Final Determinations of Sales at Less Than Fair Value: Calcium Aluminate Cement, Cement Clinker and Flux From France

DEPARTMENT OF COMMERCE

International Trade Administration

[A-427-812]

Final Determinations of Sales at Less Than Fair Value: Calcium

Aluminate Cement, Cement Clinker and Flux From France

Agency: Import Administration, International Trade Administration,

Commerce.

EFFECTIVE DATE: March 25, 1994.

FOR FURTHER INFORMATION CONTACT: V. Irene Darzenta or Katherine

Johnson, Office of Antidumping Investigations, Import Administration,

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

Washington, DC 20230; telephone (202) 482-6320 or 482-4929,

respectively.

Final Determinations

We determine that calcium aluminate (CA) cement, cement clinker and

flux from France are being, or are likely to be, sold in the United

States at less than fair value, as provided in section 735 of the

Tariff Act of 1930, as amended (the Act). The estimated margins are

shown in the ``Suspension of Liquidation'' section of this notice.

Scope of Investigations

The products subject to these investigations constitute two classes

or kinds of merchandise: (1) CA cement and cement clinker, and (2) CA

flux. The products covered by these investigations include CA cement,

cement clinker and flux, other than white, high purity CA cement,

cement clinker and flux. These products contain by weight more than 32

percent but less than 65 percent alumina and more than one percent each

of iron and silica.

CA cement/cement clinker and CA flux have significantly different

physical characteristics and end uses. CA cement is a specialty

hydraulic non-portland cement used for construction purposes. CA cement

clinker is the primary material used as a binding agent in the

production of CA cement. CA flux is used primarily as a desulfurizer

and/or cleaning agent in the steel manufacturing process. CA clinker

produced for sale as flux cannot be used to produce CA cement, and CA

clinker used to produce CA cement cannot be used as a flux in the

production of steel.

CA flux has a chemical composition distinct from CA cement clinker.

CA cement clinker contains the hydraulic mineral mono-calcium

aluminate, which gives it a molar ratio of lime to alumina of

approximately 1:1. In contrast, CA clinker sold as a flux does not

contain mono-calcium aluminate; it contains the complex mineral

C12A7 (12CaO * 7A12O2), which gives it a molar

ratio of lime to alumina of approximately 2:1. This higher lime to

alumina ratio gives the CA clinker sold as a flux a lower melting point

than CA cement, and also results in extra lime which can bond with

sulfur and other impurities in molten steel. Although CA clinker sold

as flux has some hydraulic properties, it hydrates too quickly to be

used for those properties.

These products are currently classifiable under the following

Harmonized Tariff Schedule of the United States (HTSUS) subheadings:

2523.30.0000 (for aluminous cement) and 2523.10.0000 (for cement

clinker and flux). Although the HTSUS subheadings are provided for

convenience and customs purposes, the written description of the scope

of these investigations remains dispositive.

Period of Investigations

The period of investigation (POI) is October 1, 1992, through March

31, 1993.

Case History

Since the publication of the notice of preliminary determinations

on November 3, 1993 (58 FR 58683), the following events have occurred.

On October 29, 1993, the respondent, Lafarge Fondu International

(LFI) and Lafarge Calcium Aluminates, Inc. (LCA) (collectively

Lafarge), and the petitioner, Lehigh Portland Cement Company (Lehigh),

both requested that the Department postpone the final determinations in

these investigations. Pursuant to these requests, the Department

postponed the final determinations until March 18, 1994 (58 FR 60843,

November 18, 1993).

On November 8, 1993, Lafarge submitted supplemental responses to

the Department's questionnaire for CA flux sales.

On November 15, 1993, petitioner requested that the Department

collect data on respondent's home market sales of CA flux, objecting to

respondent's use of constructed value (CV) based on differences-in-

merchandise (difmer) adjustments calculated inclusive of home market

bagging costs. (See Comment 11 in the ``Interested Party Comments''

section of this notice.) Subsequently, on November 24, 1993, the

Department requested that respondent provide such data.

On November 15 and 24, 1993, respectively, Lafarge and Lehigh

requested a public hearing. On December 14, 1993, the Department issued

a second set of supplemental questionnaires for sales of both classes

or kinds of merchandise. Respondent submitted home market sales data

for flux and responses to the Department's second set of supplemental

questionnaires on December 23 and 29, 1993, respectively. On January 3,

1994, respondent submitted certain corrections to the cost and sales

data reported in its previous questionnaire responses.

The Department conducted verification of the cost and sales

responses of LFI and LCA from January 10 through January 20, 1994, in

Paris, France and Chesapeake, Virginia.

Petitioner and respondent filed case and rebuttal briefs on

February 14 and 18, 1994, respectively. On February 16, 1994, the

parties withdrew their requests for a public hearing which was

scheduled to take place on February 18, 1994.

Such or Similar Comparisons

Regarding the CA cement and cement clinker class or kind of

merchandise, we have determined that the products covered by this

investigation constitute two ``such or similar'' categories of

merchandise: CA cement and CA cement clinker. We made fair value

comparisons on this basis. Since this investigation was initiated

during a period in which certain simplification procedures were in

effect (see the preliminary determination), we conducted the home

market viability test based on the class or kind of merchandise, rather

than on the such or similar category. In order to determine whether

there was a sufficient volume of sales in the home market to serve as a

viable basis for calculating foreign market value (FMV), we compared

the volume of home market sales of CA cement and cement clinker to the

volume of third country sales of CA cement and cement clinker, in

accordance with section 773(a)(1)(B) of the Act, and determined that

the home market was viable for the CA cement and cement clinker class

or kind. During the POI, CA cement clinker was the only product within

the cement class or kind which was imported into the United States from

France. Because there were no sales of such or similar merchandise

(i.e., clinker) in the home market during the POI to compare to U.S.

sales, we made comparisons on the basis of CV (see the ``Fair Value

Comparisons'' section of this notice), in accordance with section

773(a)(2) of the Act.

Regarding the CA flux class or kind of merchandise, we determined

that the products covered by this investigation comprise a single

``such or similar'' category of merchandise and that the home market

was viable. Where there were no sales of identical merchandise in the

home market during the POI to compare to U.S. sales, we made similar

merchandise comparisons on the basis of size (i.e., degree of crushing/

screening), in accordance with section 773(a)(1) of the Act (see the

``Fair Value Comparisons'' section of this notice). We made adjustments

for differences in the physical characteristics of the merchandise, in

accordance with section 773(a)(4)(C) of the Act.

Fair Value Comparisons

To determine whether sales of CA cement and cement clinker, and CA

flux from France were made at less than fair value, we compared United

States Price (USP) to the FMV, as specified in the ``United States

Price'' and ``Foreign Market Value'' sections of this notice. We made

revisions to respondent's reported data, where appropriate, based on

verification findings. For those unreported U.S. cement sales which

respondent claimed were made pursuant to certain graduated requirements

contracts effective prior to the POI, but for which respondent could

not provide documentary evidence substantiating its claim, we based our

analysis on best information available (BIA), in accordance with 19 CFR

353.37. As BIA, we used the highest, non-aberrational margin calculated

for any of respondent's reported U.S. sales of cement. (See Comment 1

in the ``Interested Party Comments'' section of this notice.)

United States Price

All of Lafarge's U.S. sales to the first unrelated purchaser took

place after importation into the United states. Therefore, we based USP

on exporter's sales prices (ESP), in accordance with section 772(c) of

the Act.

For ESP sales of cement, we included in our final analysis certain

reported sales allegedly made under an exclusive supply contract, using

the reported, verified date of purchase order as the date of sale. (See

Comment 2 in the ``Interested Party Comments'' section of this notice.)

For ESP sales of flux, we included in our final analysis certain

reported sales made under a contract which expired but which respondent

claimed had been subsequently renewed prior to the POI, but for which

respondent could not provide documentary evidence substantiating that

claim. For these sales, we used the verified date of purchase order (or

date of invoice where the purchase order date was unavailable) as the

date of sale. (See Comment 9 in the ``Interested Party Comments''

section of this notice.) Furthermore, we excluded certain reported flux

shipments made in October 1992 pursuant to a contract effective prior

to the POI, the price terms of which were modified in November 1992.

(See Comment 10 in the ``Interested Party Comments'' section of this

notice.)

