[Federal Register Volume 64, Number 95 (Tuesday, May 18, 1999)]
[Notices]
[Pages 26934-26944]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-12504]


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DEPARTMENT OF COMMERCE

International Trade Administration
[A-201-504]


Porcelain-on-Steel Cookware from Mexico: Final Results of 
Antidumping Duty Administrative Review

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


[[Page 26935]]


ACTION: Notice of Final Results of Antidumping Duty Administrative 
Review.

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SUMMARY: On January 11, 1999, the Department of Commerce published the 
preliminary results of the administrative review of the antidumping 
duty order on certain porcelain-on-steel cookware from Mexico (64 FR 
1592). This review, the eleventh review of this order, covers Cinsa, 
S.A. de C.V. and Esmaltaciones de Norte America, S.A. de C.V., 
manufacturers/exporters of the subject merchandise to the United States 
and the period December 1, 1996, through November 30, 1997. We gave 
interested parties an opportunity to comment on the preliminary 
results. Based on our analysis of the comments received and the 
correction of certain clerical errors, the final results differ from 
the preliminary results. The final results are listed below in the 
``Final Results of Review'' section of this notice.

EFFECTIVE DATE: May 18, 1999.

FOR FURTHER INFORMATION CONTACT: Kate Johnson or David J. Goldberger, 
Office 5, AD/CVD Enforcement Group II, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, N.W., Washington, D.C. 20230, 
telephone: (202) 482-4929 or (202) 482-4136, respectively.

SUPPLEMENTARY INFORMATION:

Background

    On January 11, 1999, the Department of Commerce (the Department) 
published in the Federal Register the preliminary results of the 1996-
97 administrative review of the antidumping duty order on certain 
porcelain-on-steel (POS) cookware from Mexico (64 FR 1592) (preliminary 
results). On February 1, 1999, Cinsa, S.A. de C.V. (Cinsa) and 
Esmaltaciones de Norte America, S.A. de C.V. (ENASA) filed comments in 
an attempt to rebut the presumption of reimbursement of antidumping 
duties with respect to eleventh review entries, pursuant to the 
opportunity afforded respondents by the Department in its preliminary 
results Federal Register notice. On February 16, 1999, petitioner filed 
comments on the information submitted by respondents. On March 12, 
1999, and March 19, 1999, Columbian Home Products, LLC (CHP) (the 
petitioner), Cinsa and ENASA submitted case and rebuttal briefs, 
respectively. The Department held a hearing on March 26, 1999. The 
Department has now completed its administrative review in accordance 
with section 751 of the Tariff Act of 1930, as amended.

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 (1998).

Scope of the Review

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

Changes Since the Preliminary Results

    We have made the following changes in these final results for both 
Cinsa and ENASA, unless otherwise noted:
    1. We revised the preliminary results frit calculation. See Comment 
2, below.
    2. We recalculated Cinsa International Corporation's (CIC's) 
indirect selling expenses. See Comment 4, below.
    3. We corrected a misplaced decimal point in the BILLADJU (billing 
adjustment) variable in the sales listing.
    4. For Cinsa, we included the startup costs associated with the 
acquisition of Acero Porcelanizado, S.A. (APSA) in cost of 
manufacturing (COM) as opposed to general and administrative (G&A) 
expenses.
    5. We deducted repacking expenses incurred in the United States by 
CIC as a direct selling expense. See Comment 5, below.
    6. For sales reported without cost of production (COP) data, we 
assigned the average COP reported for other sales in the database.

Interested Party Comments

    Comment 1: Alleged Reimbursement of U.S. Affiliate CIC for 
Antidumping Duties. Respondents argue that the Department erred in 
finding that the April 1997 capital contribution by Grupo Industrial 
Saltillo (GIS), Cinsa's and ENASA's affiliated holding company, to CIC, 
respondents' affiliated importer, constituted reimbursement within the 
meaning of the Department's regulations. The respondents claim that (1) 
there was no direct payment of CIC's antidumping duty liability by 
Cinsa or ENASA; (2) there was no direct reimbursement of antidumping 
duties paid by Cinsa or ENASA; and (3) there was no indirect 
reimbursement of CIC's antidumping duty liability by Cinsa or ENASA.
    In addition, respondents contend that 19 CFR Sec. 351.402(f)(1) 
specifically states that ``reimbursement'' occurs only when the 
reimbursement is made to the importer by the exporter or producer, and 
that the Department has always applied the plain language of this 
regulation strictly and literally. Respondents further argue that the 
Courts and the Department have uniformly limited application of the 
reimbursement regulation to payments by exporters or producers. 
Respondents assert that, as the Department has previously stated, it 
could have written a reimbursement regulation explicitly covering 
payments ``on behalf of'' or ``attributable to'' a producer or 
exporter. Moreover, according to respondents, it is the Department's 
well-established policy to recognize separate corporate identities, and 
the Court of International Trade, in Outokumpu Copper Rolled Products 
AB v. United States (``Outokumpu''), 829 F. Supp. 1371 (1993), rejected 
the theory that it should ``collapse'' the related parties involved to 
find reimbursement. Respondents state that the Department itself, in 
the context of the ninth review litigation, recognized the 
administrative burden that would be created for the Department if the 
regulation covered reimbursement by all entities within a corporate 
family. Respondents note that, in the context of the same litigation, 
The Department recognized that Congress had specifically rejected the 
``duty as a cost'' theory. As a result, respondents claim, the 
Department cannot argue that payments made ``on behalf of'' or payments 
``attributable to'' an exporter or producer can constitute 
reimbursement within the meaning of the regulation.
    Respondents also claim that the Department's new interpretation of 
the reimbursement regulation is not simply a ``policy change,'' but 
rather the promulgation of a new substantive rule without satisfying 
the notice and comment requirements of the Administrative Procedures 
Act (APA). Moreover, according to respondents, this reinterpretation 
also violates the

[[Page 26936]]

