Color Negative Photographic Paper (CNPP) and Chemical Components Thereof From the Netherlands; Suspension of Investigation

DEPARTMENT OF COMMERCE

[A-421-806]

Color Negative Photographic Paper (CNPP) and Chemical Components

Thereof From the Netherlands; Suspension of Investigation

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice.

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SUMMARY: The Department of Commerce has decided to suspend the

antidumping investigation involving color negative photographic paper

(CNPP) and chemical components thereof from the Netherlands. The basis

for the suspension is an agreement by the Dutch producers/exporters,

which account for substantially all of the known imports of these

products from the Netherlands, to revise their prices to eliminate

sales of this merchandise to the United States at less than fair value.

EFFECTIVE DATE: August 24, 1994.

FOR FURTHER INFORMATION CONTACT: Steven Presing, Office of Agreements

Compliance, Import Administration, International Trade Administration,

U.S. Department of Commerce, 14th Street and Constitution Avenue, NW.,

Washington, DC 20230; telephone: (202) 482-3793.

SUPPLEMENTARY INFORMATION:

Case History

On September 20, 1993, the Department initiated an AD investigation

on CNPP and chemical components thereof from the Netherlands based on a

petition filed by the Eastman Kodak Company. The International Trade

Commission issued an affirmative preliminary injury determination on

October 15, 1993. On March 29, 1994, the Department preliminarily

determined that imports of CNPP from the Netherlands are being sold at

less than fair value in the United States .

Scope of the Agreement

The merchandise covered by this investigation consists of color

negative photographic paper (CNPP) sensitized, unexposed silver-halide

color negative photographic paper, whether in master rolls, smaller

rolls or sheets. Subject chemical components are sensitized (whether

chemically or spectrally) and unsensitized emulsions, couplers and

coupler dispersions used in making color negative photographic paper.

Unsensitized silver-halide emulsions consist of silver-halide

microcrystals dispersed in a gelatin and water matrix after preparation

and washing to remove soluble sales. Unsensitized emulsions are

naturally sensitive to blue and ultraviolet light, but cannot

efficiently convert light to form a color image without further

processing. Sensitized emulsions have been treated to increase their

sensitivity across the entire spectrum and/or treated by the addition

of spectral sensitizing dyes to make the emulsions selectively

sensitive to specific wavelengths of light. A coupler dispersion

consists of a coupler dispersed in a water-gel solution, and may

contain organic solvents, chemicals to stabilize the coupler and other

substances.

Specifically excluded from this suspension agreement are: (1) all

paper and chemical products not used in the silver-halide process which

are used in other imaging technologies; (2) precursors of sensitized

(whether chemically or spectrally) and unsensitized emulsions

(including ``seed emulsions'' that are used exclusively in the process

of producing unsensitized emulsions and do not exceed 0.25 microns in

grain size (in cubic edge length)), couplers and coupler dispersions;

and (3) those items entered under the Harmonized Tariff Schedule of the

United States (HTSUS) subheadings 3707.10.0000, 3707.90.3000,

3707.90.6000, 2933.19.3000, 2933.90.2500 and 2934.90.2000, which are

precursors of couplers, emulsions and coupler dispersions (except

couplers dispersed in water gel solution) or are couplers, emulsions,

and coupler dispersions not for actual use in the color negative

photographic paper production process. Products outside the scope

include toner and developer chemicals used in electrostatic or indirect

imaging processes (e.g., xerography), products used in laser printing,

and instant photography products.

Also excluded from the scope of this investigation are paper that

is designed exclusively for use in graphic arts proofing, equipment and

does not exceed 160 microns in thickness, and emulsions classified

under 3707.10.0000 of the Harmonized Tariff Schedule of the United

States (HTSUS) that are used in the manufacture of monochrome graphic

arts film or paper that are not used in the production of CNPP.

The CNPP subject to this investigation are classifiable under HTSUS

subheadings 3703.10.3030 and 3703.20.3030. Emulsions are currently

classifiable under HTSUS subheadings 3707.10.0000 and 3707.90.3000.

Couplers and coupler dispersions are currently classifiable under HTSUS

subheadings 3707.90.3000, 3707.90.6000, 2933.19.3000, 2933.90.2500 and

2934.90.2000.

