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

DEPARTMENT OF COMMERCE

[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.

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

SUMMARY: On October 6, 1995, 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, 1993, through April 30, 1994.

We gave interested parties an opportunity to comment on the

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

have changed the final results from those presented in the preliminary

results of review

EFFECTIVE DATE: December 20, 1996.

FOR FURTHER INFORMATION CONTACT:

David Genovese, Import Administration, International Trade

Administration, U.S. Department of Commerce, Washington, D.C. 20230;

telephone (202) 482-4697.

SUPPLEMENTARY INFORMATION:

The Applicable Statute

Unless otherwise indicated, all citations to the statute are

references to the provisions as they existed prior to January 1, 1995,

the effective date of the amendments made to the Tariff Act of 1930, as

amended (the Act) by the Uruguay Round Agreements Act (URAA).

Background

On May 12, 1994, and May 31, 1994, Onoda Cement Co., Ltd. (Onoda),

and the Ad Hoc Committee of Southern California Producers of Gray

Portland Cement (the Petitioner), respectively, 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. We initiated the review, covering the period May

1, 1993, through April 30, 1994, on June 15, 1994 (59 FR 30770). On

October 6, 1995, we published the preliminary results of the

administrative review (60 FR 52368). 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

[[Page 67309]]

comments from the petitioner and from the respondent. At the request of

the petitioner and respondent, we held a public hearing on November 20,

1995.

Comment 1

Onoda argues that in calculating foreign market value (FMV), the

Department should deduct home market pre-sale movement expenses either

in their entirety as direct selling expenses or as indirect selling

expenses up to the amount of U.S. pre-sale movement expenses. Onoda

states that it has been the Department's practice since The Ad Hoc

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

States, 13 F.3d 398 (Fed. Cir. 1994), cert. denied 115 S. Ct. 67 (1994)

(hereinafter Ad Hoc Committee I), to deduct pre-sale movement expenses

as direct expenses when the freight expenses are ``incurred in

positioning the merchandise at [a] warehouse,'' and the warehousing

expenses are classified as direct expenses. Onoda argues that in this

review, pre-sale movement expenses should be deducted from FMV as

direct expenses since the cost of warehousing the cement is a direct

expense. Onoda argues that warehousing is a direct expense because

sales of the subject merchandise constitute virtually all of its cement

sales; therefore, virtually all of Onoda's warehousing expenses are

associated with the subject merchandise.

Onoda argues that, alternatively, if the Department decides to

treat home market pre-sale movement expenses as indirect expenses, in

purchase price situations, the Department should deduct from FMV home

market pre-sale movement expenses up to the amount of U.S. pre-sale

movement expenses. Onoda argues that the Department has the power to

make such an adjustment pursuant to its authority to make

circumstances-of-sale (COS) adjustments and under its inherent

authority to achieve a fair comparison. Onoda further argues that 19

CFR Sec. 353.56 permits the Department to adjust FMV to account for

indirect expenses as a COS adjustment and that the Department has the

power to adjust FMV for indirect expenses under its inherent authority

to fill in gaps in an area where the statute is silent or ambiguous.

Onoda cites Timken Company v. United States, 865 F. Supp. 881 (CIT

1994) (hereinafter Timken) and Smith-Corona Group v. United States, 713

F.2d 1568 (Fed. Cir. 1983) (hereinafter Smith-Corona) in support of its

position.

Moreover, Onoda cites 19 C.F.R. Sec. 353.56(b)(1) and the Final

Determination of Sales at Less than Fair Value: Polyethylene

Terephthalate Film, Sheet, and Strip from the Republic of Korea, 56 FR

16305 (April 22, 1991) (hereinafter PET Film from Korea) as precedent

for offsetting direct selling expenses in the U.S. market with indirect

selling expenses in the home market in purchase price situations.

Petitioner contends that Onoda's argument that pre-sale movement

expenses should be deducted from FMV as a direct expense has been

rejected by the Department in a number of Japanese cases, including,

Polyethylene Terephthalate Film, Sheet and Strip, from Japan, 60 FR

32,133 (June 20, 1995), Stainless Steel Angle from Japan, 60 FR 16,608

(March 31, 1995), Granular Polytetraflourethylene Resin from Japan, 60

FR 5,622 (January 30, 1995), and Tapered Roller Bearings, Four Inches

or Less in Diameter, and Components Thereof, from Japan, 59 FR 56,035

(November 10, 1994) (hereinafter TRBs from Japan).

Petitioner states that contrary to Onoda's assertion, the

Department requires that pre-sale movement expenses be directly related

to specific sales in order to be classified as direct expenses.

Petitioner contends that in situations like this, where the merchandise

is not dedicated to specific customers but, instead, is kept in

inventory at the warehouse and is generally available for sale to any

customer, the pre-sale expenses are indirect because there is no

specific sale to which the expenses can be directly related. Petitioner

argues that the Department addressed the issue of whether or not

Onoda's pre-sale home market transportation expenses are direct

expenses, in the second review of this case. See Gray Portland Cement

and Clinker from Japan, 60 FR 43,761 (August 23, 1995) (hereinafter

Gray Portland Cement and Clinker--Second Review). Petitioner states

that in the second review of this case, the Department determined that

Onoda's pre-sale home market movement expenses were indirect expenses.

Petitioner argues that Onoda's home market distribution system has

not changed from the second review and that, therefore, the Department

should continue to consider Onoda's pre-sale home market movement

expenses as indirect expenses as it did in the preliminary results of

this review. Petitioner states that the methodology applied in the

preliminary results of this review and the second review of this case

(i.e., the methodology outlined in Ad Hoc Committee I) has been applied

by the Department in a number of Japanese cases where the Japanese

producers, like Onoda, have a home market distribution system whereby

products are transported from manufacturing plants to warehouses prior

to sale.

Petitioner further contends that the Department's methodology for

determining whether pre-sale home market movement expenses are indirect

expenses has been approved by the Court of International Trade (CIT)

and the Court of Appeals for the Federal Circuit (CAFC) in a number of

decisions including, Ad Hoc Committee of AZ-NM-TX-FL Producers of Gray

Portland Cement v. United States, No. 95-1129 (Fed. Cir., October 10,

1995), Ad Hoc Committee of AZ-NM-TX-FL Producers of Gray Portland

Cement v. United States, 865 F. Supp. 857 (CIT 1994) (hereinafter, Ad

Hoc Committee II), Federal Mogul Corp. v. United States, 871 F. Supp.

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

1994), and Timken Co. v. United States, 855 F. Supp. 399 (CIT 1994).

