Gray Portland Cement and Clinker From Japan; Final Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[A-588-815]

Gray Portland Cement and Clinker From Japan; Final Results of

Antidumping Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of Final Results of Antidumping Duty Administrative

Review.

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SUMMARY: On February 11, 1994, the Department of Commerce (the

Department) published the preliminary results of review of the

antidumping duty order on gray portland cement and clinker from Japan.

The review covers one manufacturer/exporter, Onoda Cement Co., Ltd.,

and the period May 1, 1992, through April 30, 1993.

We gave interested parties an opportunity to comment on the

preliminary results. Based on our analysis of the comments received,

and the correction of clerical errors, we have changed the final

results from those presented in the preliminary results of review.

EFFECTIVE DATE: August 23, 1995.

FOR FURTHER INFORMATION CONTACT:

David Genovese or Michael Heaney, Office of Antidumping Compliance,

International Trade Administration, U.S. Department of Commerce,

Washington, DC. 20230; telephone (202) 482-5254.

SUPPLEMENTARY INFORMATION:

Background

On May 3, 1993, the Ad Hoc Committee of Southern California

Producers of Gray Portland Cement (the petitioner) requested that the

Department conduct an administrative review of the antidumping duty

order on gray portland cement and clinker from Japan (56 FR 21658, May

10, 1991) for Onoda Cement Co., Ltd. (Onoda). We initiated the review,

covering the period May 1, 1992, through April 30, 1993, on June 25,

1993 (58 FR 34414). On February 11, 1994, we published the preliminary

results of the administrative review (59 FR 6614). The Department has

now completed the administrative review in accordance with section 751

of the Tariff Act of 1930, as amended (the Act).

Scope of the Review

The products covered by this review are gray portland cement and

clinker from Japan. Gray portland cement is a hydraulic cement and the

primary component of concrete. Clinker, an intermediate material

produced when manufacturing cement, has no use other than grinding into

finished cement. Microfine cement was specifically excluded from the

antidumping duty order.

Gray portland cement is currently classifiable under the Harmonized

Tariff Schedule (HTS) item number 2523.29, and clinker is currently

classifiable under HTS item number 2523.10. Gray portland cement has

also been entered under item number 2523.90 as ``other hydraulic

cements''.

The HTS item numbers are provided for convenience and Customs

purposes. The written product description remains dispositive as to the

scope of the product coverage.

Analysis of Comments Received

We gave interested parties an opportunity to comment on the

preliminary results. We received comments from the petitioner and from

the respondent. At the request of the petitioner and respondent, we

held a public hearing on March 29, 1994.

Comment 1

Petitioner argues that the Department inaccurately adjusted FMV for

home market indirect selling expenses in those instances where the

Department compared U.S. sales of cement imported into the United

States and further manufactured into concrete with sales of cement in

the home market. Where such comparisons occurred, petitioner states

that, because the imported merchandise was cement, the Department

appropriately deducted further manufacturing costs and attempted to

make cement-to-cement comparisons. However, petitioner

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asserts that, for purposes of 19 CFR 353.56(b)(2), the Department must

make an adjustment to the U.S. indirect selling expense figure for U.S.

concrete sales, since Onoda's data reflect the expenses incurred on

sales of concrete in the United States, not sales of cement. Petitioner

maintains that 19 CFR 353.56(b)(2) directs the Department to limit the

home market indirect selling expense adjustment to the amount of the

indirect selling expense incurred on the U.S. merchandise. In

petitioner's view, this requires the Department, for the purpose of

establishing the appropriate adjustment to FMV for indirect selling

expenses, to recalculate the indirect selling expense figure for the

U.S. sales of concrete so that they reflect the cement equivalent. In

this manner, petitioner concludes that the Department will meet the

requirements of the regulations by limiting the indirect selling

expense adjustment to home market sales of cement to those expenses

associated with sales of cement in the United States.

Onoda argues that the Department should base the exporter's sales

price (ESP) ``cap'' on the entire amount of indirect selling expenses

associated with ESP sales as it did in the 1990/92 review of this

order. Onoda asserts that this method of determining the ESP cap is

appropriate because indirect selling expenses associated with ESP sales

can not be ascribed to foreign production and U.S. further

manufacturing. Onoda cites the Court of International Trade's ruling in

Torrington Co. v. United States, 818 F. Supp. 1563, 1576 (CIT 1993),

and the Department's findings in Final Results of Antidumping Duty

Administrative Review; Color Picture Tubes from Japan, 55 FR 37915

(September 14, 1990) (hereafter CPTs), to argue that the Department's

established practice has been to include in the ESP cap all indirect

selling expenses deducted from ESP under 19 CFR 353.41(e).

Department's Position

We agree with the petitioner. It is the Department's practice to

allocate indirect expenses to the product imported into the United

States (in this case cement) and to the further manufactured product

sold in the United States (in this case, concrete) when calculating the

ESP cap. (see Final Determination of Sales at Less Than Fair Value:

Calcium Aluminate Cement, Cement Clinker and Flux from France, 59 FR

14136 (March 25, 1994)) Because Onoda exported cement to the United

States and, before selling it to an unrelated customer, converted the

cement into concrete, our calculation of U.S. price (USP) reflects the

deduction of the value which Onoda added in the United States, other

expenses, and indirect selling expenses.

In determining the appropriate adjustment to FMV under 19 CFR

353.56(c), we have limited the home market indirect selling expense

adjustment to the amount of those selling expenses associated with the

cement which entered the United States, since we are making a cement-

to-cement comparison. This requires adjusting Onoda's total U.S.

indirect selling expenses to reflect only those expenses associated

with cement.

Onoda's argument that indirect selling expenses are indivisible is

inaccurate. The Department's goal is to make an apples-to-apples

comparison when comparing merchandise sold in the United States with

merchandise sold in the home market. In order to make such a

comparison, it is necessary to allocate expenses so that we compare

cement which enters the United States with cement sold in the home

market.