We calculated USP based on packed or bulk, ex-U.S. warehouse or

delivered prices to unrelated customers in the United States. For sales

of both classes or kinds of merchandise, we made deductions, where

appropriate, for foreign inland freight, foreign brokerage and

handling, ocean freight, marine insurance, U.S. brokerage and handling

(including harbor maintenance and customs processing fees), unloading

costs, and U.S. inland freight charges (including loading, freight to

processors' warehouses/transfer freight to warehouses, demurrage and

freight to customer charges, where applicable). For sales of CA flux,

we recalculated foreign inland freight, foreign brokerage and handling,

ocean freight and U.S. inland freight expenses to correct minor

clerical errors found at verification.

For sales of both classes or kinds of merchandise, we also deducted

direct selling expenses including credit and product liability

premiums. We recalculated credit expenses to account for discounts,

where applicable, and to correct minor clerical errors found at

verification with respect to the reported weighted-average short-term

interest rate and the reported payment or shipment dates for certain

transactions. We also recalculated credit for those sales that had

missing payment dates. For those missing payment dates, we used, as

BIA, the date of the final determination as the date of payment. In

addition, we reclassified premiums for product liability insurance as

direct selling expenses, and deducted them from USP accordingly. (See

Comment 15 in the ``Interested Party Comments'' section of this

notice.)

For sales of both classes or kinds of merchandise, we also deducted

indirect selling expenses (including pre-sale warehousing costs

incurred in the United States and selling expenses incurred in France

on the merchandise exported to the United States for further

manufacturing). U.S. indirect selling expenses were recalculated to

exclude certain administrative expenses which were determined to be

more appropriately classified as general and administrative (G&A)

expenses. (See Comment 18 in the ``Interested Party Comments'' section

of this notice.) We also deducted imputed inventory carrying costs for

the period between production of the clinker/flux in France and

shipment of the finished cement/processed flux to the customer in the

United States. For sales of CA cement, we recalculated inventory

carrying costs for the period between production of the clinker in

France and the start of production of the finished cement in the United

States, using the verified weighted-average short-term interest rate in

France for the POI. (See Comment 4 in the ``Interested Party Comments''

section of this notice.)

For sales of CA cement, we also deducted rebates, discounts and

warranty expenses, where applicable. For sales of CA flux, we also

deducted commissions, where appropriate.

In addition, for both classes or kinds of merchandise, we made

deductions, where appropriate, for all value added in the United States

pursuant to section 772(e)(3) of the Act. The value added consists of

the costs associated with further manufacturing the imported products,

including a proportional amount of any profit related to further

manufacturing. We calculated profit attributable to further

manufacturing in the United States by deducting from the sales price

all applicable costs incurred in producing the further manufactured

products. We then allocated the total profit proportionally to all

components of cost. We deducted only the profit attributable to the

value added in the United States. In determining the costs incurred to

produce the further manufactured products, we included: (1) The costs

of manufacture (COM); (2) movement and packing expenses; (3) selling,

general and administrative (SG&A) expenses; and (4) interest expenses.

For both classes or kinds of merchandise, we relied on the

submitted further manufacturing costs except in certain instances where

the costs were not appropriately quantified or valued. We reclassified

certain administrative expenses which were reported as indirect selling

expenses as G&A expenses. We also recalculated financial expenses to

exclude the claimed adjustment for short-term interest income. (See

Comments 18 and 19, respectively, in the ``Interested Party Comments''

section of this notice.)

For CA flux sales, we made an adjustment to U.S. price for the

value-added tax (VAT) paid on the comparison sale in France. In

Federal-Mogul Corporation and The Torrington Company v. United States,

Slip Op. 93-194 (CIT October 7, 1993), the Court of International Trade

(CIT) rejected our revised implementation of the Act's instructions on

taxes and prohibited us from applying a purely tax neutral margin

calculation methodology. Accordingly, we have again changed our

practice, as instructed by the CIT, and adjusted USP for tax by

multiplying the home market tax rate by the U.S. price at the point in

the chain of commerce of the U.S. merchandise that is analogous to the

point in the home market chain of commerce at which the foreign

government applies the home market consumption tax.

In this investigation, the tax levied on the subject merchandise in

the home market is 18.6 percent. We calculated the appropriate tax

adjustment to be 18.6 percent of USP net of adjustments reflected on

the invoice at the time of sale (which, in this case, is the point in

the chain of commerce of the U.S. merchandise that is analogous to the

point in the home market chain of commerce at which the foreign

government applies the home market consumption tax), and added this

amount to the USP. We also calculated the amount of the tax adjustment

that was due solely to the inclusion of price deductions in the

original tax base (i.e., 18.6 percent of the sum of any adjustments,

expenses and charges that were deducted from the tax base). We deducted

this amount from the net USP after all other additions and deductions

had been made. By making this additional tax adjustment, we avoid a

distortion that would cause the creation of a dumping margin even when

pre-tax dumping is zero.

Foreign Market Value

For CA cement and cement clinker, we based FMV on the CV data

submitted for cement clinker because cement clinker was the only such

or similar product within the cement and clinker class or kind which

was imported into the United States during the POI, and there were no

sales of this product in the home market or to unrelated customers in

third countries during the POI. (See the ``Such or Similar

Comparisons'' section of this notice.) For CA flux, we based FMV on

home market sales prices because we found the home market to be viable

for flux sales during the POI, and because the difference-in-

merchandise adjustments between the flux products sold to the United

States and those sold in the home market do not exceed 20 percent. (See

Comment 12 in the ``Interested Party Comment'' sections of this

notice.)

CV-to-Price Comparisons

We calculated CV for cement clinker based on the sum of Lafarge's

cost of materials, fabrication, general expenses, U.S. packing costs

and profit. We relied on the submitted CV information, except in the

following instances where the costs were not appropriately quantified

or valued:

(1) We adjusted material costs for minor errors presented at

verification. We also increased material costs for foreign exchange

losses incurred when reporting raw materials. (See Comment 21 in the

``Interested Party Comments'' section of this notice.)

(2) We adjusted variable overhead to correct minor errors found

at verification.

(3) We did not allow the annualization of fixed costs as we had

done in the preliminary determination because respondent incorrectly

reported labor costs as part of annualized fixed costs, rather than

as variable costs for the POI in accordance with the Department's

instructions; and because respondent failed to provide an

itemization of fixed and variable costs that would allow us to

appropriately reclassify labor costs from annualized fixed costs to

POI variable costs. As BIA, we used the fixed costs, including the

labor costs, incurred during the POI. (See Comment 22 in the

``Interested Party Comments'' section of this notice.)

(4) We revised the COM reported to include an amount for

depreciation on research and development (R&D) assets which was not

originally reported. (See Comment 20 in the ``Interested Party

Comments'' section of this notice.)

(5) We recalculated financial expenses to exclude the claimed

adjustment for short-term interest income. (See Comment 19 in the

``Interested Party Comments'' section of this notice.)

(6) We also recalculated home market selling expenses on a class

or kind basis. (See Comment 6 in the ``Interested Party Comments''

section of this notice.)

In accordance with section 773(e)(1)(B) (i) and (ii) of the Act we

included in CV the recalculated general expenses since these

expenses were greater than the statutory minimum of ten percent of

the COM. We revised respondent's reported profit calculation to

reflect verification findings. (See Comment 8 in the ``Interested

Party Comments'' section of this notice.) Since this amount was

greater than the statutory minimum of eight percent of the sum of

the COM and general expenses, we used the recalculated profit for CV

purposes.

We deducted from CV home market direct selling expenses. We also

deducted home market indirect selling expenses capped by the amount

of U.S. indirect selling expenses attributable to the cement clinker

imported into the United States and further manufactured into

finished cement, in accordance with 19 CFR 353.56(b)(2).

Price-to-Price Comparisons

For sales of flux, we calculated FMV based on packed, ex-factory or

delivered prices to unrelated home market customers. We excluded from

our analysis those sales made to home market customers on a test basis

because they were in unusually small quantities, rather than in the

usual commercial quantities, in accordance with 19 CFR 353.46(a)(1). We

also excluded from our analysis those sales to a home market customer

which were destined for a third country market. (See Comment 16 in the

``Interested Party Comments'' section of this notice.) We made

deductions, where appropriate, for rebates. We also deducted home

market packing costs which were recalculated to exclude the costs of

bagging and G&A expenses. (See Comments 11 and 12 in the ``Interested

Party Comments'' section of this notice.)

