[Federal Register Volume 69, Number 155 (Thursday, August 12, 2004)]
[Notices]
[Pages 49863-49871]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-18453]


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DEPARTMENT OF COMMERCE

International Trade Administration

[A-588-865]


Notice of Preliminary Determination of Sales at Less Than Fair 
Value and Postponement of Final Determination: Outboard Engines From 
Japan

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

ACTION: Notice of preliminary determination of sales at less than fair 
value and postponement of final determination.

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DATES: Effective August 12, 2004.

FOR FURTHER INFORMATION CONTACT: James Kemp or Shane Subler at (202) 
482-5346 or (202) 482-0189, respectively; AD/CVD Enforcement Office 1, 
Import Administration, Room 1870, International Trade Administration, 
U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., 
Washington, DC 20230.

SUPPLEMENTARY INFORMATION:

Preliminary Determination

    We preliminarily determine that outboard engines from Japan are 
being sold, or are likely to be sold, in the United States at less than 
fair value (LTFV), as provided in section 733 of the Tariff Act of 
1930, as amended (the Act). The estimated margins of sales at LTFV are 
shown in the Suspension of Liquidation section of this notice. 
Interested parties are invited to comment on this preliminary 
determination. We will make our final determination not later than 135 
days after the date of publication of this preliminary determination.

Case History

    This investigation was initiated on January 28, 2004.\1\ See Notice 
of Initiation of Antidumping Duty Investigation: Outboard Engines from 
Japan, 69 FR at 5316 (February 4, 2004) (Initiation Notice). Since the 
initiation of the investigation, the following events have occurred:
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    \1\ The petitioner in this investigation is Mercury Marine, a 
division of Brunswick Corporation (Mercury).
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    The Department of Commerce (the Department) set aside a period for 
all interested parties to raise issues regarding product coverage. See 
Initiation Notice, 69 FR at 5317. On February 24, 2004, the following 
companies submitted timely responses: American Honda Motor Co., Inc., 
and Honda Motor Co., Ltd. (Honda); Nissan Marine Co., Ltd. (Nissan); 
Suzuki Motor Corporation and American Suzuki Motor Corporation 
(Suzuki); Tohatsu Corporation, Tohatsu Marine Corporation, and Tohatsu 
America Corporation (Tohatsu); and Yamaha Motor Company, Ltd., Yamaha 
Marine Company, Ltd., and Yamaha Motor Corporation, USA (Yamaha).
    On February 3, 2004, the Department issued a letter providing 
interested parties an opportunity to comment on the Department's 
proposed model match characteristics and its hierarchy of 
characteristics. The petitioner submitted a timely response on February 
20, 2004. Honda, Nissan, Suzuki, Tohatsu, and Yamaha also submitted 
comments on February 20, 2004. Bombardier Motor Corporation and 
Bombardier Recreational Products Inc. (Bombardier), a domestic 
interested party, submitted a timely response on February 27, 2004. 
Based on these comments, we determined the appropriate model match 
characteristics and included them in the antidumping questionnaire 
issued to Yamaha on March 11, 2004.
    On February 23, 2004, the United States International Trade 
Commission (ITC) preliminarily determined that there is a reasonable 
indication that imports of the products subject to this investigation 
are materially injuring an industry in the United States producing the 
domestic like product. See Outboard Engines from Japan, 69 FR at 9643 
(March 1, 2004) (ITC Preliminary Determination).
    On April 30, 2004, the petitioner requested that the Department 
extend the preliminary determination in this investigation by 30 days. 
Because there were no compelling reasons to deny the request, we 
postponed the preliminary determination to July 16, 2004, under section 
733(c)(1) of the Act. On June 22, 2004, the petitioner made an 
additional request to extend the preliminary deadline 20 days beyond 
the July 16, 2004, deadline. Once again, there were no compelling 
reasons to deny the request, and the Department made a second 
postponement of the preliminary determination to August 5, 2004.

Postponement of Final Determination and Extension of Provisional 
Measures

    Section 735(a)(2) of the Act provides that a final determination 
may be postponed until not later than 135 days after the date of the 
publication of the preliminary determination if, in the event of an 
affirmative preliminary determination, a request for such postponement 
is made by exporters who account for a significant proportion of 
exports of the subject merchandise. Section 351.210(e)(2) of the

[[Page 49864]]

Department's regulations requires that exporters requesting 
postponement of the final determination must also request an extension 
of the provisional measures referred to in section 733(d) of the Act 
from a four-month period until not more than six months. We received a 
request to postpone the final determination from the respondent, 
Yamaha. In its request, the respondent consented to the extension of 
provisional measures to no longer than six months. Since this 
preliminary determination is affirmative, the request for postponement 
is made by an exporter that accounts for a significant proportion of 
exports of the subject merchandise, and there is no compelling reason 
to deny the respondent's request, we have extended the deadline for 
issuance of the final determination until the 135th day after the date 
of publication of this preliminary determination in the Federal 
Register and have extended provisional measures to no longer than six 
months.

Selection of Respondents

    Section 777A(c)(1) of the Act directs the Department to calculate 
individual dumping margins for each known exporter and producer of the 
subject merchandise. Where it is not practicable to examine all known 
producers/exporters of subject merchandise, section 777A(c)(2) of the 
Act permits the Department to investigate either: (1) A sample of 
exporters, producers, or types of products that is statistically valid, 
based on the information available at the time of selection; or (2) 
exporters and producers accounting for the largest volume of the 
subject merchandise that can reasonably be examined. In the petition, 
the petitioner identified six potential producers and exporters of 
outboard engines in Japan: Honda, Nissan, Suzuki, Tohatsu, Tohatsu 
Marine Corporation (TMC), and Yamaha. On March 4, 2004, Tohatsu placed 
information on the record indicating that Nissan is not a producer, 
although it exports engines produced by Tohatsu to the U.S. market.\2\ 
Information placed on the record by the petitioner indicated that it 
was appropriate to treat Tohatsu and TMC as a single entity.\3\
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    \2\ See letter from Tohatsu to the Department, dated March 4, 
2004, at Exhibit 1.
    \3\ See letter from Mercury to the Department, dated February 
27, 2004, at page 2.
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    On March 1, 2004, the Department requested information on the total 
quantity and value of subject merchandise exported to the United States 
during the period of investigation (POI), and the total quantity and 
value of subject merchandise sold in the United States during the POI, 
by the Japanese producers and exporters of the subject merchandise. On 
March 4, 2004, the Department received timely responses from Honda, 
Nissan, Suzuki, Tohatsu, and Yamaha. For selecting respondents, the 
Department considered these statistics and statistics from U.S. Customs 
and Border Protection (CBP). Using these data, we selected Yamaha as 
the mandatory respondent.\4\ On March 11, 2004, the Department issued 
an antidumping questionnaire to Yamaha.
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    \4\ See memo from Shane Subler, International Trade Compliance 
Analyst, to Gary Taverman, Director of Office 5, RE: Selection of 
Respondents, dated March 11, 2004.
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Period of Investigation

    The POI is January 1, 2003, through December 31, 2003. This period 
corresponds to the four most recent fiscal quarters prior to the month 
of filing of the petition (i.e., January, 2004) involving imports from 
a market economy, and is in accordance with our regulations. See 19 CFR 
351.204(b)(1).