Period of Investigation

The period of investigation (POI) is March 1, 1993 through August

31, 1993.

Suspension of Investigation

The Department consulted with the parties to the proceeding and has

considered the comments submitted with respect to the proposed

suspension agreement. We have determined that the agreement will

eliminate sales of this merchandise to the United States at less than

fair value, that the agreement can be monitored effectively, and that

the agreement is in the public interest. We find, therefore, that the

criteria for suspension of an investigation pursuant to section 734 of

the Act have been met. The terms and conditions of the agreement,

signed August 19, 1994, are set forth in Annex 1 to this notice.

Pursuant to section 734(f)(2)(A) of the Act, effective (date of

publication of Federal Register notice), the suspension of liquidation

of all entries, entered or withdrawn from warehouse, for consumption of

CNPP from the Netherlands, as directed in our notice of ``Antidumping

Preliminary Determination of Sales at Less than Fair Value, Color

Negative Photographic Paper and Chemical Components Thereof from the

Netherlands'' is hereby terminated. Any cash deposits on entries of

CNPP from the Netherlands pursuant to that suspension of liquidation

shall be refunded and any bonds shall be released.

Nothwithstanding the suspension agreement, the Department will

continue the investigation if we receive such a request in accordance

with section 734(g) of the Act within 20 days after the date of

publication of this notice. This notice is published pursuant to

section 734(f)(1)(A) of the Act.

Dated: August 19, 1994.

Susan G. Esserman,

Assistant Secretary for Import Administration.

Annex 1: Suspension Agreement; Color Negative Photographic Paper and

Chemical Components Thereof From the Netherlands

Under section 734 of the Tariff Act of 1930, as amended (19 U.S.C.

1673c) (the Act), and 19 CFR 353.18, the U.S. Department of Commerce

(the Department) and the signatory producers/exporters of color

negative photographic paper and chemical components thereof from the

Netherlands enter into this suspension agreement (the Agreement). On

the basis of this suspension agreement, the Department shall suspend

its antidumping investigation initiated on September 20, 1993 (58 FR

50331), with respect to color negative photographic paper and chemical

components thereof from the Netherlands, subject to the terms and

provisions set out below.

(A) Product Coverage

The merchandise subject to this Agreement is the following

merchandise which has the Netherlands as its origin:

(1) For purposes of the Agreement, color negative photographic

paper is all sensitized, unexposed silver-halide color negative

photographic paper, whether in master rolls, smaller rolls or sheets.

Subject chemical components are sensitized (whether chemically or

spectrally) and unsensitized emulsions, couplers, and coupler

dispersions used in making color negative photographic paper.

Unsensitized silver-halide emulsions consist of silver-halide

microcrystals dispersed in a gelatin and water matrix after preparation

and washing to remove soluble salts. Unsensitized emulsions are

naturally sensitive to blue and ultraviolet light, but cannot

efficiently convert light to form a color image without further

processing. Sensitized emulsions have been treated to increase their

sensitivity across the entire spectrum and/or treated by the addition

of spectral sensitizing dyes to make the emulsions selectively

sensitive to specific wavelengths of light. A coupler dispersion

consists of a coupler dispersed in a water-gel solution, and may

contain organic solvents, chemicals to stabilize the coupler, and other

substances.

Specifically excluded from the Agreement are: (1) all paper and

chemical products not used in the silver-halide process which are used

in other imaging technologies; (2) precursors of sensitized (whether

chemically or spectrally) and unsensitized emulsions (including ``seed

emulsions'' that are used exclusively in the process of producing

unsensitized emulsions and do not exceed 0.25 microns in grain size (in

cubic edge length)), couplers and coupler dispersions; and (3) those

items entered under the Harmonized Tariff Schedule of the United States

(HTSUS) subheadings 3707.10.0000, 3707.90.3000, 3707.90.6000,

2933.19.3000, 2933.90.2500 and 2934.90.2000, which are precursors of

couplers, emulsions and coupler dispersions (except couplers dispersed

in water-gel solution) or are couplers, emulsions, and coupler

dispersions not for actual use in the color negative photographic paper

production process. Products outside the scope include toner and

developer chemicals used in electrostatic or indirect imaging processes

(e.g., xerography), products used in laser printing, and instant

photography products.

