Large Power Transformers From Italy; Final Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[A-475-031]

Large Power Transformers From Italy; 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 October 2, 1995, the Department of Commerce (the

Department) published the preliminary results of its administrative

review of the antidumping duty finding on large power transformers

(LPTs) from Italy. These final results of review cover one

manufacturer/exporter of this merchandise and the period June 1, 1993,

through May 31, 1994.

We gave interested parties an opportunity to comment on the

preliminary results. Analysis of the comments received resulted in no

change in the weighted-average margin for these final results.

EFFECTIVE DATE: July 18, 1996.

FOR FURTHER INFORMATION CONTACT: Andrea Chu, Kris Campbell or Michael

Rill, Office of Antidumping Compliance, Import Administration,

International Trade Administration, U.S. Department of Commerce, 14th

Street and Constitution Avenue, NW., Washington, DC 20230; telephone

(202) 482-4733.

SUPPLEMENTARY INFORMATION:

Background

On October 2, 1995, the Department published in the Federal

Register (60 FR 51455) the preliminary results of its administrative

review of the antidumping duty finding on LPTs from Italy (37 FR 11772,

June 14, 1972). We gave interested parties an opportunity to comment on

our preliminary results. The petitioner, ABB Power T&D Co., Inc. (ABB),

and the respondent, Tamini Costruzioni Elettromeccaniche S.R.L.

(Tamini), submitted comments.

Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute and to the

Department's regulations are references to the provisions as they

existed on December 31, 1994.

Scope of Review

Imports covered by the review are shipments of large power

transformers; that is, all types of transformers rated 10,000 kVA

(kilovolt-amperes) or above, by whatever name designated, used in the

generation, transmission, distribution, and utilization of electric

power. The term ``transformers'' includes, but is not limited to, shunt

reactors, autotransformers, rectifier transformers, and power rectifier

transformers. Not included are combination units, commonly known as

rectiformers, if the entire integrated assembly is imported in the same

shipment and entered on the same entry and the assembly has been

ordered and invoiced as a unit, without a separate price for the

transformer portion of the assembly. This merchandise is currently

classifiable under the Harmonized Tariff Schedule (HTS) item numbers

8504.22.00, 8504.23.00, 8504.34.33, 8504.40.00, and 8504.50.00. The HTS

item numbers are provided for convenience and Customs purposes. The

written description remains dispositive.

The review covers shipments of transformers by Tamini during the

period June 1, 1993, through May 31, 1994.

Changes Since the Preliminary Results

We have made the following changes in these final results.

1. We changed Tamini's negative net interest expense to zero.

2. With respect to Tamini's profit calculation, we computed the

profit ratio by dividing Tamini's profit amount by its cost of

production (COP), and not by the sales value as used in the preliminary

results.

Analysis of Comments Received

Comment 1: Petitioner states that the Department understated the

constructed values (CV) upon which foreign market value (FMV) was based

by (1) Including a negative interest expense amount in selling, general

and administrative (SG&A) expenses as a result of allowing Tamini to

offset its short-term interest expense with an interest income amount

greater than the expense, and (2) subtracting home market commission

expenses as a circumstance-of-sale adjustment to CV without first

including them in the initial CV calculation.

With respect to petitioner's claim concerning interest expense,

Tamini responds that the Department allowed the negative interest

expense offset adjustment in calculating COP in the

[[Page 37444]]

immediately preceding review and that petitioner did not object to this

adjustment. Tamini further states that the nature of the large power

transformer industry involves sales that require substantial lead times

between order acceptance and shipment and that such sales tend to

generate substantial interest income. Tamini contends that it is

appropriate to apply its entire short- term interest income because

such an analysis not only reflects accurately the company's actual COP,

but also recognizes costs that Tamini incurred in generating interest

income.

With respect to petitioner's argument concerning the omission of

home market commissions in the calculation of CV, Tamini states that

the Department did in fact include such commissions in the CV

calculation before removing them through a circumstance-of-sale

adjustment.