APA because, they claim, the Department has applied its new policy to 
Cinsa and ENASA retroactively.
    Finally, respondents argue that the Department lacked authority to 
impose a rebuttable presumption that eleventh review duties will be 
reimbursed, and that, even if the Department's application of its 
rebuttable presumption were proper, Cinsa and ENASA have submitted 
sufficient factual information to rebut any such presumption. 
Specifically, Cinsa and ENASA state that they have provided 
documentation establishing that: (1) CIC has refunded the April 1997 
capital contribution using monies not supplied by any corporate 
affiliate; (2) CIC and its corporate affiliates have taken steps to 
ensure that it will not receive any future reimbursement within the 
terms of the Department's new interpretation of the regulation; and (3) 
CIC will be able to fund its future antidumping duty obligations 
through its own financial resources. Cinsa and ENASA state that, in 
prior administrative cases involving reimbursement, the Department has 
found lesser factual showings to constitute a rebuttal of a presumption 
of future reimbursement of antidumping duties.
    Petitioner agrees with the Department's preliminary finding that 
Cinsa and ENASA reimbursed their affiliated U.S. importer for 
antidumping duties and argues that this finding should be affirmed for 
purposes of the final results. According to petitioner, Cinsa and ENASA 
concede that: (1) the payment to CIC was made; (2) the payment to CIC 
was made on behalf of the producers under review; and (3) CIC used the 
funds to pay antidumping duty assessments.
    Petitioner also argues that the Department is entitled to 
reinterpret its reimbursement regulation in a manner that better 
effectuates the regulatory purpose. Petitioner contends that the 
Department has a special interest in being able to apply its 
reimbursement regulation flexibly so that it can address the many 
different factual situations that arise.
    In addition, petitioner argues that, contrary to respondents' 
claim, the Department has not ``collapsed'' the respondents in this 
case. The Department's preliminary finding, according to petitioner, is 
that GIS made the reimbursement payment on behalf of Cinsa and ENASA, 
as opposed to a collapsed entity making the reimbursement payment. 
Furthermore, petitioner notes, the Department's new interpretation does 
not constitute the adoption of the ``duty as a cost'' theory because 
this case involves an undisputed link between the payment of 
antidumping duties by the U.S. subsidiary and an intracorporate payment 
providing funds for this purpose.
    With regard to the alleged violation of the APA, petitioner claims 
that the Department's preliminary results merely interpret the 
regulation; therefore, it involves a general statement of policy or an 
interpretive rule, neither of which is subject to the notice and 
comment requirements of the APA.
    In addition, petitioner argues that the Department is permitted to 
apply its new interpretation of the reimbursement rule to the facts of 
this review. Petitioner believes that the Department's reinterpretation 
of the regulation in this review is an attempt to further develop an 
evolving policy with respect to reimbursement of antidumping duties 
between affiliated parties. According to petitioner, all the law 
requires is that the Department's change of position be in accordance 
with the statute and be based on a reasonable interpretation of the 
regulation. Furthermore, petitioner adds, Cinsa and ENASA could not 
have relied upon any prior interpretation of the regulation in making 
the April 1997 transaction, because the transaction itself occurred 
prior to the final determinations in the ninth and tenth reviews of the 
underlying order.
    Finally, petitioner argues that, contrary to Cinsa's and ENASA's 
assertions, respondents have failed to rebut the presumption that CIC 
will continue to rely on reimbursements in order to meet its 
obligations to pay antidumping duties with respect to entries made 
during the eleventh period of review (POR). Petitioner claims that the 
new information submitted by Cinsa and ENASA does not establish ``by 
clear and convincing evidence'' (the standard set forth in the 
preliminary results) that CIC will not need to rely on reimbursements 
from its Mexican affiliates to satisfy its antidumping obligations. 
Specifically, petitioner states that: (1) both the repayment of the 
April 1997 transfer and the restructuring undertaken by CIC in 1998 
have weakened CIC financially; (2) the corporate non-reimbursement 
resolutions are meaningless and should be disregarded; and (3) the 
evidence submitted in support of the contention that CIC will be able 
to fund its future antidumping obligations through its own financial 
resources amounts to little more than ``overly-optimistic, self-serving 
projections.'' Petitioner also states that prior cases in which the 
Department determined that a party had rebutted the presumption of 
reimbursement involved (1) more substantial changed circumstances and 
(2) only an agreement to reimburse, not the actual reimbursement 
characterizing this case.
    DOC Position: We agree with petitioner that, for purposes of this 
review, the Department properly determined that the April 1997 capital 
contribution to CIC for purposes that included payment of antidumping 
duties on fifth and seventh review entries constituted reimbursement of 
antidumping duties within the meaning of 19 CFR Sec. 351.402. We also 
agree with petitioner that, based on this history of actual 
reimbursement, the Department reasonably presumed that antidumping 
duties payable on the entries for this eleventh review likewise have 
been or will be reimbursed. Finally, we also agree with petitioner that 
Cinsa and ENASA have failed to adequately rebut the presumption that 
reimbursement has occurred or will occur with respect to eleventh 
review entries.

Interpretation of the Regulation

    The reviews of this order have presented an issue of first 
impression. In the few other cases in which reimbursement has been 
addressed, the issue has most often been factual, i.e., whether there 
was evidence that reimbursement occurred. See, e.g., Brass Sheet and 
Strip from the Netherlands: Final Results of Antidumping Duty 
Administrative Reviews, 54 FR 9534, 9537 (March 19, 1992); Color 
Television Receivers from the Republic of Korea: Final Results of 
Antidumping Duty Administrative Reviews (``Korean TVs''), 61 FR 4408, 
4410-11 ( February 6, 1996). Outside the POS cookware reviews, the 
Department has interpreted the general scope of the regulation, i.e. 
what constitutes reimbursement, in only two situations: (1) we 
interpreted the regulation to cover reimbursement by an exporter that 
is affiliated with the importer (e.g., Korean TVs, 61 FR at 4410-11, 
Certain Cold-Rolled Carbon Steel Flat Products from the Netherlands: 
Final Results of Antidumping Duty Administrative Review, 61 FR 48465, 
48470 (September 13, 1996)), and (2) we interpreted the regulation as 
not applying when the exporter is also the importer ( e.g., Circular 
Welded Non-Alloy Steel Pipe and Tube from Mexico: Final Results of 
Antidumping Duty Administrative Review, 63 FR 33041, 33044 (June 17, 
1998)). This is the first case in which we have addressed the issue of 
whether reimbursement by a party acting on behalf of the exporter 
constituted reimbursement within the meaning of the regulation.

[[Page 26937]]