Additionally, the Torrington case cited by Onoda does not advocate

including all indirect selling expenses associated with ESP sales in

the ESP cap. Rather, Torrington advocates allocating expenses incurred

on ESP sales between the imported product (which is the product sold in

the home market) and the further-manufactured product. Accordingly, we

allocated indirect expenses between the imported product (which is the

product sold in the home market) and the further-manufactured product

and limited the ESP cap to those indirect selling expenses incurred on

the imported product.

Similarly, in the aforementioned CPTs case, the respondent was

importing color picture tubes (CPTs) and incorporating them into color

televisions (CTVs). In CPTs, the Department determined that ``(s)ince

it is the CTV and not the CPT that is ultimately sold in the United

States, a proportional amount of the CTV indirect selling expenses was

allocated to the CPT based upon the costs associated solely with the

CPT to the total CTV cost. The total of the indirect selling expenses

allocated to the CPT formed the cap for the allowable home market

selling expenses offset under Sec. 353.56(b) of the Department's

regulations.'' See CPTs at 37917.

Comment 2

Petitioner argues that Onoda is not entitled to a difference-in-

merchandise (difmer) adjustment for the cost differences between U.S.

models Type I and Type II, and home market models Type N and Type M.

Petitioner argues that Onoda has failed to meet the criterion for a

difmer adjustment that was articulated in the Department's Policy

Bulletin No. 92.2 and in other antidumping cases. According to

petitioner, that criterion is that respondents are entitled to difmer

adjustments only if they show that the difference in cost between the

two models is attributable to the difference in physical

characteristics of the merchandise. Petitioner relies upon plant-by-

plant variable cost of manufacture data for Type N cement to argue that

the weighted-average difmer adjustments reported by Onoda are largely

attributable to differences in efficiencies between Onoda's various

production facilities and not to cost differences associated with the

physical characteristics of the merchandise. Accordingly, petitioner

requests that the Department deny Onoda's difmer adjustment.

Onoda argues that it followed the exact same procedure in preparing

its difmer adjustment in this segment of the proceeding as it did in

the less-than-fair-value (LTFV) investigation and the 1990/92 review.

Onoda notes that during the LTFV investigation, the Department verified

the difmer data, and granted the difmer adjustment in calculating the

dumping margin. Furthermore, Onoda observes that in the LTFV

investigation the Department was satisfied that Onoda had reasonably

tied cost differences to physical differences (Final Determination of

Sales at Less Than Fair Value; Gray Portland Cement and Clinker from

Japan, 56 FR 12156, March 22, 1991 (Gray Portland Cement--LTFV

Investigation)). Additionally, Onoda notes that the Department

determined in the final results of the 1990/92 review that evidence on

the record did not establish that any differences in plant efficiencies

were the source of the cost differences (Gray Portland Cement and

Clinker from Japan, Final Results of Antidumping Duty Administrative

Review, 58 FR 48826, September 20, 1993 (Gray Portland Cement--First

Review)).

Additionally, Onoda argues that the only way it can calculate the

difmer adjustment is to weight-average the variable costs to produce

Type N cement at all plants and compare that amount to the variable

costs to produce Type I cement at the single plant where it produced

Type I cement. Onoda argues that this methodology of weight-averaging

costs across all plants is consistent with Departmental practice.

Thus, according to Onoda, there is no reason for the Department not

to grant the adjustment in this review. However,

[[Page 43763]]

should the Department decline to grant the full difmer adjustment,

Onoda argues that the Department should at least grant a difmer

adjustment for the cost differences of the material inputs.

Department's Position

Consistent with the Department's practice in the LTFV investigation

and the 1990/92 review of this case, we have allowed the difmer

adjustment claimed by Onoda. As we stated in the 1990/92 review, which

was the first review, although Onoda's plants may have different

efficiencies, evidence on record does not establish that any

differences in plant efficiencies are the source of the cost

differences identified by Onoda (see Gray Portland Cement and Clinker--

First Review at 48827). Rather, cost differences are due to differences

in material inputs and the physical differences which result from

different production processes.

First, as stated previously, the Department compared Type I and

Type II cement in the United States with Type N and Type M cement in

the home market, respectively. The specific differences in costs among

the various cement types are due to the varying costs of the inputs,

including material inputs (limestone, clay, silica, etc.), fuel inputs

(fuel oil, coal, anthracite, etc.) and electricity (mixing, grinding,

burning, etc.). For example, Type I cement contains clinker, gypsum and

minor grinding agents. In contrast, Type N cement contains clinker,

gypsum, minor grinding agents and additives. Furthermore, Type I cement

contains a higher percentage of clinker and gypsum than Type N cement.

Moreover, Type I, on average, has a slightly higher percentage of

silicon dioxide. Similarly, Type II and Type M cement also differ in

terms of their chemical and physical composition. Type M cement

generally has a higher percentage of clinker and a lower percentage of

gypsum than Type II cement. Additionally, Type M cement has a lower

tricalcium aluminate level than Type II.

Second, as noted in the LTFV investigation, ``we verified Onoda's

claimed difference in merchandise adjustment and found it to be an

accurate representation of the relevant variable costs of production as

reflected in its actual cost accounting records. Given the fact that

physical differences between types of cement arise from differences in

the production process (e.g., amount and duration of heat), and from

differences in component materials, we are satisfied that Onoda has

reasonably tied cost differences to physical differences'' (see Gray

Portland Cement and Clinker--LTFV Investigation at 12161).

Additionally, with regard to the weighted-average methodology

employed by Onoda, the Department specifically requested that Onoda

report its cost of manufacture information on a weighted-average basis

(see the Department's questionnaire at page 54: ``If the subject

merchandise is manufactured at more than one facility, the reported COM

should be the weighted-average manufacturing cost from all

facilities'').

Accordingly, we have allowed Onoda's claimed difmer adjustment.