With regard to Onoda's argument that in purchase price situations

the Department should deduct home market pre-sale freight expenses up

to the amount of the U.S. pre-sale movement expenses, Petitioner states

that such a methodology would require the Department to overrule the

CAFC's decision in Ad Hoc Committee I and all of the judicial and

administrative rulings based on this decision. Petitioner contends that

in Ad Hoc Committee I, the CAFC plainly stated that because Congress

drafted the FMV section of the antidumping statute without any

authority for the deduction of home market pre-sale movement expenses,

Congress did not intend those expenses to be deducted from FMV under

any ``inherent'' authority. Petitioner states that this principle is

supported by the decision of the current Congress, in enacting the

implementing legislation for the Uruguay Round amendments to the

antidumping law, to provide expressly for the deduction of pre-sale

home market movement expenses from FMV.

With regard to Onoda's argument that the Department has the power

to adjust FMV for indirect expenses under its inherent authority to

fill in gaps in an area where the statute is silent or ambiguous,

Petitioner argues that the Department has recognized that Ad Hoc

Committee I plainly held that in purchase price comparisons there was

no ``gap'' with respect to whether pre-sale movement charges could be

deducted from FMV. Petitioner cites to TRBs from Japan, in which the

Department stated: ``The Ad Hoc Committee decision states that the

statute does not give the Department the

[[Page 67310]]

authority to deduct home market movement expenses from FMV by invoking

its inherent power to fill `gaps' in the antidumping statute.'' TRBs

from Japan, at 56042.

In a related issue, Petitioner argues that because home market pre-

sale transportation costs should be considered indirect selling

expenses 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.

In response, Onoda states that DIRSELH consists of freight expenses

associated with swap transactions and periodic adjustments made to the

freight expenses recorded in Onoda's books. Onoda contends that freight

expenses associated with swap transactions are post-sale rather than

pre-sale freight expenses since such freight occurs after the sale has

been made by the other manufacturer. Moreover, states Onoda, while the

freight costs associated with the tanker freight adjustment include

pre-sale freight expenses, the Department should still deduct these

expenses from FMV pursuant to Onoda's aforementioned argument on the

deduction of pre-sale freight expenses as a direct expense or as an

indirect expense capped by U.S. pre-sale freight expense.

Department's Position

We disagree with Onoda. Onoda is correct that since Ad Hoc

Committee I the Department has deducted pre-sale movement expenses as

direct expenses when freight expenses are incurred in positioning the

merchandise at the warehouse, and the warehousing expenses are

classified as direct expenses. However, as with the first and second

reviews of this case, the Department has determined that Onoda's

warehousing expense is an indirect selling expense. The Department's

determination in the first review that Onoda's warehousing expense is

an indirect selling expense has been upheld by the CIT in The Ad Hoc

Committee of Southern California Producers of Gray Portland Cement v.

United States, 914 F. Supp. 535 (CIT 1995) (hereinafter Southern

California Producers.). In its decision the CIT stated that:

Home market expenses for which Commerce makes an allowance,

must, as a general matter, be directly tied to specific sales or

specific customers. Hussey Copper, 17 CIT at 1001, 834 F. Supp. at

421. If the expenses are not directly tied to specific sales, but

are incurred to advance sales in general, then Commerce may treat

them as indirect selling expenses * * *

Upon review, the Court finds that Commerce's decision to

classify Onoda's home market service station expenses as warehousing

expenses, and to treat them as indirect selling expenses, is

supported by substantial evidence and otherwise in accordance with

law for several reasons. First, Onoda has not earmarked the cement

held in the service stations for particular sales or particular

customers; indeed, Onoda admits that the service stations

temporarily store cement that is awaiting sale. Final Results, 58

Fed. Reg. 48,828. Second, Onoda failed to submit evidence showing

that service stations differ from warehouses in their physical

structure. See Id. Third, some repacking, a job that is

traditionally done at warehouses, is done at the service stations.

Id.; Pub. Doc. 107, Conf. Doc. 46. Fourth, Commerce found evidence

to indicate that the service stations are not entirely necessary to

transport cement to customers.

Id. at 540-541. The facts of this review are no different from the

facts in the first review upheld by the CIT. Accordingly, the

Department continues to view Onoda's warehousing as an indirect expense

and therefore, we continue to view Onoda's home market pre-sale

movement charges as an indirect expense.

The Department also disagrees with Onoda's argument that in

purchase price situations the Department should deduct from FMV as

indirect expenses home market pre-sale movement expenses up to the

amount of U.S. pre-sale movement expenses through the Department's

inherent authority to fill in gaps in an area where the statute is

silent or ambiguous. We have determined, in light of Ad Hoc Committee I

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 COS provision of 19 CFR Sec. 353.56 and the ESP offset

provision of 19 CFR Sec. 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

Sec. 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 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. See Gray

Portland Cement and Clinker--Second Review, at 43765; Ad Hoc Committee

II, 865 F. Supp. 861-862.

Onoda reported in its questionnaire response of August 22, 1994,

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.

Additionally, it is the Department's standard practice when a

respondent commingles direct and indirect home market expenses in the

same field to treat that field as an indirect expense. See Gray

Portland Cement and Clinker--Second Review, at 43766; Antifriction

Bearings (Other Than Tapered Roller Bearings) and Parts Thereof From

France, et al. 58 FR 39729, 39742 (July 26, 1993). Accordingly, 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 2

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 argues that comparing bulk sales to

bagged sales in this case contravenes the Department's past practice of

comparing, whenever possible, sales of identically packed

[[Page 67311]]

merchandise. Onoda cites to the Final Determination of Sales at Less

Than Fair Value: Gray Portland Cement and Clinker from Japan, 56 FR

12,156 (March 22, 1991), Final Determination of Sales at Less Than Fair

Value: Fresh Kiwifruit from New Zealand, 57 FR 13,695 (April 17, 1992)

(hereinafter, Kiwifruit from New Zealand), Final Determination of Sales

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

55 FR 29,244 (July 18, 1990) (hereinafter Cement from Mexico), and the

concurrence memorandum for Gray Portland Cement and Clinker from

Venezuela, 56 FR 56,390 (November 4, 1991) (hereinafter Cement from

Venezuela), in support of its position.

Petitioner argues that Onoda made this same argument in the second

review and that the Department determined in the second review that it

was appropriate to compare bulk sales in the United States to bulk and

bagged sales in the home market after adjusting for differences in

packing costs. See Gray Portland Cement and Clinker--Second Review, at

43763. Petitioner argues that home market sales of bagged cement should

be included in the calculation of FMV since the technical

specifications for cement sold in bags and in bulk are identical.

Moreover, asserts Petitioner, Onoda has made no attempt to demonstrate

that bagged cement is sold in different distribution channels or at

different levels of trade than bulk cement, or that sales of bagged

cement are not in the ordinary course of trade.

Department's Position

We agree with the petitioner. As we stated in the second review of

this case, 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 is 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. See Gray

Portland Cement and Clinker--Second Review, at 43763.