Also excluded from the scope of the Agreement is paper that is

designed exclusively for use in graphic arts proofing equipment and

does not exceed 160 microns in thickness, and emulsions classified

under subheading 3707.10.0000 of the HTSUS that are used in the

manufacture of monochrome graphic arts film or paper that are not used

in the production of color negative photographic paper.

(2) The color negative photographic papers subject to this

Agreement are classifiable under HTSUS subheadings 3703.10.3030 and

3703.20.3030. Emulsions are currently classifiable under HTSUS

subheadings 3707.10.0000 and 3707.90.3000. Couplers and coupler

dispersions are currently classifiable under HTSUS subheadings

3707.90.3000, 3707.90.6000, 2933.19.3000, 2933.90.2500 and

2934.90.2000.

(B) U.S. Import Coverage

The signatory producers/exporters collectively are the producers

and exporters in the Netherlands which, during the antidumping

investigation on the merchandise subject to the Agreement, accounted

for substantially all (not less than 85 percent) of the subject

merchandise imported into the United States, as provided in the

regulations. The Department may at any time during the period of the

Agreement require additional producers/exporters in the Netherlands to

sign the Agreement in order to ensure that not less than substantially

all imports into the United States are covered by the Agreement.

In reviewing the operation of the Agreement for the purpose of

determining whether this Agreement has been violated or is no longer in

the public interest, the Department will consider imports into the

United States from all sources of the merchandise described in Section

A of the Agreement. For this purpose, the Department will consider

factors including, but not limited to, the following: volume of trade,

pattern of trade, whether or not the reseller is an original equipment

manufacturer, and the reseller's purchase price (PP).

(C) Basis of the Agreement

On and after the effective date of the Agreement, each signatory

producer/exporter individually agrees to make any necessary price

revisions to eliminate completely any amount by which the foreign

market value (FMV) of this merchandise exceeds the U.S. price of its

merchandise subject to the Agreement. For this purpose, the Department

will determine the FMV in accordance with section 773(e) of the Act and

U.S. price in accordance with section 772 of the Act.

(1) For all sales occurring on or after the effective date of the

Agreement through November 30, 1994, each signatory producer/exporter

agrees not to sell its merchandise subject to the Agreement to

unrelated purchasers in the United States at prices that are less than

its FMV, as determined by the Department based on cost information for

the period December 1, 1993, through May 31, 1994, and provided to

parties not later than August 19, 1994; and

(2) For all sales occurring on or after December 1, 1994, each

producer/exporter agrees not to sell its merchandise subject to the

Agreement to any unrelated purchaser in the United States at prices

that are less than its FMV of the merchandise, as determined by the

Department on the basis of information submitted to the Department not

later than the dates specified in section D of the Agreement and

provided to parties not later than November 20, February 20, May 20,

and August 20 of each year. This FMV shall apply to sales occurring

during the fiscal quarter beginning on the first day of the month

following the date the Department provides the FMV, as stated in this

paragraph.

(D) Monitoring

Each signatory producer/exporter will supply to the Department all

information that the Department decides is necessary to ensure that the

producer/exporter is in full compliance with the terms of the

Agreement. As explained below, the Department will provide each

signatory producer/exporter a detailed request for information and

prescribe a required format and method of data compilation, not later

than the beginning of each reporting period.

(1) Sales Information

The Department will require each producer/exporter to report, on

computer tape in the prescribed format and using the prescribed method

of data compilation, each sale (which includes further manufactured

sales) of the merchandise subject to the Agreement, either directly or

indirectly to unrelated purchasers in the United States, including each

adjustment applicable to each sale, as specified by the Department.

The reporting of further manufacturing costs shall be in accordance

with Appendix A.

The first report of sales data shall be submitted to the

Department, on computer tape in the prescribed format and using the

prescribed method of data compilation, not later than December 30,

1994, and shall contain the specified sales information covering the

period August 19, 1994, to November 30, 1994. Subsequent reports of

sales data shall be submitted to the Department not later than March

31, June 30, September 29, and December 30 of each year, and each

report shall contain the specified sales information for the quarterly

period ending one month prior to the due date, except that if the

Department receives information that a possible violation of the

Agreement may have occurred, the Department may request sales data on a

monthly, rather than quarterly basis.

