Porcelain-on-Steel Cooking Ware From Mexico; Final Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[A-201-504]

Porcelain-on-Steel Cooking Ware From Mexico; 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 its administrative

review of the antidumping duty order on porcelain-on-steel cooking ware

(POS cooking ware) from Mexico. The review covers two manufacturers/

exporters of this merchandise to the United States and the period

December 1, 1990 through November 30, 1991.

Based on our analysis of the comments received and the corrections

of certain clerical and computer program errors, we have changed the

preliminary results.

EFFECTIVE DATE: January 9, 1995.

FOR FURTHER INFORMATION CONTACT: Lorenza Olivas or Rick Herring, Office

of Countervailing Compliance, Import Administration, International

Trade Administration, U.S. Department of Commerce, 14th Street and

Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-

2786.

SUPPLEMENTARY INFORMATION:

Background

On February 11, 1994, the Department published in the Federal

Register (59 FR 6616) the preliminary results of its administrative

review of the antidumping duty order (51 FR 43415) on POS cooking ware

from Mexico for the period December 1, 1990 through November 30, 1991.

The review covers two manufacturers/exporters, Acero Porcelanizado,

S.A. de C.V. (APSA) and CINSA, S.A. de C.V. (CINSA). The Department has

now completed that administrative review in accordance with section 751

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

Scope of Review

Imports covered by this review are shipments of POS cooking ware,

including tea kettles, which do not have self-contained electric

heating elements. All of the foregoing are constructed of steel and are

enameled or glazed with vitreous glasses. This merchandise is currently

classifiable under Harmonized Tariff Schedule (HTS) item number

7323.94.00. Kitchenware currently entering under HTS item number

7323.94.00.30 is not subject to the order. The HTS item number is

provided for convenience and Customs purposes. The written description

remains dispositive.

Analysis of Comments Received

We gave interested parties an opportunity to comment on the

preliminary results. At the request of the respondents, we held a

hearing on March 28, 1994. We received comments and rebuttals from both

respondents and the petitioner, General Housewares Corporation (GHC).

Comment 1: CINSA contends that the Department incorrectly

calculated depreciation on a revalued cost basis. CINSA states that

since the Department only uses revalued depreciation for

hyperinflationary economies, and Mexico was not experiencing

hyperinflation during the review period, the Department should use

depreciation expenses on an historical basis.

Petitioner responds that the Department's use of depreciation

expenses on a revalued basis in cases involving hyperinflationary

economies does not mean that its practice is to limit the use of

depreciation expenses based on a revalued basis to only those cases

involving hyperinflationary economies. Petitioner furthermore argues

that, since CINSA reported its depreciation on a revalued basis, as

required by the Mexican Generally Accepted Accounting Principles

(GAAP), for its audited financial statements, CINSA should also report

cost of production (COP) and constructed value (CV) in this manner.

Department's Position: We disagree with respondent. The Department

followed Mexican GAAP and adjusted CINSA's COP data to reflect the

revalued depreciation. This approach coincided with CINSA's financial

statements which were also prepared in accordance with Mexican GAAP. It

is the Department's policy to adhere to the home market GAAP as long as

the home market GAAP reasonably reflects actual costs. Thus, Commerce

has determined that when a foreign country allows a company to revalue

its assets, as opposed to relying upon historical cost, and when a

company reflects the revalued basis in its financial statements, it is

appropriate to accept the financial statements as reflecting actual

cost. See, Final Determination of Sales at Less Than Fair Value:

Circular Welded Nonalloy Steel Pipe From the Republic of Korea (57 FR

42942; September 17, 1992). See also, POS Cooking Ware From Mexico;

Final Results of Antidumping Administrative Review (58 FR 43327; August

16, 1993) (Mexican Cooking Ware Fourth Review Final Results).

Comment 2: Assuming that the Department should continue to rely on

the revalued depreciation expense as a component of fixed overhead

costs, CINSA claims that the Department incorrectly calculated its

preliminary COP adjustment. CINSA believes that the ``best information

available'' (BIA) methodology used by the Department grossly overstates

the amount of revalued depreciation expense, and is not appropriate

since the Department can derive a suitable fixed overhead expense

factor from available information provided in CINSA's responses of May

18, 1992 and June 18, 1993.

Petitioner, on the other hand, contends that the use of BIA for

CINSA's unreported depreciation is justified and reasonable. The

petitioner asserts that CINSA did not provide the Department with a

complete and accurate response to the COP questionnaire.