Comment 3

The petitioner argues that home market sales of bagged cement

should be included in the calculation of FMV. Petitioner asserts that

this is appropriate since: (1) The technical specifications for cement

sold in bags and in bulk are identical; (2) charges related to sales of

bagged cement were included in the calculation of various adjustments

made to FMV; and (3) the Department has all the data necessary to

calculate FMV for bagged cement. Petitioner cites to Gray Portland

Cement and Cement Clinker from Venezuela, 56 FR 56390 (November 4,

1991), Industrial Phosphoric Acid from Israel, 52 FR 25440 (July 7,

1987, and Frozen Concentrated Orange Juice from Brazil, 57 FR 3995

(February 3, 1992) as examples where the Department compared identical

merchandise that was packaged differently.

Onoda argues that the Department should not include home market

sales of bagged cement in the FMV calculation since it only sold bulk

cement in the United States. Onoda asserts that since the Department's

goal should be to compare sales in the United States and foreign

markets which are as similar as possible, the Department should compare

bulk sales in the United States to bulk sales in the home market. Onoda

argues that it is not relevant that cement sold in bags is within the

scope of the order and is physically the same. Onoda asserts that it

would be unfair to include bagged cement sales in the calculation of

FMV since it would distort the FMV figure. Onoda cites Final

Determination of Sales at Less Than Fair Value: Fresh Kiwifruit from

New Zealand, 57 FR 13695 (April 17, 1992), Final Determination of Sales

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

55 FR 29244 (July 18, 1990), and Gray Portland Cement and Clinker from

Venezuela, 56 FR 56390 (November 4, 1991), to argue that the Department

has consistently made bulk-to-bulk and bag-to-bag comparisons.

Department's Position

We agree with the petitioner. There is no physical difference

between the bagged and bulk cement sold in Japan. The only difference

is the manner in which the merchandise is packed. Since packing in not

a criterion for comparability, and because there is no physical

difference between bulk and bagged cement sold in the home market, we

did not exclude home market sales of bagged cement from our

calculations of FMV.

In Brazilian orange juice, the Department based USP on packed

merchandise and FMV on packed and bulk merchandise. In Venezuelan

cement, the Department compared bulk-to-bulk and bagged-to-bagged sales

as well as bulk-to-bag sales. In Israeli acid, the Department compared

bulk U.S. product to the home market product packed in drums. The

comparison of bulk-to-bag and bulk-to-drum sales in Venezuelan cement

and Israeli acid supports the Department's conclusion in this case that

it is acceptable to compare bulk-to-bagged sales.

Additionally, the issue raised in New Zealand kiwifruit was whether

the Department ``must * * * adjust for difference in packing costs when

comparing differently packed identical merchandise,'' not whether the

Department should compare bulk-to-bulk and bagged-to-bagged

merchandise. In Mexican cement, the issue did not arise because all

U.S. sales and their corresponding identical matches in Mexico were

bulk sales. Finally, in prior segments of this proceeding, we made

bulk-to-bag and bag-to-bulk comparisons, with appropriate adjustments

for packing differences.

Therefore, because the cases cited by Onoda do not stand for the

proposition that the Department must always compare bulk-to-bulk and

bag-to-bag sales, and because packing is not a criterion for matching

types of cement, we compared sales of bulk cement in the United States

to sales of both bulk and bagged cement in the home market, and made

the appropriate adjustments to reflect the packing costs associated

with bagged cement.

Comment 4

Petitioner argues that the Department should disallow Onoda's

claimed deductions for commissions to distributors because Onoda has

not properly documented what portion of its commission payments are

made to related parties, or whether the terms of commissions paid to

related distributors

[[Page 43764]]

are comparable to the terms of commissions paid to unrelated

distributors.

Additionally, petitioner states that Onoda has failed to show how

one type of commission, which is offered to distributors to promote

sales of all Onoda cement, not just cement within the scope of the

order, is tied directly to the subject merchandise.

Onoda states that the Department should grant a full deduction for

these commissions in its FMV calculations because it has fully

explained the basis for the payment of the commissions in the home

market and has directly tied these commissions to its home market sales

of Types N and M cement.

Onoda disagrees with petitioner's assertion that it failed to tie

commissions to the subject merchandise. Onoda asserts that because Type

N and M cement accounted for the majority of home market sales, the

majority of the commissions in question were associated with the sale

of Types N and M cement. Additionally, Onoda argues that it did not

simply deduct the total commission expense from the sales price of

Types N and M cement. Rather, Onoda allocated these expenses over all

cement types.

Department's Position

We agree with Onoda. Onoda provided a sufficient response to the

Department's questions concerning the commissions it grants to related

and unrelated distributors in the home market. The terms of the

commissions offered by Onoda are fixed, so that related and unrelated

distributors are offered commissions on precisely the same terms that

do not vary according to the product sold. The commissions in question

are allocated to the subject merchandise, are offered to both related

and unrelated distributors, and, because the terms of the commissions

are the same whether the distributors are related or unrelated, we have

determined that the commissions are at arm's-length and therefore an

allowable deduction from the home market price.

Comment 5

Petitioner argues that the Department should include in its

calculation of FMV the price actually charged by Onoda's related

distributors to the first unrelated customer. To accomplish this,

petitioner suggests that the Department add to the related distributor

price a mark-up which Onoda provides to all of its distributors.

Petitioner contends that this is appropriate because the mark-up Onoda

provides to its related distributors is merely an intracompany transfer

that benefits Onoda.

Department's Position

We disagree with the petitioner. Since the mark-up to related

distributors is at arm's-length (i.e., is the same for related and

unrelated distributors and the sales prices to related distributors are

comparable to the sales price to unrelated distributors (see our

response to comment 6)) and directly related to the sales in question,

the mark-up should not be added to the related distributor's price when

calculating FMV. Accordingly, when calculating FMV, the Department did

not add the mark-up to the price charged related distributors because

Onoda provides the identical mark-up to all its distributors, whether

related or unrelated.

