Notice of Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination: Large Newspaper Printing Presses and Components Thereof, Whether Assembled or Unassembled, From Japan

Federal RegisterMar 1, 1996

Ask Donna

What actually matters in this document.

Text

DEPARTMENT OF COMMERCE

[A-588-837]

Notice of Preliminary Determination of Sales at Less Than Fair

Value and Postponement of Final Determination: Large Newspaper Printing

Presses and Components Thereof, Whether Assembled or Unassembled, From

Japan

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: March 1, 1996.

FOR FURTHER INFORMATION CONTACT: William Crow or Irene Darzenta, Office

of Antidumping Investigations, Import Administration, International

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

Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202)

482-0116 or (202) 482-6320.

THE APPLICABLE STATUTE: Unless otherwise indicated, all citations to

the Tariff Act of 1930, as amended (the Act) are references to the

provisions effective January 1, 1995, the effective date of the

amendments made to the Act by the Uruguay Rounds Agreements Act.

PRELIMINARY DETERMINATION: As explained in the memoranda from the

Assistant Secretary for Import Administration dated November 22, 1995,

and January 11, 1996, the Department of Commerce (the Department) has

exercised its discretion to toll all deadlines for the duration of the

partial shutdowns of the Federal Government from November 15 through

November 21, 1995, and December 16, 1995, through January 6, 1996.

Thus, all deadlines in this investigation have been extended by 28

days, i.e., one day for each day (or partial day) the Department was

closed. The revised deadline for this preliminary determination is

February 23, 1996.

We preliminarily determine that large newspaper printing presses

and components thereof (LNPPs) from Japan are being, or are likely to

be, sold in the United States at less than fair value (LTFV), as

provided in section 733 of the Act. The estimated margins of sales at

LTFV are shown in the ``Suspension of Liquidation'' section of this

notice.

Case History

Since the initiation of this investigation on July 20, 1995 (60 FR

38546 (July 27, 1995)), the following events have occurred:

On August 14, 1995, the United States International Trade

Commission (ITC) notified the Department of Commerce (the Department)

of its affirmative preliminary determination. (See ITC Investigation

No. 731-TA-736 and 737.)

On August 28, 1995, we presented Section A 1 of the

questionnaires to the Japanese embassy, counsel for Mitsubishi Heavy

Industries, Ltd., (MHI) and Tokyo Kikai Seisakusho, Ltd. (TKS). MHI

submitted responses to Section A on September 27, 1995, and October 10,

1995, as revised on December 13, 1995. TKS submitted responses to

Section A on September 27, 1995, and October 2,5, and 10, 1995, as

revised on October 17, 1995.

\1\ Section A requests data concerning corporate organization,

accounting practices, markets and merchandise.

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

On October 20, 1995, at the request of Rockwell Graphics Systems,

Inc. And its parent company, Rockwell International Corporation (the

petitioner), we postponed the preliminary determination to January 26,

1996. See Notice of Postponement of Preliminary Determinations:

Antidumping Investigation of Large Newspaper Printing Presses and

Components Thereof, Whether Assembled or Unassembled from Japan (60 FR

54841, October 26, 1995).

On October 19, 1995, the petitioner alleged that there are

reasonable grounds to believe or suspect that MHI and TKS made below-

cost sales of the subject merchandise in Japan, and that these below-

cost sales must be excluded from the Department's calculation of profit

for constructed value (CV). Because we determined the appropriate basis

for normal value (NV) to be CV, we did not address petitioner's below-

cost allegation. We did, however, solicit contract price and production

costs data for MHI's and TKS's home market sales of subject merchandise

in order to compute selling,general and administratie expenses (SG&A)

and profit for CV in accordance with section 773(e)(2)(A) of the Act.

(See ``Product Comparisons'' section of this notice.)

The Department issued Sections C and D of its questionnaire to MHI

on October 27, 1995.2 The Department issued Section C, D, and E

3 to TKS on October 27, 1995. MHI submitted its response to

Section C and D on December 1, 1995, as revised December 13, 1995. TKS

submitted its response to Section C, D, and E on December 1, 1995.