Scope of Investigation

    For the purpose of this investigation, the products covered are 
outboard engines (also referred to as outboard motors), whether 
assembled or unassembled; and powerheads, whether assembled or 
unassembled. The subject engines are gasoline-powered spark-ignition, 
internal combustion engines designed and used principally for marine 
propulsion for all types of light recreational and commercial boats, 
including, but not limited to, canoes, rafts, inflatable, sail and 
pontoon boats. Specifically included in this scope are two-stroke, 
direct injection two-stroke, and four-stroke outboard engines.
    Outboard engines are comprised of (1) a powerhead assembly, or an 
internal combustion engine, (2) a midsection assembly, by which the 
outboard engine is attached to the vehicle it propels, and (3) a 
gearcase assembly, which typically includes a transmission and 
propeller shaft, and may or may not include a propeller. To the extent 
that these components are imported together, but unassembled, they 
collectively are covered within the scope of this investigation. An 
``unassembled'' outboard engine consists of a powerhead as defined 
below, and any other parts imported with the powerhead that may be used 
in the assembly of an outboard engine.
    Powerheads are comprised of, at a minimum, (1) a cylinder block, 
(2) pistons, (3) connecting rods, and (4) a crankshaft. Importation of 
these four components together, whether assembled or unassembled, and 
whether or not accompanied by additional components, constitute a 
powerhead for purposes of this investigation. An ``unassembled'' 
powerhead consists of, at a minimum, the four powerhead components 
listed above, and any other parts imported with it that may be used in 
the assembly of a powerhead.
    The scope does not include parts or components (other than 
powerheads) imported separately.
    The outboard engines and powerheads subject to this investigation 
are currently classifiable in the Harmonized Tariff Schedule of the 
United States (HTSUS) at subheadings 8407.21.0040 and 8407.21.0080. 
Although the HTSUS subheadings are provided for convenience and customs 
purposes, the written description of the merchandise under 
investigation is dispositive.

Scope Issues

    In the Initiation Notice, we invited all interested parties to 
raise issues and comment regarding the product coverage under the scope 
of this investigation. We received comments from Honda, Nissan, Suzuki, 
Tohatsu, and Yamaha and rebuttal comments from the petitioner. We have 
preliminarily determined to continue to include engines under 25 
horsepower (hp) and powerheads sold as spare parts in the scope of the 
investigation. We have also preliminarily determined that powerheads 
and completed engines constitute a single class or kind of merchandise.

Outboard Engines Under 25 Horsepower

    Tohatsu requested that the scope of the investigation be revised to 
exclude all outboard engines under 25 hp. Tohatsu argues that the 
Department has the authority to both limit and expand the scope of an 
investigation proposed in a petition.\5\ Tohatsu maintains that 
domestic producers import all or, if not all, the vast majority of 
their engines under 25 hp. According to Tohatsu, the petitioner 
purchases the vast majority of its under 25 hp line from its Japanese 
joint venture, Tohatsu Marine Corporation. The remainder of the 
petitioner's under 25 hp line consists of either limited domestic 
production or outboard engines assembled from powerheads imported from 
Japan.
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    \5\ See, e.g., Mitsubishi Elec. Corp v. United States, 700 F. 
Supp. 538, 555 (CIT 1988), aff'd 898 F.2d 1577 (Fed. Cir. 1990).
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    Further, Tohatsu argues, the emission standards established by the 
U.S. Environmental Protection Agency

[[Page 49865]]

(EPA), which mandate that outboard motor manufacturers reduce their 
average emissions in each year from the 1998 through 2005 model years, 
will prevent the petitioner from manufacturing two-stroke carbureted 
engines under 25 hp after 2006. Tohatsu maintains that this would leave 
the U.S. customers of these engines no choice but to buy an imported 
motor on which antidumping duties have been imposed.
    Finally, Tohatsu argues that small horsepower engines do not 
compete with large engines. According to Tohatsu, engines under 25 hp 
are lightweight, portable, hand-throttle models which do not require 
special factory or dealer-installed rigging. They are used primarily 
for inflatable dinghies and small boats, or as the auxiliary power 
source for sailboats. Large engines, Tohatsu states, are not portable, 
require specialized rigging, and are used as the main power source for 
larger boats and specialty boats where speed is required. Tohatsu 
believes that this lack of interchangeability supports excluding 
engines under 25 hp from the scope of the investigation.
    The petitioner states that outboard engines under 25 hp 
unambiguously come within the literal terms of the petition.\6\ The 
petitioner also argues that the Department gives ``ample deference to 
the petitioners on the definition of the product for which they seek 
relief.'' \7\ Although the petitioner concedes that the Department has 
the ultimate authority to define the scope of the investigation, it 
generally does not alter the petitioner's scope definition except to 
clarify ambiguities in the language or address administrability 
problems.\8\
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    \6\ See letter from the petitioner to the Department, dated 
March 11, 2004, at page 3.
    \7\ See Notice of Final Determination of Sales at Less Than Fair 
Value: Circular Seamless Stainless Steel Hollow Products from Japan, 
65 FR at 42985 (July 12, 2000) and Accompanying Issues and Decision 
Memorandum.
    \8\ See, e.g., id. at 42985.
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    The petitioner states that Mercury does produce domestically a 
range of engines under 25 hp. However, the petitioner notes that it is 
not necessary that the domestic industry produce products identical to 
every item imported or to every single segment of the subject 
merchandise continuum. Further, the petitioner contends that Tohatsu's 
argument that 2-stroke carbureted engines will not be available for 
sale after 2005 due to EPA regulations is incorrect. The petitioner 
states that the EPA regulations impose emission standard levels on 
outboard engines, but do not prohibit specific technologies.
    In addition, the petitioner contends that outboard motors under 25 
hp do compete with other engines. The petitioner argues that a 25 hp 
engine competes with both 20 and 30 hp engines, and that there is no 
clear dividing line at 25 hp that would merit making it a cut-off point 
for the purpose of excluding engines from the scope of the 
investigation.