(2) Cost Information

Producer/exporters must request FMVs for all subject merchandise

that will be sold in the United States. For those products which the

producer/exporter is requesting FMVs, the Department will require each

producer/exporter to report: their actual cost of manufacturing;

selling, general and administrative (SG&A) expenses; further

manufacturing costs; and profit data on a quarterly basis, in the

prescribed format and using the prescribed method of data compilation.

Further manufacturing costs will be subtracted from the U.S. sale price

to determine compliance with the FMV. As indicated in Appendix B,

profit from sales to a third country\1\ will be utilized, and country-

specific and consolidated research and development costs will be

reported by the producers/exporters on a quarterly basis. Each such

producer/exporter also must report anticipated increases in production

costs and may report anticipated decreases in production costs in the

quarter in which the information is submitted resulting from factors

such as anticipated changes in production yield, changes in production

process, changes in production quantities or changes in production

facilities.

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\1\The Department calculated this figure based on information

collected during the period of investigation.

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The first report of cost data shall be submitted to the Department

not later than September 29, 1994, and shall contain the specified cost

data covering the period June 1, 1994, through August 31, 1994. Each

subsequent report shall be submitted to the Department not later than

December 30, March 31, June 30, and September 29 of each year, and each

report shall contain specified information for the quarter ending one

month prior to the due date.

(3) Special Adjustment of Foreign Market Value

If the Department determines that the FMV is determined for a

previous quarter was erroneous because the reported costs for that

period were inaccurate or incomplete, or for any other reason, the

Department may adjust FMV in a subsequent period or periods, unless the

Department determines that Section F of the Agreement applies.

(4) Verification

Each producer/exporter agrees to permit full verification of all

cost and sales information semi-annually, or more frequently, as the

Department deems necessary.

(5) Bundling or Other Arrangements

Producers/exporters agree not to circumvent the Agreement. In

accordance with the date set forth in Section D(1) of the Agreement,

producers/exporters will submit a written statement to the Department

certifying that the sales reported herein were not, or are not part of

or related to, any bundling arrangement, on-site processing

arrangement, discounts/free goods/financing package, swap, or other

exchange where such arrangement is designed to circumvent the basis of

the Agreement.

Where there is reason to believe that such an arrangement does

circumvent the basis of the Agreement, the Department will request

producers/exporters to provide within 15 days all particulars regarding

any such agreement, including, but not limited to, sales information

pertaining to covered and non-covered merchandise that is manufactured

or sold by producers/exporters. The Department will accept written

comments, not to exceed 30 pages, from all parties no later than 15

days after the date of receipt of such producer/exporter information.

If the Department, after reviewing all submissions, determines that

such arrangement circumvents the basis of the Agreement, it may, as it

deems most appropriate, utilize one of two options: (1) the amount of

the effective price discount resulting from such arrangement shall be

reflected in FMV in accordance with Section D(3), or (2) the Department

shall determine that the Agreement has been violated and take action

according to the provisions under Section F.

(6) Rejection of Submissions

The Department may reject any information submitted after the

deadlines set forth in this section or any information which it is

unable to verify to its satisfaction. If information is not submitted

in a complete and timely fashion or is not fully verifiable, the

Department may calculate fair value, FMV, and/or U.S. price based on

best information available, as it determines appropriate, unless the

Department determines that Section F applies.

(E) Disclosure and Comment

(1) The Department may make available to representatives of each

domestic party to the proceeding, under appropriately drawn

administrative protective orders, business proprietary information

submitted to the Department during the reporting period as well as the

results of its analysis under section 773 of the Act.

(2) Not later than November 1, February 1, May 1, and August 1 of

each year, the Department will disclose to each producer/exporter the

results and the methodology of the Department's calculations of its

FMV. At that time, the Department may also make available such

information to the domestic parties to the proceeding, in accordance

with this section.