Comment 6

The petitioner states that, when determining what sales to use to

calculate FMV, the Department should use only those related party sales

for which the price is greater than or equal to the price charged to

unrelated customers. Petitioner argues that using related party sales

whose prices are below those of unrelated party sales is inconsistent

with the Department's general practice in prior cases and fails to

eliminate related party sales that were not made at arm's-length.

Onoda states that it treats all sales to distributors, whether

related or unrelated, in the same fashion, and, therefore, all sales to

related distributors should be included in the calculation of FMV.

Moreover, Onoda asserts that the price it charges its distributors is

in no way influenced by Onoda, since it is based on a price that is

negotiated between the distributor and its unrelated customer. Thus,

argues Onoda, all sales to related distributors should be included in

the calculation of FMV.

Department's Position

Consistent with 19 CFR 353.45(a), we include related party

transactions in our calculation of FMV when we are satisfied that the

price of such sales are comparable to the prices of sales to the

unrelated party. In this case, since related party sales were generally

at prices equal to or greater than unrelated party sales, we determined

that related party sales are comparable to Onoda's sales to unrelated

parties. Accordingly, we have included all related party sales in our

calculation of FMV.

Comment 7

Petitioner argues that the commission Onoda granted to a Japanese

trading company should be deducted in its entirety from Onoda's U.S.

prices (i.e., the Department should deduct from U.S. price the result

of multiplying the F.O.B. Japan price by the contractually arranged

commission rate).

Onoda argues that petitioner's methodology represents only one-half

of the transaction. Onoda asserts that the actual commission is the net

amount which passes from the Onoda corporate family (i.e., Onoda and

Lone Star Northwest) to the Japanese trading company corporate family,

and that the sequence and composition of the payments have no bearing

on the value of the commission. Thus, Onoda argues that in the

preliminary results the Department correctly calculated the amount of

U.S. commissions.

Department's Position

We agree with Onoda. In a sales/distribution situation where there

are two payments and two corporate families, what is relevant is the

entire payment from one corporate family to the other. Thus, as we did

in the 1990/92 review of this case, we have included both portions of

the transaction in our calculation of the payment to the trading

company rather than applying the commission rate to the F.O.B. Japan

price as recommended by the petitioner.

Comment 8

Petitioner argues that the direct selling expenses Onoda reported

in its cost of production (COP) response do not equal the direct

selling expenses Onoda reported in its home market sales tape.

Petitioner states that certain expenses included in the direct selling

expense category of Onoda's home market sales tape were not included in

the direct selling expense category for Onoda's COP response.

Petitioner states that the Department should weight-average and add to

its COP calculations the direct selling expenses reported on Onoda's

home market sales tape in order to ensure that the direct selling

expenses used to determine FMV and COP are used consistently.

Petitioner asserts that this adjustment is necessary to ensure a fair

comparison of expenses in the COP and FMV calculations.

Onoda states that the direct selling expenses it reported on the

home market sales tape and the COP response are not equal because

certain direct selling expenses, such as two commission expenses, were

reported as indirect selling expenses rather than as direct selling

expenses in the COP response. Onoda states that, for COP purposes, it

does not matter if commission expenses are categorized as direct or

indirect, since all selling

[[Page 43765]]

expenses are treated identically in determining whether home market

sales are below cost. Onoda asserts that what is important is that the

total selling expenses reported on the home market sales tape and in

the COP response be equal.

Department's Position

It is important that the total selling expenses reported in the COP

response equal the total selling expenses reported on the home market

sales tape, since the Department will compare the COP with the net home

market price in order to determine if sales below cost occurred. Any

inequality in total selling expenses between COP and home market sales

will lead to an imperfect comparison and therefore an inaccurate

determination of sales below cost.

Accordingly, for these final results, we have added to the reported

total selling expenses for COP the weighted-average direct selling

expenses included in the home market sales tape (i.e., technical

service, quality control, plant quality control, and advertising) since

they were not included in the COP calculation reported by Onoda.

Additionally, we deducted from the reported total selling expenses for

COP the amounts included in the field DIRSELEX (tanker freight costs

and freight expense for swap transactions) since these selling expenses

were deducted from the calculation of net home market price for

comparison to the COP. We did not add commission expenses to the

reported total selling expenses for COP since, as noted by Onoda, they

were already included in the reported indirect selling expense figure.

This methodology ensures that the amount of total selling expenses we

use in our COP analysis equals the total selling expenses we use in our

FMV calculations.

Comment 9

Onoda argues that the decision by the Court of Appeals for the

Federal Circuit (Federal Circuit) in The Ad Hoc Committee of AZ-NM-TX-

FL Producers of Gray Portland Cement v. United States, 13 F.3d 398

(Federal Circuit 1994), (hereafter Ad Hoc Committee), which states that

pre-sale movement expenses cannot be deducted as a direct expense from

FMV, does not apply to FMV when the U.S. sales are ESP transactions.

(Since Onoda submitted its comments, the cite for Ad Hoc Committee has

changed. The revised cite is The Ad Hoc Committee of AZ-NM-TX-FL

Producers of Gray Portland Cement v. United States, 13 F.3d 398

(Federal Circuit 1994) cert. denied 115 S. Ct. 67 (1994).) Onoda cites

the Court of International Trade's decision, The Torrington Company v.

United States, Slip Op. 94-37, at 7 (CIT 1994) (hereafter Torrington

II), to support its claim that Ad Hoc Committee does not apply to ESP

sales. (Since Onoda submitted its comments, the cite for Torrington II

has changed. The revised cite is The Torrington Company v. United

States, 850 F. Supp 7, (CIT 1994).)

Onoda states that if the Department were to conclude that Ad Hoc

Committee does apply to FMV when calculating margins on ESP

transactions, then the Department should treat U.S. pre-sale freight

expenses as indirect expenses. Otherwise, Onoda argues that the

resulting comparison between U.S. and home market sales will be

inequitable.