    In the ninth and tenth reviews of this order, the Department found 
that funds provided to CIC by its ultimate parent, GIS, for the payment 
of antidumping duties on entries during the fifth and seventh review 
periods did not constitute reimbursement within the meaning of the 
regulation because neither GIS nor GIS/US is an exporter or producer. 
Specifically, we found that the facts merely established that there was 
an infusion into CIC by its parent and there was no evidence that the 
source of the funds was a producer or exporter of the subject 
merchandise. Porcelain-on-Steel Cookware from Mexico; Final Results of 
Antidumping Duty Administrative Review, 62 FR 42496, 42504 (August 7, 
1997). While that decision is based on a permissible interpretation of 
the regulation, upon further reflection, as a matter of policy, the 
Department finds that interpretation too restrictive.
    The Department may depart from its prior interpretation, provided 
it ``articulates a reasoned basis'' for doing so. Hoogovens Staal, BV 
v. United States, 4 F. Supp. 2d 1213, 1217, 1219 (1998) (upholding the 
Department's decision to apply the reimbursement regulation to related 
parties). We have a reasoned basis in this instance. The remedial 
effect of the antidumping law is defeated if importers are reimbursed 
for antidumping duties. Thus, the reimbursement regulation is designed 
to preserve the statute's remedial purpose. Hoogovens, 4 F. Supp. 2d at 
1217. In this review, the Department for the first time considered 
whether the reimbursement regulation encompasses reimbursement by 
parties acting on behalf of the exporter or producer. We are departing 
from our prior interpretation of the reimbursement regulation in favor 
of an interpretation that takes into account situations in which 
reimbursement occurs indirectly, i.e., through someone acting on behalf 
of the exporter, because such an interpretation more effectively 
accomplishes the purposes of the regulation. A more literal and 
restrictive interpretation could seriously undermine the effectiveness 
of the regulation by making it possible to avoid its application merely 
by acting through third parties. Therefore, the Department interprets 
the reimbursement regulation to include reimbursement by parties acting 
on behalf of the exporter or producer.
    As explained in the preliminary determination, GIS regularly 
manages funds on behalf of its various subsidiaries, including Cinsa 
and ENASA. In making the transfer in question, GIS acted for the 
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 other members of the corporate family. Thus, only 
Cinsa and ENASA have a direct interest in assisting CIC in paying 
antidumping duties on POS cookware products. Based on these facts, 
taken as a whole, we find that when GIS transferred funds to CIC for 
the payment of antidumping duties, it was acting on behalf of Cinsa and 
ENASA. Therefore, consistent with the interpretation articulated in 
this review, the April 1997 payment to CIC constitutes reimbursement 
within the meaning of the regulation.
    We disagree with respondents that finding that GIS acted ``on 
behalf of'' Cinsa and ENASA is tantamount to considering the entire GIS 
family of corporations to be a single ``collapsed'' entity. We have not 
collapsed the corporations involved, and it is not necessary to do so 
in order to find that one company acted on behalf of another. We also 
disagree with respondent's argument that our decision in this case is 
inconsistent with rejecting the concept of duty as a cost. A ``duty as 
a cost'' approach treats antidumping duties paid by the importer as an 
expense that should be automatically deducted from the U.S. price. In 
contrast, the reimbursement regulation does not require the deduction 
of antidumping duties paid by the importer. It only requires the 
deduction of antidumping duties paid by the exporter or producer on 
behalf of the importer or any amount the exporter or producer pays to 
the importer as reimbursement for antidumping duties. Moreover, our 
interpretation of the regulation does not rely on the principle of the 
fungibility of money or the so-called ``holding company rule'' Cf. In 
the Matter of Porcelain-on-Steel Cookware From Mexico: Final Results of 
the Ninth Antidumping Duty Administrative Review, Secretariat File. No. 
USA-97-1904-07. at 7 (April 30, 1999)(agreeing with the Department that 
authorities relied upon for fungibility and holding company arguments 
for reimbursement did not relate to these concepts as applied in the 
context of reimbursement).
    We also disagree with respondents' claim that the Department's 
broader interpretation of the regulation constitutes the promulgation 
of a new substantive rule, which requires compliance with the notice 
and comment requirements of the APA. There is an existing rule 
governing reimbursement by exporters and producers. We are not amending 
that rule, we are merely interpreting it to cover reimbursement by 
parties acting on behalf of the exporter or producer. Such an 
``interpretive rule'', i.e., a clarification or explanation of an 
existing regulation, may evolve over time, without the need for formal 
notice and comment, provided the Department explains the reasons for 
changes in its policies or practices, which we have done in this case. 
Furthermore, we note that respondents have availed themselves of the 
opportunity provided to comment on this interpretation following the 
preliminary determination.
    The Department also disagrees with respondents' claim that 
application of the new policy in this review constitutes 
``retroactive'' application in violation of the APA. ``[T]he general 
principle is that when as an incident of its adjudicatory function, an 
agency interprets a statute, it may apply that new interpretation in 
the proceeding before it.'' Clark-Cowlitz Joint Operating Agency v. 
Federal Energy Regulatory Commission, 826 F.2d 1074, 1081 (D.C. Cir. 
1987), cert. denied, 485 U.S. 913 (1988). The same is true of applying 
a new interpretation of a regulation. Thus, application of the new 
policy in this review is permissible. The finding of prior 
reimbursement in this review does not alter the results of prior 
reviews in any respect. Therefore, we have not given the new policy 
retroactive effect. The finding of prior reimbursement is being 
addressed only to determine whether the reimbursement regulation should 
be applied in the current review. Furthermore, application of the 
regulation in this review does not create a ``manifest injustice'' as 
to respondents. See Id. First, the Department has no long-standing 
practice regarding reimbursement of antidumping duties by parties 
acting on behalf of the producer or exporter. Second, although the 
Department determined not to apply the reimbursement regulation in the 
final determinations of the ninth and tenth reviews of this order, the 
actions at issue here are not ones taken in reliance on the agency's 
decisions in those reviews. The reimbursement at issue here is the same 
as it was in the ninth and tenth reviews, i.e., the April 1997 transfer 
to CIC. Because the decisions in the ninth and tenth reviews were made 
after the April 1997 transfer, the parties could not have relied upon 
those findings when that transfer was made.

Use of a Rebuttable Presumption

    The Department has previously stated that ``where the Department 
determines in the final results of an administrative

[[Page 26938]]

review that an exporter or producer has engaged in the practice of 
reimbursing the importer, the Department will presume that the company 
has continued to engage in such activity in subsequent reviews, absent 
a demonstration to the contrary.'' Dutch Steel 3rd Review, 63 FR at 
13213-14. ``The establishment of a rebuttable presumption allows the 
Department to administer the law fairly and effectively.'' 63 FR at 
13214. ``The Department's policy is crafted to address the instances in 
which there has been a finding of reimbursement and the importer is 
financially unable to pay the duty on its own. In that circumstance, 
the Department will determine that the importer must continue to rely 
on reimbursements, such as intracorporate transfers, from the producer 
or exporter in order to meet its obligations to pay the duties.'' Id. 
Accordingly, based on our finding that GIS, acting on behalf of Cinsa 
and ENASA, reimbursed CIC for antidumping duties assessed on entries 
during the fifth and seventh review periods, the Department reasonably 
presumed that, absent evidence to the contrary, antidumping duties to 
be assessed on entries during the current review period would be 
reimbursed as well.
    Respondents argue that such a rebuttable presumption is improper 
and unjustified because there is no such language in the regulation. 
However, no express grant of authority is required for the Department 
to employ a rebuttable presumption when implementing one of its 
regulations. Indeed, the Department has considerable discretion in 
interpreting and applying its own regulations.
    Whether circumstances warrant reversing the presumption of 
reimbursement must be decided on a case-by-case basis. Id. In the 
preliminary determination for this eleventh review, the Department 
stated that, to rebut the presumption that reimbursement will continue 
to take place when current entries are liquidated, a respondent must 
normally demonstrate that, during the POR in question (in this case the 
eleventh 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 such a case, the importer's 
financial ability to pay antidumping duties during the current POR is 
sufficient evidence of the importer's ability, without reimbursement, 
to pay the antidumping duties to be assessed on entries during the 
current review. Alternatively, respondents may rebut the presumption by 
demonstrating 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. We stated in the preliminary determination that this 
alternative means of rebuttal required ``clear and convincing'' 
evidence. However, because this alternative test is by nature 
speculative, we have concluded that a ``clear and convincing'' standard 
is inappropriate. Rather, the alternative is the test applied in the 
Dutch Steel 3rd Review; specifically, there must be evidence sufficient 
to satisfy the Department that the importer can be expected to pay 
antidumping duties to be assessed in the future without reimbursement. 
See 63 FR at 13213.
    Because we determined in the current review that the April 1997 
transfer constitutes reimbursement and because that transfer occurred 
during the current POR, Cinsa and ENASA cannot rebut the presumption of 
continuing reimbursement under the first alternative. Therefore, the 
Department opened the record for respondents to provide evidence 
sufficient to satisfy the Department that they can be expected to pay 
antidumping duties to be assessed in the future without reimbursement.

