Replacement Parts for Self-Propelled Bituminous Paving Equipment From Canada; Final Results of Antidumping Duty Administrative Review

SUMMARY: On November 21, 1994, the Department of Commerce (the

Department) published the preliminary results of its administrative

review of the antidumping duty order on replacement parts for self-

propelled bituminous paving equipment from Canada (59 FR 59993). The

review period is September 1, 1990 through August 31, 1991. This review

involves one manufacturer/exporter of this merchandise, the Allatt

Paving Division of Ingersoll-Rand Canada Inc. (Allatt). After

considering the comments submitted by petitioner and respondent, we

determine the dumping margin for this period to be 6.86 percent.

EFFECTIVE DATE: April 14, 1995.

FOR FURTHER INFORMATION CONTACT: Gayle Longest or Kelly Parkhill,

Office of Countervailing Compliance, Import Administration,

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

Washington, DC 20230; telephone: (202) 482-2786.

SUPPLEMENTARY INFORMATION:

Background

On November 21, 1994, the Department published in the Federal

Register the preliminary results of its administrative review of the

antidumping duty order on replacement parts for self-propelled

bituminous paving equipment from Canada (59 FR 59993) covering the

period September 1, 1990 through August 31, 1991. This review involves

one manufacturer/exporter of this merchandise, Allatt. The Department

has now completed this administrative review in accordance with section

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

Scope of the Review

Imports covered by this review are shipments of replacement parts

for self-propelled bituminous paving equipment, excluding attachments

and parts for attachments. This merchandise is currently classifiable

under Harmonized Tariff Schedule (HTS) item numbers 4016.93.10,

7315.11.00, 7315.89.50, 7315.90.00, 8336.50.00, 8479.99.00, 8481.20.00,

8482.10.10, 8483.90.90, 8539.29.20, 8544.20.00, 8544.41.00, 8544.51.80,

8544.60.20, and 9015.30.40. The HTS item numbers are 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. We received comments from the petitioner, Blaw-

Knox, and from the Road Machinery Division of Ingersoll-Rand, which is

the successor to the respondent.

Comment 1: The petitioner claims that the Department improperly

made adjustments to foreign market value (FMV) for pre-sale home market

movement costs through a circumstance-of-sale adjustment and the

exporter's sales price (ESP) offset. Petitioner maintains that these

adjustments are prohibited by the decision of the Court of Appeals for

the Federal Circuit (the Federal Circuit) in Ad Hoc Committee of AD-NM-

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

(Fed. Cir. 1994).

Respondent maintains that Ingersoll-Rand did not claim pre-sale

home market movement charges, and therefore that the issue is moot.

(See Supplemental Questionnaire Response dated December 2, 1993,

Section B-1 Format Sheets, p. 2).

Department's Response: We agree with the respondent. No pre-sale

home market movement charges were claimed and the Department did not

make any adjustment to FMV for these expenses.

Comment 2: The respondent argues that the Department incorrectly

adjusted the United States price (USP) to account for certain home

market taxes. The respondent maintains that the Department's current

methodology is the result of the decision of the Court of International

Trade (CIT) in Federal-Mogul Corp. v. United States, Slip Op. 93-194

(CIT 1993) (Federal-Mogul), in which the court ordered the Department

to adjust USP by the ad valorem tax rate at the same point in the chain

of commerce at which the tax is imposed in the home market. Thus, the

respondent claims that the first step of the Department's current tax

methodology, as mandated in Federal-Mogul, is to increase USP by

applying the home market tax rate to the price of U.S. sales at the

point at which the product would be taxed in the home market. According

to the respondent, the second step of the Department's tax methodology

involves making an additional deduction to USP and FMV by multiplying

each adjustment by the ad valorem tax rate. The respondent disagrees

with the second step of the Department's methodology because it

believes that the second round of adjustments does not conform with the

requirement that the Department calculate accurate margins.

Furthermore, even if these second step adjustments are warranted, the

respondent maintains that the Department has not applied the stated

methodology correctly.