Department's Position: The Department has reviewed the information

contained in CINSA's responses and found that adequate data was

available for a more accurate calculation of COP. Therefore, BIA was

not required since the COP questionnaire responses provided the

necessary information for calculating an appropriate fixed overhead

factor. Accordingly, the Department has revised the calculation of

fixed overhead based on information contained in CINSA's responses.

Comment 3: CINSA claims that the Department incorrectly increased

the COP to account for mandatory profit [[Page 2379]] sharing payments

made to its employees. CINSA contends that these payments are not

related to the COP. CINSA explains that these payments are determined

based upon the amount of profit earned by the company and, therefore,

should be treated in the same manner as income taxes and excluded from

COP. CINSA states that the Department's administrative precedent

excludes from COP and CV non-operating expenses unrelated to the

production of the subject merchandise. CINSA cites Television Receivers

from Japan (56 FR 56189 (1991)) where the Department stated that ``[I]n

determining the cost of the subject merchandise, the Act does not

provide us with the authority to include income or expenses that are

unrelated to the product's manufacture.'' CINSA further states that if

the Department does include profit sharing in COP and CV, the

adjustment should be based on information derived from the financial

statement of CINSA's corporate parent rather than information derived

from the financial statement of the operating division.

Petitioner, on the other hand, states that the Department correctly

included the profit sharing payments in its calculated COP. Petitioner

contends the profitability of the company is derived from production

and is directly related to production efficiency. Petitioner also

states that these payments are part of the total compensation paid to

employees and should be treated no differently than salaries and other

employee benefits that are directly related to production.

Petitioner further contends that the Department should base the

profit sharing expenses on CINSA's financial statements and not on

CINSA's parent company, Grupo Industrial Saltillo, S.A. de CV (GIS),

since CINSA's experience more accurately reflects the profit sharing

expenses of the entity producing the products. Furthermore, according

to petitioner, Mexican law requires that certain companies make

payments to employees based on the profit of the company. CINSA

reported these payments in its financial statements, but excluded them

in its COP and CV.

Department's Position: We disagree with respondent. Mexican GAAP

requires that the profit sharing costs be reflected in a company's

financial statement. The profit sharing payments are mandatory

according to Mexican law. The payments represent compensation to

employees involved in the production of the merchandise and

administration of the company. Therefore, these payments are labor

costs related to the product's manufacture and are part of CINSA's COP

for the subject merchandise. We agree with petitioner that the

calculation should be based on CINSA's financial statements and not the

parent company's financial statement in order to capture the profit

sharing costs most closely attributable to the subject merchandise.

See, Final Determination of Sales at Less Than Fair Market Value;

Certain Hot-Rolled Carbon Steel Flat Products and Certain Cut-to-Length

Carbon Steel Plate from Canada (58 FR 37099; July 9, 1993).

Comment 4: CINSA claims that the Department improperly limited

CINSA's short-term interest income that was used to offset interest

expense incurred by its corporate parent. CINSA contends that the

Department's current administrative practice of limiting the net short-

term interest expense does not reflect the economic reality of the

information in the financial statement.

Petitioner argues that the Department correctly excluded net

financial income from CINSA's COP and CV. The petitioner contends that

interest income does not directly relate to the manufacturing cost

associated with the production of the product. Petitioner further

states that using CINSA's methodology results in higher margins for

companies with long term investments than for companies with short-term

investments.

Department's Position: We disagree with respondent. It is the

Department's normal practice to allow short-term interest income to

offset financing costs only up to the amount of such financing costs.

See, Frozen Concentrated Orange Juice from Brazil; Final Results of

Antidumping Administrative Review (55 FR 26721; June 29, 1990); Brass

Sheet and Strip from Canada; Final Results of Antidumping

Administrative Review (55 FR 31414; August 2, 1990); and Final

Determination of Sales at less than Fair Market Value; Sweaters from

Taiwan (55 FR 34585; August 23, 1990). The Department reduces interest

expense by the amount of short-term income to the extent finance costs

are included in COP. Using total short-term interest income in excess

of interest expense to reduce production cost, as suggested by CINSA,

would permit companies with large short-term investment activity to

sell their products below the COP. Accordingly, we limited the amount

of the offset to the amount of the expense from the related activity.

Comment 5: CINSA and APSA argue that the Department's new

methodology of adjusting U.S. price and foreign market value (FMV) for

home market value added tax (IVA) is contrary to law. Respondent

contends that by statute, the Department is directed to add to U.S.

price ``the amount of any taxes imposed in the country of exportation''

which have not been collected by reason of exportation of the

merchandise to the United States. 19 U.S.C. 1677a(d)(1)(C).