Respondents' Rebuttal Evidence

    In order to establish that CIC is no longer being reimbursed for 
antidumping duties and that changed circumstances exist sufficient to 
obviate the need for reimbursement as to eleventh review entries when 
these entries are liquidated, respondents submitted documentation 
intended to establish the following:
     CIC has refunded to GIS/US the April 1997 capital 
contribution, using monies obtained based on its own resources, without 
reliance on monies or guarantees from its affiliates.
     CIC's Board of Directors has passed a resolution to the 
effect it will not accept from any company within the GIS group any 
monies, directly or indirectly, in any form, as reimbursement for any 
antidumping duties or duty deposits for which CIC may be liable. In 
addition, the Boards of Directors of the GIS companies have each 
resolved that they will not provide any such reimbursement. Respondents 
note that, under Article 157 of the Mexican corporate law, such 
resolutions have the authority to legally bind the company to a future 
course of action.
     CIC is expected to be able to fund its future antidumping 
duty obligations through its own financial resources. In support of 
this argument, respondents submitted documentation detailing certain 
changes in the structure of CIC and an income statement and cash flow 
projection for the period 1999-2002 (when the eleventh review entries 
can reasonably be expected to be liquidated). Respondents also provided 
documentation as to the rationales supporting their income and expense 
projections.
    CIC's return of the monies received as reimbursement and 
expressions of intent not to reimburse in the future, while supportive 
of a rebuttal argument, are not alone sufficient to provide the 
Department with adequate assurance to rebut the presumption that CIC 
will again require, and therefore again receive, reimbursement from its 
affiliates for the eleventh review entries. We agree with petitioner 
that the Board resolutions in question, even though they may currently 
be legally binding, could easily be reversed by different resolutions 
at some future date, and therefore provide little evidence that 
reimbursement will not recur at some future date. Therefore, the 
principal focus of our analysis of whether there are changed 
circumstances sufficient to allay our concerns with respect to 
reimbursement of the eleventh review entries must be on respondents' 
attempt to show that CIC will be financially able to pay these duties 
when they become due. After careful analysis, we must agree with the 
petitioner that CIC's projections of its financial future are unduly 
optimistic, and cannot be relied upon.
    Respondents' claims that CIC's financial health will have improved 
sufficiently by 2002 to pay the duties on these entries have two 
primary bases. First, respondents claim that the June 1998 closure of 
CIC's San Antonio warehouse operation will allow it to achieve cost 
savings as compared to the time of the April 1997 transfer. These cost 
savings, however, could well be offset by sales losses due to the 
inability of CIC to fill orders from inventory quickly. Thus, it is not 
clear that the closing of the warehouse will be a net financial gain. 
Second, respondents claim that their projected sales for 1998 and 
beyond will enable them to pay antidumping expenses in the foreseeable 
future. We agree with petitioner that the evidence supporting 
respondent's projections of CIC's future financial health is 
insufficient for the Department to conclude that CIC will be able to 
pay, independently, its antidumping expenses with respect to the 
eleventh review entries. Because much of this information is 
proprietary, it is discussed more fully in the May 11,

[[Page 26939]]

1999, Analysis Memorandum for the Final Results (Analysis Memorandum).
    We disagree, however, with petitioner's argument that a higher 
standard of proof should be required in this case than in the Dutch 
Steel cases on the grounds that this case involved an actual 
reimbursement, whereas in those cases the triggering element was only 
an agreement to reimburse. Both cases involve a finding of 
reimbursement. The same consequences flow from those findings: a 
deduction from U.S. price and a presumption that, absent evidence to 
the contrary, duties assessed on future entries will also be 
reimbursed. We do not believe it is useful or appropriate to establish 
what could potentially be numerous different standards based on the 
nature of the reimbursement at issue.
    We note, however, that, even when the same standard is applied, 
Hoogovens, the respondent in the Dutch Steel cases, provided much more 
convincing evidence that its importer would be financially able to pay 
future antidumping duties. For example, the Hoogovens case involved 
acquisition by the importing subsidiary of new profit centers and 
income streams. See Certain Cold-rolled Carbon Steel Flat Products from 
the Netherlands: Final Results of Antidumping Duty Administrative 
Review, 64 FR 11825, 11832 (March 10, 1999) (Hoogovens has entered into 
a joint venture with a U.S. firm to build a galvanizing plant in 
Indiana; this was a major element of Hoogovens' restructuring, which 
also included the transfer to the U.S. importer of ``the Rafferty-Brown 
companies''). This type of restructuring provides a much firmer basis 
for predicting stronger financial health than does the closing of a 
warehouse and vague expectations with respect to future sales trends.
    Furthermore, the evidence respondents provide in support of their 
claim that they will be financially able to pay the eleventh review 
duties without assistance is intrinsically weak. Based on the foregoing 
analysis and that provided in our Analysis Memorandum, we find that 
respondents have failed to rebut the presumption in this case, and 
therefore determine that reimbursement within the meaning of 19 CFR 
402(f) exists as to the eleventh POR entries. Therefore, in calculating 
the export price (or the constructed export price) in this review, the 
Department deducted the amount of the antidumping duty found to exist 
for Cinsa and ENASA in this review prior to calculating the final 
duties to be assessed.
    We will continue to evaluate in future reviews whether CIC will 
have the financial capacity to meet independently its antidumping duty 
obligations.
    Comment 2: Enamel Frit Cost. Respondents Cinsa and ENASA disagree 
with the Department's finding in the preliminary results that 
affiliated supplier ESVIMEX's prices to Cinsa and ENASA did not reflect 
fair market prices. For the final results, respondents contend that the 
Department should use the enamel frit costs as reported. In the 
alternative, respondents assert that, if the Department continues to 
find that the reported enamel frit prices do not fully reflect fair 
market prices, the Department's preliminary results adjustment of 
reported enamel frit prices by a factor calculated to approximate fair 
market prices was fully consistent with the statute and should be used 
in the final results as well.
    Respondents claim that, although the transfer prices for enamel 
frit charged by ESVIMEX to Cinsa and ENASA were less than prices 
charged to ESVIMEX's unaffiliated customers, the transfer prices 
represented fair market prices due to cost savings (in the areas of 
freight, insurance, commissions, packing, credit, bad debt and 
inventory costs) accruing to ESVIMEX on its sales to Cinsa and ENASA. 
In addition, Cinsa and ENASA asserted in their questionnaire response 
that any portion of the affiliated party discount not substantiated by 
cost savings and unaffiliated purchaser discounts, corresponded to a 
quantity discount, thereby making the affiliated party price equal to 
the fair market price.
    According to respondents, the record provides substantial evidence 
that ESVIMEX's transfer prices for frit sold to Cinsa and ENASA were 
well above ESVIMEX's COP and similar to the prices for the same enamel 
frit types purchased from unaffiliated frit producers. In addition, 
respondents argue that, as in previous reviews, the Department 
improperly focused solely on the price difference between ESVIMEX's 
prices to Cinsa and ENASA, and ESVIMEX's prices to other unaffiliated 
customers. Respondents claim that the Department should have focused on 
the price paid by Cinsa for ESVIMEX's frit and the prices paid by Cinsa 
for the enamel frit of the unaffiliated producer. In addition, 
respondents assert that ESVIMEX's profit and loss statement for 1997 
confirms that ESVIMEX was operating profitably during the POR, which 
would not be possible it if did not charge arm's length prices on a 
majority of its sales.
    Finally, respondents contend that petitioner's alternate 
calculation is mathematically incorrect because the adjustment is based 
upon the percentage of the documented cost savings as opposed to the 
percentage of undocumented costs savings necessary to increase transfer 
prices to approximate fair market value.
    Petitioner also disagrees with the Department's finding in the 
preliminary results. Petitioner maintains that, because frit is a major 
input in the production of POS cookware, and because the record clearly 
reflects that the highest value for frit on the record is market value, 
the statute and the Department's practice require that enamel frit 
purchased from ESVIMEX be valued on the basis of market value. 
Accordingly, for purposes of the final results, petitioner argues that 
the Department should use the market price information on the record. 
In the alternative, petitioner states that if the Department adjusts 
rather than disregards the reported transfer prices, the methodology 
used in the tenth review is appropriate for that purpose.
    Petitioner claims that the Court of International Trade held in 
Cinsa, S.A. de C.V. v. United States, 976 F. Supp. 1034, 1035 (1997) 
that the Department must consider alternative evidence only if there 
are no third-party prices available. In addition, petitioner contends 
that, by adjusting respondents' reported frit costs instead of 
disregarding such costs, the Department failed to follow the statute. 
Petitioner argues that the Department does not have the discretion to 
adjust below-market prices if actual market prices are available.
    Furthermore, petitioner argues that it would be unreasonable and 
unsupported by the record for the Department to determine that a 
difference between prices reflects a discount when the existence of a 
discount has not been established. Petitioner claims that respondents 
concede that there was no such discount offered, but nevertheless argue 
that recognizing such a discount would not be ``unreasonable.'' 
Petitioner contends that the Department correctly determined in the 
preliminary results, as well as in both the ninth and tenth reviews, 
that respondents failed to account for the entire difference between 
the affiliated and unaffiliated party frit prices.
    Finally, petitioner argues that the Department cannot conclude that 
respondent's reported frit costs reflect market value based on Cinsa's 
purchases from an unaffiliated supplier, because the record is unclear 
as to exactly how much frit Cinsa actually purchased from an 
unaffiliated supplier during the POR. According to petitioner, Cinsa 
and ENASA have not even