Additionally, Onoda states that Ad Hoc Committee is not yet final

because there is still time to file a petition for appeal to the

Supreme Court. Therefore, Onoda urges the Department not to apply Ad

Hoc Committee until all possibilities for appeal have been exhausted.

Petitioner argues that Ad Hoc Committee applies to FMV in both ESP

and purchase price (PP) comparisons. Petitioner asserts that the issue

the Federal Circuit addressed in Ad Hoc Committee was whether pre-sale

transportation costs should be categorized as a direct or indirect

expense in calculating FMV. Petitioner contends that the Federal

Circuit did not distinguish between comparisons to PP and ESP in

reaching its conclusion.

Petitioner also argues that the Torrington II decision cited by the

respondent takes too narrow a view of the Federal Circuit's holding in

Ad Hoc Committee. Accordingly, petitioner argues that the Department

should follow the Federal Circuit's ruling in Ad Hoc Committee, and not

the CIT's decision in Torrington II interpreting the Federal Circuit's

decision. Accordingly, the Department should continue to follow Ad Hoc

Committee.

Moreover, petitioner cites Ayuda, Inc. v. Thornburgh, 919 F.2d 153

(D.C. Cir. 1990), to argue that a decision by the Federal Circuit is

final unless and until it is reversed or overruled by the U.S. Supreme

Court.

Finally, petitioner argues that the Department cannot treat pre-

sale transportation costs for U.S. sales as indirect expenses (which

would increase the ESP cap) because section 772(d)(2)(A) of the Act

clearly instructs the Department to treat these expenses as direct

expenses.

In a related matter, petitioner argues that because home market

pre-sale transportation costs are considered indirect selling expenses

(in accordance with the Court's decision in Ad Hoc Committee) and

because Onoda reported home market pre-sale transportation expenses

with other direct selling expenses in the field DIRSELH, the Department

should treat all expenses reported in the DIRSELH field as indirect,

rather than direct, selling expenses.

Department's Position

We agree with Onoda and the CIT's assertion in Torrington II, that

the Ad Hoc Committee decision was limited to the narrow question of our

inherent authority to deduct pre-sale freight expenses in purchase

price situations. However, as noted by the CIT in Ad Hoc Committee of

AZ-NM-TX-FL Producers of Gray Portland Cement v. United States, 865 F.

Supp. 857 (CIT 1994) (Ad Hoc Committee II), the Ad Hoc Committee

decision ``discussed without disapproval, Commerce's ESP-COS procedures

where, as indicated, indirect expenses, such as most pre-sale

transportation costs, are deductible from FMV to the extent of the USP

level of expenses.'' (emphasis added)

We have determined, in light of Ad Hoc Committee and its progeny,

that the Department no longer can deduct home market movement charges

from FMV pursuant to its inherent power to fill in gaps in the

antidumping statute. We instead adjust for those expenses under the

circumstance-of-sale (COS) provision of 19 CFR 353.56 and the ESP

offset provision of 19 CFR 353.56(b)(1) and (2), as appropriate, in the

manner described below.

When USP is based on either ESP or purchase price, we adjust FMV

for home market movement charges through the COS provision of 19 CFR

353.56(a). Under this adjustment, we capture only direct selling

expenses, which include post-sale movement expenses and, in some

circumstances, pre-sale movement expenses. Specifically, we treat pre-

sale movement expenses as direct expenses if those expenses are

directly related to the home market sales of the merchandise under

consideration.

In order to determine whether pre-sale movement expenses are

direct, the Department examines the respondent's pre-sale warehousing

expenses, since the pre-sale movement charges incurred in positioning

the merchandise at the warehouse are, for analytical purposes, linked

to pre-sale warehousing expenses. See Final Results of Redetermination

Pursuant to Court Remand, dated January 5, 1995 (pertaining to Slip.

Op. 94-151). If the pre-sale warehousing constitutes an

[[Page 43766]]

indirect expense, the expense involved in getting the merchandise to

the warehouse, in the absence of contrary evidence, also must be

indirect; conversely, a direct pre-sale warehousing expense necessarily

implies a direct pre-sale movement expense. We note that although pre-

sale warehousing expenses in most cases have been found to be indirect

expenses, these expenses may be deducted from FMV as a COS adjustment

in a particular case if the respondent is able to demonstrate that the

expenses are directly related to the sales under consideration. See Ad

Hoc Committee of AZ-NM-TX-FL Producers of Gray Portland Cement v.

United States, Slip Op. 95-91 (CIT May 15, 1995) (upholding the

Department's pre-sale inland freight methodology set forth in its

January 5, 1995 Remand Results).

Respondent reported in its questionnaire response of August 26,

1993, that it incurred no after-sale warehousing expenses and

respondent did not claim any warehousing expenses as direct COS

expenses. The Department interprets this to mean that any warehousing

expenses incurred are properly classified as pre-sale, indirect selling

expenses and that the expense of transporting the cement to the

warehouse should also be treated as an indirect expense. Accordingly,

the Department has not deducted home market pre-sale movement expenses

from FMV for comparison to PP sales. However, we deducted post-sale

movement expenses from FMV as a direct expense.

When USP is based on ESP, the Department applies the COS adjustment

in the same manner as it does in PP situations. We treated pre-sale

movement charges as indirect expenses, which we deducted from FMV

pursuant to the ESP offset provision set forth in 19 CFR 353.56(b)(2).

We disagree with Onoda's assertion that the Department should treat

U.S. pre-sale freight expenses as indirect expenses. As Petitioner

states, section 772(d)(2)(A) of the Tariff Act clearly instructs the

Department to treat these expenses as direct expenses: The purchase

price and exporter's sales price ``shall be adjusted by being--reduced

by * * * any additional costs, charges, and expenses, * * * incident to

bringing the merchandise from the place of shipment in the country of

exportation to the place of delivery in the United States.''