(3) Not later than 7 days after the date of disclosure under

paragraph E(2), the parties to the proceeding may submit written

comments to the Department, not to exceed 15 pages. After reviewing

these submissions, the Department will provide to each producer/

exporter its FMV as provided in paragraph C(2). In addition, the

Department may provide such information to domestic interested parties

as specified in this section.

(F) Violations of the Agreement

If the Department determines that the Agreement is being or has

been violated or no longer meets the requirements of section 734 (b) or

(d) of the Act, the Department shall take action it determines

appropriate under section 734(i) of the Act and the regulations. In the

event that the Department determines that the investigation shall be

resumed, it will be resumed on the basis of the original administrative

record, and the statutes, regulations, policies, and practices in

effect on the effective date of the Agreement.

(G) Provision for Existing Commitments

Pursuant to Appendix C and the terms and conditions outlined below,

producers/exporters may continue shipments under existing commitments

and their existing terms for a period not to exceed 60 days after the

effective date of the Agreement. Recognizing that certain long-term

contracts must be renegotiated and that terminated customers may

require time to find alternative suppliers, the producers/exporters may

continue shipments under existing contract terms for a period, the

deadline of which is equal to the earliest of: (1) the earliest date on

which an alternative supplier can begin supplying the customer; (2) the

earliest date, not to exceed 45 days, on which an existing customer has

renegotiated the contract terms with the producer/exporter, or (3) 60

days after the effective date of the Agreement to customers who are

terminated.

Appendix C contains a list of companies subject to this provision

along with their corresponding requirements that have been approved for

shipment by the producer/exporter under this provision. Total shipments

to a specific company may not exceed that company's corresponding

quantity listed on Appendix C or the aggregate for ``all other'', in

the case for smaller customers. Appendix C also contains the total

shipment quantity allowable under this provision for all companies;

this amount is less than the sum of the individual company requirements

listed on Appendix C. This difference is in anticipation of termination

prior to all permitted shipments taking place to individual customers.

If a company renegotiates or terminates its commitments with the

producer/exporter prior to receiving and accepting its maximum

shipments approved, this provision no longer applies and the company

will be removed from those eligible under Appendix C. The remaining

quantities that have not been shipped, but were approved for a certain

customer, may not be used to increase another customer's corresponding

requirements. The maximum customer-specific quantities listed in

Appendix C cannot be increased to account for undershipments to other

customers. If a customer would like to accept additional supply above

and beyond its corresponding quantity listed in Appendix C, these sales

must be made at or above the applicable FMV.

If a company-specific shipment would bring the total shipments for

all companies to an amount in excess of the total quantity allowable,

the producer/exporter must only ship a quantity that ensures compliance

with the total quantity allowable for all companies. Any quantities in

excess of the total quantity allowable must be sold at or above the

applicable FMV.

The producer/exporter shall notify the Department weekly of each

shipment made under this provision and provide a written statement from

the producer/exporter certifying that each shipment is pursuant to

commitments listed in Appendix C. The certification must contain all

particulars concerning each specific shipment including, but not

limited to, customer, date, quantity, price, and delivery and

particulars concerning the terms and conditions under which the

shipment is being made. The Department will review and approve the

certification upon receipt, thereby monitoring on an individual basis

all such shipments to ensure compliance with this provision. Where

there is reason to believe that shipments, which do not meet the

criteria described above, have nonetheless been shipped under this

provision, and that certification has been made falsely, the producer/

exporter will share within 5 days of any such request from the

Department all particulars regarding such shipment(s). After reviewing

the information, the Department will determine whether the terms of

this provision have been satisfied. If the Department determines that a

certification has been provided falsely or does not meet the

requirements of this provision, Section F of the Agreement applies.

At the end of the 60 days, the Department will calculate upon

request the total difference between the FMV in effect on the date of

shipment and the actual net price at which the goods were sold. The

total difference will be added to the FMV to be in effect during

succeeding period(s). The resulting FMV will apply to a number of units

identical to the number for which a difference was calculated. The

specific units to which this resulting FMV will apply will be those

units first sold in the succeeding quarter.

To the extent necessary, this provision supersedes the dates set

forth in Section C of the Agreement.