Because of the first partial federal government shutdown mentioned

previously, a supplemental questionnaire was not issued until December

8, 1995. Because of the second partial government shutdown, MHI and TKS

responded to the supplemental questionnaires on January 18, 1996.

\2\ Section C requests data on sales to the United States.

Section D requests data on the cost of production and constructed

value.

\3\ Section E requests data on the cost of further manufacturing

or assembly performed in the United States.

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

On October 26 and 31, 1995, TKS requested that the Department

exclude a certain sale to the Dallas Morning News and a sale to the

Spokane Spokesman Review from our antidumping analysis. During the

period preceding this preliminary determination, the petitioner

objected on several occasions to TKS's proposal. We determined to

include these two sales in our preliminary antidumping analysis,

contrary to TKS's arguments, since U.S. sales cannot classified as

outside the ordinary course of trade, and because there are no

administrative barriers to conducting an analysis of these sales.

[[Page 8030]]

See February 23, 1996, Memorandum to Richard W. Moreland, from The

Team, Re: Request for Exclusion of TKS Sales.

During the period July 28, 1995 through January 23, 1996, the

petitioner, MHI and TKS filed comments requesting clarification of the

scope of this investigation with respect to elements (i.e., parts or

subcomponents) of covered components, and spare and replacement parts.

Respondents in the companion investigation of LNPPs from Germany, Konig

Bauer Albert and MAN Roland Druckmaschienen, also submitted comments

concerning scope on the record of this preceding. On January 23, 1996,

petitioner clarified the scope to exclude used presses. See Scope of

Investigation section of this notice. At the Department's request, on

February 8, 1996, the parties filed comments on suspension of

liquidation instructions.

On February 2, 1996, petitioner filed comments on issues concerning

MHI to be resolved and on general methodologies to be employed in the

preliminary determination. Petitioner filed additional comments

concerning MHI issues on February 8, 1996, and concerning TKS issues on

February 6, 1996. MHI and TKS filed such comments on February 6 and 16,

1996, respectively.

Respondent Selection

The producers named in the petition were MHI and TKS. On August 2,

1995, we contacted the U.S. Embassy in Tokyo, requesting the

identification of Japanese producers and exporters of LNPPs to the

United States, and the volume and value of subject merchandise they

sold to the United States during the period January 1, 1991 through May

31, 1995. On July 31, 1996, we requested the names and addresses of

manufacturers or exporters; and the value and quantity of the subject

merchandise sold and shipped to the United States for each company

during the period January 1, 1991 through May 31, 1995, from the

Embassy of Japan in Washington D.C. On August 11, 1995, we received a

reply from the Embassy of Japan indicating that there were no other

Japanese exporters of subject merchandise to the United States. At the

time of respondent selection, no reply had been received from our

Embassy in Tokyo.

Based on the petition and the information received from the Embassy

of Japan, we issued questionnaires to MHI and TKS. (See the August 28,

1995, Memorandum to The File Re: Questionnaire Recipients.)

Postponement of Final Determination and Extension of Provisional

Measures

Pursuant to section 735(a)(2)(A) of the Act, on February 9, 1996,

MHI requested, and on February 13, 1996, TKS requested that, in the

event of an affirmative preliminary determination in this

investigation, the Department postpone its final determination until 60

days after the date of the scheduled final determination, which is

equivalent to 135 days after the publication of an affirmative

preliminary determination in the Federal Register. In accordance with

19 CFR 353.20(b), because our preliminary determination is affirmative,

the respondent accounts for a significant proportion of exports of the

subject merchandise, and no compelling reasons for denial exist, we are

granting respondents' request and postponing the final determination.

Section 773(d) of the Act provides that provisional measures may

not remain in effect for more than four months. However, that provision

of the Act also states that the Department may extend that period to

six months at the request of exporters representing a significant

proportion of exports of the subject merchandise. Such a request was

made by both respondents in this investigation on February 23, 1996.