Furthermore, the statute expressly sets the additions and subtractions

that are to be made and does not authorize additional adjustment to

those adjustments. Respondents further argue that Court of

International Trade (CIT) has ruled that the Department must ``add the

full amount of VAT [such as IVA] paid on each sale in the home market

FMV without adjustment.'' See, Torrington Co. v. United States, 824 F.

Supp. 1095, 1101 (1993). Respondents also argue that an adjustment to

the amount of IVA charged by CINSA on its home market sales to parallel

the Department's further adjustment to the imputed IVA on the U.S.

price is not a circumstance-of-sale adjustment and, therefore, is

outside the scope of the circumstance-of-sale provision, which,

according to respondents, is strictly limited to differences in selling

terms or conditions. To support their argument, respondents cite Zenith

Electronics Corp. v. United States, 988 F.2d 1573, 1581 (Fed. Cir.

1993) (Zenith), where the CIT held that the circumstances-of-sale

adjustment does not encompass adjustments for commodity taxes

specifically covered by section 1677A (d)(1)(C). Respondents contend

that, although the Department claims to be following Zenith by applying

a methodology that will not create margins where none exist, the

Department's tax adjustment is nothing less than another attempt to

achieve tax neutrality. Respondents suggest that the Department should

not try to achieve tax neutrality and should only add to U.S. price the

amount of the IVA tax rate multiplied by the U.S. price, net of

discounts and rebates.

Petitioner does not oppose the Department's new methodology.

Department's Position: We disagree with respondents. Respondents'

suggested methodology would lead to margin creation where none would

otherwise exist. Recent case law makes it clear that there should be no

margin creation where no margin would exist but for the imposition of a

value added tax in the home market. See, Federal-Mogul Corporation v.

United States, 813 F. Supp 856, 864-5 (1993). While the new methodology

may not be specifically authorized by the Act, the Department has

determined that it is neither contrary to the spirit of the case law,

nor prohibited by the language of the Act. As such, the methodology is

within the Department's discretion. [[Page 2380]]

The Department disagrees with respondents' assertion that this

methodology is contrary to Zenith. We have acted reasonably in adopting

the methodology set forth in Federal-Mogul, which was found by the CIT

in Federal-Mogul to be consistent with Zenith, the higher court

holding. (See also, The Torrington Co. v. United States Slip Op. 94-51

(CIT March 31, 1994), wherein the CIT upheld the new methodology for

the value added tax adjustment without comment). See also, Avesta

Sheffield, et al, v. United States, Slip Op. 94-53 (CIT March 31,

1994).

Comment 6: CINSA states that the Department failed to properly

calculate the amount of IVA in COP. CINSA claims that the Department

added the IVA collected by CINSA on HM sales to cost rather than the

IVA incurred by CINSA on the purchase of direct raw materials, variable

overhead and packaging materials and reported in its COP response.

Petitioner does not oppose the Department's methodology but

suggests that it would achieve the same objectives by comparing the

home market sales with COP, exclusive of IVA, as used in the prior

administrative review of this case. In the event the Department adjusts

the amount of tax included in COP, petitioner notes that the difference

in the tax treatment would yield a corresponding increase in CINSA's

profit on home market sales. Therefore, if the Department makes the COP

change requested by CINSA, the Department must also increase profit for

CV to reflect CINSA's reduced COP.

Department's Position: Value added taxes are paid on inputs and,

therefore, are costs incurred in production. Upon the sale of the

product, value added taxes are reimbursed to CINSA by the ultimate

consumer. Any amount of tax which is in excess of the amount reimbursed

is payable to the Mexican government. The Department's calculations

must reflect the economic reality that CINSA does not receive a benefit

from collecting and paying IVA. Therefore, because COP is compared to

home market price which includes the entire IVA paid, to be neutral,

our calculations of COP must take into account the entire IVA paid (a

portion of which is paid on the inputs, and the remainder of which is

due to the government). The amount of tax is based upon information

reported in the home market sales tape which includes both components.

See, Mexican Cooking Ware Fourth Review Final Results.

Comment 7: CINSA argues that, in its price-to-price comparison, the

Department incorrectly adjusted the U.S. price to account for the

assessed countervailing duties. CINSA states that, pursuant to 19

U.S.C. 1677a(d)(1)(D), the Department must add to U.S. price any

countervailing duties imposed on the subject product to offset an

export subsidy. CINSA points out that for all U.S. sales made between

January 1, 1991 and June 5, 1991 the applicable rate is 2.18 percent.