(H) Non-Participating Signatories

For signatories which did not receive a questionnaire in the less-

than-fair-value investigation on the subject merchandise, the

Department will issue, if requested in a timely manner, the initial FMV

9 months after the effect date of the Agreement. The total sales volume

made during the 9-month period prior to the issuance of the initial FMV

may not exceed the total sales volume made by the signatory during the

period January 1994 through June 1994. All sales made by the

signatories will be made during this 9-month period at prices that are

not less than fair value.

At the end of the initial 9 months, the Department may upon request

review all sales made during this period. For those sales which have

occurred, the Department will calculate an FMV using information for

the most recent 9-month period available. The Department will calculate

the total difference between the FMV and the actual price at which the

goods were sold. The total difference will be added to the FMV to be in

effect during the succeeding period(s). The resulting FMV will apply to

a number of units identical to the number for which a difference was

calculated. The specific units to which this resulting FMV will apply

will be those units first sold in the succeeding quarter(s).

For all sales of covered merchandise made after the 9-month period

the producer/exporter must request an FMV consistent with Section D(2)

of the Agreement. Signatories will collect and report all information

required by the Department for the calculation of FMV in the format

specified under the Agreement.

The Department will consult with the signatories regarding data

preparation and reporting format in order to ensure that all

requirements are met.

To the extent necessary, this provision supersedes the dates set

forth in Section C of the Agreement.

(I) Re-Export Provision

Imports into the United States of subject merchandise which are

physically incorporated into a further manufactured product by a

related party and are subsequently exported by the related party, are

not covered by the Agreement if the following conditions apply. Upon

request by the producer/exporter, the Department may approve a system

which tracks imports of covered merchandise through production, to the

point of re-export, and allows for verification.

The approved system will reflect an understanding between the

Department and the producer/exporter that there have been a historical

volume of entries of covered merchandise imported into the United

States and subsequently exported in the form of a further manufactured

good by a related party. Understanding this history, and taking into

consideration an element for growth, the Department and the producer/

exporter will agree that the volumes of entries for the duration of the

Agreement will not be inconsistent with that history. The producer/

exporter agrees to provide quarterly reports detailing the entries and

subsequent re-exports which will be subject to verification semi-

annually or more frequently as the Department deems appropriate.

(J) Other Provision

(1) In entering into the Agreement, the signatory producers/

exporters do not admit that any sales of the merchandise subject to the

Agreement have been made at less-than-fair-value.

(2) Changes in U.S. legislation resulting from U.S. implementation

of Article VI of GATT 1994, shall be applicable to the requirements and

obligations of the Agreement for the period beginning on the first full

quarter after the effective date of any such changes.

(K) Termination

The Department will not consider requests for termination of this

suspended investigation prior to August 1999. Termination will be

conducted in accordance with section 353.25 of the Department's

regulations.

Any producer/exporter may terminate the Agreement at any time upon

notice to the Department. Termination shall be effective 60 days after

such notice is given to the Department. Upon termination, the

Department shall follow the procedures outlined in section 734(i)(1) of

the Act.

(L) Definitions

For purposes of the Agreement, the following definitions apply:

(1) U.S. PRICE--means the price at which merchandise is sold by the

producer or exporter to the first unrelated party in the United States,

including the amount of any discounts, rebates, price protection or

ship and debit adjustments, and other adjustments affecting the net

amount paid or to be paid by the unrelated purchaser, as determined by

the Department under section 772 of the Act.

(2) FOREIGN MARKET VALUE--means the constructed value (CV) of the

merchandise, as determined by the Department under section 773 of the

Act and the corresponding sections of the Department's regulations, as

determined by the Department.

(3) PRODUCER/EXPORTER--means (1) the foreign manufacturer or

producer, (2) the foreign producer or reseller which also exports, and

(3) the related person by whom or for whose account the merchandise is

imported into the United States, as defined in section 771(13) of the

Act.

(4) DATE OF SALE--means the date on which the essential terms of

the contract, including price, are agreed and determinable normally the

date of confirmation of sale.

The effective date of the Agreement is the date on which it is

published in the Federal Register.

For Dutch Producers/Exporters.

Fuji Photo Film U.S.A. Inc., and Fuji Photo Film B.V.