In the second review of this case, we determined that the cases

cited by Onoda in support of its argument did not construct a standard

whereby the Department will not make bulk-to-bag comparisons. Further,

the LTFV investigation of this case is distinguishable from both the

second and present case. In the LTFV investigation, bagged cement was

sold in the United States, not in the home market, and the amount sold

in the United States was ``insignificant.'' Accordingly, in the LTFV

investigation, we did not require Onoda to report U.S. sales of bagged

cement and we did not use bagged sales in our margin calculations. In

the second review of this case, and in this review, bagged cement was

sold in the home market and the amount was not insignificant.

Accordingly, Onoda was required to report bagged sales and such sales

were included in the Department's margin calculations.

We conclude here, as we did in the second review of this case, that

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

that packing is not a criterion for matching types of cement.

Therefore, 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 3

Onoda argues that in the preliminary results of review, the

Department improperly classified a commission paid to an unrelated

trading company as a ``document handling fee'' (i.e., as a movement

expense that was directly deducted from U.S. price). Onoda states that

its sales to the United States are made through an unrelated trading

company which purchases the cement from Onoda at a discount and then

resells the cement at the pre-discount price to Lone Star Northwest

(LSNW), a party related to Onoda. Onoda claims that the payment the

trading company receives (i.e., the difference between what the trading

company pays Onoda and what LSNW pays the trading company for the

cement) is a commission compensating the trading company for arranging

transportation and providing other services in support of cement sold

to the United States.

Onoda asserts that under the antidumping law, payments for a wide

range of services may qualify for treatment as commissions. Onoda,

citing to Chapter 8, page 26 of the Department's antidumping manual,

states that the services provided by a commissionaire may vary from the

level of minimal services in facilitating communication to substantive

services including maintaining inventory and providing support in all

areas of the sales transactions. Similarly, Onoda cites to Final

Determination of Sales at Less Than Fair Value: Coated Groundwood Paper

from France, 56 FR 56,380 (November 4, 1991) to argue that the

``Department treats payments for `ensuring that production, shipping,

and deliveries meet . . . scheduling requirements, taking title to the

merchandise, performing sales accounting and collection functions,

arranging for the provision of technical services, and participating in

trade shows and other events' as commission.'' See Onoda's case brief

at page 10, fn 14.

Onoda, citing to Final Determination of Sales at Less Than Fair

Value and Final Determination of Sales at Not Less Than Fair Value:

Certain Carbon Steel Products from Austria, 50 FR 33,365 (August 19,

1985) (hereinafter Carbon Steel Products from Austria), states that the

Department has, in the past, treated payments like that which Onoda

pays to the trading company as commissions. Onoda states that in Carbon

Steel Products from Austria, the Department stated the following:

Home market purchasers contact [the respondent] to establish

price and terms of sale. Once the parties have agreed on the terms

of sale, the purchaser designates a trading company to handle the

paperwork. [The respondent] then sells to the trading company at a

reduced price and the trading company resells to the purchaser at

the full price. Under these facts, the payments are clearly

commissions paid to the trading company for services rendered in

connection with the sale. (emphasis added by Onoda)

Onoda also argues that the payment to the trading company does not

affect the final price to the U.S. customer, and, therefore, it should

not be deducted from U.S. price as a discount. Onoda cites to Carbon

Steel Products from Austria and the Final Determinations of Sales at

Less Than Fair Value: Certain Hot-Rolled Carbon Steel Flat Products,

Certain Cold-Rolled Carbon Steel Flat Products, and Certain Cut-to-

Length Carbon Steel Flat Products from Belgium, 58 FR 37,083 (July 9,

1993), in support of its position.

Petitioner argues that the role of the trading company has not

changed since the LTFV investigation in which ``Onoda minimized the

role of the trading company in the sales process, stating that the

trading company `arranged the freight and takes care of the shipping,'

but that otherwise it was a `bystander'.'' See Petitioner's Case Brief,

at 16. Petitioner states that since the trading company merely arranged

for the shipment of merchandise that had already been sold, the

Department should continue to treat payments to the trading company as

a movement expense. Petitioner cites to Certain Internal-Combustion,

Industrial Forklift Trucks from Japan, 57 FR 3,167 (January 28, 1992),

accord Certain Internal-Combustion, Industrial Forklift Trucks

[[Page 67312]]

from Japan, 59 FR 1,374 (January 10, 1994), Mechanical Transfer Presses

from Japan, 55 FR 335 (January 4, 1990), in support of its argument.

Petitioner argues that the Department classifies payments to

trading companies as commissions only if the services provided by the

trading company involve selling the merchandise (i.e., finding and

cultivating customers, marketing the product, negotiating transactions,

retaining customers, etc.). Petitioner cites to Oil Country Tubular

Goods from Austria, 60 FR 33,551 (June 28, 1995) (hereinafter OCTG from

Austria), Stainless Steel Angle from Japan, 60 FR 16,608 (March 31,

1995) (hereinafter SSA from Japan), and Sweaters Wholly or in Chief

Weight of Man-Made Fiber from Taiwan, 55 FR 34,585 (August 23, 1990)

(hereinafter Sweaters from Taiwan), in support of its position.

Petitioner argues that alternatively, the Department could classify

payments to the trading company as discounts on sales to the United

States. Petitioner asserts the Onoda classified the payment as a

discount in its August 22, 1994, questionnaire response. Petitioner

cites to Industrial Phosphoric Acid from Israel, 52 FR 25,440 (July 7,

1987), accord Mirrors in Stock Sheet and Lehr End Sizes from the United

Kingdom, 51 FR 43,411 (December 2, 1986), and Portland Hydraulic Cement

from Japan, 48 FR 41,059 (September 13, 1983), to argue that Department

precedent supports this approach.

Department's Position

We disagree with Onoda. If the trading company provides services

related to the movement of the merchandise, the Department considers

the payment the trading company receives for such services as a

movement expense which is deducted directly from U.S. price. See

Forklift Trucks from Japan, at 3178. The Department considers a payment

to a trading company to be a commission if the trading company provides

services related to the sale of the merchandise. See Chapter 8, page 26

of the Department's antidumping manual. In this case, the trading

company is not involved in the sale of the merchandise to the customer.

Rather, LSNW sells cement to the United States. The price of the cement

is set by LSNW, in consultation with Onoda. After the terms of the sale

are negotiated between LSNW, Onoda, and the U.S. buyer, Onoda hires the

trading company to arrange shipment of the cement. Clearly, the work

performed by the trading company (i.e., arranging for transportation of

the cement) is a movement expense rather than a commission. This is

supported by Onoda's statement in its case brief of November 6, 1995 at

page 11, where Onoda states that the trading company ``is primarily

responsible for arranging transportation of cement.'' Additionally, in

its supplemental questionnaire response of October 31, 1994 at page 30,

Onoda clarifies the role of the trading company, stating, that the

trading company does not take physical possession of the merchandise;

it is not a freight-forwarder, although it does coordinate with the

broker and with arranging the shipments; and, it is not the importer of

record. Again, the service provided by the trading company is to

arrange for shipment, after the sale between Onoda, LSNW and the U.S.

customer has been completed.