Pursuant to section 773(a)(4)(B) and 19 CFR 353.56(a)(2), we also

deducted direct selling expenses including bagging costs, credit,

technical service expenses and product liability premiums. (See

Comments 11, 13 and 15 in the ``Interested Party Comments'' section of

this notice.) We recalculated credit expenses to exclude VAT from the

gross unit prices and to correct minor clerical errors found at

verification with respect to the credit periods reported for certain

transactions. (See Comment 14 in the ``Interested Party Comments''

section of this notice.) We revised respondent's reported technical

service expense calculation, treating the verified travel expense

portion of the calculation as a direct expense and the verified salary

portion as an indirect selling expense. (See Comment 13 in the

``Interested Party Comments'' section of this notice.) In accordance

with the decision in Ad Hoc Committee of AZ-NM-TX-FL Producers of Gray

Portland Cement v. United States, Slip Op. 93-1239 (Fed. Cir., January

5, 1994), we made a circumstance-of-sale adjustment for post-sale home

market movement expenses, namely inland freight and loading charges. We

also deducted from FMV home market indirect selling expenses, including

inventory carrying costs. The deduction for home market indirect

selling expenses was capped by the sum of U.S. indirect selling

expenses and U.S. commissions attributable to the flux imported into

the United States and further manufactured, in accordance with 19 CFR

353.56(b) (1) and (2). Where there was no U.S. commission applicable to

a particular U.S. flux sale, we offset the indirect selling expenses in

the United States with a corresponding deduction for indirect selling

expenses in the home market, capped by the total indirect selling

expenses incurred on the U.S. sale in the manner described above.

We included in FMV the amount of the VAT collected in the home

market. We also calculated the amount of the tax that was due solely to

the inclusion of price deductions in the original tax base (i.e., 18.6

percent of the sum of any adjustments, expenses, charges and offsets

that were deducted from the tax base). We deducted this amount after

all other additions and deductions had been made. By making this

additional tax adjustment, we avoid a distortion that would cause the

creation of a dumping margin even when pre-tax dumping is zero.

We also made an adjustment for physical differences in the

merchandise, in accordance with 19 CFR 353.57. We revised the reported

difmer amount to reflect only the verified variable COM, excluding the

reported costs of bagging associated with the home market products, and

associated G&A expenses and profit. (See Comments 11 and 12 in the

``Interested Party Comments'' section of this notice.)

Verification

As provided in section 776(b) of the Act, we conducted verification

of the information provided by Lafarge by using standard verification

procedures, including the examination of relevant sales, cost and

financial records, and selection of original source documentation.

Currency Conversion

We made currency conversions based on the official exchange rates

in effect on the dates of the U.S. sales as certified by the Federal

Reserve Bank of New York.

Interested Party Comments

Comment 1

Petitioner argues that certain unreported U.S. CA cement sales

alleged by Lafarge to have been made under graduated requirements

contracts effective prior to the POI should be included in the

Department's final analysis. Petitioner notes that at verification

respondent could not provide the Department with any contemporaneous

documentation regarding the acceptance of the essential terms of sale

by the customers associated with these contracts. Petitioner contends

that, despite the fact that respondent believes that these shipments

were based on contracts entered into before the POI, the Department

could not verify the existence or terms of these alleged contracts.

Petitioner also maintains that respondent refused to provide the

relevant data requested by the Department with regard to this issue.

Petitioner further argues that respondent never demonstrated that

the alleged contracts governing these CA cement shipments were made

prior to the POI. According to petitioner, the alleged contracts cover

time periods much earlier than the POI and in fact constitute

unilateral sales proposals made by Lafarge which are not evidence of a

binding commitment between the parties as to quantity and price.

According to petitioner, Lafarge also has not demonstrated that these

shipments were not in excess of the quantity requirements stipulated in

the alleged contracts.

Petitioner believes that, as BIA, the Department should apply a

rate of 198.10 percent, the highest margin alleged in the petition, to

account for these sales.

Respondent maintains that for these CA cement sales the Department

should use the date of the customers' acceptance of the graduated

requirements pricing proposals as the date of sale and exclude these

sales from its final analysis. Respondent believes its pricing

proposals were accepted by the customers when the customers placed

initial purchase orders at the prices specified in the proposals. At

the time these orders were placed, respondent claims the parties had

already orally reached an agreement with LCA regarding the percentage

of their requirements they were committed to purchase from LCA in order

to qualify for each price level specified in the proposals; the orders

provided confirmation of each customer's prior acceptance of LCA's

pricing proposal. Because these initial orders were dated prior to the

POI, respondent argues that the date of sale for the shipments made

during the POI pursuant to these proposals also fell outside the POI

and, therefore, these shipments were properly not reported to the

Department.

Respondent notes, however, that, should the Department disagree

with its reasoning and determine that the shipments pursuant to

graduated requirements contracts should be included in its analysis,

there is no basis for the Department to make adverse inferences or use

``punitive'' BIA. Respondent asserts that it fully disclosed the nature

of its graduated requirements contracts to the Department from the

start of this case, and it had no reason to believe that it should

provide further information about those shipments in the form of a

sales listing. Respondent further notes that it provided a summary of

the quantity and value of the shipments made during the POI under the

graduated requirements contracts in its December 29, 1993, supplemental

questionnaire response, and that, at verification, Department verifiers

retained as an exhibit a listing of all the POI invoices generated

under these contracts with related pricing and other sales data.

Respondent argues that, if the Department decides to include these

sales in the final determination, the sales data examined at

verification should be used to allow proper analysis of these sales.

DOC Position

We agree with petitioner in part. Despite several requests for

information in our questionnaires, Lafarge did not provide

documentation regarding customers' acceptance of the graduated

requirements pricing proposals. For example, Lafarge did not provide

any of the ``initial'' orders allegedly placed pursuant to these

graduated requirements pricing proposals. In addition, respondent did

not offer any indication of the date on which these ``initial'' orders

were placed for purposes of establishing date of sale for these sales.

Furthermore, respondent could not provide at verification any

contemporaneous documentation or other sufficient evidence regarding

acceptance of the terms of sale by customers associated with the

subject graduated requirements contracts or indicating a ``meeting of

the minds'' between the parties with respect to price and quantity,

despite the Department's repeated requests for such evidence. The POI

invoices that we examined at verification that were allegedly generated

pursuant to the pricing proposals and ``initial'' orders gave no

indication of association with the pricing proposals or ``initial''

orders, and respondent provided no other documentation that would

establish such a connection.

Lafarge submitted in its December 29, 1993, response sample pricing

proposals associated with the graduated requirements customers in

question. At verification, we were able to examine in detail only one

of those pricing proposals. This proposal, dated January 9, 1991, was

specifically for 1991 (all the prices and discounts mentioned

referenced 1991 only) and was silent on the effective period of the

terms it quoted. We also reviewed a letter that was dated January 20,

1994, the last day of verification, and was faxed to the respondent on

that day by the customer in question. This letter attempted to show

that the January 9, 1991, pricing proposal constituted the date of the

agreement regarding the essential terms of sale for all sales made to

that customer after that date. This letter also discussed renewal of

the pricing arrangement. However, not only was this letter unclear as

to exactly what kind of agreement the parties had reached pursuant to

the proposal, but it also did not indicate when renewal was discussed.

In accordance with the Department's practice, the date of any such

renewal would constitute a new date of sale. Also in accordance with

our practice, we required some form of documentation attesting to the

date of renewal, yet no documentation apart from the faxed letter was

provided. Lafarge was also unable to provide any such documentation for

the other customers in question.

Without some documentary evidence of a renewal prior to the POI, we

cannot assume that the terms of the January 1991 pricing proposal were

in effect during the POI. See Final Determination of Sales at Less Than

Fair Value: Certain Forged Steel Crankshafts from the Federal Republic

of Germany, 52 FR 28170, 28172 (July 28, 1987) (Crankshafts from the

FRG); and Final Determination of Sales at Less Than Fair Value: Gray

Portland Cement and Clinker from Mexico, 55 FR 29244, 29248 (July 18,

1990) (Gray Portland Cement from Mexico). Because we have no such

evidence, we have determined that the dates of sale for the shipments

at issue are within the POI. Accordingly, we have included them in our

final dumping analysis. We do not think, however, that the pricing

information contained in the invoice listing referred to by respondent

is appropriate for use in our dumping analysis. This data was only

submitted at verification to support the reconciliation of Lafarge's

reported POI sales with its financial statements (information

previously submitted in its responses). For purposes of making CV-to-

price comparisons in our dumping analysis, this listing constitutes new

information under 19 CFR 353.31(a)(i), and was therefore not timely

submitted. It is not the Department's practice to accept new

information at verification, because it leaves no opportunity for

petitioners to analyze the sales reporting and provide deficiency

questions, and no opportunity for petitioners to analyze and comment on

these sales. In addressing this issue previously, we have stated:

The untimely submission of key information * * * precluded the

Department from conducting a reasonable and thorough analysis of

this information prior to the verification, just as petitioners were

unable to comment on the new [information] * * * The purpose of

verification is to establish the accuracy of a response rather than

to reconstruct the information to fit the requirements of the

Department.