Date-----------------------------------------------------------------

William H. Barringer, Esq.,

Willkie, Farr & Gallagher.

For U.S. Department of Commerce.

Date-----------------------------------------------------------------

Susan G. Esserman,

Assistant Secretary for Import Administration.

APPENDIX A--COLOR NEGATIVE PHOTOGRAPHIC PAPER (CNPP) AND CERTAIN

CHEMICAL COMPONENTS FROM THE NETHERLANDS SUSPENSION AGREEMENT

PRINCIPLES OF COST

General Framework

The cost information reported to the Department that will form the

basis of the FMV calculations for purposes of the Agreement must be:

comprehensive in nature and based on a reliable accounting

system (i.e., a system based on well-established standards and can be

tied to the audited financial statements);

representative of the company's costs incurred for the

general class of merchandise;

calculated on a quarterly weighted-average basis of the

plants or cost centers manufacturing the product;

based on fully-absorbed costs of production, including any

downtime;

valued in accordance with generally accepted accounting

principles;

reflective of appropriately allocated common costs so that

the cost necessary for the manufacturing of the product are not

absorbed by other products; and

reflective of the actual cost of producing the product.

Additionally, a single figure should be reported for each cost

component.

Cost of Manufacturing

Costs of manufacturing are reported by major cost category and for

major stages of production. Weighted-average costs are used for a

product that is produced at more than one facility (including further

manufacturing in the United States); based on the cost at each

facility.

Direct materials--cost of those materials which are input into the

production process and physically become part of the final product.

Direct labor--cost identified with a specific product. These costs

are not allocated among products except when two or more products are

produced at the same cost center. Direct labor costs should include

salary, bonus, and overtime pay, training expenses, and all fringe

benefits. Any contracted-labor expense should reflect the actual billed

cost or the actual costs incurred by the subcontractor when the

corporation has influence over the contractor.

Factory overhead--overhead costs include indirect materials,

indirect labor, depreciation, and other fixed and variable expenses

attributable to a production line or factory. Because overhead costs

are typically incurred for an entire production line, an appropriate

portion of those costs must be allocated to covered products, as well

as any other products produced on that line. Acceptable cost

allocations can be based on labor hours or machine hours. Overhead

costs should also reflect any idle or downtime and be fully absorbed by

the products.

Cost of Production (COP)

Is equal to the sum of materials, labor, and overhead (COM) plus

SG&A expenses in the home market (HM).

SG&A--those expenses incurred for the operation of the corporation

as a whole and not directly related to the manufacture of a particular

product. They include corporate general and administrative expenses,

financing expenses, financing expenses, and general research and

development expenses. Additionally, direct and indirect selling

expenses incurred in the HM for sales of the product under

investigation are included. Such expenses are allocated over cost of

goods sold.

Constructed Value

Is equal to the sum of materials, labor, and overhead (COM) and

SG&A expenses plus profit.

Calculation of Suspension Agreement FMVs

FMVs (for purposes of the Agreement) are calculated by adjusting

the CV and are provided for both PP and ESP transactions. In effect,

any expenses uniquely associated with the covered products sold in the

HM are subtracted from the CV, and any such expenses which are uniquely

associated with the covered products sold in the United States are

added to the CV to calculate the FMV.

Purchase price--price at which the exported merchandise is sold to

the first unrelated buyer when the sale occurs prior to the

importation. Typically, when the producer sells directly to an

unrelated U.S. importer or to a foreign trading company for export to

the United States. For PP FMVs, the CV is adjusted for movement costs,

packing costs, and differences in direct selling expenses such as

commissions, credit, warranties, technical services, advertising, and

sales promotion.

Exporter's sales price--price at which the exported merchandise is

sold to the first unrelated buyer after importation into the United

States. Typically, when a related party in the United States makes the

sale. For ESP FMVs, the CV is adjusted similar to PP sales, with

differences for adjustments to U.S. and HM indirect-selling expenses.

Home market direct-selling expenses--expenses that are incurred as

a direct result of a sale. These include such expenses as commissions,

co-op advertising, discounts and rebates, credit, warranty expenses,

freight costs, etc. Certain direct-selling expenses are treated

individually. They include:

Commission expenses--payments to unrelated parties for sales in the

HM.