Onoda's cite to Carbon Steel Products from Austria is accurate;

however, the Department's practice has evolved since 1985.

Specifically, the Department has recognized that commissions paid to

trading companies have certain characteristics: (1) they are agreed

upon in writing; (2) they are earned directly on sales made, based on

flat rates or percentage rates applied to the value of individual

orders; (3) they take into consideration the expenses which a trading

company must incur to cultivate and maintain successful relationships

with purchasers; and, (4) they take into consideration the sales and

marketing services performed by a trading company in lieu of an

exporter/manufacturer establishing its own larger sales force. See OCTG

from Austria, at 33554. Again, the trading company in this case does

not cultivate and maintain relationships with purchasers nor does it

perform sales and marketing services. Rather, the trading company is

paid to arrange for shipment of the cement after it has been sold and

the terms set.

Moreover, Onoda's cite to Groundwood Paper from France is

misleading in that the quote cited is not attributable to the

Department, but rather to the respondent who argued that a markup to a

related party should not be considered a commission because the related

party ``performs a number of additional selling and administrative

functions not undertaken by commission agents, including ensuring that

production, shipping, and deliveries meet printers' scheduling

requirements, taking title to the merchandise, performing sales

accounting and collection functions, arranging for the provision of

technical services, and participating in trade shows and other

events.'' See Groundwood Paper from France, at 56381. In that case,

although the Department granted the deduction as a commission, it

focused its response on the related-party nature of the commission

rather than the actual services performed for the commission payment.

Moreover, in the instant case, the only function performed by the

trading company is to arrange for shipment of the merchandise.

We do agree with Onoda that the payment to the trading company

should not be considered a discount since the payment to the trading

company does not reduce the final price to the U.S. customer. See

Carbon Steel Products from Austria, at 33366.

Accordingly, for these final results of review, we have continued

to treat the payment to the trading company as a movement expense and

have deducted this expense directly from U.S. price.

Comment 4

Onoda argues that in performing the calculations for determining

whether Onoda made home market sales below cost, the Department

erroneously double-counted the expenses reported in the DIRSELH field

on the sales tape (i.e., the Department included the field DIRSELH in

its calculation of COP, and the Department deducted the DIRSELH field

from the home market price that was used in the cost test). Onoda

asserts that the Department should revise its COP calculations for the

final results to make only one of these adjustments. The Department

should either (1) include the DIRSELH field in the COP and not deduct

it from the home market price used in the cost test, or (2) the

Department should not include the DIRSELH field in COP and deduct the

DIRSELH field from the home market price used in the cost test.

Petitioner agrees with Onoda and has no objection to the

Department's correcting the COP test in the manner suggested by Onoda

so that the DIRSELH field is either included in COP or deducted from

the net price compared to COP, but not both.

Department's Position

We agree with Onoda and Petitioner. For these final results, we

included the DIRSELH field in the COP and did not deduct the field

DIRSELH from the home market price used in the cost test.

Comment 5

Petitioner argues that the Department should use best information

available (BIA) to account for unreported downstream sales by related

distributors that failed the arm's-length test rather than drop such

sales from the analysis.

[[Page 67313]]

Petitioner argues that the Department has repeatedly asked for this

information, and Onoda has refused to provide it. Petitioner, citing to

Final Determination of Sales at Less Than Fair Value: Certain Cold-

Rolled Carbon Steel Products from Argentina, 58 FR 37,062 (July 9,

1993) (hereinafter Steel from Argentina), argues that the Department

has stated in the past that when a related seller fails the arm's-

length test, the need for downstream sales becomes evident.

Moreover, states Petitioner, citing to Gray Portland Cement and

Clinker from Mexico, 60 FR 26,865 (May 19, 1995) (hereinafter Cement

from Mexico) and Certain Malleable Cast Iron Pipe Fittings from Brazil,

60 FR 41,876 (August 14, 1995) (hereinafter Pipes from Brazil), it is

the Department, not respondent which determines what information is to

be provided for an administrative review, and, respondent should not be

allowed to control the results of the review by providing only partial

information.

Petitioner hypothesizes that given the Department's prior practice

of applying BIA for unreported downstream sales only to establish FMVs

for those U.S. sales left without adequate matches when non-arm's-

length sales are excluded, Onoda could have reasonably concluded that

refusing to report downstream sales in this review would carry no

risks. Under such circumstances, asserts Petitioner, the Department

should resort to BIA for unreported downstream sales lest Onoda be

rewarded for ``stonewalling'' and refusing to respond. Petitioner,

citing to Silicon Metal from Argentina, 58 FR 65,336 (December 14,

1993), states that Onoda should not be placed in a better position as a

result of non-compliance than it would have occupied had it provided

the Department with complete, accurate, and timely data. Petitioner

concludes that based on the foregoing, the Department should report to

BIA for unreported downstream sales, and as BIA, the Department should

use the highest net home market price otherwise reported by Onoda and

verified by the Department. Alternatively, the Department should apply

as BIA the weighted-average price of all related-party home market

sales that passed the arm's-length test, increased by the standard

distributor mark-up.

Onoda argues that it cooperated with the Department in every aspect

of this administrative review, but that it was unable to report

downstream sales because none of the related distributors is

consolidated with Onoda, and Onoda does not have the power to compel

its minority-owned distributors to report information on their sales to

unrelated customers. Onoda states that in the LTFV investigation and

the first and the second review of this case, the Department has not

required it to report downstream sales; rather, the Department has

simply applied an arm's-length test to determine whether to include

sales to the related distributors in the FMV calculations. Moreover,

Onoda asserts that there are other cases in which the Department has

not required the reporting of downstream sales if the respondent

demonstrates that the sales to the related parties were made on an

arm's-length basis. Onoda cites to Certain Corrosion Resistant Carbon

Steel Flat Products from Australia; Preliminary Results of Antidumping

Duty Administrative Review, 60 FR 42,507 (August 16, 1995), in support

of its position. Further, asserts Onoda, it is not the Department's

practice to resort to BIA when there are sufficient home market sales

to unrelated customers to provide matches for all of a respondent's

U.S. sales. Onoda cites to Steel from Argentina and 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 Product, and

Certain Cut-to-Length Carbon Steel Plate from France, 58 FR 37,125

(July 9, 1993) (hereinafter Steel from France), in support of its

position.

Onoda concludes that because there were more than enough home

market sales to unrelated parties to provide matches for all of Onoda's

U.S. sales during the POR, any sales to the related distributors which

are found not to be at arm's-length should simply be dropped from the

FMV calculation.