Thus, for all U.S. sales made between those dates, the Department

should add 2.18 percent to U.S. price. Instead, the Department limited

the period in which that amount was assessed from January 1, 1991 to

January 5, 1991.

Petitioner contends that the Department is only required to add to

the U.S. price the amount of any countervailing duty ``imposed'' to

offset an export subsidy. Petitioner states that there has been no

countervailing duty imposed, because upon liquidation of the entries at

issue, CINSA will be returned the ``assessed amount.''

Department's Position: We agree with respondent and will make the

correction.

Comment 8: CINSA alleges that the Department failed to make the

several corrections to information contained in CINSA's July 15, 1992,

supplemental submission, which was provided in a timely fashion:

A. In its COP/CV computer file, CINSA overstated the COP of certain

items by failing to divide the cost of these items by four to reflect

that four items were contained in one package. CINSA states that the

Department should make this division.

B. CINSA also overstated the weight of article 1065910 by a factor

of four. To derive the per unit weight, CINSA asserts that the

Department must divide the weight by the number of items contained in

the package.

C. Further, CINSA omitted the weights in certain items reported in

its home market and U.S. sales tapes. CINSA asserts that the Department

should include these corrected weights in the computer tape, since the

weights are necessary to calculate the freight charges attributable to

both home market and U.S. sales of these items.

D. CINSA reported the incorrect number of units sold and the unit

price for one home market sale of item number 1018001, and for one home

market sale of item number 1061701, CINSA reported the incorrect unit

price. CINSA asserts that the Department should make these corrections.

Department's Position: We agree with respondent. Since the above

corrections were submitted in a timely manner, we will make those

corrections where appropriate.

Comment 9: CINSA asserts that the COP data reported for item

numbers 10158 and 19177 in its COP sales tape submission were based on

the cost of producing two units and not based on a single cost.

Therefore, CINSA stated that the Department should use the cost

information included in the submission to derive the single unit COP

for these items.

Petitioner argues that there is no evidence of this fact on the

record to support CINSA's claim.

Department's Position: We agree with petitioner. There is no

evidence in the administrative record satisfactorily demonstrating that

these two items were not based on single unit costs.

Comment 10: Petitioner contends that CINSA incorrectly weight-

averaged factory overhead included in the COP and CV. Petitioner states

that the respondent weight-averaged using 13 months rather than the 12-

month review period.

CINSA replies that the methodology employed for weight-averaging

cost of certain production factors is reasonable, since any adjustment

to this calculation would have a de minimis impact on CINSA's COP and

any final antidumping margin.

Department's Position: The methodology used by the respondent is

inappropriate because the review period covers 12 months, not 13.

However, the required adjustments to correct cost of manufacturing

would have an insignificant impact on COP and no impact on the margin.

Therefore, the Department did not adjust for the miscalculation.

Comment 11: APSA claims the antidumping duty margin reported in the

preliminary results published in the Federal Register does not

accurately reflect the weighted-average margin calculation released to

counsel by the Department in its disclosure documents.

Department's Position: We agree and have made the correction.

Comment 12: Petitioner contends CINSA's reported inland freight

expenses should be disallowed, since it includes its factory-to-

warehouse pre-sale inland freight expenses. Petitioner argues that

factory-to-warehouse freight charges incurred on home market sales

cannot be deducted as direct sales expenses in purchase price

comparisons because those charges were incurred prior to the date of

sale. Petitioner cites The Ad Hoc Committee of AZ-NM-TX-FL Producers of

Gray Portland Cement v. United States, CAFC Opinion 93-1239 (Jan 5,

1994) and Gray Portland Cement and Clinker From Japan (59 FR 6614;

February 11, 1994). The Court of Appeals for the Federal Circuit (CAFC)

[[Page 2381]] held that the FMV value provision of the antidumping

statute does not authorize a deduction from FMV for pre-sale

transportation costs within the exporting country. According to

petitioner, if the Department cannot separate home market direct

movement expenses from the home market indirect expenses, then it must

treat the entire reported amount as home market indirect expenses.