Analysis

    When the Department receives a petition that meets the requirements 
of the statute, it must initiate an investigation \9\ and, if warranted 
by the evidence, provide the relief requested.\10\ The starting place 
for determining the merchandise that is to be the subject of an 
investigation is the petition itself.\11\ While the Department does 
have the authority to define or clarify the scope of an 
investigation,\12\ it does not use its authority to define the scope of 
an investigation in a manner that would thwart the statutory mandate to 
provide the relief requested in the petition. As a result, absent an 
``overarching reason to modify'' the scope in the petition, the 
Department accepts it.\13\
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    \9\ Sections 702(c)(2) and 732(a)(1) of the Act.
    \10\ Section 731(1) of the Act. The relief sought would apply to 
all subject merchandise that is within the scope of the 
investigations. See section 731(2) of the Act.
    \11\ See 19 CFR 351.225(k)(1) (2001). See also Eckstrom 
Industries, Inc. v. United States, 254 F.3d 1068, 1071-72 (Fed. Cir. 
2001) (citing Smith Corona Corp. v. United States, 915 F.2d 683, 685 
(Fed. Cir. 1990)).
    \12\ See generally Final Determination of Sales at Less Than 
Fair Value: Certain Carbon Alloy Steel Wire Rod from Japan, Comment 
1, 59 FR at 5987, 5988-5989 (Feb. 9, 1994).
    \13\ See Notice of Final Determination of Sales at Less Than 
Fair Value: Certain Softwood Lumber Products from Canada, 67 FR at 
15539 (April 2, 2002) and Accompanying Issues and Decision 
Memorandum at Comment 51; see also 19 CFR 351.225(k) (2001).
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    Engines having 25 hp or less clearly meet the definition of covered 
merchandise in that the scope makes no limitation on horsepower. 
Further, we agree with the petitioner that it is not necessary that the 
domestic industry produce all products covered by the scope. We note, 
however, that Mercury has placed evidence on the record indicating that 
it does produce certain engines under 25 hp. Therefore, since the scope 
language of this case clearly includes engines of 25 hp or less, we 
continue to include them in the scope of the investigation.

Powerheads Imported as Replacement Parts

    Honda and Suzuki requested that powerheads imported as spare parts 
solely for the purpose of repairing outboard engines previously sold by 
the same manufacturer be excluded from the scope of the investigation. 
Both Honda and Suzuki emphasize that they import a limited number of 
powerheads for this purpose. Suzuki states that, with most of these 
imports, the cost of the powerhead was reimbursed as a warranty cost. 
Honda states it does not have any ``sale'' prices for these units, as 
they were used almost exclusively to satisfy warranty claims.
    The petitioner argues that the Department should deny Honda and 
Suzuki's request to exclude powerheads from the scope of the 
investigation based on their intended use. According to the petitioner, 
the proposed exclusion would be impossible to monitor and would present 
an obvious means of circumventing the order. To the extent the 
companies do not have sale prices for these units, the petitioner 
suggests that the Department could excuse respondents from reporting 
these units if the imports are indeed very limited. The petitioner 
asserts, however, that these units should not be excluded from the 
scope.
Analysis
    As discussed above, absent an ``overarching reason to modify'' the 
scope in the petition, the Department accepts it. In the instant case, 
the scope specifically includes powerheads. Attempting to exclude 
certain powerheads from the scope of the investigation based on usage 
would cause significant administrability problems for CBP, should an 
antidumping duty order ensue. Therefore, we continue to include all 
powerheads in the scope of the investigation, regardless of the reason 
for importation.

Treatment of Powerheads as a Separate Class or Kind

    The term ``class or kind'' is equated with the term ``subject 
merchandise'' at section 771(25) of the Act. (This provision defines 
subject merchandise as the class or kind of merchandise within the 
scope of an investigation or other proceeding covered by the statute.) 
The Department bases its determination of whether the merchandise, as 
described in the scope of a proceeding, constitutes a single class or 
kind of merchandise on an evaluation of the criteria set forth in 
Diversified Products v. United States, 572 F. Supp. 883, 889 (CIT 1983) 
(Diversified Products), which look to differences in: (1) The general 
physical characteristics of the merchandise, (2) the expectations of 
the ultimate

[[Page 49866]]

purchaser, (3) the ultimate use of the merchandise, (4) the channels of 
trade in which the merchandise moves, and (5) the manner in which the 
product is advertised or displayed. Both parties addressed the 
Diversified Products criteria.
    Yamaha argues that powerheads should be treated as a separate class 
or kind from completed engines, and that powerheads should be excluded 
from the scope of the investigation. According to Yamaha, the 
Department's practice has been to treat sub-assemblies and semi-
finished products as a separate class or kind.\14\
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    \14\ See, e.g., Color Picture Tubes from Canada, Japan, Republic 
of Korea and Singapore; Negative Final Determinations of 
Circumvention of Antidumping Duty Orders, 56FR at 9667, (March 7, 
1991); Final Determinations of Sales at Less Than Fair Value: 
Certain Alloy and Carbon Hot-Rolled Bars, Rods, and Semifinished 
Products of Special Bar Quality Engineered Steel from Brazil, 58 FR 
at 31496 (June 3, 1993) (Hot-Rolled Steel from Brazil).
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    The petitioner rebuts that the Department has included less than 
complete merchandise within the scope of the investigation with 
complete merchandise in numerous cases, and has not determined less 
than complete and complete merchandise to be separate classes or 
kinds.\15\
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    \15\ See, e.g., Mechanical Transfer Presses From Japan: Final 
Results of Antidumping Duty Administrative Review, 68 at 39515 (July 
2, 2003).
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A. Physical Characteristics
    Yamaha maintains that powerheads have distinct physical 
characteristics from finished outboard motors in that the components 
making up a powerhead constitute a small portion of the overall parts 
and systems incorporated within a finished engine. Yamaha states that 
``according to the petition, powerheads consist of the cylinder block, 
pistons, connecting rods and the crankshaft.'' \16\
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    \16\ See letter from Yamaha to the Department, dated February 
24, 2004, at page 5.
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    The petitioner argues that the general physical characteristics of 
both powerheads and outboard engines are very similar. The outboard 
engine, the petitioner points out, contains all the physical 
characteristics of the powerhead, which is the ``engine'' part of an 
outboard engine. Further, the petitioner states that the scope of the 
investigation defines the minimum defining characteristics of a 
powerhead. A powerhead may also include additional components. The 
petitioner contends that the powerheads covered in the scope of the 
investigation include assemblies that consist of a significant 
percentage of a completed outboard engine. For this reason, the 
petitioner maintains that there is a significant overlap in the general 
physical characteristics of powerheads and outboard engines, and no 
clear dividing line exists.
B. Expectations and End-Uses by the Ultimate Customer
    According to Yamaha, the ultimate purchaser of a finished engine is 
the consumer who buys the engine as part of a boat package and intends 
to use that engine to power the boat. The ultimate purchasers of 
powerheads are outboard motor manufacturers, who intend to incorporate 
this component into their own engines. Because of the large degree of 
further manufacturing necessary to convert a powerhead to a finished 
engine, these two products are not interchangeable--a customer could 
not buy a powerhead to use as the propulsion system on a boat. 
Therefore, Yamaha maintains that the products have entirely different 
end-users and, as a result, different expectations among the particular 
end-users.
    The petitioner maintains that there is almost complete overlap in 
the end uses of outboard engines and powerheads. Outboard engines are 
used to propel a boat; powerheads are used to provide power to the 
outboard engine in order to propel a boat. According to the petitioner, 
because every outboard engine contains a powerhead, the end uses are 
the same. The petitioner concedes that a powerhead alone cannot propel 
a boat, but finds this fact irrelevant because a powerhead has no end 
use unless it is propelling a boat as part of an outboard engine. 
Further, the petitioner points out that powerhead failure is not 
uncommon, and when it happens, the boat owner is faced with a decision 
of whether to buy a powerhead or a completely new engine. According to 
the petitioner, the expectation of that customer, whether he decides to 
buy a powerhead or a completely new engine, is that the non-functional 
outboard engine will be replaced with a functional outboard engine 
capable of providing propulsion to the boat.
C. Channels of Trade
    Because they have completely different purchasers, Yamaha argues, 
powerheads and finished engines of necessity have completely different 
channels of trade. Powerheads are sold to manufacturers; finished 
engines are sold to customers buying a boat package. Yamaha maintains 
that there are consequently different costs associated with each of 
these channels as a great deal of marketing and sales expenditures are 
required to sell finished engines to the retailers and dealers which 
are the ultimate customers. Powerheads have a limited number of 
customers and require much less in the way of marketing and selling 
expenses.
    The petitioner points out that in its Section A response, Yamaha 
stated that the channels of distribution for powerheads are identical 
to those for outboard motors. See Yamaha's Section A questionnaire 
response dated May 18, 2004, at page A-28. In addition, for sales of 
powerheads in the U.S. market, Yamaha stated that there is only one 
channel of distribution for powerheads--dealer distribution. See id. at 
page A-29. Therefore, the petitioner concludes that there is ample 
evidence on the record that powerheads and outboard engines are sold 
through the same channels of trade in both the U.S. and home markets.
D. Manner of Advertising
    With respect to powerheads, Yamaha states that when there is only 
one customer, such as the petitioner, it is not necessary to incur 
excessive selling and marketing expenses. Finished motors, on the other 
hand, require a great deal of additional expenses to market and 
advertise because there is an extremely large customer base. Yamaha 
explains that various forms of print and television advertising are 
necessary to advertise the finished outboard engine and boat package, 
whereas there is virtually no advertising necessary to sell powerheads 
to outboard engine manufactures.
    The petitioner contends that while there is essentially no 
advertising of powerheads alone, the advertising for powerhead sales is 
subsumed within the advertising for the outboard engine. If a company's 
advertising for completed engines persuades a customer to purchase its 
brand of outboard motor, it creates a captive market for its powerheads 
in that the customer must come back to the manufacturer to purchase a 
replacement powerhead should the engine fail. This subtle difference in 
advertising, the petitioner maintains, is not sufficient to outweigh 
the significant overlap among the other four diversified product 
criteria.
Analysis
    We analyzed this issue based on the criteria set forth by the CIT 
in Diversified Products.
A. Physical Characteristics
    The powerhead, which provides the motive force to an outboard 
engine, is a major component of the finished product, and thus shares 
its primary physical characteristics. Additionally, in deciding whether 
physical