Final Result of Sales at Less Than Fair Value; Light-Walled Welded

Rectangular Carbon Steel Tubing from Argentina, 54 FR 13913 (April 6,

1989); Final Determinations of Sales at Less Than Fair Value: Certain

Hot-Rolled Carbon Steel Flat Products and Cold-Rolled Carbon Steel Flat

Products from the Netherlands, 58 FR 37199, 37203 (July 9, 1993).

Even if this listing had been submitted seven days prior to

verification, in accordance with 19 CFR 353.31(a)(i), it did not

contain sufficient data for purposes of dumping analysis. Therefore,

because we did not have complete sales information on the record to

properly analyze these sales, we used BIA.

However, we do not think that use of the petition rate as BIA for

these sales, as suggested by petitioner, is warranted. In this case, we

are using partial BIA because Lafarge has provided responses to our

questionnaires. When we resort to partial BIA, it is our practice to

use the highest non-aberrational margin based on respondent's reported

sales. This is an adverse figure, yet is based on the respondent's

calculated margins. Therefore, we have used as BIA for these sales the

highest, non-aberrational margin calculated for any of respondent's

reported U.S. sales of cement.

Comment 2

Petitioner contends that certain reported U.S. cement sales alleged

to have been made under an exclusive supply contract dated outside the

POI should be included in the Department's analysis. Petitioner argues

that the Department was unable to verify that these sales were in fact

made pursuant to a Master Agreement that Lafarge claims was an

exclusive supply contract. Accordingly, petitioner maintains that

respondent failed verification with respect to these sales.

Furthermore, petitioner contends that, even if the Department had been

able to verify these sales, respondent never had an exclusive supply

contract with this particular customer. Petitioner asserts that the

Master Agreement is neither ``exclusive'' nor a ``contract.''

Therefore, petitioner argues that the Department should determine that

the appropriate date of sale for these particular sales is the date of

invoice, which is within the POI, and the Department should include

these sales in its dumping calculation.

Respondent maintains that the Department should consider the date

of the Master Agreement as the date of sale for the subject sales.

Respondent argues that the blanket purchase orders issued by the

customer prior to the POI indicates the customer's commitment to

purchase its requirements from the respondent for specific products at

the specific prices set by the Master Agreement.

DOC Position

We agree with petitioner. In our deficiency questionnaire of

December 14, 1993, the Department specifically asked the respondent to

support its assertion regarding the ``exclusivity'' of the Master

Agreement. Respondent, in its December 29, 1993, response, could

neither demonstrate that the Master Agreement was ``exclusive,'' nor

what quantity of the subject merchandise the respondent was agreeing to

sell. Rather, Lafarge merely stated that the customer purchased all its

requirements for certain cement products from it and that the ``volume

commitment'' mentioned in the Master Agreement had been agreed to

beforehand. Since we have no documentation demonstrating that a

``meeting of the minds'' regarding both quantity and price occurred

before the POI, we cannot assume, based on respondent's word, that the

Master Agreement is a requirements contract for purposes of

establishing date of sale. (See Crankshafts from the FRG and Gray

Portland Cement from Mexico.) Accordingly, we have determined the

appropriate date of sale for these particular sales to be the date of

purchase order, and we have included them in our final dumping

calculations.

Comment 3

Petitioner argues that the Department should reverse its

preliminary determination that CA cement and CA cement clinker

constitute two such or similar categories. According to petitioner, the

Department's determination was based on the incorrect premises that:

(1) CA cement is not like CA cement clinker in the purposes for which

used, and (2) in all past cases involving intermediate and finished

products the Department has determined that there should be two such or

similar categories. Petitioner contends that there is no question that

CA cement and CA cement clinker constitute only one such or similar

category pursuant to section 1677(16)(C) of the antidumping statute.

According to petitioner, CA cement clinker is like the CA cement it is

used to produce, and the difference-in-merchandise adjustment that

would be required to make fair value comparisons between home market

sales of CA cement and U.S. sales of clinker would be well below the

Department's 20 percent difmer guideline. Petitioner further argues

that because there is no data on the record for home market sales of CA

cement to calculate FMV, the Department should use BIA to determine a

margin for Lafarge's sales of both CA cement and CA cement clinker.

Petitioner believes that, as BIA, the Department should use 41.23

percent, which is the lowest margin alleged in the petition.

Respondent does not believe that there is any reason for the

Department to revisit its decision that CA cement and CA cement clinker

are different such or similar categories at this late stage in the

investigation. Respondent argues that it would be unfair for the

Department to penalize it for failing to report information that the

Department decided not to request. Furthermore, respondent contends

that the statute does not allow the Department to use BIA when the

information at issue was never requested.

DOC Position

We agree with respondent. It was decided early on in these

investigations that CA cement and cement clinker constituted two such

or similar categories of merchandise in accordance with the definition

of similar merchandise under section 771(16)(B)(ii) and (C)(ii) of the

Act, which states that the component materials and uses of the products

must be ``like.'' (See June 15, 1993, Memorandum from Richard W.

Moreland to Barbara R. Stafford Re Such or Similar Categories and

attached Memorandum from Stafford to Moreland). In this case, while

cement and clinker may be made of similar materials, they are not used

for the same purposes. Clinker is used to make cement, and cement is

used to bind things together or to create some structure or form.

Clinker requires further processing to be like cement in the purposes

for which it is used. For these reasons we have held cement and clinker

to constitute different such or similar merchandise categories in this

and past cement cases. Moreover, contrary to petitioner's assertion,

the component materials and uses of products within the class or kind

of merchandise subject to investigation are the determinants in

establishing categories of such or similar merchandise: The 20 percent

difmer rule is not considered by the Department in establishing such or

similar categories.

Comment 4

Respondent maintains that in the preliminary determination the

Department incorrectly deducted from the USP as an indirect selling

expense, inventory carrying costs (ICC) based on an inventory period

including the time between clinker production in France and production

of the finished cement in the United States. Respondent claims that it

did not sell clinker to an unrelated party in the United States, but

rather to its U.S. subsidiary for further processing into cement.

Therefore, the clinker in this case is work-in-process inventory, and

the period between the production of the intermediate clinker product

and the completion of the finished cement product is part of the

production period. Respondent maintains that the Department ordinarily

imputes an ICC for finished goods inventory and almost never imputes

ICC on work-in-process inventory, except for large, made-to-order goods

that are produced as discrete projects. To support its arguments,

respondent cites among other cases the Final Determination of Sales at

Less Than Fair Value: Dynamic Random Access Memory Semiconductors of

One Megabit and Above from the Republic of Korea (58 FR 15467, March

23, 1993) (DRAMs from Korea) and Color Television Receivers from the

Republic of Korea; Final Results of Antidumping Duty Administrative

Review (55 FR 26,255, June 27, 1990) (CTVs from Korea). Furthermore,

citing Final Determination of Sales at Less Than Fair Value: Offshore

Platform Jackets and Piles from Japan (51 FR 11788, April 7, 1986)

(OPJPs from Japan) and the Final Determination of Sales at Less Than

Fair Value: Mechanical Transfer Presses from Japan (55 FR 335, January

4, 1990) (MTPs from Japan), respondent maintains that in the rare

instances in which the Department has imputed ICC on work-in-process

inventory, it classifies those costs as part of the COM, not as selling

expenses.

Petitioner contends that ICC must be calculated to include the time

CA cement clinker is produced in France until the time it is further

manufactured into cement in the United States. Petitioner argues that

both CA clinker and cement will be subject to the scope of any order

that may be issued in this case and, therefore, CA clinker cannot be

considered work-in-process, as respondent suggests.

DOC Position

We agree with petitioner. The Department's general practice in all

further manufacturing cases has been to begin the inventory carrying

period from the time that the product comes off of the production line.