Additionally, Onoda's argument that Ad Hoc Committee is not yet final

because there is still time to file a petition for appeal to the

Supreme Court is moot. This case became final and conclusive in October

1994, when the U.S. Supreme Court denied the writ of certiorari

submitted by Onoda. We agree with petitioner that since Onoda reported

home market pre-sale transportation expenses (which are indirect

expenses) with direct selling expenses in the field DIRSELH, we should

treat all expenses reported in the DIRSELH field as indirect, rather

than direct, selling expenses. Comment 10: Onoda argues that the

Department, in accordance with its new tax methodology as outlined in

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

834 F. Supp. 1391 (CIT, 1993), included a tax adjustment for indirect

selling expenses when calculating the USP for ESP sales, but that the

Department failed to make a similar adjustment when calculating the net

FMV for home market sales that were subsequently compared to USP.

Accordingly, Onoda asserts that the Department should include a tax

adjustment for home market indirect selling expenses when calculating

the net home market price since the Department included this adjustment

in its calculation of USP.

Department's Position

We agree with Onoda and have made the appropriate correction to our

calculations.

Comment 11

Onoda argues that the Department should have made a difmer

adjustment to FMV for comparisons between U.S. sales of Type II cement

and home market sales of Type M cement during the period October 1992

through March 1993. Onoda asserts that the fact that these sales came

from inventory rather than from its cement production in no way affects

the applicability of a difmer adjustment. Onoda states that the

Department can correct its oversight by calculating a difmer adjustment

based on a comparison of U.S. Type II cement variable cost information

for the period April 1992 through September 1992 and variable cost

information for home market Type M cement for the period October 1992

through March 1993.

Petitioner argues that the Department should not grant a difmer

adjustment since it used the information which Onoda supplied.

Additionally, petitioner argues that it is not reasonable for the

Department to apply variable cost data from one period to another

period, since Onoda has not demonstrated that the use of such a difmer

calculation is warranted.

Department's Position

We agree with Onoda. Upon reviewing the data submitted by Onoda, we

have determined that a difmer adjustment when comparing Type II and

Type M cement for the period October 1992 through March 1993 is

appropriate even though Onoda did not produce Type II cement during the

period October 1992 through March 1993 (the threshold issue of whether

Onoda is entitled to a difmer adjustment was discussed in Comment 2).

Accordingly, for these final results, we used the variable cost of Type

II cement for the period April 1992 through September 1992, and

compared it with the variable cost of Type M cement for the period

October 1992 through March 1993 in order to determine a difmer

adjustment for comparison of Type II and Type M cement for the period

October 1992 through March 1993.

Comment 12

Onoda argues that the Department incorrectly calculated the

commission offset to FMV for comparisons to PP sales. Onoda states that

in calculating the FMV for PP sales, the Department used as the

commission offset either the indirect selling expenses of the division

responsible for export sales, or the sum of home market commissions,

whichever was lower. Onoda asserts that since commissions had been paid

on home market sales but not on PP sales, the Department should have

followed its normal practice and calculated the commission offset by

deducting the full amount of home market commissions from FMV and then

adding to FMV, as an offset, the amount of U.S. indirect expenses

capped by the amount of home market commissions.

Department's Position

We agree with Onoda and have made the appropriate adjustments to

our calculations.

Comment 13

Onoda argues that the Department should include in its calculation

of FMV, all home market sales in which a zero or a negative value

appeared under the variable for gross value, quantity, or gross unit

price. Onoda argues that these values are due to retroactive downward

price changes, input errors, or renegotiations with customers. Onoda

asserts that by dropping all sales with negative and zero values from

the FMV database, the Department has calculated monthly average FMVs

which do not reflect the actual sales value of the merchandise in the

home market.

[[Page 43767]]

Petitioner argues that the Department should continue to exclude

zero and negative values from its calculation of FMV since Onoda has

failed to provide a detailed explanation, or documentation, for these

values.

Department's Position

We agree with the petitioner. We requested in a supplemental

questionnaire (dated December 7, 1993) that Onoda provide a ``detailed

explanation'' of the retroactive price adjustments and adjustments to

volume that resulted in negative numbers or zeros for numerous

variables in the home market sales tape. In response to this request,

Onoda merely stated, without providing supporting documentation, that

such values occur due to retroactive downward price changes, input

errors or revisions after negotiations with customers. Since Onoda did

not support its claim, we have excluded from our calculations, sales in

which a zero or negative value appeared under the variable for gross

value, quantity or gross unit price.

Comment 14

Onoda argues that the Department, in its COP calculations, should

have accepted Onoda's claim that the interest expense it incurred

should reflect the short-term interest income it earned. Onoda argues

that its supporting documentation was adequate and that the Department

should have requested additional information if the documentation

submitted was considered inadequate.

Department's Position

We disagree with Onoda. When a respondent makes a claim for an

adjustment, it is the respondent's responsibility to provide a detailed

explanation of the adjustment as well as supporting documentation if

necessary. In its original questionnaire response, Onoda did not

provide documentation to support this adjustment. In a supplemental

questionnaire issued by the Department, we requested that Onoda provide

documentation to support its claim for a short-term interest income

offset. In response to this request, Onoda provided the Department with

two untranslated pages that are reported to be from a general ledger

showing bank interest earned by Onoda. Onoda's documentation is not

only ambiguous and untranslated, it also lacks a narrative response

explaining exactly how the documentation supports the deduction of

Onoda's short-term interest income from its interest expense.

Therefore, we have used the full interest figure in determining the

interest ratio for our COP calculations.

Comment 15

Onoda argues that the Department's methodology of using the mean

service station expense (SSLH) when calculating the COP directly

conflicts with the methodology employed in the 1990/92 review. Onoda

asserts that the Department should use the methodology it used in the

1990/92 review (i.e., calculating the total SSLH expense from the sales

tape, dividing this amount by the total gross value of home market

sales and then multiplying this percentage by the unit cost of

manufacture, and adding the resulting per unit amount to the COP).