Accordingly, we are extending the applicability of the provisional

measures to six months in this investigation.

Scope of Investigation

As specified below, we have revised the scope since our notice of

initiation to exclude used presses, in accordance with the petitioner's

January 23, 1996, clarification. Furthermore, we have clarified the

scope to include ``elements'' (otherwise referred to as ``parts'' or

``subcomponents'') of an LNPP system, addition or component, which

taken as a whole, constitute a subject LNPP system, addition or

component used to fulfill an LNPP contract. See ``Scope Issues''

section of this notice concerning the treatment of elements in the

scope. In addition, we have stipulated that spare or replacement parts,

which are imported pursuant to an LNPP contract and are separately

identified and valued in that contract, whether or not shipped in

combination with covered merchandise, are excluded from the scope of

the investigation. (See February 23, 1996, Decision Memorandum to

Richard Moreland from The Team Re: Scope Issues.)

The products covered by these investigations are large newspaper

printing presses, including press systems, press additions and press

components, whether assembled or unassembled, that are capable of

printing or otherwise manipulating a roll of paper more than two pages

across. A page is defined as a newspaper broadsheet page in which the

lines of type are printed perpendicular to the running of the direction

of the paper or a newspaper tabloid page with lines of type parallel to

the running of the direction of the paper.

In addition to complete systems, the scope of these investigations

includes the five press system components. They are:

(1) A printing unit, which is any component that prints in

monocolor, spot color and/or process (full) color, or a printing-unit

cylinder;

(2) A reel tension paster (RTP), which is any component that feeds

a roll of paper more than two newspaper broadsheet pages in width into

a subject printing unit;

(3) A folder, which is a module or combination of modules capable

of cutting, folding, and/or delivering the paper from a roll or rolls

of newspaper broadsheet paper more than two pages in width into a

newspaper format;

(4) Conveyance and access apparatus capable of manipulating a roll

of paper more than two newspaper broadsheet pages across through the

production process and which provides structural support and access;

and

(5) A computerized control system, which is any computer equipment

and/or software designed specifically to control, monitor, adjust, and

coordinate the functions and operations of large newspaper printing

presses or press components.

A press addition is comprised of a union of one or more of the

press components defined above and the equipment necessary to integrate

such components into an existing press system.

Because of their size, large newspaper printing press systems,

press additions, and press components are typically shipped either

partially assembled or unassembled. Any of the five components, or

collection of components, the use of which is to fulfill a contract for

large newspaper printing press systems, press additions, or press

components, regardless of degree of assembly and/or degree of

combination with non-subject elements before or after importation, is

included in the scope of this investigation. Also included in the scope

are elements of an LNPP system, addition or component, which taken as a

whole, constitute a subject LNPP system, addition or

[[Page 8031]]

component used to fulfill an LNPP contract.

This scope does not cover spare or replacement parts. Spare or

replacement parts imported pursuant to an LNPP contract, which are not

integral to the original start-up and operation of the LNPP, and are

separately identified and valued in an LNPP contract, whether or not

shipped in combination with covered merchandise, are excluded from the

scope of this investigation. Used presses are also not subject to this

scope. Used presses are those that have been previously sold in an

arm's length transaction to a purchaser that used them to produce

newspapers in the ordinary course of business.

Further, these investigations cover all current and future printing

technologies capable of printing newspapers, including, but not limited

to lithographic (offset or direct), flexographic, and letterpress

systems.

The products covered by these investigations are imported into the

United States under subheadings 8443.11.10, 8443.11.50, 8443.30.00,

8443.59.50, 8443.60.00, and 8443.90.50 of the HTSUS. Large newspaper

printing presses may also enter under HTSUS subheadings 8443.21.00 and

8443.40.00. Large newspaper printing press computerized control systems

may enter under HTSUS subheadings 8471.49.10, 8471.49.21, 8471.49.26,

8471.50.40, 8471.50.80, 8524.51.30, 8524.52.20, 8524.53.20, 8524.91.00,

8524.99.00 and 8537.10.90. Although the HTSUS subheadings are provided

for convenience and customs purposes, our written description of the

scope of these investigations is dispositive.