Department's Position

We disagree with Petitioner. As Onoda points out, it is the

Department's practice to drop from our FMV calculations sales to home

market related parties which have failed the arm's-length test. If

sales to a related party in the home market are determined not to be at

arm's-length, and the Department does not have information pertaining

to downstream sales (because respondent has refused or is unable to

provide such information), it is the Department's practice to resort to

BIA. However, the Department will only resort to BIA if it cannot find

a home market match for a U.S. sale (i.e., there are no home market

sales to unrelated parties or to related parties that have passed the

arm's-length test to match to a U.S. sale) and that sale would be

matched to a non-arm's length sale.

In this case, the Department did not include those home market

sales to related parties which were not made at arm's-length prices. In

order to determine whether these sales were made at arm's-length

prices, we calculated a weighted-average price of the home market sales

for each related party. Where the weighted-average price charged to a

related party was less than the weighted-average price charged to all

of Onoda's unrelated customers, we determined that those related party

sales were not made at arm's-length prices, and removed those sales

from our FMV calculation.

We agree with Petitioner that the Department has stated in the past

that when a ``related seller fails the arm's-length test, the need for

downstream sales becomes evident.'' However, as fully explained in

Steel from Argentina:

As outlined in the preliminary determinations, when the

respondents could not, or would not, report downstream sales, we

applied margins based on BIA to any U.S. sale matched only to a sale

to a related reseller in the home market that failed the arm's-

length test, and we will continue to do so for these final

determinations. In other words we did not simply disregard the fact

that respondents failed to report downstream sales. Once a related

reseller fails the arm's-length test, the need for downstream sales

becomes evident, but only as an alternative to the sale to that

related reseller. The integrity of FMV is not seriously challenged

because in all other cases U.S. sales are matched to unrelated party

sales in the home market or to related party sales at arm's length.

(emphasis added)

Id. at 37083. In the instant case, all U.S. sales were matched to

unrelated-party sales in the home market or to related-party sales that

were conducted in an arm's-length manner.

We agree that the Department, not respondent, determines what

information is to be provided and that respondent should not be allowed

to control the results of review by providing partial information.

However, in the instant case, these principles have not been breached.

The Department requested information, and the respondent did not

provide it. In this instance, BIA was not necessary since all U.S.

sales were matched to unrelated-party sales in the home market or to

related-party sales that were conduced in an arm's-length manner.

Accordingly, the Department did determine what information was to be

provided and respondent has not been allowed to control the results of

the review.

[[Page 67314]]

We also agree that Onoda should not be placed in a better position

due to non-compliance with a request for information. As stated above,

it is the Department's practice to require downstream sales information

when a related party fails the arm's-length test and the Department

does not have home market matches for U.S. sales. If the Department

does have home market matches for U.S. sales, the Department drops

related party sales that failed the arm's length test, as was the case

here. Under these circumstances, Onoda does not benefit from its

noncompliance since U.S. sales were matched with home market sales to

unrelated parties and to related parties at prices determined to be on

an arm's-length basis.

Accordingly, for these final results, as with the preliminary

results, we have not resorted to BIA to account for unreported

downstream sales by related distributors that have failed the arm's-

length test. Rather, we have dropped these sales from our analysis of

FMV.

Comment 6

Petitioner argues that because Onoda failed to report distributor

rebates and prompt payment discounts (PPDs) on a transaction-specific

basis and these adjustments were not granted as a fixed and constant

percentage of sales on all transactions for which they were reported,

these adjustments should be classified as indirect selling expenses.

Petitioner argues that the Department requested that Onoda report

rebates and discounts on a transaction specific basis but that Onoda

responded that: (1) its central accounting system is ``unable to tie

the rebates and discounts to specific sales'' and (2) rebates and

discounts were allocated over all sales because Onoda's accounting

system ``is unable to identify the specific distributors which earned

the rebates and discounts.'' (See Onoda's October 31, 1994 Deficiency

questionnaire Response at 16-17.) Petitioner also argue that Onoda's

rebate calculations inappropriately allocated rebates granted on sales

of non-comparison merchandise (i.e., gray portland cement other than

Type N cement) over all sales of gray portland cement, including sales

of comparison merchandise.

Petitioner argues that at verification the Department found that no

written rebate contracts exist between the distributor and Onoda.

Instead, Onoda informs the distributor verbally about rebates. Also at

verification, the Department noted that Onoda's records do not reflect

which distributors actually received rebates. Accordingly, argues

Petitioner, Onoda's rebates and discounts were not granted as a fixed

and constant percentage of sales on all transactions for which they are

reported. Petitioner states that contrary to being fixed and constant,

Onoda did not grant rebates and/or discounts on every reported home

market sale.

Citing to Smith Corona, Torrington Co. v. United States, 832 F.

Supp 379 (CIT 1993) (hereinafter Torrington), Koyo Seio Co. v. United

States, 796 F. Supp. 1526 (CIT 1992) (hereinafter Koyo Seiko), and SKF

USA Inc. v. United States, 874 F. Supp 1395 (CIT 1995), Petitioner

argues that because Onoda's rebates and discounts were not actually

paid on all sales, and the expenses could not be directly correlated

with the sales to which they actually related, the Department should

deny Onoda's claim for a direct adjustment to price for rebates and

discounts. Petitioner argues that to adjust home market prices downward

without any evidence that any rebate or discount was even granted in

the months in which U.S. sales were made, has the potential to result

in a severe distortion when calculating FMV.

Petitioner argues that Onoda's only argument in support of its

allocation methodology is that the Department accepted the same

methodology in previous reviews. Petitioner asserts, however, that the

Department's findings in previous reviews, based on different factual

records, are irrelevant. Petitioner argues that antidumping

administrative reviews are separate and distinct proceedings, and the

results of this review must be in accordance with law and based on

substantial evidence in the record of this review.

With specific regard to PPDs, Petitioner states that the Department

should make no adjustment to FMV for such discounts because they were

allocated over sales of non-subject merchandise (i.e., white cement).

Petitioner asserts that this methodology distorts the prices used to

calculate Onoda's dumping margin. Petitioner argues that because the

total amount of PPDs reported by Onoda includes PPDs granted on sales

of non-subject merchandise, Onoda's claim for any PPD adjustment to FMV

(either direct or indirect) must be rejected.

With specific regard to rebates, Petitioner argues that Onoda

included in its rebate amounts rebates paid to distributors to sell

cement manufactured by two cement manufacturers who rely on Onoda to

sell their products under Onoda's label. Petitioner contends that these

rebates should not be included in the rebate amount because Onoda

charges (i.e., is reimbursed by) the two manufacturers for these

rebates.

Onoda argues that the Department's general policy always has been

to favor the reporting of transaction-specific information but that the

Department has accepted Onoda's allocation methodology in prior

administrative reviews of this case and the CIT and CAFC have, on

numerous occasions (e.g., Torrington and Smith-Corona), upheld the

Department's authority to treat allocated rebates and discounts as

direct expenses.

Onoda asserts that an allocation methodology is appropriate in this

case because Onoda grants rebates based on a distributor's sales for an

entire six-month period rather than on specific sales transactions.