[[Page 49867]]

differences in merchandise rise to the level of a class or kind 
distinction, the Department looks for a clear dividing line between 
product groups, not merely the presence or absence of physical 
differences.\17\ The scope of this investigation defines the minimum 
components which make up a powerhead--cylinder block, pistons, 
connecting rods and the crankshaft. It does not, however, define a 
limit for the maximum number of additional parts which can be added to 
the powerhead before it ceases to be properly categorized as a 
powerhead and becomes an outboard engine. The petition lists other 
components which may be attached to the four basic elements of a 
powerhead, such as a starter; alternator; flywheel ignition system; 
flywheel; stator or ECU (programmable); carburetors; electrical 
harness; electrical plate assembly and electrical harness; oil pump; 
throttle linkages; battery cables and connections; and spark plugs.\18\ 
Presumably, other components could be added to a powerhead to the point 
where it might be more properly classified as an outboard engine. 
Consequently, we find that a clear dividing line between powerheads and 
completed outboard engines does not exist. For these reasons, we 
preliminarily determine that the differences in physical 
characteristics between powerheads and outboard engines are not 
significant.
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    \17\ See Final Affirmative Less Than Fair Value Determination: 
Sulfur Dyes, Including Vat Sulfur Dyes, from the U.K., 58 FR at 3253 
(January 8, 1993); see also, Notice of Final Determinations of Sales 
at Less Than Fair Value: Certain Large Diameter Carbon and Alloy 
Seamless Standard, Line and Pressure Pipe from Japan; and Certain 
Small Diameter Carbon and Alloy Seamless Standard, Line and Pressure 
Pipe from Japan and the Republic of South Africa, 65 FR at 25907 
(May 4, 2000) and the Accompanying Issues and Decision Memorandum at 
Comment 1.
    \18\ See Petition for the Imposition of Antidumping Duties: 
Outboard Engines from Japan at Exhibit I-1.
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    We note that in developing the model matching criteria to be used 
in this investigation, all parties agree that products should be 
classified as either powerheads or complete engines. Yamaha's 
classification of its products into those categories has not been 
contested. Nevertheless, this cannot be construed to mean that a clear 
dividing line exists for all manufacturers in all situations.
B. Expectations and End-Uses by the Ultimate Customer
    Completed outboard engines are unquestionably used to power boats. 
Powerheads are fitted into outboard engines either by engine 
manufacturers making new engines or by engine repair facilities using 
the powerhead as a replacement part. Although the powerhead cannot be 
used by itself to power a boat, both the engine manufacturers and 
engine repair facilities expect that, after installation, the powerhead 
will be capable of powering the boat. The finished engine gets its 
propulsion from the powerhead.
    In contrast to Hot-Rolled Steel from Brazil, where the Department 
found that the semi-finished products, hot-rolled bars and rods, ``have 
numerous ultimate uses, including machining, forging, and hot- and 
cold-forming,'' and that ``consumers of hot-rolled bars and rods expect 
a product which meets relatively exacting tolerances, while consumers 
of semifinished products do not require such exacting 
specifications,''\19\ we find that the powerheads in this case have 
only one use--to be incorporated into a completed outboard engine and 
used to propel a boat. Further, the standards to which the powerhead is 
produced determine into which specific type of engine it will be 
incorporated. These standards also determine what level of power the 
consumer, be it an engine manufacturer, a boat-builder, or a boat 
owner, can expect from that engine.
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    \19\ See Hot-Rolled Steel from Brazil at 31496.
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C. Channels of Trade
    Powerheads are sold primarily to engine manufacturers, a different 
customer category than the boat manufacturers, dealers and distributors 
which purchase completed engines. When powerheads are sold as spare or 
replacement parts, they also are sold to boat manufacturers, dealers, 
and distributors. With regard to the petitioner's cites to Yamaha's 
response, we note that in both the U.S. and home market, Yamaha was 
referring to its sales of powerheads as spare and replacement parts. 
The majority of Yamaha's sales of powerheads are going to engine 
manufacturers. There is no evidence on the record that this is not 
typical for the industry. Therefore, it appears that the majority of 
powerhead sales are made via a different channel of trade from that of 
completed outboard engines.
D. Manner of Advertising
    Both parties agree that powerheads are not advertised directly. The 
advertising which does occur in the industry is for the completed 
engine and is often aimed at the boat owner. Yamaha has indicated that 
some of the advertising is for the ``boat package.'' \20\ This would 
indicate that the completed engine, a component of the boat package, 
benefits from the advertising for the whole package. Powerheads can be 
assumed to receive at least some benefit from the advertising done for 
the completed engine, to the extent the customers are convinced that 
the features the powerhead contributes to the final engine are 
desirable. However, we note that if a powerhead goes into an engine 
which is subsequently marketed under another manufacturer's name, this 
advertising benefit is largely eliminated. Therefore, there appears to 
be little similarity in the manner of advertising between powerheads 
and completed engines.
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    \20\ See letter from Yamaha to the Department, dated February 
24, 2004, at page 7.
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Conclusion