Scope Issues

Since our initiation, we received numerous comments from interested

parties in this investigation and the concurrent investigation

involving Germany, requesting that the Department clarify the treatment

of ``elements'' in the scope of the investigation.

In general, respondents believe that if the imported elements do

not constitute a complete, albeit unassembled, component, or are

missing ``essential'' elements to function as one of the five

components named in the scope, they would not be subject to the scope

of this investigation and the concurrent investigation involving

Germany. The petitioner believes that, because an imported LNPP press,

addition or component will almost always contain elements, which, by

themselves, are not subject to the scope, it is not practical to

exclude these elements from the scope of the investigation in so far as

they comprise an incomplete subject component. (For a complete

discussion of these comments, see February 23, 1996 Memorandum to

Richard W. Moreland from The Team Re: Scope Issues.)

As stated in the ``Scope of Investigations'' section above, we

interpret the scope to include those elements or collection of elements

imported from a subject country in so far as they constitute any one of

the five covered components which are, in turn, used to fulfill a

contract for a LNPP press system, press addition or press component.

Individual parts per se are not covered by the scope of these

investigations unless taken as a whole they constitute a subject

component used to fulfill an LNPP contract. This interpretation,

however, raises a question: at what point do the elements imported from

a subject country rise to the level of an LNPP component, addition or

system subject to the scope of these investigations?

The Department must decide on a reasonable and practicable approach

in determining what constitutes a subject LNPP component, addition or

system, and in so doing, establish the basis on which we will include

elements in the scope. We are considering two alternative approaches

for analyzing what governs the inclusion of parts or subcomponents,

other than spare or replacement parts, within the scope of these

investigations. One approach would consider, on a case-by-case basis,

whether the imported parts or subcomponents when taken together are

essentially an LNPP system, addition or component. This so called

``essence'' approach is of necessity subjective and turns on the

question of how near the sum of the imported parts comes to comprising

a complete LNPP system, addition or component. A second approach would

consider the value of the imported parts or subcomponents relative to

the total value of the finished LNPP component, addition or system in

the United States. That is, we would determine that the imported parts

or subcomponents would be within the scope if they comprised a certain

minimum percentage of the value of the parts of a finished LNPP system,

addition or component.

Both of these approaches raise threshold questions. Because certain

sales reported by respondents in both the German and Japanese

investigations consist of imported elements from Germany or Japan,

rather than a complete LNPP component, addition or system, acceptance

of either of the two approaches will have implications as to which of

the respondents sales the Department will consider in its final

determination. Therefore, we are presently soliciting comments from

interested parties as to the merits of these approaches and/or others

that may be relevant for use in the final determination. Interested

party comments on this topic are due no later than May 1, 1996.

Period of Investigation (POI)

The petitioner, MHI, and TKS filed comments on October 19, 20, 25

and 26, 1995, concerning the appropriate period of investigation (POI)

and the use of home market sales as the basis for NV. On October 27,

1995, we established the appropriate POI for MHI to be July 1, 1991

through June 30, 1995, and for TKS to be July 1, 1992 through June 30,

1995.

As a result of changes to section 773(b)(2)(B) of the Act, which

codified the normal period within which sales made below the cost of

production are to be analyzed, the Department modified its practice so

that the standard POI would cover a one-year period. In this

investigation, however, in order to capture sufficient and

representative sales, the Department established a POI beyond the

normal one-year period because of the nature of the LNPP industry,

characterized by custom order sales and long term sales contracts. (See

October 27, 1995, Memorandum to Richard W. Moreland, from The Team Re:

Establishing the Period of Investigation.)