Moreover, asserts Onoda, its sales records simply do not permit it to

report transaction-specific information and its central accounting

system is unable to tie the rebates and discounts to specific sales.

Onoda, citing to Final Determinations of Sales at Less Than Fair Value:

Professional Electric Cutting Tools and Professional Electric Sanding/

Grinding Tools from Japan, 58 FR 30,144 (May 26, 1993), states that the

Department has held in prior cases that a respondent should not be

required to submit information it does not maintain, nor should it be

required to report information which would be unduly burdensome to

provide. Accordingly, asserts Onoda, the Department should not penalize

Onoda for not reporting information which it does not maintain in its

central accounting system.

With regard to Petitioner's claim that Onoda inappropriately

allocated rebates over non-comparison merchandise, Onoda asserts that

the subject merchandise covered by the antidumping duty order includes

all types of gray portland cement, not just Type N cement. Moreover,

argues Onoda, it offers rebates on all of its home market sales of gray

portland cement to distributors not just on home market sales of Type N

cement. Consequently, in calculating the per unit distributor rebates,

Onoda allocated the rebates only over sales to distributors of gray

portland cement in the home market.

Onoda asserts that there is no requirement that Onoda allocate its

rebates over the specific product (Type N cement) which serves as the

model match for sales to the United States. Onoda, citing to

Torrington, asserts that while the CIT has held that the Department may

deny adjustments for rebates if they include rebates on non-subject

merchandise, the CIT has permitted allocations over the subject

merchandise.

[[Page 67315]]

With regard to Petitioner's argument that Onoda's rebates and

discounts were not granted as a fixed and constant percentage of sales

on all transactions for which they were reported, Onoda contends the

Department made no such finding at verification and that the record

evidence leads to a contrary conclusion. Onoda cites to its August 22,

1994 Questionnaire Response at B-4, to argue that the distributor

rebates that it granted were given according to a fixed schedule on the

basis of the total volume of cement purchased by each distributor.

Similarly, argues Onoda, the PPD was applied as a fixed percentage, and

all of Onoda's home market sales were eligible for the discount. Onoda

asserts that the Department verified Onoda's cost and sales information

and the total amount of the rebates and discounts and, therefore, it is

appropriate to grant a full adjustment for these expenses.

With regard to Petitioner's argument that the Department should not

adjust home market prices downward without any evidence that any rebate

or discount was even granted in the months in which U.S. sales were

made, Onoda claims that its methodology precludes the possibility that

rebates and discounts have been applied to sales which did not receive

them. First, argues Onoda, the rebates were given only on sales to

distributors, and, therefore, were only allocated to sales to

distributors. Accordingly, argues Onoda, if there were no sales to

distributors in a given month, then no rebates would be applied to the

sales in that month. Second, argues Onoda, rebates were given on all of

its distributors sales, even if a distributor only purchased one ton of

cement during the period. Therefore, asserts Onoda, there is no

possibility that a rebate would have been reported for a particular

sale when no rebate was actually given on that sale. Third, argues

Onoda, the distributor rebates were not given based on the volume of

individual transactions. Rather, states Onoda, the distributor rebates

were calculated based on the aggregate volume of the sales made to the

distributors over a six-month period. Therefore, a portion of the total

rebates should be allocated to each sale made during that six-month

period. Consequently, argues Onoda, there is no possibility that any

distributor sales within a particular month did not receive a rebate.

Finally, argues Onoda, the Department must calculate FMV based on

weighted-average monthly prices. Thus, the Department will calculate

FMV by dividing the total value of sales for the month over the total

volume of sales for the month. Regardless of whether the rebates and

discounts granted on sales during the month are allocated or reported

on a transaction-specific basis, the total value of the sales will not

be affected. Therefore, argues Onoda, the fact that the rebates and

discounts cannot be matched to specific transactions does not distort

the FMV calculation.

Onoda argues that contrary to Petitioner's assertion, it did not

include PPDs paid on non-subject merchandise in the reported PPD

adjustment. Onoda argues that, as in the first and second reviews, it

gave PPDs on sales of both gray and white cement during the POR but

that Onoda's central accounting system does not permit it to trace

these discounts to individual transactions. Consequently, in

calculating the per unit discounts, Onoda allocated the total discounts

over total sales of cement and not just sales of gray portland cement.

Onoda asserts that this methodology was upheld by the CAFC in Smith

Corona and CIT in Torrington Co. v. United States, 818 F. Supp. 1563,

1577 (CIT 1993) (hereinafter Torrington II).

Onoda argues that the total amount of rebates granted should not be

reduced by the amounts reimbursed by other manufactures. Onoda argues

that sales of cement manufactured by the two other producers were

included in Onoda's reported volume and value if the cement was sold

under the Onoda brand. Because cement produced by the other

manufacturers are reported on the sales tape, the rebates reimbursed by

the producers must be included in the total rebate amount in the

allocation calculation. Onoda contends that Petitioner's methodology

would artificially inflate the net price and would distort the total

income Onoda and the other producer received because, while the amount

of rebates would be reduced, the volume of cement sold would remain the

same. This would reduce the rebate adjustment thereby inflating FMV in

the Department's calculations.

Department's Position

We agree with Petitioner. It is our practice to make a direct

adjustment to the home market price for rebates and discounts if (a)

they were reported on a transaction-specific basis or (b) they were

granted as a fixed and constant percentage of sales on all transactions

for which they were reported. See Antifriction Bearings (Other Than

Tapered Roller Bearings) and Parts Thereof from France, et al., 60 FR

10,900, 10929 (February 28, 1995) (hereinafter AFBs from France); NSK

Ltd. v. United States, 896 F. Supp. 1263, 1271 (CIT 1995) (hereinafter

NSK); and Torrinngton at 387. The rationale for this practice is that

we only accept direct adjustments to price if actual amounts are

reported for each transaction. Discounts and rebates based on

allocations are not allowable as direct adjustments to price since

allocated price adjustments have the effect of partially averaging

prices by diluting discounts or rebates on some sales, inflating them

on others, and attributing them to sales which received no such

discounts. Just as we do not normally allow respondents to report

average prices, we do not allow average direct additions or

subtractions to price. Although we usually average FMVs on a monthly

basis, we require individual prices to be reported for each sale.

In this case, Onoda took the total amount of rebates granted to

distributors of gray portland cement and divided this amount by total

sales of gray portland cement by all distributors for a six-month

period. This amount was then applied to the home market unit price to

calculate the amount of rebate to allocate to each sale of Type N

cement. Onoda's rebate adjustment fails to provide actual amounts that

were discounted or rebated on each individual sale. Under this

methodology there is no way to determine which discount or rebate was

applied to each particular sale. Onoda's allocation methodology

presents the very type of flaws discussed above.