Alternatively, Onoda urges the Department to use a weighted-average

SSLH expense in its calculations rather than a mean expense.

Petitioner argues that the methodology the Department used in the

1990/92 review would understate the amount of SSLH in COP, since the

cost of manufacture figure is a much lower number than the gross sales

price. Moreover, petitioner argues that the Department must treat SSLH

equally when calculating COP and home market price for the below-cost

test. Petitioner provides two methodologies it believes would result in

a fair treatment of SSLH costs in the sales-below-cost test: (1)

Calculate total SSLH as a percentage of total gross price, multiply

this percentage by the gross unit price, and add the resulting amount

to COP; or (2) calculate total SSLH as a percentage of total

manufacturing costs, multiply this ratio by COP, and add the resulting

amount to COP and net price.

Department's Position

In the 1990/92 review we calculated two COPs, one for the period

April 1990 through March 1991, and one for the period April 1991

through March 1992. The Department's goal in calculating two COPs was

to annualize costs in order to prevent the distortion of per unit

charges and adjustments due to the seasonal nature of the merchandise.

(Moreover, we did not simply divide the total SSLH by total QTYH as

given on the sales tape when calculating the two COPs since the sales

tape only covered the period October 31, 1990 through April 30, 1992.)

To calculate the per metric ton amount to add to the COP in the 1990/92

review, we first totaled the gross value (GRSVALH) and SSLH fields and

then divided total SSLH by total GRSVALH. We then multiplied the

resulting ratio by the total COM.

In this review, since the POR is one year, the Department does not

face the same situation (i.e., we do not have to annualize costs).

Accordingly, in this review, the Department followed its standard

practice and used a weighted-average, per unit, SSLH expense (i.e.,

total SSLH expense incurred divided by total quantity sold) and added

this amount to COP. The Department applied the weighted-average SSLH

expense reported by Onoda (in its case brief filed in response to the

Department's preliminary results of review) and added it to the COP.

The use of a weighted-average insures that SSLH expenses are accurately

represented in the sales-below-cost test.

The Department did not use the alternatives recommended by the

petitioner since it was our goal to calculate a per unit SSLH expense

to be added to COP since these expenses are reported in the home market

on a per unit basis.

Comment 16

Onoda argues that the Department should use the U.S. interest rate

for calculating imputed credit expenses associated with PP sales,

rather than Onoda's Japanese interest rate, since Onoda had access to

the lower U.S. interest rates.

Department's Position

We agree with Onoda. It is our practice to use U.S. interest rates

to calculate credit expenses incurred on U.S. sales when a respondent

demonstrates that it had either actual borrowings or access to U.S.

dollar loans during the period of review (see, e.g., Notice of Final

Determinations of Sales at Less Than Fair Value: Certain Hot-Rolled

Carbon Steel Flat Products, Certain Cold-Rolled Carbon Steel Flat

Products, Certain Corrosion-Resistant Carbon Steel Flat Products, and

Certain Cut-to-Length Carbon Steel Plate from France, 58 FR 37125 (July

9, 1993)). In the present case, Onoda's U.S. subsidiary, Lone Star

Northwest (LSNW), had access to U.S. dollar loans. Accordingly, for

these final results we have used the average U.S. interest rate

available to LSNW during the third quarter of 1992 for all PP sales.

Comment 17

Onoda disagrees with the Department's classification of U.S. port-

to-U.S. facility movement expense in its further manufacturing

calculations. Specifically, Onoda argues that the resulting allocations

between cost of manufacturing in Japan and value-added in the United

States are flawed. Onoda argues that these pre-value-added inland

freight expenses should be

[[Page 43768]]

considered part of the cost of materials of the imported product.

Onoda argues that based on Sec. 353.41(e) of the Department's

regulations and the wording of certain questions in the Department's

questionnaire, these costs should be attributed to the Japanese cost of

materials rather than to the amount of Onoda's U.S. further

manufacturing activities.

Onoda states that section 353.41(e) of the Department's

questionnaire directs the Department to reduce exporter's sales price

by the amount of ``(a)ny increased value resulting from a process of

production or assembly performed on the merchandise after importation

and before sale to a person who is not the exporter of the merchandise,

which value the Secretary generally will determine from the cost of

material, fabrication, and other expenses incurred in such production

and assembly.''

Onoda states that Sec. 353.41(e) clearly defines ``increased

value'' as that added by a manufacturing process or an assembly

operation after the merchandise is imported into the United States.

Onoda asserts that when a manufacturer merely moves a component or

product from the port to its factory, it does not perform a

manufacturing or assembly process on the imported merchandise.

Consequently, these movement costs should not be considered part of

U.S. value added.

With regards to the Department's questionnaire, Onoda states that

the section of the questionnaire entitled ``Further Processing''

discusses material costs in two places. Onoda refers to section 8A(1)

of the questionnaire which states: ``Material cost: Provide the

transfer prices of individual components, subassemblies and completed

units received by the U.S. affiliate(s) * * *'' Onoda states that this

definition of material cost refers to the price of the delivered item.

Onoda further cites Section 8A(1)(c) which states: ``Provide the actual

costs for all individual components * * * These should include the

price paid to the third party, transportation costs, and other costs

normally associated with materials costs.'' Accordingly, Onoda argues

that movement expense is defined as part of the materials costs, and,

therefore, transportation costs between the port and the factories

should be allocated entirely to the Japanese portion of the cement

cost. Onoda further states that in the cost of production and

constructed value portion of the questionnaire (question

VIII(3)(B)(2)(a)), the Department defines material cost as including

``the purchase price, transportation charges, duties and all other

expenses normally associated with obtaining the materials used in

production.'' Onoda argues that in each of these provisions, the

expense of transporting the material to the factory is defined as part

of the cost of materials. Onoda concludes that it follows that the

freight costs between the port and the terminals should be allocated

entirely to the Japanese portion of the cement cost.