(See e.g., Final Determination of Sales at Less Than Fair Value:

Stainless Steel Wire Rods from France (58 FR 68865, December 29, 1993)

(Wire Rods From France). In this case, we are calculating ICC for the

imported product, which is the clinker that is further manufactured

into finished cement. We distinguish this case from that of CTVs from

Korea, where the product imported into the United States was the

finished merchandise; and OPJPs from Japan and MTPs from Japan, where

the products were large and made-to-order, unlike the subject

merchandise in the instant investigation; and from DRAMs from Korea,

where we made no adjustment regarding the imported merchandise only

where it merely constituted parts of larger and considerably more

complicated modules. Therefore, we have imputed ICC in this case

inclusive of the period between production of the clinker in France and

shipment to the first unrelated customer in the United States, and have

adjusted USP accordingly. Moreover, for the portion of the ICC costs

which reflect the period between production of the clinker in France

and the start of production of the finished cement in the United

States, we recalculated the reported ICC using the short-term interest

rate prevailing in France during the POI.

Comment 5

Respondent argues that the Department should use the U.S.

warehousing costs included in the reported U.S. indirect selling

expenses for CA cement sales. Contrary to what is suggested in the

sales verification report, Lafarge maintains that the reported pre-sale

warehousing costs for one warehouse are consistent with the prices

shown in the warehousing contract examined at verification, and the

pre-sale warehousing costs included in the reported indirect selling

expenses were based on the actual costs incurred and paid by Lafarge,

not on the per ton cost stated in the contract.

DOC Position

We agree. Upon further examination of the documentation reviewed at

verification, we noted that the verified per unit U.S. indirect selling

expenses, reported inclusive of pre-sale warehousing costs, were based

on actual costs incurred. Thus, we have deducted from USP the reported

pre-sale warehousing costs as indirect selling expenses.

Comment 6

Petitioner maintains that indirect selling expenses included in the

CV of CA clinker should be recalculated to include indirect selling

expenses allocated to CA cement as shown in Exhibit 6 of petitioner's

case brief because clinker is of the same class or kind of merchandise

as cement.

Respondent argues against such a recalculation because the channels

of distribution and sales process for CA clinker differ substantially

from those of CA cement. Because the CV of clinker is intended to

provide a surrogate for a home market sales price for clinker based on

the costs and expenses that would be incurred in producing and selling

clinker in the home market, Lafarge appropriately included in CV only

the selling expenses that would be incurred in selling clinker.

DOC Position

We disagree with respondent. Section 773(e)(1)(B) of the Act

provides that CV should include, among other things, ``an amount for

general expenses * * * equal to that usually reflected in sales of

merchandise of the same general class or kind as the merchandise under

consideration.'' We have recalculated indirect selling expenses to

include home market indirect selling expenses for cement using verified

information on the record. We consider cement indirect selling expenses

to be representative of selling expenses of the general class or kind

of merchandise, i.e., all CA products sold within the home market

country.

Comment 7

Petitioner asserts that the Department should make an adjustment to

the G&A expense reported in the CV for clinker to include the

amortization of patents and trademarks which respondent had not

included in the reported G&A amount.

Respondent argues that the amortization of patents and trademarks

was included in the reported G&A expenses.

DOC Position

We agree with respondent. Upon review of the verification exhibits

we found that the reported depreciation costs included the amortization

of patents and trademarks. (See Exhibit 14 and Cost Verification Report

at 12).

Comment 8

Petitioner argues that, for purposes of calculating the CV for

clinker in the final determination, the Department should use the BIA

profit ratio that the Department calculated for the preliminary

determination. Petitioner does not believe the Department should use

the reported profit ratio because this calculation includes data on

sales of non-subject merchandise. Petitioner argues that this profit

ratio expands beyond the CA cement and cement clinker class or kind

and, therefore, should not be used. Petitioner further maintains that

in past cases the Department has consistently rejected the use of

profit based on merchandise other than of the class or kind subject to

investigation.

Respondent contends that the antidumping statute does not require

the Department to use the profit on the ``class or kind'' of

merchandise in its CV calculations. Rather, respondent states that the

statute directs the Department to use the profit rate on the ``general

class or kind,'' indicating an intent that the Department have

flexibility in choosing the appropriate profit rate, and not be limited

solely to the profit on the merchandise comprising the ``class or

kind.''

DOC Position

We agree with respondent. In accordance with section 773(e)(1)(B),

we have used the verified profit rate for all CA products, including

the subject merchandise, sold in France because it represents the

profit experience on sales of the general class or kind of merchandise

in the home market.

Comment 9

Petitioner contends that certain reported U.S. flux sales made

under an expired master order allegedly renewed prior to the POI should

be included in the Department's analysis as sales made during the POI.

Petitioner argues that the master order expired prior to the POI and

was not renewed prior to the POI as respondent claims. Despite

respondent's claim that prior to the POI the parties ``evidenced a

clear intent to continue the contract under the terms specified in the

expired master order'' but failed to renew the contract due to internal

delays, there is no evidence on the record to support respondent's

position. Petitioner argues that implicit renewal of the contract is

not legally binding (i.e., there was no binding agreement between the

parties as to any essential terms of sale at the time shipments of CA

flux were made to this customer during the POI). According to

petitioner, any shipments made to this customer during the POI were

individual spot sales with dates of sale established by the date of the

invoices issued for particular shipments.

Respondent argues that the Department should use the date of the

master order as the date of sale for sales made pursuant to this

contract (which it claims was renewed prior to the POI), and exclude

them from the dumping analysis in the final determination. Although the

original contract expired prior to the POI, Lafarge claims that the

customer continued to purchase from LCA after that date in accordance

with the sales terms set in the original contract. Moreover, respondent

maintains that the orders placed by the customer during the POI

continued to reference the purchase order numbers from the expired

master order. According to respondent, the customer indicated its

intent to re-issue the master order, but had not yet done so because of

internal delays. Based on these facts, respondent maintains that the

shipments to this customer during the POI continued to be governed by

the terms of the original master order even if there was no formal

written agreement to that effect.

DOC Position

We agree with petitioner. The effective date of the subject master

order was prior to the POI. At verification, LCA could not provide any

documentation indicating renewal of the subject master order prior to

the POI. Without some documentary evidence of a renewal of the master

order prior to the POI, we cannot assume, based on respondent's word,

that the essential terms enumerated in the original master order (which

expired three months prior to the POI) governed the subject flux

shipments made during the POI. (See Crankshafts from the FRG and Gray

Portland Cement from Mexico.) Therefore, we have included these sales

in the final determination, using the verified date of purchase order

(or date of invoice where the date of purchase order was unavailable)

as the date of sale.

Comment 10

Respondent argues that certain reported flux shipments made in

October 1992 pursuant to a contract claimed to be effective prior to

the POI, but the price terms of which were modified in November 1992,

should not be included in our final dumping analysis. Respondent claims

that the date of the November 1992 price modification notice should be

used as the date of sale for subsequent sales made to this customer

during the POI. Therefore, respondent asserts that all shipments made

after the November price modification should be included in the

Department's final dumping calculations, while those POI shipments made

prior to the November price modification should be excluded from the

final determination.

DOC Position

We agree. Respondent reported all sales/shipments of flux to the

customer in question pursuant to purchase orders issued during the POI,

because (1) it was unable to locate the original master order for that

customer allegedly dated prior to the POI and (2) the original price

terms changed in November 1992. At verification, although we were

unable to locate the original master agreement or blanket purchase

order for the subject customer, we did find a ``change order'' dated

November 2, 1992, which stipulated a change in price terms effective on

that date. We also examined invoices issued to this customer shortly

before and after the November 2 change order date. Based on our

examination of these invoices, we found that the invoices confirmed

LCA's acceptance of the November 2 change order, because the price per

ton LCA charged the customer changed after that date. In accordance

with these verification findings, we have included in our final dumping

analysis only those shipments made after the November 1992 price

modification, using the November 2, 1992, change order date as the date

of sale for these shipments.

Comment 11

Respondent argues that CV should be the basis for FMV because

including home market bagging costs in variable COM would cause the

difmer adjustment to exceed 20 percent. Respondent states that the bags

used in the home market are not merely packing for shipment, but rather

consumer required packaging; therefore, their costs must be treated as

part of COM. Respondent argues that it would be contrary to the

Department's past practice to classify these bags as packing

``incidental'' to the shipment of the merchandise. To support its

arguments, respondent cites the FMV Calculations performed pursuant to

the 1992 Suspension Agreement in the antidumping duty investigation on

gray portland cement and clinker from Venezuela; Final Determination of

Sales At Less Than Fair Value: Porcelain-on-Steel Cooking Ware from

Taiwan (51 FR 36425, October 10, 1986) (Porcelain-on-Steel Cooking Ware

from Taiwan); Final Determination of Sales At Less Than Fair Value:

Certain Stainless Steel Cooking Ware from the Republic of Korea (51 FR

42873, November 26, 1986) (Stainless Steel Cooking Ware from Korea);

and Washington Red Raspberry Commission v. United States (859 F.2nd.