    As an initial matter, we disagree with Yamaha that it is the 
Department's practice to treat subassemblies of finished products as a 
separate class or kind. The Department has a large number of cases 
where a petition was filed on products and their major components, in 
which they were treated as a single class or kind.\21\ Further, we find 
Yamaha's reference to Color Picture Tubes to be off-point, as the order 
in question did not cover completed color televisions.
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    \21\ See, e.g., Notice of Initiation: Floor-Standing Metal-Top 
Ironing Tables and Certain Parts Thereof from the People's Republic 
of China, 68 FR at 44040 (July 25, 2003); Final Results of Change 
Circumstances Review, Revocation of the Antidumping Duty Order, and 
Rescission of Administrative Reviews: Large Newspaper Printing 
Presses and Components Thereof, Whether Assembled or Unassembled, 
from Germany, 67 FR at 53996 (April 22, 2002).
---------------------------------------------------------------------------

    In analyzing the Diversified Products criteria, we find that the 
similarities in physical characteristics, end uses, and the 
expectations of the ultimate purchaser outweigh differences in channels 
of trade and advertising. The powerhead is a defining characteristic of 
the completed engine, and there is no clear dividing line between the 
two. We note that because we have determined that powerheads and 
completed outboard engines constitute a single class or kind of 
merchandise, Yamaha's comment regarding removing powerheads from the 
scope becomes moot.

Yamaha's Sales to Mercury

    Yamaha reported sales of certain powerhead models to Mercury's 
affiliate in Japan, Mercury Marine Japan, as U.S. sales. Yamaha assists 
Mercury in shipping these models to the United States. Therefore, 
Yamaha has knowledge that the United States is the final destination of 
the merchandise. However, for sales of other models of

[[Page 49868]]

engines and powerheads to Mercury Marine Japan, Yamaha states that it 
relinquishes the title to the product when it arrives at the Japanese 
port. Yamaha, therefore, asserts that it has no knowledge of the final 
destination of this merchandise and classified these sales as home 
market sales. As support for this classification, Yamaha points to 
Mercury's plants in Belgium and Mexico as evidence that the merchandise 
may go elsewhere than the United States for further processing. 
Although Yamaha is not aware of any Mercury plants in Japan that could 
process powerheads into outboard engines, it does claim that Mercury 
sells finished engines containing the powerheads in question in Japan. 
Furthermore, Yamaha notes that Mercury has sales outside of the United 
States of engines built from the powerhead models in question.\22\
---------------------------------------------------------------------------

    \22\ See Yamaha's second supplemental Sections A, B, and C 
questionnaire response, dated July 22, 2004, at page 2.
---------------------------------------------------------------------------

    In response to Yamaha's classification of these sales as home 
market sales, Mercury submitted an affidavit \23\ stating that all of 
the powerheads and engines purchased by Mercury Marine Japan from 
Yamaha had to undergo further processing at Mercury's Wisconsin plant. 
Mercury claims that all of the engines and powerheads sold by Yamaha to 
Mercury were exported directly from Japan to the United States for 
processing at this plant. The affidavit also states that Mercury's 
plant in Mexico only produces components for outboard engines, and that 
its plant in Belgium has never received powerheads or engines directly 
from Yamaha. The submission attached to the affidavit states that 
neither plant manufactures or further processes the subject 
merchandise. The affidavit also claims that Yamaha officials have 
toured these two plants and are aware of the plants' functions.
---------------------------------------------------------------------------

    \23\ See letter from Mercury to the Department, dated June 29, 
2004.
---------------------------------------------------------------------------

    Although Yamaha acknowledges that one of its officials toured the 
Mercury plant in Belgium, Yamaha claims to have no specific knowledge 
of Mercury's manufacturing and shipping process at this plant.\24\ 
Yamaha also notes that Mercury sells completed engine units containing 
the powerhead models in question outside of the United States. 
Furthermore, Yamaha suggests that Mercury could import the powerheads 
into the United States under a temporary importation bond or send them 
to a bonded warehouse or foreign trade zone.\25\ Mercury could then 
further manufacture the powerheads and re-export them to a third 
country. Under these circumstances, Yamaha argues, the powerheads would 
not be entering the United States for customs purposes.
---------------------------------------------------------------------------

    \24\ See Yamaha's second supplemental Sections A, B, and C 
questionnaire response, dated July 22, 2004, at page 2.
    \25\ See id. at page 3.
---------------------------------------------------------------------------

    The Department has interpreted the phrase ``for exportation to the 
United States'' in section 772(b) of the statute to mean that the 
reseller or manufacturer from whom merchandise was purchased knew or 
should have known at time of sale that merchandise was being exported 
to the United States. See LG Semicon v. United States, 23 CIT 1074 
(December 30, 1999). Based on evidence placed on the record, we 
preliminarily determine that Yamaha knew or should have known that the 
powerheads it sold to Mercury were being exported directly to the 
United States. These sales should, therefore, be classified as U.S. 
sales.
    Bombardier placed the U.S. Securities and Exchange Commission's 
Form 10-K report for Brunswick Corporation, Mercury's parent company, 
on the record of this case.\26\ The document states, ``Mercury Marine 
also manufactures engine component parts at plants in Florida and 
Mexico, and has a facility in Belgium that customizes engines for sale 
into Europe.'' Furthermore, Mercury's Web site describes the Mexican 
plant's function as the ``manufacture of wire harnesses, remote 
controls for Quiksilver, miscellaneous electrical assemblies for 
engines and spare parts, and machining operation for the outboard 
business unit.'' \27\ This publicly available information, combined 
with Yamaha's tours of these plants, indicates Yamaha knew or should 
have known that the powerheads it sold to Mercury Marine Japan were to 
be exported to the United States, the only location where Mercury could 
process the powerheads into completed outboard engines. Information 
placed on the record by Yamaha does not support its contention that it 
had no specific knowledge of Mercury's manufacturing process at the 
plant in Belgium.\28\
---------------------------------------------------------------------------

    \26\ See letter from Bombardier to the Department, dated May 27, 
2004, at Attachment 1.
    \27\ See memorandum from Shane Subler, International Trade 
Compliance Analyst, to file, Re: Mercury's Web site Description of 
its Juarez, Mexico Plant, dated August 5, 2004.
    \28\ See Yamaha's second supplemental Sections A, B, and C 
questionnaire response, dated July 22, 2004, at Exhibit 2.
---------------------------------------------------------------------------