[[Page 26940]]

alleged, let alone established, that the frit purchased from an 
unaffiliated supplier is comparable to the frit purchased from ESVIMEX.
    DOC Position: As noted in the ``Changes Since the Preliminary 
Results'' section of this notice above, we have revised our preliminary 
frit calculation in order to increase more accurately the reported 
transfer price by the amount of the unverified discount. See 
Calculation Memo for the Final Results dated May 11, 1999 (Calculation 
Memo).
    To ensure that enamel frit costs reflected fair market prices, we 
increased the reported costs of frit (based upon actual transfer 
prices) by a calculated factor to cover fully the differential in 
prices (inclusive of all documented cost savings) between sales to 
affiliated and unaffiliated parties. By increasing the reported 
affiliated party prices (i.e., transfer prices) by the percentage of 
the cost savings that was not verified, we accounted for the extent to 
which the verified cost savings failed to account for the difference 
between prices to affiliates and prices to unaffiliated parties.
    We do not agree with Cinsa's and ENASA's argument that the 
Department must accept ESVIMEX's frit transfer prices as reported on 
the theory that the transfer price sales were made at a fair market 
value. Pursuant to section 773(f)(2) of the Act, a transaction between 
affiliated parties is considered an appropriate source of ascertaining 
the value of an input if it fairly represents the amount usually 
reflected in sales of subject merchandise in the relevant market. We 
have determined that the respondents adequately supported their claim 
during this review with respect to all cost efficiencies listed on the 
schedule. The Department has previously verified (e.g., in the context 
of the tenth review), that certain quantified differences between 
ESVIMEX's prices to affiliated parties and its prices to unaffiliated 
parties are accounted for by market-based factors, such as differences 
in transportation and packaging costs. However, these cost efficiencies 
did not account for the full extent of the discount afforded only to 
affiliated parties. Although Cinsa and ENASA claim that the 
unaccounted-for portion of the affiliated party discount should be 
attributed to a volume discount, they were unable to quantify and 
support how the volume of their purchases resulted in market-based 
savings equivalent to that unaccounted-for portion of the discount. 
Therefore, in accordance with the Department's longstanding policy of 
considering that transactions between affiliated parties are not at 
arm's length in the absence of sufficient evidence to the contrary, the 
Department determined that this standard had not been met with respect 
to ESVIMEX's frit transfer prices to Cinsa and ENASA, and based its 
cost calculations instead upon the ``adjusted transfer price,'' the 
computation of which is described in the Calculation Memo. Similarly, 
based on the information provided by Cinsa, we decline to find that the 
prices for Cinsa's purchases of enamel frit from an unaffiliated 
producer are an appropriate basis for determining whether their 
purchases from ESVIMEX reflect fair market prices. See Calculation Memo 
for further explanation. In addition, we disagree with respondents' 
contention that ESVIMEX's profit and loss statement for 1997 proves 
that it charges arm's-length prices on its sales of frit. Sales can 
produce some profit and still not be fully responsive to market 
conditions. Thus, we do not agree with the respondents that it is 
sufficient to show that ESVIMEX's frit prices to affiliates are above 
ESVIMEX's COP. The respondents' argument to this effect ignores the 
provisions of section 773(f)(2) of the Act, which also requires a 
comparison of transfer prices and market prices when the latter are 
available, and permits the use of the higher of those prices. 
Accordingly, we compared the transfer prices Cinsa and ENASA paid to 
prices charged to unaffiliated customers. We noted that the prices 
charged to unaffiliated customers were greater than both the affiliated 
transfer prices and the actual costs incurred to produce the frit 
supplied to Cinsa and ENASA. Because the prices charged to unaffiliated 
customers did not reflect certain market-based savings unique to 
ESVIMEX's affiliates, however, we constructed an ``adjusted transfer 
price'' which did reflect these elements. Because this price was higher 
than both ESVIMEX's COP and the transfer price, in conformity with 
section 773(f)(2) and (3) of the Act, we based Cinsa's and ENASA's frit 
cost on the ``adjusted transfer price.''
    Comment 3: Inclusion of Costs Associated with the Acquisition of 
APSA in Cinsa's COP. Petitioner believes that the Department erred by 
failing to include any of the costs associated with the acquisition of 
fixed assets in Cinsa's COP. Petitioner argues that the Department's 
longstanding practice is to recognize gains or losses associated with 
the disposition of fixed assets as manufacturing costs, if the 
equipment was used in the production of the subject merchandise. See 
Tapered Roller Bearings and Parts Thereof, Finished and Unfinished, 
from the People's Republic of China, 62 FR 6173, 6184 (February 11, 
1997). Petitioner argues that, based on Cinsa's claim that it is 
currently using only a portion of the fixed assets purchased as part of 
the APSA acquisition, the Department should (1) determine that Cinsa 
incurred losses through the disposition of fixed assets purchased as 
part of the acquisition of APSA, (2) classify those losses as overhead 
costs, and (3) allocate the overhead costs to production of the subject 
merchandise during the POR. In the alternative, petitioner suggests 
that the Department should, at a minimum, include in Cinsa's COP the 
cost of depreciation with respect to both the machinery in use and the 
machinery in storage.
    Respondents argue that the Department properly did not include the 
costs associated with the acquisition of fixed assets in Cinsa's COP. 
Cinsa argues that there is no record evidence to indicate that these 
fixed assets will be ``written off,'' as claimed by petitioner. 
Furthermore, according to respondents, the Department's practice is to 
consider disposition of fixed assets as part of G&A expense and not as 
overhead expense.
    DOC Position: We agree with both petitioner and respondents, in 
part. We agree with respondents that there is no record evidence to 
indicate that the fixed assets in question will be ``written off.'' 
Cinsa reported that the remaining fixed assets ``are stored for later 
use or sale.'' In fact, contrary to petitioner's argument, it is 
possible that if these fixed assets are sold, they could result in a 
gain, rather than a loss. Therefore, we have not determined that Cinsa 
incurred losses with respect to the disposition of fixed assets 
purchased as part of the acquisition of APSA. With regard to 
petitioner's argument that the cost of depreciation of the fixed assets 
purchased from APSA should be included in Cinsa's costs, we agree with 
petitioner in principle. However, based on our review of Cinsa's 
financial statements on the record, we cannot conclude that 
depreciation of the APSA assets has not already been accounted for in 
the depreciation costs reported by Cinsa. Accordingly, we have made no 
adjustment for the cost of depreciation of fixed assets.
    Comment 4: Reclassification of All U.S. Sales as Constructed Export 
Price (CEP) Sales. Petitioner argues that respondents have failed to 
establish that the role of their U.S. affiliate, CIC, was merely 
ancillary with respect to the sales classified as EP. Specifically, 
petitioner claims that, despite the