898, 905 (Fed. Cir. 1988)).

Furthermore, respondent argues that the bags used for home market

packing have a number of special features unrelated to shipment: (1)

they have built-in handles that facilitate use of a crane to lift the

bag into the ladle or furnace of a steel mill; (2) they are constructed

of non-permeable polymer material that protects the flux from

contaminants in the steel mill environment and can vaporize in the

steel melt without toxic emissions or undesirable residues; and (3)

they come in varying sizes which allows the customer to control the

amount of flux introduced into the steel melt. Respondent claims that

its home market customers specifically order the bagged product, and

they willingly pay more for it because they perceive that it provides

additional value.

In addition, respondent maintains that, because the bags are part

of the merchandise purchased by home market customers and their costs

are significant relative to the overall manufacturing costs of the

product, it must set prices taking into account the SG&A and profit

attributable to the bagging which are also significant. However,

because the Department does not normally include SG&A and profit in

packing or difmer adjustments, respondent contends that the

Department's comparison of prices for bagged flux sold in the home

market and bulk flux exported to the United States will not account for

these factors and will therefore be distortive. Therefore, respondent

argues that CV should be used instead of home market prices for

purposes of calculating FMV for flux sales.

Petitioner argues that bagging costs associated with home market

flux sales should not be included in the calculation of the difmer

adjustment because they represent packing costs related to shipment of

the merchandise to the home market customer, rather than variable COM.

Petitioner contends that such an inclusion is contrary to Department

policy which states that the difmer adjustment is limited only to costs

directly attributable to differences in the physical characteristics of

the merchandise and that in this case all physical differences in the

CA flux occur before the bagging/packing stage. Petitioner further

claims that, contrary to respondent's assertion, the bagging/packing at

issue is not consumer packing which serves an advertising, promotional

and educational function at the point of sale to the retail end-user.

Rather, using bags is another way of handling and shipping flux in bulk

quantities. To buttress its argument, petitioner cites Final

Determination of Sales at Less Than Fair Value: Pads for Woodwind

Instrument Keys from Italy (58 FR 42295, August 9, 1993) (Pads from

Italy), Final Determination of Sales at Less Than Fair Value:

Industrial Phosphoric Acid from Israel (52 FR 25440, July 7, 1987)

(Phosphoric Acid from Israel); and Preliminary Determination of Sales

at Less Than Fair Value: Gray Portland Cement and Clinker from

Venezuela (56 FR 56390, November 4, 1991) (Gray Portland Cement and

Clinker from Venezuela). Petitioner claims that both respondent's CA

flux marketing expert in France and petitioner's CA flux marketing

expert in the United States agree that when a customer does not have a

dedicated bulk storage silo system, the CA flux must be shipped to that

customer in bags. Petitioner also contends that respondent's claims

that the design of its bags adds value to the customer are not relevant

to the determination of whether the bagging costs can be deducted as a

packing expense.

Petitioner further argues that respondent's cite to the suspension

agreement concerning Gray Portland Cement and Clinker from Venezuela

where the Department treated bagging costs as part of COM for purposes

of calculating an FMV at or over which a Venezuelan cement producer/

exporter would have to sell in the United States is not relevant

because calculation of a difmer adjustment was not at issue in that

investigation. Petitioner points out that in the Venezuelan cement

investigation the Department made fair value comparisons of bulk cement

sold to the United States with cement sold in Venezuela in 50 to 100

pound sacks, but did not make a difmer adjustment for packing/bagging.

Instead, it adjusted for home market bagging costs by deducting them

from FMV and adding the U.S. packing costs to FMV pursuant to its

normal practice.

In addition, petitioner notes that the normal packing adjustment in

this case would include all fixed costs as well as variable costs of

bagging/packing and thus would not distort fair value comparisons as

would the inclusion of only variable bagging/packing costs in the

difmer adjustment, as respondent suggests. According to petitioner, any

claimed price distortions attributable to SG&A and profit associated

with bagging/packing will be minimal because Lafarge subcontracts these

services (i.e., the fees it pays to subcontractors would cover fixed

costs such as G&A expenses, and any selling costs would be included in

normal circumstance-of-sale adjustments). Petitioner concludes that,

even if packing costs are included in the difmer adjustment, the

Department should still use the home market sales data submitted by

Lafarge after the preliminary determination rather than CV for fair

value comparisons because the U.S. and home market flux products sold

during the POI are comparable and the 20 percent difmer guideline is

not an inflexible rule.

DOC Position

We agree with petitioner in part. At verification, respondent

explained that flux is placed in special bags pursuant to customer

orders because home market customers do not have the appropriate

facilities for handling and measuring flux for use in their steel

production process. Bagged flux is not sold from inventory. Flux can be

sold in bulk form without the specialty bags, and is sold as such to

the United States and the majority of third country markets. The fact

that customers (in the home market or otherwise) have the choice to buy

the flux without the special bagging strongly suggests that the bagging

is not an integral part of the product covered by the scope of the

investigation and, therefore, should not be considered part of variable

COM and included in the difmer adjustment. This is in contrast to the

situation in Washington Red Raspberry Commission v. United States,

where the subject merchandise [raspberries] would be unrecognizable and

completely unusable without the containers in which it was sold.

Characterizing the bagging costs as variable COM as suggested by

respondent is not justifiable in this case. Respondent has not been

able to explain to our satisfaction how bagging costs contribute to

differences in the physical characteristics of the merchandise, as

directed by 19 CFR 353.57. (See also the Department's July 29, 1992

Policy Bulletin (No. 92.2), which states that any difmer adjustment

must be tied to such differences.)

The 1986 less than fair value determinations cited by respondent

are inapposite. Stainless Steel Cooking Ware from Korea reflected our

prior practice regarding the inclusion of difference in consumer

packing in making difmer adjustments, which was changed in the 1992

Policy Bulletin cited above. Likewise, in Porcelain-on-Steel Cookware

from Taiwan, we merely said that consumer packaging was not a cost

incidental to shipment. We did not say that it constituted an integral

physical part of the merchandise under investigation.

As noted above, in difmer analysis, we focus only on the

differences in physical characteristics of the merchandise. The

merchandise in this instance is CA flux. Bagging does not change the

physical characteristics of flux and, therefore, it was not included in

the difmer calculation. In the FMV Calculations performed pursuant to

the Suspension Agreement in Venezuelan cement, we were not examining

the differences in the physical characteristics per se of the subject

merchandise. Therefore, respondent's reliance on Venezuelan cement is

inapposite.

We also do not consider bagging costs as representative of normal

packing costs. Rather, it appears to us that Lafarge could not sell the

flux to the home market customers without incurring these special

bagging costs. While we agree with petitioner that Pads from Italy is

applicable here (in that difmer adjustments are based on the variable

cost of manufacture only), petitioner's reliance on Phosphoric Acid

from Israel is misplaced, because the bagging for flux is clearly

distinguishable from the drums used for packing (and accounted for in

packing costs) in Phosphoric Acid from Israel. Therefore, we do not

consider bagging in this case to be a pre-shipment expense, but rather

a condition of sale. For these reasons, we have treated these bagging

costs as direct selling expenses, rather than as part of variable COM

or packing for purposes of the final determination. (See March 9, 1994,

Memorandum from V. Irene Darzenta to Richard W. Moreland Re. Treatment

of Bagging Costs Associated with Home Market Sales of Flux.) Because

the difmer that resulted from exclusion of these costs from variable

COM was less than 20 percent, we used the reported, verified home

market flux sales as the basis for FMV and deducted bagging costs as

direct selling expenses from FMV accordingly.

Comment 12

Petitioner states that the difmer adjustment is also incorrect

because respondent included fixed costs (i.e., G&A) and profit in its

calculation. Petitioner asserts that if the Department includes bagging

in the difmer adjustment, it should recalculate the amount of the

difmer to include only variable costs. Finally, petitioner maintains

that the reported packing expenses, inclusive of bagging costs, should

be adjusted to avoid double- counting G&A expenses.