    Yamaha's argument that Mercury had sales outside of the United 
States of engines that are built from the powerhead models in question 
does not change our analysis that Yamaha knew or should have known the 
destination of the powerheads. The first sale of the powerheads is from 
Yamaha to Mercury. We have based our analysis on this sale. The sale of 
complete engines from Mercury to the ultimate purchasers occurs after 
the powerheads have undergone the requisite further manufacturing at 
Mercury's Wisconsin plant. Because the powerheads must go directly to 
the Wisconsin plant after Yamaha sells them to Mercury, the sale of the 
complete engine by Mercury to the ultimate purchaser did not affect our 
analysis. With regard to Yamaha's argument that Mercury may import the 
powerheads under a temporary import bond or to a bonded warehouse or 
foreign trade zone, we note that the duty rate for powerheads during 
the period of investigation was zero. Therefore, Mercury would have had 
little reason to import the powerheads under a temporary import bond or 
to a bonded warehouse or foreign trade zone.
    For these reasons, we preliminarily determine that Yamaha knew or 
should have known that these sales were to be exported to the United 
States. As a result, we have moved all of Yamaha's sales of powerheads 
to Mercury from its home market database to its U.S. database.
    For outboard engines sold by Yamaha to Mercury Marine Japan, 
however, there is no compelling reason to believe Yamaha knew or should 
have known that these engines were destined for the United States. 
Yamaha acknowledges that this merchandise is packed for export. This 
does not, however, indicate that all of these sales were exported to 
the United States. Although Mercury indicated that all of these engines 
were exported to the Wisconsin plant for further processing, it is 
reasonable to believe that a finished engine could be sold directly in 
Japan or to a third country. Without evidence that Yamaha knew or 
should have known these exports were destined for the United States, we 
preliminarily determine that these sales should be excluded from our 
analysis.

Fair Value Comparisons

    To determine whether sales of outboard engines were made in the 
United States at LTFV, we compared the export price (EP) and the 
constructed export price (CEP) to the normal value (NV), as described 
in the Export Price and Constructed Export Price and Normal Value 
sections of this notice. In accordance with section 777A(d)(1)(A)(i) of 
the Act, we calculated weighted-average EPs and

[[Page 49869]]

CEPs. We compared these to weighted-average home market prices in 
Japan.
    The date of sale on which we based our comparisons depended on the 
market. For all of Yamaha's home market sales, Yamaha Motor Marketing 
Japan Co., Ltd. (YMMJ) issues monthly sales invoices to its customers. 
Yamaha reported the date of shipment as either before or equal to the 
invoice date. In keeping with Department practice, we used the date of 
shipment as the date of sale for all home market sales.\29\ In the U.S. 
market, we used the invoice date as the date of sale for the majority 
of transactions. However, some U.S. sales have a shipment date that 
precedes the invoice date. For these sales, we determined that date of 
shipment is the most appropriate date of sale. For sales of powerheads 
to Mercury, we found that the shipment date was the appropriate date of 
sale.
---------------------------------------------------------------------------

    \29\ See, e.g., Synthetic Indigo From the People's Republic of 
China; Notice of Final Determination of Sales at Less Than Fair 
Value, 65 FR 25706 (May 3, 2000) and accompanying Decision 
Memorandum at Comment 11; Final Results of Antidumping 
Administrative Review: Stainless Steel Bar From Japan, 65 FR 13717 
(March 14, 2000) and accompanying Decision Memorandum at Comment 1.
---------------------------------------------------------------------------

Export Price and Constructed Export Price

    For the price to the United States, we used, as appropriate, EP or 
CEP, as defined in sections 772(a) and 772(b) of the Act, respectively. 
Section 772(a) of the Act defines EP as the price at which the subject 
merchandise is first sold before the date of importation by the 
producer or exporter outside of the United States to an unaffiliated 
purchaser in the United States or to an unaffiliated purchaser for 
exportation to the United States, as adjusted under subsection 772(c) 
of the Act.
    Section 772(b) of the Act defines CEP as the price at which the 
subject merchandise is first sold in the United States before or after 
the date of importation by or for the account of the producer or 
exporter of such merchandise or by a seller affiliated with the 
producer or exporter, to a purchaser not affiliated with the producer 
or exporter, as adjusted under subsections 772(c) and (d) of the Act.
    Certain sales by Yamaha are properly classified as EP sales because 
they were made outside the United States by the exporter or producer to 
an unaffiliated customer in the United States prior to the date of 
importation. The remainder of Yamaha's sales are properly classified as 
CEP sales because they were made for the account of Yamaha, by Yamaha's 
U.S. affiliate, Yamaha Motor Corporation, USA, to unaffiliated 
purchasers in the United States.
    In accordance with section 772(c)(2) of the Act, for both EP and 
CEP sales, we made deductions from the starting price for movement 
expenses, discounts, billing adjustments, and rebates, where 
appropriate.
    After reviewing the terms of delivery for EP sales to Mercury, we 
deducted foreign inland freight from the gross price, where 
appropriate. For EP sales to Puerto Rico, the deductions for movement 
expenses depended on the circumstances of the transaction. For direct 
sales to Puerto Rico, we deducted only foreign inland freight and 
foreign brokerage, handling, and port charges. For all other sales to 
Puerto Rico, we deducted foreign inland freight; foreign brokerage, 
handling, and port charges; international freight and insurance; U.S. 
brokerage, handling, and port charges; U.S. warehousing; and U.S. 
inland freight. For CEP sales, movement expenses included foreign 
inland freight and insurance; foreign warehousing; foreign brokerage, 
handling, and port charges; international freight and insurance; U.S. 
inland freight and insurance; U.S. warehousing; and U.S. brokerage, 
handling, and port charges.
    Section 772(d)(1) of the Act provides for additional adjustments to 
calculate CEP. Accordingly, where appropriate, we deducted direct 
selling expenses and indirect selling expenses related to commercial 
activity in the United States. Pursuant to section 772(d)(3) of the 
Act, where applicable, we made an adjustment for CEP profit.
    In addition to these adjustments, we recalculated credit expense 
for sales that had no reported pay dates. For all such sales, we used 
the date of this preliminary determination as date of payment for the 
merchandise. See the Memorandum from James Kemp and Shane Subler, 
International Trade Compliance Analysts, to the File, Re: Analysis 
Memorandum for Yamaha Motor Company, Ltd., Yamaha Marine Company, Ltd., 
and Yamaha Motor Corporation, USA, dated August 5, 2004 (Analysis 
Memorandum).

Normal Value

A. Selection of Comparison Markets

    Section 773(a)(1) of the Act directs the Department to calculate NV 
based on the price at which the foreign like product is sold in the 
home market, provided that the merchandise is sold in sufficient 
quantities (or value, if quantity is inappropriate), and that there is 
no particular market situation that prevents a proper comparison with 
the EP or CEP. Under the statute, the Department will normally consider 
quantity (or value) insufficient if it is less than five percent of the 
aggregate quantity (or value) of sales of the subject merchandise to 
the United States. We found that Yamaha had a viable home market for 
outboard engines. As such, Yamaha submitted home market sales data for 
the calculation of NV.
    In deriving NV, we made adjustments as detailed in the following 
Calculation of Normal Value Based on Home Market Prices section.