Credit expenses--expenses incurred for the extension of credit to

the HM customers.

Movement expenses--freight, brokerage and handling, packing, and

insurance expenses.

Home market indirect-selling expenses--fixed portion of a

corporation's expenses and includes such items as salaries of

administrative personnel, warehousing expenses, advertising expenses,

and sales promotion. These expenses will not increase or decrease

depending on production or sales.

U.S. direct-selling expenses--the same as HM direct-selling

expenses except that they are incurred in the United States for sales

in the United States.

Movement expenses--additional expenses incidental to importation

into the United States. Typically include U.S. inland freight,

insurance, brokerage and handling expenses, U.S. Customs duties, and

international ocean, air, or land freight.

U.S. indirect-selling expenses--include general-fixed expenses

incurred by the U.S. sales subsidiary or related exporter for sales to

the United States. They may also include a portion of indirect expenses

incurred in the HM for export sales.

Further Manufacturing

Further manufacturing costs are calculated by taking the sum of

COM, plus SG&A expenses, plus profit in the U.S. market for further

manufacturing. Where further manufacturing modifies the subject

merchandise to the extent that the finished product is no longer within

the scope of the investigation, the Department will provide its

calculations of further manufacturing.

For ESP Transactions

direct materials

+ direct labor

+ factory overhead

= Cost of Manufacturing

+ home market SG&A\2\

---------------------------------------------------------------------------

\2\Home market SG&A must be at least 10 percent of the cost of

manufacturing.

---------------------------------------------------------------------------

= Cost of Production

+ Profit\3\

---------------------------------------------------------------------------

\3\Profit must be at least 8 percent of the cost of production.

---------------------------------------------------------------------------

= Constructed Value

+ U.S. direct-selling expense

+ U.S. indirect-selling expense

+ U.S. commission expense

+ U.S. movement expense

+ U.S. credit expense

- HM direct-selling expense

- HM indirect-selling expense\4\

---------------------------------------------------------------------------

\4\This expense is capped and can be no greater than either (1)

the total of U.S indirect-selling expense or (2) the combined total

of U.S. indirect-selling expense and U.S. commission when no HM

commissions are paid.

---------------------------------------------------------------------------

- HM commission expense

- HM credit expense

= FMV for ESP sales

For PP Transactions

direct materials

+ direct labor

+ factory overhead

= Cost of Manufacturing

+ home market SG&A\5\

---------------------------------------------------------------------------

\5\Home market SG&A must be at least 10 percent of the cost of

manufacturing.

---------------------------------------------------------------------------

= Cost of Production

+ Profit\6\

---------------------------------------------------------------------------

\6\Profit must be at least 8 percent of the cost of production.

---------------------------------------------------------------------------

= Constructed Value

+ U.S. direct-selling expense

+ U.S. commission expense

+ U.S. movement expense

+ U.S. credit expense

- HM direct-selling expense

- HM commission expense\7\

---------------------------------------------------------------------------

\7\If the company does not have HM commissions, HM indirects are

subtracted only up to the amount of U.S. commissions.

---------------------------------------------------------------------------

- HM credit expense

= FMV for PP sales

For Further Manufacturing

direct materials

+ direct labor

+ factory overhead

= Cost of Further Manufacturing

+ further manufacturing SG&A

= Further Manufacturing Cost of Production

+ further manufacturing profit

= Total Further Manufacturing Costs

Appendix B--Profit Calculation

The profit figure represents the profit from sales of CNPP to

unrelated customers in Germany during the period of Investigation

(POI). The Department computed the profit percentage in the

following manner:

Gross Sales Price

--Discounts

--Rebates

--Movement Expenses

=Net Price

Less: Cost of Production (materials, labor, overhead, selling,

general and administrative expenses, interest, other, packing)

=Profit per transaction

Profit percentage=Profit from all transactions/COP from all

transactions

=[ ] percent

BILLING CODE 3510-DS-M

TN24AU94.000

[FR Doc. 94-20869 Filed 8-22-94; 8:45 am]

BILLING CODE 3510-DS-C