Although we verified that the rebates granted to distributors were

given according to a fixed schedule, we found that Onoda's rebate were

not granted as a fixed and constant percentage of sales but rather

varied based on the volume of cement sold by a distributor. If one

distributor sold more cement than another distributor it received a

higher rebate per metric ton. Thus, consistent with our practice

discussed above, because Onoda did not report discounts or rebates on

either a transaction-specific basis or as a fixed and constant

percentage of sales, we have disallowed its claim as a direct

adjustment to FMV.

Onoda is correct in its statement that in Torrington and Smith-

Corona the courts have upheld the Department's authority to treat

allocated rebates and discounts as direct expenses. However, in order

for allocated price adjustments to be regarded as a direct deduction

from FMV, the allocation methodology employed by respondent must ``be

directly correlated with specific merchandise'' (i.e., results in the

calculation of the actual amount incurred on each individual sale). See

[[Page 67316]]

Torrington at 390; AFBs from France at 10929.

Onoda calculated its PPD in a fashion similar to its rebate

calculation. Accordingly, we have also disallowed a direct deduction

from FMV for PPDs. Moreover, Onoda included non-subject merchandise in

its calculation of PPDs. It is the Department's practice to disallow an

adjustment which relies on a methodology that includes discounts,

rebates, and other price adjustments paid on out-of-scope merchandise.

See AFBs from France at 10935; Torrington II at 1578. Therefore, since

Onoda's prompt payment discounts were given for and allocated over

sales of non-subject merchandise, we have made no adjustment to FMV for

Onoda's prompt payment discounts.

Finally, Onoda's argument that the Department should allow these

deductions in this review since it permitted them in prior reviews is

without merit. The Courts have recognized that antidumping

administrative reviews are separate and distinct proceedings, and the

results of this review must be in accordance with law and based on

substantial evidence in the record of this review. See, e.g.,

Torrington Co. v. United States, 786 F. Supp. 1027, 1028 (CIT 1992).

Accordingly, based on the foregoing, we have not adjusted FMV for

Onoda's claimed rebates and PPDs.

Comment 7

Petitioner, citing to Antifriction Bearings (Other Than Tapered

Roller Bearings) and Parts Thereof from Japan, 58 FR 39,729 (July 26,

1993) (hereinafter AFBs from Japan) and accord Tapered Roller Bearings

and Parts Thereof, Finished and Unfinished, from Japan, and Tapered

Roller Bearings, Four Inches or Less in Outside Diameter, and

Components Thereof, from Japan, 58 FR 64,720 (December 9, 1993), argues

that the Department should have included the depreciation of idle

machinery in Onoda's cost of production. Petitioner, citing to Small

Diameter Circular Seamless Carbon and Alloy Steel, Standard, Line, and

Pressure Pipe from Italy, 60 FR 31,981 (June 19, 1995), states that the

Department's practice requires that this cost be included in Onoda's

COP because the machinery was temporarily idle, not permanently idle

and due to be sold or scraped.

Onoda states that it has no objection to Petitioner's suggestion

that the Department add the depreciation of idle assets on Onoda's COP.

Department's Position

The Department agrees with Petitioner. In AFBs from Japan, we

stated:

We include in the fully absorbed factory overhead the

depreciation of equipment not in use or temporarily idle. While

Japan's accounting methodology does provide that depreciation for

idle equipment may be stopped, we do not accept this accounting

method because idle fixed assets are a cost to the company.

Id. at 39756.

Accordingly, for these final results, we have included the

depreciation of idle machinery in Onoda's COP.

Comment 8

Petitioner argues that the Department should exclude from its

calculation of FMV sales in which other cement manufacturers shipped

cement from their inventory to Onoda's customers (with the sale

recorded by Onoda) as well as sales of cement purchased by Onoda from

other manufacturers.

Petitioner, citing to section 773(a)(1)(A) of the Act, states that

the FMV of imported merchandise shall be the price ``at which such or

similar merchandise is sold, or in the absence of sales, offered for

sale in the . . . country from which exported.'' Petitioner, citing to

section 771(16) (A), (B), and (C) of the Act, states that ``such or

similar'' in turn, is defined as merchandise ``produced in the same

country by the same person'' as the merchandise that is the subject of

the investigation. Petitioner, citing to Antifriction Bearings (Other

Than Tapered Roller Bearings) and Parts Thereof from France, et al., 57

FR 28,360 (June 24, 1992); accord Canned Pineapple Fruit from Thailand,

60 FR 2,734 (January 11, 1995); Titanium Sponge from Japan, 57 FR 557

(January 7, 1992) and Brass Sheet and Strip from Japan, 53 FR 23,296

(June 21, 1988), argues that based on the definition of ``such or

similar'' merchandise, it has been the Department's policy to exclude

sales of merchandise produced by a manufacturer other than the

respondent from the calculation of FMV for the respondent.

Petitioner contends that the Department should be able to exclude

such merchandise since Onoda identifies sales of merchandise produced

by other manufacturers. Petitioner notes that Onoda has not separately

identified sales of cement produced by two unrelated manufacturers

(i.e., the two manufacturers referred to in comment 6 above) based on

the claim that they cannot separately identify these sales. Petitioner

argues that this claim is inconsistent with Onoda's ability to identify

the amount of rebates it paid with respect to sales of cement

manufactured by the two manufacturers. Petitioner contends that if

Onoda can identify the amount of rebates paid with respect to sales of

merchandise produced by the two manufacturers, Onoda should be able to

identify these sales. Accordingly, argues Petitioner, the Department

should require Onoda to identify sales of cement manufactured by the

two manufacturers so that such sales can be excluded from the

calculation of FMV. Petitioner contends that this is necessary since

using sales of merchandise produced by one manufacturer to calculate

another manufacturer's FMV could distort FMV (i.e., manufacturers

generally have different costs of production resulting in a possible

price differential).

Onoda states that it does not object if the Department wishes to

drop the sales of cement which are indicated on the sales tape as

having been produced by other manufacturers and shipped directly to

Onoda's customer (i.e., not commingled with Onoda cement). However,

Onoda states that it cannot provide a revised sales tape indicating

which of the remaining sales were resales of cement manufactured by two

specific cement producers. Onoda states that it cannot provide a

revised sales tape because it cannot identify which sales contained

cement produced by the two manufacturers. Onoda states that cement it

purchased from the two manufacturers was intermixed with Onoda cement

and was sold under the Onoda brand name. Accordingly, states Onoda,

while it knows the total amount of the two manufacturers' cement that

it sold, it sales records cannot trace this cement to individual

transactions. Onoda allocates a portion of its total rebates to the two

manufacturers based on the total volume of the two manufacturers'

cement that it sold. Accordingly, asserts Onoda, the fact that it can

determine the amount of the total rebates allocated to the two

manufacturers does not mean that Onoda can provide a revised sales tape

which indicates which individual sales were of cement produced by the

two manufacturers. Moreover, argues Onoda, due to the intermixing of

the cement, it prices the cement produced by Onoda and the other

manufacturers in exactly the same manner. Accordingly, argues Onoda,

there is no merit to Petitioner's allegations that including such sales

in the FMV calculation could result in distortion.