B. Cost of Production Analysis

    Based on allegations contained in the petition, and in accordance 
with section 773(b)(2)(A)(i) of the Act, we found reasonable grounds to 
believe or suspect that outboard engine sales were made in Japan at 
prices below the cost of production (COP). See Initiation Notice, 69 FR 
at 5318. As a result, the Department has conducted an investigation to 
determine whether Yamaha made home market sales at prices below their 
respective COPs during the POI within the meaning of section 773(b) of 
the Act. We conducted the COP analysis described below.
1. Calculation of Cost of Production
    In accordance with section 773(b)(3) of the Act, we calculated a 
weighted-average COP based on the sum of the cost of materials and 
fabrication for the foreign like product, plus amounts for the home 
market G&A expenses, including interest expenses, and packing expenses. 
We relied on the COP data submitted by Yamaha in its cost questionnaire 
responses.
2. Test of Home Market Sales Prices
    We compared the weighted-average COP for Yamaha to its home-market 
sales prices of the foreign like product, as required under section 
773(b) of the Act, to determine whether these sales had been made at 
prices below the COP within an extended period of time (i.e., a period 
of one year) in substantial quantities and whether such prices were 
sufficient to permit the recovery of all costs within a reasonable 
period of time.
    On a model-specific basis, we compared the revised COP to the home 
market prices, less any applicable movement charges, discounts, 
rebates, and direct and indirect selling expenses.
3. Results of the COP Test
    We disregarded below-cost sales where (1) 20 percent or more of 
Yamaha's sales of a given product during the POI were made at prices 
below the COP, and thus such sales were made within an extended period 
of time in substantial quantities in

[[Page 49870]]

accordance with sections 773(b)(2)(B) and (C) of the Act, and (2) based 
on comparisons of price to weighted-average COPs for the POI, we 
determined that the below-cost sales of the product were at prices 
which would not permit recovery of all costs within a reasonable time 
period, in accordance with section 773(b)(2)(D) of the Act. We found 
that Yamaha made sales below cost and we disregarded such sales where 
appropriate.

C. Calculation of Normal Value Based on Home Market Prices

    We determined NV for Yamaha as follows. We made adjustments for any 
differences in packing and deducted home market movement expenses, 
rebates, and discounts pursuant to sections 773(a)(6)(A) and 
773(a)(6)(B)(ii) of the Act. In addition, where applicable in 
comparison to EP transactions, we made adjustments for differences in 
circumstances of sale (COS) pursuant to section 773(a)(6)(C)(iii) of 
the Act. We made COS adjustments for Yamaha's EP transactions by 
deducting direct selling expenses incurred for home market sales (e.g., 
credit expense and warranty expenses) and adding U.S. direct selling 
expenses (e.g., credit expenses).
    In addition to these adjustments, we disregarded certain sales in 
the home market database because the merchandise was produced in 
France. See Analysis Memorandum.

D. Calculation of Normal Value Based on Constructed Value

    Section 773(a)(4) of the Act provides that, where NV cannot be 
based on comparison-market sales, NV may be based on CV. Accordingly, 
for those models of outboard engines for which we could not determine 
the NV based on comparison-market sales, either because there were no 
useable sales of a comparable product or all sales of the comparable 
products failed the COP test, we based NV on CV.
    Section 773(e) of the Act provides that the CV shall be based on 
the sum of the cost of materials and fabrication for the imported 
merchandise, plus amounts for selling, general and administrative 
(SG&A) expenses, profit, and U.S. packing costs. We calculated the cost 
of materials and fabrication based on the methodology described in the 
Cost of Production Analysis section, above. We based SG&A and profit on 
the actual amounts incurred and realized by Yamaha in connection with 
the production and sale of the foreign like product in the ordinary 
course of trade for consumption in the comparison market, in accordance 
with section 773(e)(2)(A) of the Act. We used U.S. packing costs as 
described in the Export Price and Constructed Export Price section, 
above.
    We made adjustments to CV for differences in COS in accordance with 
section 773(a)(8) of the Act and 19 CFR 351.410. For comparisons to EP, 
we made COS adjustments by deducting direct selling expenses incurred 
on home-market sales from, and adding U.S. direct selling expenses to, 
CV. For comparisons to CEP, we made COS adjustments by deducting from 
CV direct selling expenses incurred on home-market sales.

E. Level of Trade/Constructed Export Price Offset

    In accordance with section 773(a)(1)(B) of the Act, to the extent 
practicable, we determine NV based on sales in the comparison market at 
the same level of trade as the EP transaction. The NV level of trade is 
that of the starting-price sales in the comparison market. For EP 
sales, the U.S. level of trade is also the level of the starting-price 
sale, which is usually from exporter to importer.
    To determine whether comparison market sales are at a different 
level of trade than EP transactions, we examine stages in the marketing 
process and selling functions along the chain of distribution between 
the producer and the unaffiliated customer. If the comparison-market 
sales are at a different level of trade and the difference affects 
price comparability, as manifested in a pattern of consistent price 
differences between the sales on which NV is based and comparison-
market sales at the level of trade of the export transaction, we make a 
level-of-trade adjustment under section 773(a)(7)(A) of the Act.
    In implementing these principles in this investigation, we obtained 
information from Yamaha about the marketing stages involved in the 
reported U.S. and home market sales, including a description of the 
selling activities performed by the respondent for each channel of 
distribution. In identifying levels of trade for EP and home market 
sales, we considered the selling functions reflected in the starting 
price before any adjustments.
    In conducting our level-of-trade analysis for Yamaha, we examined 
the specific types of customers, the channels of distribution, and the 
selling practices of the respondent. Generally, if the reported levels 
of trade are the same, the functions and activities of the seller 
should be similar. Conversely, if a party reports levels of trade that 
are different for different categories of sales, the functions and 
activities may be dissimilar. We found the following.
    Yamaha reported three channels of distribution in the home market: 
(1) Sales to distributors (HM2); (2) sales to dealers (HM3); and (3) 
sales to Mercury. For purposes of the preliminary determination, we 
disregarded the sales made to Mercury and did not consider such sales 
in our level of trade analysis. See Yamaha's Sales to Mercury above.
    To determine whether HM2 and HM3 constitute separate levels of 
trade in the home market, we examined the marketing process and selling 
functions to these two types of customers. We find that sales made to 
dealers are at a more remote marketing stage than that for sales to 
distributors. We also find that sales to dealers require more intensive 
selling activities. Based on this examination, we preliminarily 
determine that Yamaha sold merchandise at two levels of trade in the 
home market during the POI. One level of trade is for sales made by 
Yamaha to distributors (HM2), and the second level of trade is for 
sales made by Yamaha to dealers (HM3). For a more detailed discussion 
of Yamaha's levels of trade, see Analysis Memorandum.
    In the U.S. market, Yamaha reported two EP channels of 
distribution: (1) Direct sales by Yamaha to Mercury (US1) and (2) 
direct sales to a distributor in Puerto Rico (US2). To determine 
whether separate levels of trade exist for EP sales to the U.S. market, 
we examined the selling functions, the chain of distribution, and the 
customer categories reported in the United States.
    For Yamaha's sales to Mercury, the questionnaire response indicates 
that the respondent conducted invoice/order processing for the 
transactions and in some instances made freight arrangements. 
Nevertheless, we concluded that there were few selling activities 
undertaken to support these sales. Further, comparing Yamaha's sales to 
Mercury to Yamaha's home market sales, we find that there is no level 
of trade in the home market that corresponds to Yamaha's sales to 
Mercury. Therefore, for Yamaha's EP sales to Mercury (US1), we first 
attempted to match to the closest home market level of trade (HM2).
    For Yamaha's EP sales to the distributor in Puerto Rico, we found 
that the number and degree of selling functions closely correspond to 
Yamaha's sales to distributors in the home market. Thus, we determined 
that these two channels of distribution are at the same level of trade. 
For a more detailed discussion of the selling functions corresponding 
to levels of trade for sales to the distributor in