Department's Position: We agree with petitioner that short-term

interest income may only be used to offset the short-term interest

expense and cannot create a negative interest amount for purposes of

determining SG&A. The Department's policy is to permit short-term

interest income related to production as an offset to interest expense

and not to COP. See Frozen Concentrated Orange Juice From Brazil: Final

Results of Administrative Review, 55 FR 26721, 26723 (1990); Porcelain-

on-Steel Cooking Ware From Mexico: Final Results of Administrative

Review, 58 FR 43327 (1993). Therefore, we have set interest expense

equal to zero for the final results.

However, we disagree with petitioner concerning its contention that

CVs were further understated due to the omission of the home market

commission expense. The Department first added an amount for home

market direct selling expenses, including the commission expense, in

calculating CV, then subtracted the same amount as a circumstance of

sale adjustment. See Comment 5, infra.

Comment 2: Petitioner contends that the methodology used by Tamini

to calculate the home market profit ratio is incorrect. Petitioner

states that Tamini computed its home market profit ratio by dividing

the amount of its profit by sales value instead of by its COP and that,

as a result, this methodology inappropriately lowered Tamini's profit

ratio and its CV.

Tamini responds that its profit methodology was accepted by the

Department in the previous review and petitioner did not object to it.

Tamini further states that this allocation is reasonable because it is

the manner in which Tamini measures profitability internally.

Department's Position: We agree with petitioner. The home market

profit ratio should be calculated by dividing the amount of the

company's profit by COP and not by sales value, since the per-unit

profit amount is derived by multiplying the profit ratio by the COP.

Therefore, we corrected Tamini's home market profit ratio by dividing

the amount of its total profit for calendar year 1993 by the cost of

all transformers sold by the company in 1993, as reported in Tamini's

response.

Comment 3: Petitioner asserts that the Department improperly

included in the dumping analysis amounts for both expenses and revenues

associated with technical services provided in the United States.

Tamini responds that the Department should include both technical

service expenses and revenues in the dumping analysis because the

services Tamini provided were an integral part of the sales

transactions at issue. Tamini further contends that the fact that such

services were not included in a lump-sum price for all products and

services is irrelevant.

Department's Position: We disagree with petitioner and have

continued to include both expenses and revenues associated with the

technical services Tamini provided on the reported sales in our

analysis. As in the preliminary results, we have included revenue from

technical services connected with the sales in question in the unit

price. We have also deducted expenses associated with the provision of

these services as direct selling expenses. The information regarding

technical services in Tamini's questionnaire response, and which we

examined at verification, clearly indicates that the technical service

expenses and revenues at issue were tied to the sales for which they

were reported, i.e., these expenses and revenues would not have been

incurred or earned but for the sales in question. As we noted in our

sales verification report, Tamini records sales, payment, and direct

expense information on a transaction-specific basis in its accounting

records; accordingly, we verified that these technical services were

accurately reported on a per-unit basis without the use of allocations.

See Memorandum from Analyst to the File: Sales Verification Report for

Tamini Costruzioni Elettromeccaniche S.R.L. (October 2, 1995) at 2-5.

Comment 4: Tamini contends that, for one of the sales under review,

the Department did not apply the interest expense ratio (total interest

expense to the total cost of manufacturing) to the cost of

manfacturing, but instead multiplied this ratio by only the sum of

direct selling expenses and general and administrative expenses. Tamini

states that, by doing so, the Department significantly understated the

interest expenses for the CV calculation and requests that the

Department correct its calculations.

Department's Position: Since we have decided to use interest income

to offset interest expense only up to the amount of interest expense

incurred in our SG&A calculation (see our response to Comment 1,

supra), we did not allow any actual interest income amount that is

greater than interest expense. Tamini's contention, which would simply

affect the amount of the negative interest expense, is therefore moot.

Comment 5: Tamini claims that the Department double-counted U.S.

indirect selling expenses by adding an amount representing U.S.

indirect selling expenses to CV as a commission offset while failing to

reduce Tamini's reported general and administrative expenses for a

portion representing these indirect expenses.