Department's Position

We disagree with Onoda. It is the Department's established practice

to attribute all costs incurred after a product has arrived in the U.S.

to U.S. production costs when the product is further manufactured in

the United States. See Stainless Steel Hollow Products from Sweden;

Final Results of Antidumping Duty Administrative Review (57 FR 21389,

May 20, 1992) and Gray Portland Cement and Clinker from Japan; Final

Results of Antidumping Duty Administrative Review (58 FR 48826,

September 20, 1993).

Onoda correctly cites Sec. 353.41(e) of the Department's

regulations, but interprets the regulation too narrowly. The Department

has interpreted this regulation to include in further-manufacturing

expenses the cost of transporting the merchandise from the port to the

factory where further-manufacturing occurs. Only by incurring this

expense can increased value through the process of production occur.

Accordingly, the process of transporting the material is inextricably

linked to the ``process of production'' in further-manufactured sales.

Similarly, Onoda's cite to sections 8A(1) and 8A(1)(c) of the

Department's questionnaire to support its argument that movement costs

are considered part of materials costs is misleading. The Department

requests information on movement cost, but does not specifically state

that such costs should be allocated to the cost of materials in the

home market. Rather, as stated above, it is our practice to attribute

all costs incurred after a product has arrived in the United States to

U.S. production costs when the product is further-manufactured in the

United States.

Additionally, Onoda correctly cites the COP/CV section of the

questionnaire in explaining that in the home market, the expense of

transporting the material to the factory is defined as part of the cost

of materials which is then incorporated into the cost of manufacturing.

This is done so that the cost of materials and therefore, the cost of

manufacturing reflects all the expenses incurred during the production

process. Similarly, in further-manufacturing situations, the cost of

transporting the cement from the U.S. port to the U.S. factory is

included under ``process of production'' expenses used to determine

U.S. value added in order to accurately reflect all expenses incurred

during the further-manufacturing process.

Consistent with our established practice, we included freight

expense from the U.S. port to the U.S. plant in the U.S. further

manufacturing costs in establishing the relationship between U.S.

further manufacturing costs and total costs of the merchandise.

Comment 18

Onoda argues that the Department incorrectly calculated the profit

per transaction for each U.S. sale of ready-mix concrete by deducting

from the gross transaction price only the prompt payment discount and

the total cost of the further-manufactured product. Onoda argues that

the Department must also deduct from the gross price the cost of

delivery to the unrelated customer, including the associated insurance

cost, in order to calculate profit correctly. Onoda states that these

delivery costs are real costs, and, as such, directly reduce the profit

on each sale.

Petitioner argues that the Department should not adjust further

manufacturing profit to reflect LSNW's costs for ready-mix delivery and

related insurance. Petitioner states that, ``(i)n this case, Onoda asks

that the profit on further manufactured sales of concrete be reduced by

the costs incurred by Onoda to transport concrete'' to its unrelated

customers. Petitioner argues that the issue of whether ready-mix

delivery and insurance costs should be included in U.S. value added was

addressed and decided in the first review of this case where the

Department declined to include such costs in U.S. value added.

Department's Position

We agree with Onoda that the cost of delivery to the unrelated

customer, including the associated insurance cost, should be deducted

when determining the gross profit on further-manufactured sales since

these costs are real costs, and, as such, directly reduce the profit on

each sale. Therefore, we have revised our calculations in these final

results to ensure that freight and related insurance costs are deducted

from the gross price in calculating the profit on each U.S. sale.

Contrary to petitioner's statement, we did not address the issue of

[[Page 43769]]

transportation expenses in calculating the total profit in the last

review.

Final Results of Review

Based on our analysis of comments received, and the correction of

clerical errors, we have determined that a final margin of 24.27

percent exists for Onoda for the period May 1, 1992, through April 30,

1993.

The Department will instruct the Customs Service to assess

antidumping duties on all appropriate entries. Individual differences

between USP and FMV may vary from the percentage stated above. The

Department will issue appraisement instructions directly to the Customs

Service.

Furthermore, the following deposit requirements will be effective

for all shipments of the subject merchandise, entered or withdrawn from

warehouse, for consumption on or after the publication date of these

final results of administrative review, as provided by section

751(a)(1) of the Act: (1) The cash deposit rate for Onoda will be

24.27; (2) for merchandise exported by manufacturers or exporters not

covered in this review but covered in a previous review or the original

less-than-fair-value (LTFV) investigation, the cash deposit rate will

continue to be the rate published in the most recent final results or

determination for which the manufacturer or exporter received a

company-specific rate; (3) if the exporter is not a firm covered in

this review, earlier reviews, or the original investigation, but the

manufacturer is, the cash deposit rate will be that established for the

manufacturer of the merchandise in these final results of review,

earlier reviews, or the original investigation, whichever is the most

recent; and (4) the ``all others'' rate, as established in the original

investigation, will be 70.23 percent.

These deposit requirements, when imposed, shall remain in effect

until publication of the final results of the next administrative

review.

This notice also serves as a final reminder to importers of their

responsibility under 19 CFR 353.26 to file a certificate regarding the

reimbursement of antidumping duties prior to liquidation of the

relevant entries during this review period. Failure to comply with this

requirement could result in the Secretary's presumption that

reimbursement of antidumping duties occurred and the subsequent

assessment of double antidumping duties.

This notice also serves as a reminder to parties subject to

administrative protective orders (APOs) of their responsibility

concerning the disposition of proprietary information disclosed under

APO in accordance with 19 CFR 353.34(d). Timely written notification of

return/destruction of APO materials or conversion to judicial

protective order is hereby requested. Failure to comply with the

regulations and the terms of an APO is a sanctionable violation.

This administrative review and notice are in accordance with

section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 353.22.

Dated: August 11, 1995.

Paul L. Joffe,

Deputy Assistant Secretary for Import Administration

[FR Doc. 95-20929 Filed 8-22-95; 8:45 am]

BILLING CODE 3510-DS-P