CINSA argues that petitioner misinterprets the CAFC decision in Ad

Hoc Committee, claiming that the CAFC's decision was based solely upon

the Department's stated rationale for its decision, i.e.; the

Department's inherent authority to fill gaps in the statutory framework

and to make ex-factory comparisons in order to achieve an ``apples to

apples'' comparison. Thus, the CAFC's decision did not decide if any

alternative authority existed under which the Department could have

adjusted FMV for the pre-sale transportation expense, including the

circumstance-of sale adjustment, which is specifically authorized by

statute and regulation. Therefore, the Department should not simply

exclude pre-sale transportation expenses from the FMV calculation as

suggested by petitioner, but should be deducted from FMV because such

expenses are directly related to the sale of the subject merchandise in

the home market.

According to CINSA, petitioner also misstates the Department's

current treatment of pre-sale selling expenses. By assuming that

CINSA's pre-sale transportation expenses to the warehouses are indirect

selling expenses, petitioner asserts that the entire transportation

expense should be disallowed because CINSA's combined indirect and

direct transportation expenses cannot be separated. According to CINSA,

its reported pre-sale and post-sale transportation expenses are both

directly related selling expenses and both equally qualify as a

circumstance-of-sales adjustment.

Department's Position: We have concluded that, in light of the

CAFC's decision in Ad Hoc Committee, the Department no longer can

deduct home market movement charges from foreign market pursuant to its

inherent power to fill in gaps in the antidumping statute. We instead

will adjust for those expenses under the circumstance-of-sale provision

of 19 CFR 353.56 and the exporter's selling price (ESP) offset

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

following manner.

When U.S. price is based on purchase price, we only adjust for home

market movement charges through the circumstance-of-sale provision of

19 CFR 353.56. Under this adjustment, we capture only direct selling

expenses, which include post-sale movement expenses. We will 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 in this case, the Department will examine 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, inextricably linked to pre-sale warehousing

expenses. If pre-sale warehousing constitutes an indirect expense, the

expense involved in getting the merchandise to the warehouse 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

circumstance-of-sale adjustment in a particular case if the respondent

is able to demonstrate that the expenses are directly related to the

sales under consideration.

When U.S. price is based on ESP, the Department uses the

circumstance-of-sale adjustment in the same manner as in purchase price

situations. Additionally, under the ESP offset provision set forth in

19 CFR 353.56(b)(1) and (2), we will adjust for any pre-sale movement

charges which are treated as indirect selling expenses.

Therefore, we requested that respondent provide separate factory-

to-warehouse transportation expenses. Based on the information

provided, in the final results, we deducted only the post-sale

transportation expenses in the home market from FMV, since the pre-sale

warehousing and, thus, pre-sale inland freight were not shown to be

directly related to the sales in question.

Final Results of the Review

As a result of our review, we determine the margins to be:

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Margin

Manufacturer/exporter Time period (percent)

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APSA......................... 12/01/90- 4.66

11/30/91

CINSA........................ 12/01/90- 27.96

11/30/91

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The Department will instruct the Customs Service to assess

antidumping duties on all appropriate entries. Individual differences

between U.S. price and FMV may vary from the percentages stated above.

The Department will issue appraisement instructions directly to the

Customs Service.

Furthermore, the following deposit requirements will be effective

upon publication of this notice of final results of administrative

review for all shipments of the subject merchandise, entered, or

withdrawn from warehouse, for consumption on or after the publication

date, as provided by section 751(a)(1) of the Act: (1) The cash deposit

rate for the reviewed companies will be as outlined above; (2) for

previously reviewed or investigated companies not listed above, the

cash deposit rate will continue to be the company-specific rate

published for the most recent period; (3) if the exporter is not a firm

covered in this review, a prior review, or the original less-than-fair-

value (LTFV), but the manufacturer is, the cash deposit rate will be

the rate established for the most recent period for the manufacturer of

the merchandise; and (4) the cash deposit rate will be 29.52 percent,

the ``all others'' rate established in the LTFV investigation. See,

Floral Trade Council v. United States, Slip Op. 93-79, and Federal

Mogul Corp. v. United States, Slip Op. 93-83.

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 the review period. Failure to comply with this

requirement could result in the Secretary's presumption that

reimbursement of antidumping duties occurred and the subsequent

assessment of double antidumping duties. This notice serves as the only

reminder to parties subject to administrative protective order (APO) of

their responsibilities concerning 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.

This administrative review and notice are in accordance with

section 751(a)(1) of the Act, as amended (19 U.S.C. 1675(a)(1)) and 19

CFR 353.22.

[[Page 2382]] Dated: December 21, 1994.

Susan G. Esserman,

Assistant Secretary for Import Administration.

[FR Doc. 95-450 Filed 1-6-95; 8:45 am]

BILLING CODE 3510-DS-P