Exclusion of the Washington Post Sale

On October 27, 1995, the Department decided to exclude MHI's sale

to the Washington Post from our antidumping analysis. (See Period of

Investigation Memorandum). On November 7, and November 20, 1995, the

petitioner requested that the Department reconsider its decision. On

November 13 and November 29, 1995, MHI rebutted the petitioner's

arguments.

The Department reaffirmed its exclusion of the Washington Post sale

from its margin analysis because (1) this sale was unbuilt, unshipped,

and uninstalled at the time of our analysis; (2) the Department

believes that the historical bench-marking integral to the use of

estimated costs was not reasonably available; and (3) because the

Department had two other sales available for analysis which were built,

delivered and installed. (See February 23, 1996, Memorandum to Richard

W. Moreland from The Team Re: Continuing the Exclusion of the

Washington Post Sale).

[[Page 8032]]

The Nature of the Guard Sale

On November 1, 1995, the petitioner requested that the Department

determine that the correct price for the Department to examine with

regard to the ultimate purchase of an LNPP by the Guard Publication

Company (Guard) is that set between MHI and the Sumitomo Trading

Company. In response to the petitioner's questions, the Department held

an ex parte meeting with counsel for MHI on December 7, 1995. Following

this meeting MHI submitted documentation with respect to this

transaction on December 7, 1995. MHI supplemented this submission with

more documentation on December 12, 1995. On January 11, 1996, the

petitioner submitted comments analyzing MHI's documentation of the

transaction. Finally, MHI submitted additional information concerning

this sale in its January 18, 1996, supplemental response. MHI

maintained that the documentation was evidence that the sale was made

by MHI to Guard.

Because of the participation of MHI in the business dealings

between Sumitomo and Guard, the documented correspondence between MHI

and Guard, and MHI's actual performance pursuant to the Guard's

technical requirements, we established that the appropriate transaction

to examine was the sale from MHI to Guard Publishing Company. (See

February 23, 1996, Memorandum to Richard W. Moreland from The Team Re:

Establishing the Proper Guard Sale.)

Product Comparisons

Although the home market was viable, in accordance with section 773

of the Act, we based NV on constructed value (CV) because we determined

that the particular market situation, which requires that the subject

merchandise be built to each customer's specifications, does not permit

proper price-to-price comparisons. (See November 9, 1995, Memorandum to

Richard W. Moreland from The Team Re: Determining the Appropriate Basis

for Normal Value.)

Fair Value Comparisons

To determine whether MHI's and TKS's sales of LNPPs to the United

States were made at less than fair value, we compared Constructed

Export Price (CEP) to the NV, as described in the ``Constructed Export

Price'' and ``Normal Value'' sections of this notice. In accordance

with section 777A(d)(1)(A)(ii), we calculated transaction-specific CEPs

(which in this case were synonymous with model-specific CEPs) for

comparison to transaction-specific NVs because there are few sales and

the merchandise is custom-made.

Constructed Export Price (CEP) and Further Manufacturing (FM)

TKS

TKS reported its sales as CEP and CEP/FM sales. Because we have

classified installation expenses as further manufacturing, we have

treated all TKS sales as CEP/FM sales. We calculated CEP, in accordance

with subsections 772 (b) and (d) of the Act, for (1) those sales to the

first unaffiliated purchaser that took place after importation by a

seller affiliated with the producer/exporter and (2) those sales

involved in further manufacturing in the United States.

We calculated CEP sales based on packed, installed prices to

unaffiliated customers. We made deductions from the starting price

(gross unit price), for foreign inland freight to port in Japan,

foreign brokerage and handling, international freight, combined marine

and foreign insurance, U.S. brokerage and handling, U.S. Customs duty,

U.S. inland freight port to customer, U.S. inland freight U.S.

warehouse to customer, and U.S. inland insurance. We also made

deductions for imputed credit, warranty, and other direct selling

expenses including certain U.S. trade show expenses.

