 
(B) fails to provide such information in a timely manner or in the form 
or manner requested; (C) significantly impedes a proceeding under the 
antidumping statute; or (D) provides such information but the 
information cannot be verified, the Department shall, subject to 
subsections 782(d) and (e), use facts otherwise available in reaching 
the applicable determination. In addition, section 776(b) provides that 
an adverse inference may be used against a party that has failed to 
cooperate by not acting to the best of its ability to comply with 
requests for information.
    As detailed above, Negromex withheld information concerning its 
purchases of styrene from an affiliated party in its questionnaire 
responses. Moreover, Negromex did not disclose this information at the 
start of verification, but rather it was discovered by the Department 
during verification, as described in the verification report. See 
Department's January 6, 1999, Cost Verification Report at 4. Under 
these circumstances, we were unable to obtain sufficient information 
needed to apply the major input rule, because, as described above, the 
information provided about Resirene at verification was not verified. 
Thus, we determine that use of partial facts available is appropriate 
in valuing the cost of styrene in our calculation of cost of production 
and constructed value. Furthermore, because Negromex failed to comply 
with the Department's request for information regarding purchases of 
inputs from affiliated parties, we find that it failed to cooperate to 
the best of its ability in providing this information, and therefore, 
adverse inferences are warranted. This is consistent with the 
Department's practice of applying adverse facts available when certain 
requested information is withheld by an interested party in its 
questionnaire response, but discovered at verification. See, e.g., 
Notice of Final Determination of Sales at Less Than Fair Value: Certain 
Preserved Mushrooms from Chile, 63 FR 56613, 56620 (October 22, 1998); 
Notice of Final Determination of Sales at Less Than Fair Value: 
Stainless Steel Wire Rod from Spain, 63 FR 40391, 40396 (July 29, 
1998). As facts available, we adjusted Negromex's reported direct 
materials cost by increasing the cost of the portion of styrene 
purchased from Resirene by the amount of Resirene's G&A expenses as 
computed from the company's 1997 financial statements. See Cost of 
Production and Constructed Value Calculation Adjustments for the Final 
Determination Memorandum, dated March 19, 1999.

Continuation of Suspension of Liquidation

    In accordance with section 733(d) of the Act, we are directing the 
Customs Service to continue to suspend liquidation of all entries of 
ESBR from Mexico that are entered, or withdrawn from warehouse, for 
consumption on or after November 4, 1998, the date of publication of 
our preliminary determination in the Federal Register. The Customs 
Service shall continue to require a cash deposit or the posting of a 
bond equal to the weighted-average amount by which the normal value 
exceeds the U.S. price, as indicated in the chart below. These 
suspension-of-liquidation instructions will remain in effect until 
further notice. The weighted-average dumping margins are as follows:

------------------------------------------------------------------------
                                                              Weighted
                                                               average
                   Exporter/manufacturer                       margin
                                                             percentage
------------------------------------------------------------------------
Negromex..................................................         33.01
All Others................................................         33.01
------------------------------------------------------------------------

Pursuant to section 735(c)(5)(A) of the Act, the Department has 
excluded any zero and de minimis margins, and any margins determined 
entirely under section 776 of the Act, from the calculation of the 
``All Others Rate.''

ITC Notification

    In accordance with section 735(d) of the Act, we have notified the 
ITC of our determination. As our final determination is affirmative, 
the ITC will, within 45 days, determine whether these imports are 
materially injuring, or threaten material injury to, the U.S. industry. 
If the ITC determines that material injury, or threat of material 
injury does not exist, the proceeding will be terminated and all 
securities posted will be refunded or canceled. If the ITC determines 
that such injury does exist, the Department will issue an antidumping 
duty order directing Customs officials to assess antidumping duties on 
all imports of the subject merchandise entered for consumption on or 
after the effective date of the suspension of liquidation.

Return or Destruction of Proprietary Information

    This notice serves as the only reminder to parties subject to 
Administrative Protective Order (APO)

[[Page 14884]]

of their responsibility concerning the return or destruction of 
proprietary information disclosed under APO in accordance with 19 CFR 
355.34(d). Failure to comply is a violation of the APO.
    This determination is published pursuant to section 777(i) of the 
Act.

    Dated: March 19, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-7527 Filed 3-26-99; 8:45 am]
BILLING CODE 3510-DS-P