[[Page 26941]]

Department's direct request for documentation supporting the 
classification of EP sales (such as telephone logs or bills showing 
that Cinsa's export department communicated by telephone directly with 
U.S. customers), respondents failed to provide any evidence that 
Cinsa's export department, and not CIC, made the sales reported as EP 
sales. Therefore, for purposes of the final results, petitioner argues 
that the Department should reclassify the reported EP sales as CEP 
sales.
    In the alternative, petitioner argues that the Department should 
correct the understatement of ``CEP only'' indirect selling expenses. 
Petitioner claims that, in addition to the expenses already determined 
by the Department to be ``CEP only,'' the Department should also 
include the following expense categories: warehouse expenses (using as 
a ``reasonable proxy'' the annual expenses reported in the February 1, 
1999, reimbursement submission); salesmen's salary expenses; 
professional fee expenses; travel expenses; and United Parcel Service 
(UPS) expenses. Respondents argue that the Department's classification 
of U.S. sales in the preliminary results is consistent with its 
determinations in all prior administrative reviews, including the final 
results of the ninth and tenth administrative reviews. Respondents 
argue that, in response to a Department request, they did in fact 
provide information on CIC's involvement in the sales process, stating 
on the record, for example, that ``for EP transactions the transfer 
price from Cinsa to CIC and the sales price to the unaffiliated U.S. 
customers are established by Cinsa's export sales department.''
    With respect to the calculation of CIC's indirect selling expenses, 
respondents concede that warehousing expenses could be classified as 
``CEP only'' expenses, but they argue that salaries and wages, 
professional fee expenses, travel expenses and UPS (package delivery) 
expenses are administrative expenses rather than selling expenses. 
Therefore, respondents submit that the Department's preliminary results 
correctly calculated the CEP-exclusive expenses and allocated the 
remaining joint CEP/EP expenses among EP and CEP sales. Finally, 
according to respondents, because warehouse rental expenses were 
included within total rental expenses (which are part of the reported 
indirect selling expenses), it is not necessary to revise the 
calculation. However, if the Department decides to refine this 
calculation, respondents provide for this purpose a revised CIC 
indirect selling expenses calculation as part of their rebuttal brief.
    DOC Position: We agree with the respondents that the facts on the 
record of this review show that the sales reported as EP sales should 
continue to be classified as EP sales. Pursuant to section 772(a) and 
(b) of the Act, an EP sale is a sale of merchandise by a producer or 
exporter outside the United States for export to the United States that 
is made prior to importation. A CEP sale is a sale made in the United 
States, before or after importation, by or for the account of the 
producer or exporter or by an affiliate of the producer or exporter. In 
determining whether sales involving a U.S. subsidiary should be 
characterized a EP sales, the Department has examined the following 
criteria: (1) whether the merchandise was shipped directly from the 
manufacturer to the unaffiliated U.S. customer, (2) whether this was 
the customary commercial channel between the parties involved, and (3) 
whether the function of the U.S. affiliate is limited to that of a 
``processor of sales-related documentation'' and a ``communication 
link'' with the unrelated U.S. buyer. See, e.g., Final Results of 
Antidumping Duty Administrative Review: Certain Corrosion-Resistant 
Carbon Steel Flat Products and Certain Cut-to-Length Carbon Steel Plate 
From Canada (Canadian Steel) 63 FR 12725, 12738 (March 16, 1998). In 
the Canadian Steel case, the Department clarified its interpretation of 
the third prong of this test, as follows. ``Where the factors indicate 
that the activities of the U.S. affiliate are ancillary to the sale 
(e.g., arranging transportation or customs clearance, invoicing), we 
treat the transactions as EP sales. Where the U.S. affiliate has more 
than an incidental involvement in making sales (e.g., solicits sales, 
negotiates contracts or prices, or provides customer support), we treat 
the transactions as CEP sales.''
    With respect to the first prong of the test, it is undisputed that 
the merchandise associated with the sales at issue was shipped directly 
to the unaffiliated customer without passing through the U.S. 
affiliate.
    With respect to the second prong of the test, this is the customary 
commercial channel between the parties involved. We note that it is not 
necessary for EP sales to be the predominant channel of trade in a 
given review for it to be the customary channel between the parties 
involved. EP sales have been made with the participation of a U.S. 
affiliate in the investigation and in all subsequent reviews. Thus, 
this is clearly a customary channel of trade.
    With respect to the third prong of the test, the Department 
verified in the tenth administrative review (the most recent 
verification of this order) that, for the sales classified as EP, 
prices are set by the Cinsa export office in Saltillo, Mexico. The 
record of this eleventh review demonstrates that participation of 
affiliate CIC in these sales relates primarily to: issuing payment 
invoices, accepting payment and forwarding it to Mexico, posting 
antidumping duty deposits, and clearing products through U.S. Customs. 
These services are clearly among those the Department considers as 
being ``ancillary'' to the sale. CIC does not solicit or negotiate 
these sales, does not set the price for these sales, and does not 
provide customer support in connection with these sales.
    With regard to petitioner's argument that respondents did not 
completely respond to the Department's request for evidence supporting 
the classification of certain U.S. sales as EP, Cinsa and ENASA 
provided, as part of their June 15, 1998, submission, a phone bill 
listing calls to Laredo, Texas, where the majority of calls from Mexico 
are connected to the U.S. telephone network, as well as a listing of 
calls to various U.S. locations.
    Therefore, for the purposes of this review, we will continue to 
treat as EP those sales which Cinsa and ENASA reported as EP sales.
    With regard to petitioner's argument that the Department should 
correct the alleged understatement of ``CEP only'' indirect selling 
expenses, we agree in part and have included an amount for warehouse 
expenses in ``CEP only'' expenses. For this purpose, we used the annual 
warehouse expenses reported in the February 1,1999, reimbursement 
submission, as a reasonable proxy. However, we agree with respondents 
that salaries and wages, professional fee expenses, travel expenses and 
UPS expenses are not related exclusively to CEP sales. For example, 
salaries and wages may also be paid to CIC personnel responsible for 
accounting, logistics, and administration. There is no evidence on the 
record indicating that these salaries and wages are paid only to 
salesmen involved with CEP sales. Similarly, professional fee expenses, 
travel expenses and UPS expenses relate to all CIC sales, not just CEP 
sales. Therefore we have continued to allocate these expenses among EP 
and CEP sales.
    Comment 5: CIC Packing Expenses. Petitioner argues that the 
Department should deduct packing expenses incurred in the United States 
by CIC as a direct selling expense. Petitioner claims that respondents 
originally stated