[[Page 67317]]

Department's Position

In AFBs from France the Department stated:

In accordance with the definition of such or similar merchandise

in section 771(16)(B)(i), we have not considered merchandise known

to have been produced in the facilities of one manufacturer to be

such or similar to the merchandise produced in the facilities of

another manufacturer, even if the merchandise is physically

identical or physically similar and is sold by the same person.

Id. at 28367. Accordingly, for these final results of review, we have

excluded from our calculation of FMV those sales that Onoda could

indicate were produced by other manufacturers.

Although Onoda's home market sales listing also includes sales that

commingled Onoda-produced cement with cement produced by manufacturers

other than Onoda, we continue to find it reasonable to use this sales

listing because (1) we verified that Onoda was unable to indicate which

sales were sales of commingled cement and (2) the commingled sales were

sold under the Onoda name necessitating that Onoda price such sales as

if they were Onoda-produced cement. In contrast, in the cases cited by

Petitioner in support of excluding the commingled sales from the

calculation of FMV, the respondent was able to identify the commingled

sales. Onoda's inability to identify commingled sales is not

inconsistent with Onoda's ability to identify the amount of rebates it

paid with respect to cement manufactured by these two producers because

its allocation methodology was based upon the total volume of cement

sold rather than individual transactions.

In other cases where the respondent has been unable to identify

commingled sales, the Department has utilized a weighting methodology

in order to neutralize the effect of including commingled sales. See,

Certain Cut-to-Length Carbon Steel Plate From Sweden, 60 FR 48502

(September 19, 1995). As in those cases, in this case, we applied to

the reported home market quantities a ratio of the volume of Onoda-

produced cement to the combined total volumes of Onoda-produced and

purchased cement sold on a biannual basis for the fiscal year. These

ratios were derived from verified rebate documents which indicated, on

a six-month basis for Onoda's fiscal year (i.e., April 1993-September

1994 and October 1993-March 1994), the total amount of cement sold, the

amount of Onoda-produced cement sold and the amount that was

manufactured by other producers. Additionally, since the POR is May 1,

1993-April 30, 1994, we applied the ratio for the October 1993-March

1994 period to Onoda's April 1994 sales.

Comment 9

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

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

model Type I and home market model Type N. 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, respondents are entitled to

a difmer adjustment 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 adjustment reported by Onoda is 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.

Petitioner argues that the Department's rationale for granting a

difmer adjustment in the first and second reviews of this case does not

support granting a difmer adjustment in this review. Petitioner asserts

that there is ample evidence that the cost differences between Type I

and Type N cement are attributable to differences in efficiencies

between Onoda's plants. 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 LTFV investigation and the first and second reviews. Onoda asserts

that the Petitioner has presented no new arguments or evidence which

would justify a change in the Department's prior decisions in this

case. Onoda states that in its August 22, 1994, Questionnaire Response

and October 31, 1994, Deficiency Response, it has fully documented its

difmer claim, which is based on differences in both the physical and

chemical characteristics of the comparable types of cement. Onoda

states that these differences include differences in the amounts of

clinker and gypsum, and differences in fineness and compressive

strength between Type I and Type N. Onoda states that other differences

between Type I and Type N include both material inputs (e.g.,

limestone, clay, silica, fuel inputs, fuel oil, coal, and anthracite)

and energy, due to the different fineness and compressive strengths of

these comparable cement types.

Onoda asserts that in its August 22, 1994, Questionnaire Response

it provided detailed charts setting out the variable costs of producing

comparable types of cement and that the Department verified these

charts and tied them directly to Onoda's cost accounting system in the

LTFV investigation and in this review. Onoda notes that during the LTFV

investigation and in this review, the Department verified the difmer

data, and granted the difmer adjustment in calculating the dumping

margin. Furthermore, Onoda observes that in the LTFV investigation and

in this review, the Department was satisfied that Onoda had reasonably

tied cost differences to physical differences. Additionally, Onoda

notes that the Department determined in the final results of the first

and second reviews that evidence on the record did not establish that

any differences in plant efficiencies were the source of the cost

differences.

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 produced Type I cement at the single plant where it produce

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

costs across all plants is consistent with Departmental practice.

Furthermore, argues Onoda, the evidence on the record of this

proceeding parallels exactly the type of evidence that was on the

record of the prior proceedings. Onoda states that the factories

producing Type I and Type N cement are the same factories that were

producing these cement types since the original investigation.

Moreover, states Onoda, the production processes used to produce these

types of cement are virtually unchanged, as are the physical

specifications and characteristics of the cement. Additionally, Onoda

states that it has also calculated and reported the difmer adjustment

in exactly the same manner as it has in all other prior proceedings of

this case.

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

to grant the difmer adjustment in this review.

Department's Position

Consistent with the Department's practice in the LTFV investigation

and the first and second reviews of this case, we have allowed the

difmer adjustment claimed by Onoda. As we stated in the

[[Page 67318]]

first and second reviews, 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. 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 cement

in the United States with Type N cement in the home market. The

specific differences in cost between Type I and Type N were 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.

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). We also

verified the information supplied by Onoda with regard to its difmer

adjustment in this review and did not note any discrepancies.

Additionally, with regard to the weighted-average methodology employed

by Onoda, the Department specifically requested that Onoda report is

cost of manufacture information on a weighted-average basis (see the

Department's questionnaire at page 60: ``If the subject merchandise is

manufactured at more than one facility, the reported COM should be the

weighted-average manufacturing cost from all facilities'').

The Department's determination that Onoda is entitled to a difmer

adjustment for differences between Type I and Type N cement has been

upheld by the CIT in the first review of this case (See Supra Southern

California Producers). In affirming the Department's decision to grant

the difmer adjustment, the Court stated:

Upon review, the Court finds that Commerce's determination that

price differences between U.S. and home market models were caused by

differences in the physical characteristics of the merchandise

compared, and Commerce's concomitant decision to grant a difference

in merchandise adjustment to Onoda, are supported by substantial

evidence and otherwise in accordance with law. First, evidence

submitted by Onoda shows that U.S. models contain different

materials than type N * * * In addition * * * U.S. models are

produced in a different manner, i.e. with a different amount and

duration of heat than type N, and that this causes differences in

the chemical and physical composition of the cements * * * Further *

* * Commerce verified that Onoda was entitled to a difference in

merchandise adjustment.

Id. at 545 (cites omitted).

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

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 30.12

percent exists for Onoda for the period May 1, 1993, through April 30,

1994.

The Department will instruct the U.S. 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 U.S.

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 30.12

percent; (2) for merchandise produced 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: December 13, 1996.

Jeffery P. Bialos,

Acting Assistant Secretary for Import Administration.

[FR Doc. 96-32400 Filed 12-19-96; 8:45 am]

BILLING CODE 3510-DS-M