DOC Position

For the reasons stated in the DOC Position to Comment 11 above and

in accordance with the Department's normal methodology, we have

recalculated the difmer adjustment to exclude bagging costs and include

only variable COM. However, upon further review of the documentation

examined at verification, we note that the G&A expenses included in the

reported packing expenses were not double-counted. Notwithstanding this

fact, we have also excluded from the packing adjustment the reported

G&A expenses.

Comment 13

Petitioner believes that the claimed adjustment for home market

technical service expenses should be denied or reduced. Petitioner

maintains that the Department should deny the claimed direct adjustment

for home market technical service expenses, because these expenses

cannot be directly tied to specific sales made during the POI.

According to petitioner, services such as those provided by respondent

for purposes of determining new uses for a product in future production

aimed at increasing future sales levels constitute goodwill or sales

promotion, and as such are not directly related to the sales under

consideration. Petitioner also argues that technical service expenses

attributable to test sales made during 1992 that are considered to be

outside of the ordinary course of trade should be excluded from the

adjustment; however, because the Department did not verify data that

would permit their exclusion, the Department should deny the adjustment

in toto. Nonetheless, if the Department determines that an adjustment

is warranted, petitioner urges that it should only deduct the reported

travel expenses and not the reported salary expenses comprising

respondent's technical service expense calculation because salaries are

considered fixed costs which are incurred whether or not the services

are provided.

Respondent contends that technical service expenses should be

treated as direct selling expenses in accordance with past Department

and court decisions. Respondent notes that the technical services

performed by LFI in France consist of visits to customers to review and

help analyze the customers' test data and to work with the customer to

make more efficient use of flux in its steel operations. Lafarge

emphasizes that the customer needs to know from the time he makes his

purchase that LFI's technical staff will be available to provide this

analysis for him on an on-going basis. According to respondent, these

types of services are not provided by LCA in the United States because

LCA's U.S. flux customers perform this technical service using their

own personnel. Respondent argues further that an adjustment for

technical service salaries is appropriate where the technical service

personnel provide functions that the customer would otherwise have to

perform himself.

DOC Position

We agree with respondent in part. Lafarge provides the technical

support to its home market customers because they have not yet

developed the systems required to perform these services themselves.

Without Lafarge's technical support, the customers cannot analyze and

make appropriate adjustments in their steel production processes to

optimize performance of CA flux in their operations. Given the nature

of the steelmaking industry, it is reasonable to believe that, while

these technical service expenses could not be directly tied to specific

sales of flux, they would not otherwise have been incurred but for the

sale of flux.

It is the Department's practice to allow, as a direct selling

expense, claims for services rendered in assisting the customer in

solving problems with products purchased during the POI to the extent

that the variable costs can be segregated from the fixed costs. In

general, variable technical service costs include travel expense, while

fixed technical service costs include salaries. (See e.g., Final

Determination of Sales at Less Than Fair Value: Brass Sheet and Strip

from Italy, 52 FR 816, January 9, 1987; and Final Determination of

Sales at Less Than Fair Value: Antifriction Bearings (Other Than

Tapered Roller Bearings) and Parts Thereof from the Federal Republic of

Germany, 54 FR 18992, May 3, 1989.) Therefore, in accordance with our

practice, we have treated travel expenses associated with technical

services as direct selling expenses, and we have treated salary

expenses as indirect selling expenses and deducted them from FMV

accordingly. We made no adjustment to these amounts for expenses

related to test sales that may have been made in 1992, because we did

not have sufficient information on the record to allow us to do so

accurately.

Comment 14

Petitioner claims that the adjustment for home market credit

expenses should be denied or reduced. Petitioner believes that an

adjustment for this expense should not be permitted because, of the

sales verified, over one-quarter had incorrect shipment/payment dates.

If the Department allows this expense, petitioner argues that it should

be recalculated exclusive of VAT because Lafarge did not incur any

credit expense for payment of the VAT.

Respondent maintains that the Department should not deny or reduce

home market credit expenses. It argues that the errors found at

verification with respect to shipment/payment dates were minor and

clerical in nature, and do not have a significant effect on the

Department's analysis. According to respondent, by extending credit,

Lafarge agrees to forego immediate payment of the total invoice amount

which includes the price for the goods and applicable VAT taxes. It,

therefore, loses the interest that could have been earned on the total

invoice amount. Respondent asserts that the foregone interest

represents the opportunity cost of extending credit. Respondent further

asserts that, because this opportunity cost includes foregone interest

on VAT, the foregone interest on VAT must be included in the credit

adjustment.

DOC Position

We disagree in part with both petitioner and respondent. We have

determined that a credit adjustment in general is warranted in this

case. The errors found at verification with respect to the credit

period reported for two home market transactions were clerical and

minor in nature and related to sales made either out of the ordinary

course of trade or to a third country which we have excluded from our

analysis. (See the ``Foreign Market Value'' section of this notice.)

However, we have also determined that there is no statutory or

regulatory basis for including VAT in the credit adjustment. While

there may be an opportunity cost associated with extending credit on

the payment of invoice value inclusive of VAT, that fact alone is not a

sufficient basis for the Department to make an adjustment. We note that

virtually every expense associated with less than fair value

comparisons is paid for at some point after the cost is incurred.

Accordingly, for each post-service payment, there is also an

opportunity cost. Thus, to allow the type of adjustment suggested by

respondent would imply that in the future the Department would be faced

with the impossible task of trying to determine the opportunity cost of

every freight charge, rebate, and selling expense for each sale

reported in respondent's database. This exercise would make our

calculations inordinately complicated, placing an unreasonable and

onerous burden on both respondents and the Department. (See e.g., Final

Determination of Sales at Less Than Fair Value: Sulfur Dyes, Including

Sulfur Vat Dyes, from the United Kingdom, 58 FR 3253, January 8, 1993.)

Consequently, we have recalculated home market credit expenses to

exclude the VAT included in the gross unit prices used in the original

calculation.

Comment 15

Petitioner argues that home market product liability costs are

indirect rather than direct selling expenses because they are not

directly related to sales made during the POI. Respondent disagrees,

stating that these premiums are directly related to sales because the

premium is assessed on sales value. According to respondent, each

additional sale results in an additional product liability premium

expense.

DOC Position

Because these premiums are assessed based on sales value, we have

determined that these expenses are characteristic of direct expenses.

We note that the U.S. product liability premium rates reported for U.S.

sales of flux and cement were also based on sales value. Therefore, we

have treated both home market and U.S. product liability expenses as

direct selling expenses for purposes of the final determination, and

have adjusted FMV and USP accordingly.

Comment 16

Petitioner claims that those sales made to a home market customer

that were destined for export should not be included as home market

sales in the Department's analysis. Petitioner states that the

Department verified that Lafarge knew that certain sales of CA flux

were to be exported to a third country at the time of sale to the home

market customer. Accordingly, petitioner argues that these sales should

not be included in the Department's FMV calculation.

DOC Position

We agree and have excluded these sales from our analysis.

Comment 17

Petitioner believes that for purposes of calculating profit related

to the value added in the United States, U.S. brokerage and handling

(including merchandise processing and harbor maintenance), U.S.

unloading, U.S. loading and U.S. freight to processors costs, where

applicable, should be attributed to the COM of CA clinker and flux in

the United States because these expenses are incurred only after the

product has arrived in the United States. Petitioner further believes

that certain U.S. selling expenses (e.g., credit, warranty, indirect

selling expenses, inventory carrying costs and product liability

expenses) should also be included as part of U.S. further manufacturing

costs.

Respondent does not believe that the Department should consider

these charges and expenses to be part of U.S. further manufacturing

costs, as petitioner requests. Lafarge contends that petitioner's

argument is inconsistent with the antidumping statute and was put forth

by petitioner solely to increase the profit allocated to further

manufacturing and, as a result, the adjustment to USP.

DOC Position

We disagree with petitioner. Because U.S. brokerage and handling,

and U.S. unloading and loading costs, are incurred on the imported

merchandise prior to the commencement of further manufacturing in the

United States, we find that they do not form part of the value added in

the United States. Regarding the costs of freight to processors'

warehouses associated with flux sales, we find that they do form part

of the costs of further manufacturing the imported flux in the United

States because these costs are incurred to transport the imported flux

to and among the processors' warehouses for further manufacture. For

U.S. cement sales, however, such transfer freight costs represent costs

incurred to transport the already further manufactured clinker (i.e.,

the finished cement) to the warehouses from which the finished product

is ultimately sold to U.S. customers. No freight to processors costs

are incurred on U.S. cement sales because the further processing occurs

at Lafarge's plant which is located at the U.S. port of importation.