[[Page 26942]]

in their April 9, 1998, response that no repacking occurred in the 
United States. However, according to petitioner, an amount for packing 
expenses incurred by CIC in the United States was reported in the 
November 25, 1998, response. Because it is unclear which sales (EP or 
CEP) were repacked by CIC, petitioner asserts that these repacking 
expenses should be allocated between EP and CEP sales, and deducted 
from the starting prices of all U.S. sales.
    DOC Position: We agree, in part, with petitioner and have deducted 
these repacking expenses incurred in the United States by CIC as a 
direct selling expense. See Antifriction Bearings (Other Than Tapered 
Roller Bearings) and Parts Thereof from France, Germany, Italy, Japan, 
Romania, Singapore, Sweden, and the United Kingdom: Final Results of 
Antidumping Duty Administrative Review, 63 FR 33338 (June 18, 1998). 
However, we have allocated the repacking expenses over CEP sales only 
because the vast majority of sales on which repacking is incurred at 
CIC are CEP sales. None of the sales classified as EP sales pass 
through CIC's warehouse en route to the customer for breakdown into 
smaller lots. Although it is possible that some EP sales may be 
repacked at CIC if they are being returned to Mexico, this would be the 
exception because EP sales do not normally physically pass through CIC. 
Accordingly, we have allocated these expenses over CEP sales only. See 
Calculation Memo
    Comment 6: U.S. Inland Freight Expenses. Petitioner contends that, 
for purposes of the final results, the Department should reject 
respondents' calculation of U.S. inland freight expenses, and assign an 
amount based on the facts otherwise available. Petitioner argues that 
respondents' three attempts to explain their reported U.S. inland 
freight expenses are contradictory and not credible. As the facts 
otherwise available, petitioner advocates the use of the highest per-
unit amount reported on Cinsa's and ENASA's U.S. sales tape for each 
CEP sales observation.
    Respondents argue that, because they reported their U.S. inland 
freight expense using the same methodology that was reviewed and 
accepted by the Department in prior administrative reviews, there is no 
basis to resort to the use of facts available. Cinsa and ENASA argue 
that they do not record inland freight expenses in a manner that would 
permit reporting any other way. Accordingly, respondents argue that the 
Department should continue to use the preliminary results methodology 
for purposes of the final results.
    DOC Position: We disagree with petitioner's claim that respondents' 
inland freight expenses are contradictory and not credible. Cinsa and 
ENASA calculated their U.S. inland freight expense by dividing the 
total freight cost incurred by CIC by the total weight of all products 
shipped by CIC. Because all products shipped by CIC were charged 
freight expense on the basis of the weight shipped, Cinsa's and ENASA's 
allocation methodology fairly reported the incurred freight cost for 
light and heavy gauge products during the POR. Moreover, Cinsa and 
ENASA used the same reporting methodology in the instant review as in 
prior reviews, and we have previously found this methodology acceptable 
in light of the respondents' inability to report the expenses at issue 
on a shipment-specific basis. See, Porcelain-on-Steel Cookware from 
Mexico: Final Results of Antidumping Duty Administrative Review, 63 FR 
38373 (July 16, 1998) (POS Cookware Tenth Review Final). See also 
Certain Circular Welded Carbon Steel Pipes and Tubes from Thailand: 
Final Results of Antidumping Duty Administrative Review, 61 FR 1328, 
1333 (January 19, 1996). Accordingly, we have accepted respondents' 
methodology for U.S. inland freight expenses.
    Comment 7: Indirect Selling Expenses Incurred in Mexico. Petitioner 
argues that the failure by the Department to deduct indirect selling 
expenses incurred in Mexico in calculating CEP is contrary to both the 
plain language of the statute and the congressional intent as set forth 
in the legislative history. Petitioner believes that, by specifically 
using the word ``any'' in section 772(d)(1)(D) of the Act, Congress 
expressly required the Department to deduct from the CEP starting price 
all expenses incurred by the exporter that are reasonably attributable 
to CEP sales, regardless of where the expenses were incurred, or 
whether the expenses related to the sale to the affiliated U.S. 
importer or the sale to the first unaffiliated customer in the United 
States. Petitioner cites to cases interpreting the Fair Labor Standards 
Act and the Americans with Disabilities Act and Rehabilitation Act of 
1973 in support of its position. In addition, the petitioner asserts 
that nothing in the House or Senate reports discussing the URAA 
amendments to section 772(d) indicates any intent to limit the 
deduction of indirect selling expenses to expenses incurred in the 
United States or to expenses relating to sales by affiliated importers 
to unaffiliated purchasers. Furthermore, according to petitioner, the 
legislative history confirms that Congress specifically intended no 
change in the types of expenses that the Department deducted from 
exporter's sale price under the prior law, including indirect selling 
expenses related to U.S. sales but incurred in the exporting country. 
Accordingly, for purposes of the final results, petitioner claims that 
the Department should recalculate the dumping margin after deducting 
indirect selling expenses and inventory carrying costs incurred in 
Mexico in the calculation of CEP.
    Respondents argue that the Department's own regulations explicitly 
state that ``[t]he Secretary will not make an adjustment for any 
[additional CEP] expense that is related solely to the sale to an 
affiliated importer in the United States.'' Respondents further contend 
that petitioner's argument that the Department should deduct all 
expenses incurred by the exporter, regardless of whether they can 
reasonably be attributed to ``economic activities occurring in the 
United States'' in calculating CEP is based on an incorrect reading of 
section 772(d)(1) of the Act and ignores the rest of the provision. 
Respondents contend that petitioner gives undue emphasis to the word 
``any'' and cites judicial precedents involving statutory 
interpretations of unrelated statutes. Finally, Cinsa and ENASA note 
that petitioner raised this precise issue in the context of the ninth 
and tenth administrative reviews of this proceeding and the Department 
rejected petitioner's argument in both instances.
    DOC Position: With regard to indirect selling expenses incurred in 
Mexico in support of sales to the United States, we agree with the 
respondents that such expenses do not relate to economic activity in 
the United States. The Department's current practice, as indicated by 
the preamble to the Department's new regulations, is to deduct indirect 
selling expenses incurred in the home market from the CEP calculation 
only if they relate to sales to the unaffiliated purchaser in the 
United States. We do not deduct from the CEP calculation indirect 
selling expenses incurred in the home market relating to the sale to 
the affiliated purchaser.
    Although the statute does not expressly state whether or not its 
terms apply to indirect selling expenses associated both with sales to 
the U.S. affiliates and with the subsequent sales by the U.S. 
affiliates, the overall statutory scheme and the legislative history of 
the URAA, including the Statement of Administrative Action (SAA), guide 
the interpretation of this

[[Page 26943]]