According to the respondent, the Department states in its

preliminary results that the second step of the tax methodology is made

to avoid creating dumping margins where they would not exist if no

taxes were imposed, in accordance with Silicomanganese From Venezuela

(59 FR 31205) and Zenith Electronics Corp. v. United States, 988F.2d

1573 (Fed. Cir. 1993) (Zenith). The respondent argues that the

Department has misinterpreted the holding of the Zenith opinion. The

respondent claims that the Zenith decision does not require the

Department to make specific adjustments to avoid margin creation

resulting from the multiplier effect. Furthermore, the respondent

argues that the Department's current tax methodology actually increases

dumping margins, which is in conflict with the Department's duty to

calculate accurate margins. Despite the CIT's decision upholding the

Department's current tax methodology (see Independent Radionic Workers

of America v. United States, 862 F. Supp. 422, 426 (CIT 1994); see also

Torrington Co. v. United States, 866 F. Supp. 1434, 1436 (CIT 1994)),

the respondent claims that the statute does not authorize the second

step to the Department's tax methodology and that this methodology has

not yet been reviewed by the Federal Circuit.

In addition, the respondent argues that even if the Department's

tax methodology is valid under the law, the Department did not

correctly apply it in the preliminary results of this case. The

respondent maintains that the second step tax adjustment is made to

eliminate any residual tax that would have been included in the

ultimate USP or FMV as a result of movement costs that were included in

the tax base but were later deducted in deriving the ultimate

comparison price. See Silicomanganese from Venezuela (59 FR 31205). The

respondent claims that in the preliminary results the Department

incorrectly made tax adjustments for all price adjustments, including

other price adjustments that were not deductions.

Specifically, the respondent argues that the Department made a tax

[[Page 19020]] adjustment to both PP and ESP sales for the difference-

in-merchandise adjustment (difmer), which is incorrect because the

difmer is an independent statutory adjustment made to FMV to account

for differences in physical characteristics when a product sold in the

United States does not have an exact match with a product sold in the

home market. See 19 U.S.C. Sec. 1677b(a)(4)(C); 19 CFR 353.57.

According to the respondent, because the difmer is not an adjustment

for differences in circumstances of sale, pursuant to 19 U.S.C.

Sec. 1677(a)(4)(B), it should not affect the tax added to USP or FMV.

The respondent claims that the Department's tax adjustment for the

difmer is in conflict with the directive established in Daewoo

Electronics Co., Ltd. v. United States, 760 F. Supp. 200 (CIT 1991)

(Daewoo), in which it is stated that tax adjustments are appropriate

only to account for differences in the circumstances of sale. Thus, the

respondent claims, by making this inappropriate adjustment to the

difmer, the Department has increased the FMV unnecessarily, and thereby

increased any dumping margins in comparisons where the difmer was a

positive number.

Furthermore, the respondent does not agree with tax adjustments

that the Department made to FMV corresponding to adjustments that were

added to derive FMV. The respondent claims that tax adjustments made

for additions to FMV are in conflict with the Department's stated

policy of making tax adjustments only for costs which are deducted from

the USP on which the tax was calculated. Moreover, the respondent

argues that after the Department makes its tax adjustments

corresponding to deductions, USP and FMV no longer contain any residual

tax resulting from costs that were a part of the original tax base.

However, when the Department makes tax adjustments for costs that it

adds to FMV, these costs result in creating margins that the initial

adjustments were supposed to prevent. Thus, the respondent maintains,

the Department should only make adjustments for costs that are deducted

from the original tax base.

Department's Position: The tax methodology used in this

administrative review is the Department's current administrative

practice. See Federal-Mogul. In Federal-Mogul, the 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, the Department changed its practice, as

instructed by the CIT, and adjusted USP for home market tax by

multiplying the home market tax rate by the USP 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, and have added the

result to USP. In accordance with our tax methodology, we have also

deducted from the USP and FMV those portions of the respective home

market tax and the USP tax adjustments attributable to expenses

included in the foreign market and U.S. bases of the tax if those

expenses are later deducted to calculate FMV and USP. Specifically, we

are deducting the difference between home market selling expenses and

U.S. selling expenses, whether they are added to or deducted from FMV.

Furthermore, all adjustments to U.S. price are required to be

multiplied by the tax rate, including the difmer. These adjustments to

the foreign market tax and the U.S. price tax adjustment are necessary

to prevent the methodology for calculating the U.S. price tax

adjustment from creating antidumping duty margins where no margins

would exist if no taxes were levied upon foreign market sales.