[[Page 49871]]

Puerto Rico, see Analysis Memorandum. To the extent possible, we 
compared Yamaha's EP sales to Puerto Rico to home market sales at the 
same level of trade, HM2.
    When we were unable to find sales of the foreign like product in 
the home market at the same level of trade as the U.S. sales, we 
examined whether a level-of-trade adjustment was appropriate. When we 
compare U.S. sales to home market sales at a different level of trade, 
we make a level-of-trade adjustment if the difference in levels of 
trade affects price comparability. We determine any effect on price 
comparability by examining sales at different levels of trade in a 
single market, the home market. Any price effect must be manifested in 
a pattern of consistent price differences between home market sales 
used for comparison and sales at the equivalent level of trade of the 
export transaction. To quantify the price differences, we calculate the 
difference in the average of the net prices of the same models sold at 
different levels of trade. Net prices are used because any difference 
will be due to differences in level of trade rather than other factors. 
We use the average difference in net prices to adjust NV when NV is 
based on a level of trade different from that of the export sale. If 
there is no pattern of consistent price differences, the difference in 
levels of trade does not have a price effect and, therefore, no 
adjustment is necessary.
    We found that there were consistent price differences between sales 
to HM2 and HM3. Therefore, we made a level-of-trade adjustment when we 
were forced to compare Yamaha's EP sales to Puerto Rico to Yamaha's 
sales at HM3. However, for Yamaha's U.S. sales to Mercury, there was no 
comparable level of trade in the home market. Therefore, we were not 
able to make a level of trade adjustment.
    Regarding its CEP sales in the United States, Yamaha identified 
three channels of distribution, claiming that the three constitute a 
single level of trade: (1) Sales by YMUS to OEM boat builders; (2) 
sales by YMUS to dealers and; (3) sales by G3 to dealers. For CEP 
sales, we examined the market processes and selling activities after 
deducting the U.S. selling expenses and associated profit. As a result, 
there are very few selling activities associated with Yamaha's CEP 
sales. Therefore, we preliminarily find that the CEP level of trade is 
not comparable to either level of trade in the home market.
    Being unable to quantify a level of trade adjustment for CEP sales, 
we matched, where possible, to weighted-average home market sales at 
the closest home market level of trade (HM2) and granted a CEP offset 
pursuant to section 773(a)(7)(B) of the Act. Where we were unable to 
find a match at the closest level of trade, we matched to HM3 and 
granted a CEP offset.

Currency Conversions

    We made currency conversions into U.S. dollars in accordance with 
section 773A of the Act based on exchange rates in effect on the dates 
of the U.S. sale, as obtained from the Federal Reserve Bank (the 
Department's preferred source for exchange rates).

Verification

    In accordance with section 782(i) of the Act, we intend to verify 
all information relied upon in making our final determination for 
Yamaha.

Suspension of Liquidation

    In accordance with section 733(d)(2) of the Act, we are directing 
CBP to suspend liquidation of all entries of outboard engines from 
Japan that are entered, or withdrawn from warehouse, for consumption on 
or after the date of publication of this notice in the Federal 
Register. We are also instructing CBP to require a cash deposit or the 
posting of a bond equal to the weighted-average dumping margin as 
indicated in the chart below. These instructions suspending liquidation 
will remain in effect until further notice.
    The weighted-average dumping margins are provided below:

------------------------------------------------------------------------
                                                             Weighted-
                                                              average
                    Producer/exporter                         margin
                                                           (percentage)
------------------------------------------------------------------------
Yamaha..................................................           22.52
All Others..............................................           22.52
------------------------------------------------------------------------

Disclosure

    The Department will disclose calculations performed in accordance 
with 19 CFR 351.224(b).

International Trade Commission Notification

    In accordance with section 733(f) of the Act, we have notified the 
ITC of the Department's preliminary affirmative determination. If the 
final determination in this proceeding is affirmative, the ITC will 
determine before the later of 120 days after the date of this 
preliminary determination or 45 days after the final determination 
whether imports of outboard engines from Japan are materially injuring, 
or threaten material injury to, the U.S. industry.

Public Comment

    Interested parties are invited to comment on the preliminary 
determination. Interested parties may submit case briefs on the later 
of 50 days after the date of publication of this notice or one week 
after the issuance of the verification reports. See 19 CFR 
351.309(c)(1)(i). Rebuttal briefs, the content of which is limited to 
the issues raised in the case briefs, must be filed within five days 
after the deadline for the submission of case briefs. See 19 CFR 
351.309(d). A list of authorities used, a table of contents, and an 
executive summary of issues should accompany any briefs submitted to 
the Department. Executive summaries should be limited to five pages 
total, including footnotes. Further, we request that parties submitting 
briefs and rebuttal briefs provide the Department with a copy of the 
public version of such briefs on diskette.
    In accordance with section 774 of the Act, we will hold a public 
hearing, if requested, to afford interested parties an opportunity to 
comment on arguments raised in case or rebuttal briefs. If a request 
for a hearing is made, we will tentatively hold the hearing two days 
after the deadline for submission of rebuttal briefs at the U.S. 
Department of Commerce, 14th Street and Constitution Avenue, NW., 
Washington, DC 20230, at a time and in a room to be determined. Parties 
should confirm by telephone the date, time, and location of the hearing 
48 hours before the scheduled date.
    Interested parties who wish to request a hearing, or to participate 
in a hearing if one is requested, must submit a written request to the 
Assistant Secretary for Import Administration, U.S. Department of 
Commerce, Room 1870, within 30 days of the date of publication of this 
notice. Requests should contain: (1) The party's name, address, and 
telephone number; (2) the number of participants; and (3) a list of the 
issues to be discussed. At the hearing, oral presentations will be 
limited to issues raised in the briefs. See 19 CFR 351.310(c). The 
Department will make its final determination no later than 135 days 
after the date of publication of this preliminary determination.
    This determination is issued and published pursuant to sections 
733(f) and 777(i)(1) of the Act.

    Dated: August 5, 2004.
Joseph A. Spetrini,
Acting Assistant Secretary for Import Administration.
[FR Doc. 04-18453 Filed 8-11-04; 8:45 am]
BILLING CODE 3510-DS-U