provision as applying only to the sale in the United States.
    After the URAA was implemented, the Department no longer deducted 
selling expenses associated with the foreign producer's sale to the 
affiliate from the U.S. price and the home market price when it 
calculated the margin based on CEP. The SAA describes how the 
Department is to treat these expenses under the post-URAA statute. The 
SAA clearly states that, in calculating the CEP, the Department would 
now deduct from the starting price only expenses ``associated with 
economic activities occurring in the United States.'' See SAA at 823. 
The remedy sought by petitioner would eliminate the equilibrium 
embodied in the post-URAA statute by reducing the U.S. price without a 
comparable reduction to the home market price. See Antidumping Duties: 
Countervailing Duties: Final Rule, 62 FR 27296, 27351-27352 (preamble 
to 19 CFR Sec. 351.402). See also POS Cookware Tenth Review Final at 
38381. Accordingly, because Cinsa and ENASA reported that certain 
indirect selling expenses incurred in Mexico are not associated with 
selling activity occurring in the United States, but are limited to 
selling activities associated with the sale of merchandise in Mexico to 
the affiliated party, CIC, we have not deducted these Mexican indirect 
selling expenses from the CEP calculation.
    Comment 8: Calculation of CEP Profit. Petitioner argues that 
because the Department erred in its calculation of CEP by failing to 
deduct all selling expenses as required by the statute, the Department 
also failed to include all selling expenses in ``total United States 
expenses'' and, therefore, incorrectly calculated CEP profit. 
Petitioner contends that the statute explicitly requires the Department 
to include in ``total United States expenses'' all expenses referred to 
in subsections (d)(1) and (2) of section 772.
    Petitioner further argues that the Department improperly included 
movement expenses in ``total expenses'' for purposes of the CEP profit 
calculation, citing U.S. Steel Group v. United States, 15 F. Supp.2d 
892 (CIT 1998) (U.S. Steel Group). According to petitioner, in U.S. 
Steel Group the Court found that the limitation of ``total expenses'' 
to expenses relating to ``production and sale'' of the merchandise was 
intended to include the same types of expenses that are included in the 
calculation of total U.S. expenses, all of which relate either to 
production or sale of the merchandise, excluding movement expenses.
    Accordingly, petitioner contends that the Department should include 
indirect selling expenses and inventory carrying costs incurred in 
Mexico and exclude movement expenses in determining ``total U. S. 
expenses'' for purposes of the CEP profit calculation.
    Respondents argue that, because the indirect selling expenses 
incurred in Mexico that are ``associated with economic activities in 
the United States'' do not include those expenses incurred by Cinsa and 
ENASA in making the sale to CIC, these expenses are also properly 
omitted from the CEP profit calculation. Respondents assert that, in 
calculating the amount of profit to deduct from the starting price in 
the CEP calculation, the Department properly focused on the amount of 
profit associated with the CEP sales made by CIC to its unaffiliated 
U.S. customers.
    With regard to movement expenses, respondents contend that 
inclusion of these expenses in ``total expenses'' for purposes of 
calculating CEP profit is consistent with the Department's prior 
practice and with the policy bulletin entitled ``Calculation of Profit 
for Constructed Export Price Transactions.'' Moreover, respondents 
argue that, contrary to petitioner's assertions, the CEP profit 
provision of the statute is ambiguous as to whether movement expenses 
should be included in ``total expenses.'' Therefore, according to 
respondents, it is well within the Department's discretion to interpret 
section 772 of the Act to include movement expenses as part of ``total 
expenses.''
    DOC Position: We agree with respondents. In calculating the amount 
of profit to deduct from the starting price in performing the CEP 
calculation, we properly deducted the amount of profit allocated to the 
CEP sales made by CIC to its unaffiliated U.S. customers. Since the 
purpose of the CEP adjustments is to construct the arm's length 
equivalent of a sale from the exporter to the U.S. affiliate by 
subtracting expenses associated with the downstream sale by the 
affiliate to the first unaffiliated customer and profit allocated to 
those expenses, there is no reason to include in this calculation 
expenses associated with the upstream sale by Cinsa's export office.
    As explained in Comment 7, above, the indirect selling expenses 
referred to in section 772(d)(1)(D) of the Act do not include those 
expenses incurred by the foreign producer in making the sale to the 
U.S. affiliate. Moreover, the SAA clarifies that, whether incurred by 
the foreign producer or the U.S. affiliate, the selling expenses to be 
used in the CEP profit calculation are those associated with the sale 
made in the United States. Accordingly, the Mexican indirect selling 
expenses at issue are properly excluded from the CEP profit 
calculation.
    With regard to movement expenses, such expenses are included in 
``total expenses'' pursuant to the Department's policy as embodied in 
Policy Bulletin 97.1 ``Calculation of Profit for Constructed Export 
Price Transactions.'' This policy, in recognizing that total profits 
are based upon expenses that include movement expenses, comes the 
closest to meeting the statutory purpose of the CEP profit calculation.
    With regard to U.S. Steel Group, cited by petitioner, we disagree 
with the Court's holding with respect to this issue, and are seeking 
appeal. Congress has expressly clarified in the SAA, at 824, that 
section 772(d)(3) refers to profit allocable to ``selling, 
distribution, and further manufacturing'' activities in connection with 
the affiliate's U.S. sale. Excluding movement from ``total expenses'' 
would incorrectly discount the proportionality that must logically 
exist between the ``total expenses'' calculated and the profits 
attributable to those expenses, when those profits are based on 
expenses that include movement. Moreover, such an exclusion fails to 
achieve the statutory purpose of removing the profits associated with 
all aspects of the affiliate's sale in the United States. Accordingly, 
for purposes of the final results, we have included movement expenses 
in ``total expenses'' for the CEP profit calculation.
    Comment 9: Ministerial Error in the Concordance Section of the 
Margin Program. Respondents claim that the preliminary margin programs 
cause the concordance to ``loop to end'' before matching to all sales. 
The respondents contend that this programming error results in a number 
of products matching to constructed value (CV) instead of to their 
proper sales price matches. Accordingly, respondents argue that the 
Department should correct the current product concordance sections in 
the margin programs and have provided suggested programming language to 
achieve this result.
    DOC Position: We disagree with respondents. After an analysis and 
testing of the computer programs, we have determined that the use of 
respondents' suggested programming language does not yield a different 
result with regard to product matches. Both the Department's and 
respondents' programming language are equally valid for this step of 
programming. The number of products matching to CV (or to sales price 
matches) does not change

[[Page 26944]]

between the two programs. Accordingly, we have not revised the 
concordance portions of the margin programs as suggested by 
respondents.

Final Results of Review

    As a result of this review, we have determined that the following 
margins exist for the period December 1, 1996 through November 30, 
1997:

------------------------------------------------------------------------
                                                                Margin
                    Manufacturer/Exporter                      (percent)
------------------------------------------------------------------------
Cinsa.......................................................     25.34
ENASA.......................................................     65.23
------------------------------------------------------------------------

    The Department shall determine, and the U.S. Customs Service shall 
assess, antidumping duties on all appropriate entries. We have 
calculated an importer-specific assessment rate based on the ratio of 
the total amount of antidumping duties calculated for the examined 
sales to the total entered value of those same sales. This rate will be 
assessed uniformly on all entries of that particular importer made 
during the POR. The Department will issue appraisement instructions 
directly to the Customs Service.
    Further, the following deposit requirements shall be effective for 
all shipments of the subject merchandise from Mexico that are entered, 
or withdrawn from warehouse, for consumption on or after the 
publication date of the final results of this administrative review, as 
provided for by section 751(a)(1) of the Act: (1) the cash deposit 
rates for Cinsa and ENASA will be the rates established above in the 
``Final Results of Review'' section; (2) for previously investigated 
companies not listed above, the cash deposit rate will continue to be 
the company-specific rate published for the most recent period; (3) if 
the exporter is not a firm covered in this review, or the original 
investigation, but the manufacturer is, the cash deposit rate will be 
the rate established for the most recent period for the manufacturer of 
the merchandise; and (4) the cash deposit rate for all other 
manufacturers or exporters of this merchandise will continue to be 
29.52 percent, the all others rate established in the final 
determination of the less-than-fair-value investigation (51 FR 36435, 
October 10, 1986).
    The deposit requirements, when imposed, shall remain in effect 
until publication of the final results of the next administrative 
review.
    This notice serves as a final reminder to importers of their 
responsibility under 19 CFR Sec. 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.
    This notice serves as the only reminder to parties subject to 
administrative protective order (APO) of their responsibility 
concerning the disposition of proprietary information disclosed under 
APO in accordance with 19 CFR Sec. 353.34(d). Timely written 
notification of return/destruction of APO materials or conversion to 
judicial protective order is hereby requested. Failure to comply with 
the regulation and the terms of an APO is a sanctionable violation.
    This administrative review and notice are in accordance with 
sections 751(a)(1) and 777(i)(1) of the Act and 19 CFR Sec. 351.221.

    Dated: May 11, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-12504 Filed 5-17-99; 8:45 am]
BILLING CODE 3510-DS-P