Regarding U.S. selling expenses, these expenses are incurred to sell

both the imported and further manufactured products. Therefore, adding

these expenses to U.S. further manufacturing costs, as petitioner

suggests, would disproportionately increase the U.S. value added for

purposes of calculating profit. (See e.g., Wire Rods from France.) Of

the expenses at issue, we have only included costs of freight to

processors associated with U.S. flux sales as part of U.S. value added

in our final profit calculation.

Comment 18

Petitioner claims that the Department should recalculate

respondent's U.S. indirect selling and G&A expenses for both cement and

flux sales. Petitioner argues that, based on the Department's

instructions, LCA's administration costs should have been reported as

G&A (rather than indirect selling expenses), allocated based on cost of

sales and included in the U.S. COM. According to petitioner, the

Department should reduce the reported indirect selling expenses and the

corresponding ESP cap.

Respondent maintains that LCA's calculation correctly assigned its

administrative expenses to its operations. According to Lafarge,

because LCA's administrative staff supports LCA's sales operations as

well as factory operations, a portion of LCA's administrative expenses

should be considered sales administration and treated as an indirect

selling expense. Respondent notes, however, that it would not object if

the Department reduces the amount of administrative expenses assigned

to the products under investigation under petitioner's proposal.

Respondent contends that if the Department accepts petitioner's

argument that U.S. indirect selling expenses and G&A should be

recalculated, it should revise petitioner's calculations to use the

correct, verified figures.

DOC Position

We agree with petitioner on the need to reclassify LCA's

administrative expenses. Because these expenses are more appropriately

characteristic of G&A expenses, we have reclassified them from indirect

selling to G&A expenses based on verified data on the record.

Comment 19

Petitioner argues that no offset to financial expenses should be

allowed for the short-term interest income claimed by Lafarge for

purposes of calculating clinker CV and clinker and flux further

manufacturing costs. Petitioner contends that the Department was unable

to verify that the interest income reported was short-term in nature.

Nor could the Department verify whether the reported interest income

was related to the manufacture of the subject merchandise, according to

petitioner.

Respondent asserts that the Lafarge corporate policy is not to

invest in assets which produce other than short-term interest income.

Accordingly, respondent maintains that all interest income earned by

respondent's parent company Lafarge Coppee was short-term in nature,

and an offset to interest expense should be allowed for the entire

reported short-term interest income amount.

DOC Position

We agree with petitioner. The Department normally allows an offset

to financial expenses for interest income earned on short-term

investments of working capital related to the production of the subject

merchandise. The Department does not offset interest expense with

interest income earned on long-term investments related to activities

unrelated to the manufacturing process. Because we were unable to

verify the nature of the interest income reported, we have disallowed

the financial expense offset claimed by Lafarge.

Comment 20

Petitioner notes that the Department discovered at verification

that the depreciation of R&D assets was not included in the R&D

expenses reported for purposes of calculating clinker CV. Petitioner

states that the Department should include this depreciation in the

reported R&D expenses.

DOC Position

We agree and have adjusted the R&D expenses reported for purposes

of calculating clinker CV to reflect the inclusion of depreciation for

R&D assets. We note that this adjustment also affected the total

reported COM of the imported clinker and flux used in the calculation

of U.S. value added profit.

Comment 21

Petitioner asserts that exchange rate gains and losses should be

added to raw material costs for purposes of calculating clinker CV.

According to petitioner, during verification the Department discovered

that Lafarge had not reported the foreign exchange gains and losses

related to the importation of raw materials used to produce the subject

merchandise.

DOC Position

We agree, based on our findings at verification, that Lafarge did

not report these foreign exchange gains and losses. Accordingly, we

have added these gains and losses to the reported raw material costs

for purposes of calculating clinker CV for the final determination. We

note that this adjustment also affected the total reported COM of the

imported clinker and flux used in the calculation of U.S. value added

profit.

Comment 22

Petitioner argues that, because LFI repeatedly refused to

separately report its labor costs and classify them according to

Department practice as variable costs for purposes of calculating

clinker CV and total flux and clinker COM used in the calculation of

U.S. value added profit, the Department must resort to BIA to determine

these costs. As BIA, petitioner asserts that the Department should not

annualize any fixed costs but rather use only the fixed costs reported

for the POI. Petitioner argues that this is a reasonable BIA

methodology given the Department's inability to break out the labor

costs from fixed costs and properly treat the labor costs as variable

costs.

Respondent contends that LFI's labor costs have the characteristics

of fixed costs since the number of workers working at LFI's plants is

generally constant and the total pool of labor costs tends not to vary

with production levels. LFI also asserts that labor costs are distorted

by fluctuations in monthly production volumes as a result of plant

shut-downs for maintenance. According to respondent, the use of fixed

costs for the POI would distort the Department's CV and further

manufacturing cost calculations. LFI states that, under the logic of

the preliminary determination, fixed labor costs should be based on the

reported annual period.

DOC Position

We agree with petitioner. Lafarge normally records labor costs for

clinker and flux as a fixed cost. Respondent followed its normal

accounting system for the response and reported labor as a fixed cost

for the year 1992. This methodology differs from the Department's

normal practice where labor is considered a variable cost and as such

would be reported on a weighted-average basis for the POI.

In the preliminary determination the Department accepted the

annualization of fixed costs because LFI claimed that periodic shut-

down expenses incurred for maintaining its furnaces created significant

aberrations in monthly production costs. In order to eliminate the

effect of these distortions, we allowed LFI to report fixed costs on an

annual weighted-average basis.

However, it was not until verification that the Department first

discovered that labor costs were included in the reported annualized

fixed costs. The Department's Section D and E questionnaires for

clinker and flux identified direct and indirect labor as costs that

should be reported as variable costs for response purposes. The

questionnaires also specifically requested that LFI itemize the

expenses included in fixed and variable costs. LFI did not itemize its

variable or fixed costs or otherwise identify how it treated its labor

costs in response to the Department's requests. Because LFI was not

responsive to the Department's requests for information and incorrectly

classified labor costs as fixed costs, and since there was no

information on the record to permit the accurate reclassification of

labor costs, we have disallowed the annualization of fixed costs and

have used only the reported fixed costs for the POI as BIA for purposes

of the final determination.

Suspension of Liquidation

In accordance with section 733(d)(1) of the Act, we are directing

the Customs Service to continue to suspend liquidation of all entries

of CA cement and cement clinker from France and to begin the suspension

of liquidation of all entries of CA flux from France that are entered,

or withdrawn from warehouse, for consumption on or after the date of

publication of this notice in the Federal Register. The Customs Service

shall require a cash deposit or posting of a bond equal to the

estimated margin amount by which the FMV of the subject merchandise

exceeds the USP, as shown below. The less than fair value margins for

CA cement and cement clinker are as follows:

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

Weighted-

Producer/manufacturer/exporter average margin

percentage

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

Lafarge................................................. 18.91

All Others.............................................. 18.91

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

The less than fair value margins for CA flux are as follows:

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

Weighted-

Producer/manufacturer/exporter average margin

percentage

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

Lafarge................................................. 31.08

All Others.............................................. 31.08

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

ITC Notification

In accordance with section 735(d) of the Act, we have notified the

International Trade Commission (ITC) of our determinations. As our

final determinations are affirmative, the ITC will determine whether

these imports are materially injuring, or threaten material injury to,

the U.S. industry within 45 days.

If the ITC determines that material injury or threat of material

injury does not exist, the proceedings will be terminated and all

securities posted as a result of the suspension of liquidation will be

refunded or cancelled. However, if the ITC determines that such injury

does exist, we will issue an antidumping duty order directing Customs

officers to assess an antidumping duty on CA cement, cement clinker and

flux from France entered or withdrawn from warehouse, for consumption

on or after the date of suspension of liquidation.

Notification to Interested Parties

This notice serves as the only reminder to parties subject to

administrative protective order (APO) in these investigations of their

responsibility covering the return or destruction of proprietary

information disclosed under APO in accordance with 19 CFR 353.34(d).

Failure to comply is a violation of the APO.

These determinations are published pursuant to section 735(d) of

the Act (19 U.S.C. 1673d(d)) and 19 CFR 353.20(a)(4).

Dated: March 18, 1994.

Paul L. Joffe,

Acting Assistant Secretary for Import Administration.

[FR Doc. 94-7122 Filed 3-24-94; 8:45 am]

BILLING CODE 3510-DS-P