In calculating imputed credit, we took into account the unique

nature and magnitude of the LNPP projects under investigation. These

projects require substantial capital expenditures over an extended time

period because of their size and their lengthy production process.

Moreover, the projects generally call for the purchaser to provide

scheduled progress payments prior to the completion of a given project.

In consideration of these factors, we computed credit by applying an

interest rate to the net balance of production costs incurred and

progress payments made during the construction period. We imputed

credit expenses for U.S. sales using U.S. prime short-term interest

rates as reported by the Federal Reserve, calculated as a weighted-

average rate for each fiscal year in the POI, since these sales were

denominated in U.S. dollars. However, because TKS reported that it did

not borrow in U.S. dollars, we used U.S. prime short-term interest

rates as a surrogate rate.

We deducted those indirect selling expenses that related to

economic activity in the United States. We have recalculated TKS's

reported indirect selling expenses incurred in the United States using

the total expenses and total revenue for TKS USA during the fiscal

years 1991 through 1995, in order to remove distortions in TKS USA's

financial statements caused by auditors' modifications to revenue

recognized during the POI.

We also deducted the cost of any further manufacturing or assembly

(including additional material and labor). Finally, we made an

adjustment for CEP profit in accordance with section 772(d)(3) of the

Act.

Furthermore, we have reclassified TKS's combined training and U.S.

testing expenses as installation expenses. We then reclassified total

installation expenses as U.S. further manufacturing activity.

We classified installation charges as part of further

manufacturing, because the U.S. installation process involves extensive

technical activities on the part of engineers and installation

supervisors and the integration of subject and non-subject merchandise

necessary for the operation of LNPPs. See Certain Internal-Combustion,

Industrial Forklift Trucks from Japan, 53 FR 12565 (Apr. 15, 1988) and

Small Business Telephone Systems and Subassemblies thereof from Korea,

54 FR 53151 (Dec. 27, 1989).

We have also classified as part of further manufacturing costs the

costs of certain non-Japanese items shipped directly to the United

States without further processing in Japan, and non-Japanese items

sourced in the United States, for integration into the overall LNPP

during the installation process.

We recomputed the U.S. further manufacturer's reported G&A rate

using the cost of goods sold amount reported in its audited financial

statements; and we included interest expense relating to the cost of

installation in U.S. further manufacturing.

MHI

MHI reported its sales as EP sales. We have classified all MHI

sales as CEP/FM sales because MHI's affiliated U.S. sales agent acted

as more than a processor of sales-related documentation and a

communication link with the unaffiliated U.S. customers; the U.S.

affiliate engaged in a broad range of activities including coordination

of installation, which we have classified as further manufacturing. We

calculated CEP, in accordance with subsections 772 (b) and (d) of the

Act, for these sales because they involved further manufacturing in the

United States.

We calculated CEP sales based on packed, installed prices to

unaffiliated customers in the United States. We made deductions for

inland freight to port in Japan; foreign brokerage and

[[Page 8033]]

handling; international freight; combined foreign inland and marine

insurance, export insurance and U.S. inland insurance, U.S. brokerage

and handling, U.S. Customs duty.

We also made deductions for post-sale warehousing, commissions,

imputed credit, direct warranty and training expenses, where

applicable.

With respect to reported technical service expenses, direct and

indirect, we have included these as part of total installation

expenses. We then reclassified total installation expenses as U.S.

further manufacturing activity. We are continuing to use the amounts

reported for technical expenses for purposes of the preliminary

determination. In light of MHI's claim that the expenses are limited in

time, the magnitude of any changes, and the relationship between

technical services in future years and the nature of MHI product

warranties, we are not changing the reported values; we will require

MHI to explain explicitly the administration of its technical servicing

for purposes of the final determination.

We deducted those indirect selling expenses that related to

economic activity in the United States. We have modified the

calculation of Mitsubishi Lithographic Presses--(MLP's) reported

indirect selling expenses to correct the allocation methodology for

common G&A expenses.