The adjustment to avoid the margin creation effect is in accordance

with the Federal Circuit's holding that the application of the USP tax

adjustment under section 772(d)(1)(C) of the Tariff Act should not

create a dumping margin if pre-tax FMV does not exceed USP. See Zenith.

In addition, the Federal Circuit specifically has held that an

adjustment should be made to mitigate the impact of expenses that are

deducted from FMV and USP upon the USP tax adjustment and the amount of

tax included in FMV. See Daewoo. However, the mechanics of the

Department's adjustments to the U.S. and foreign market tax amounts as

described above are not identical to those suggested in Daewoo. With

regard to the respondent's concern that this methodology expands the

margins, the Federal Circuit in Zenith held that ``[b]y engaging in

dumping, the exporters themselves are responsible for the multiplier

effect. The multiplier effect does not create a dumping margin where

one does not already exist.'' See Zenith at 1581-82. For the foregoing

reasons, we have not amended our treatment of U.S. and home market

taxes for these final results.

Comment 3: The respondent argues that in calculating the FMV for

ESP sales, the program was incorrect in that the U.S. packing costs

were multiplied by the absolute amount of tax rather than multiplied by

the tax rate. In addition, the respondent claims that when the

Department recalculated the U.S. credit expense for ESP and PP sales,

the Department applied the credit rate to the unit price, without first

subtracting discounts. Thus, the respondent maintains that corrections

should be made to the FMV calculation for ESP sales and to the U.S.

credit expenses.

Department's Position: We agree with the respondent. We have

corrected our calculations for these inadvertent errors.

Comment 4: The respondent maintains that there were two different

tax rates in Canada during the review period: the FST, which was a

value-added tax that was included in the price of the subject

merchandise until December 31, 1990, and the GST, a goods and services

tax levied after January 1, 1991, which is not included in the price

charged to the customer. The respondent argues that in Federal-Mogul

Corp. v. United States, Slip Op. 94-186, 8-9 (CIT, Dec. 7, 1994), the

CIT determined that such home market taxes should only be applied to

the part of the review period in which the tax was in effect. The

respondent argues that to prevent the tax rate change from distorting

the dumping margin, the Department should use the tax rate that would

be applied to the U.S. sale in comparisons where the tax rates differ

because the sale in one market occurred in 1990 and the sale in the

other market occurred in 1991.

Department's Position: We agree that the home market tax rate

should be adjusted to account for the differences in tax rates during

1990 and 1991; however, we disagree with respondent's proposal to use

the tax rate that would be applied to the U.S. sale in comparisons

where the tax rates differ. To account for the differences in the tax

rates during the two periods, the Department instead derived a

weighted-average tax rate for the period of review based on the volume

of home market sales made during 1990 and 1991. In our calculations for

these final results, we have used the home market weighted-average tax

rate specific to the period of review for all comparisons of home

market and U.S. sales.

Final Results of Review

We determine the following dumping margin to exist for the period

September 1, 1990 through August 31, 1991:

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

Margin

Manufacturer/exporter (percent)

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

Allatt (Ingersoll-Rand)................................... 6.86

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

The Department will instruct the Customs Service to assess

antidumping duties on all appropriate entries.

[[Page 19021]] Individual differences between USP 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 these final results of administrative review for

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

warehouse, for consumption as provided by section 751(a)(1) of the

Tariff Act: (1) The cash deposit rate for the reviewed company will be

the rate as listed; (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 investigation, 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) cash

deposits for all other manufacturers or exporters will be 20.12

percent. This is the ``new shipper'' rate established during the first

final results published by the Department in the Federal Register on

February 16, 1982 (47 FR 6681). We have determined that this rate is

the appropriate rate, because we are unable to ascertain the ``all

others'' rate from the Treasury less-than-fair-value investigation.

These deposit requirements 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 subsequent assessment

of double antidumping duties.

This notice also 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 (19 U.S.C. 1675(a)(1)) and 19 CFR 353.22.

Dated: April 7, 1995.

Susan G. Esserman,

Assistant Secretary for Import Administration.

[FR Doc. 95-9274 Filed 4-13-95; 8:45 am]

BILLING CODE 3510-DS-P