Petitioner responds that the value of the general and

administrative expenses claimed by Tamini to represent U.S. indirect

selling expenses is new information that should not be considered for

these final results. Petitioner states that the Department verified

Tamini's general indirect selling expense, and that Tamini's attempt to

segregate this expense into home market and U.S. portions in its case

brief does not allow the Department sufficient opportunity to determine

whether the allocation methodology is correct and deprives petitioner

of its right to comment on this methodology.

Department's Position: We disagree with Tamini that the addition of

U.S. indirect selling expenses to the CV as an offset to the deduction

of the home market commission results in double-counting of U.S

indirect selling expenses. Contrary to Tamini's claim, the SG&A portion

of CV did not include an amount for U.S. indirect selling expenses

prior to the commission offset adjustment. We requested in our

questionnaire that Tamini provide indirect selling expenses associated

with home market sales of the class or kind of merchandise, which we

would have included as a component of the CV of the merchandise

involved in the sales at issue. Tamini responded that it was unable to

segregate indirect selling expenses from general and administrative

expenses and it was also unable to isolate either indirect selling

expenses or general and administrative

[[Page 37445]]

expenses incurred in the home market from those incurred elsewhere.

Tamini therefore calculated a ratio of worldwide selling, general and

administrative (SG&A) expenses to worldwide cost of goods sold. Tamini

then multiplied this ratio by the cost of manufacture of the

merchandise involved in each U.S. transaction to derive a per-unit

amount for SG&A expenses.

While it is true that Tamini's worldwide SG&A expenses (the

numerator in Tamini's SG&A ratio) include selling expenses incurred on

sales outside the home market, Tamini's worldwide cost of goods sold

(the denominator in Tamini's SG&A ratio) includes the costs of goods

sold outside the home market. Accordingly, the per-unit amount of the

SG&A expense attributable to indirect selling was not necessarily

higher than that which would have been applied had Tamini been able to

isolate and report only its home market expenses, since both the

numerator and denominator of the ratio used were calculated on the same

basis. Therefore, reducing CV by an amount that Tamini claims

represents U.S. indirect selling expenses would understate the SG&A

element of the CV calculation.

The SG&A amount that we included in the calculation of CV contained

an amount for commissions. In accordance with section 353.56 of our

regulations, we made a circumstance-of-sale adjustment by deducting

this amount and offsetting this deduction by adding U.S. indirect

expenses up to the amount of the commission. As explained above, this

offset does not lead to double-counting of U.S. indirect selling

expenses, such that an amount for U.S. indirect selling expenses must

first be subtracted from the SG&A expenses included in CV, because the

CV only contains an amount for SG&A attributable to home market sales.

The adjustment is only for the difference, if any, between the

commission amount in the CV and U.S. indirect selling expenses. It does

not increase the amount of general expenses used in calculating the CV

prior to such adjustments.

Although we are not adjusting CV in the manner suggested by

respondent, we disagree with petitioner's assertion that information

submitted by respondent concerning this issue is untimely. Respondent

submitted the data contained in its case brief in the process of

responding to our initial and supplemental questionnaires.

Final Results of Review

As a result of this review, we determine that no dumping margins

exist for Tamini for the period June 1, 1993, through May 31, 1994.

The Department will issue appraisement instructions directly to the

Customs Service.

Furthermore, the following cash deposit requirements will be

effective upon publication of these final results for all shipments of

the subject merchandise entered, or withdrawn from warehouse, for

consumption on or after the publication date, as provided for by

section 751(a)(1) of the Act: (1) the cash deposit rate for Tamini will

be zero; (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, or the original less-than-fair-

value (LTFV) 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) the cash deposit rate for all

other manufacturers or exporters will be 92.47 percent.

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 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 disposition of proprietary information disclosed under APO

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

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: July 8, 1996.

Robert S. LaRussa,

Acting Assistant Secretary for Import Administration.

[FR Doc. 96-18260 Filed 7-17-96; 8:45 am]

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