Porcelain-on-Steel Cookware From Mexico: Notice of Final Results of Antidumping Duty Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[A-201-504]

Porcelain-on-Steel Cookware From Mexico: Notice of Final Results

of Antidumping Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of final results of antidumping duty administrative

review.

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SUMMARY: On November 24, 1995, the Department of Commerce (the

Department) published the preliminary results of its administrative

review of the antidumping duty order on porcelain-on-steel (POS)

cookware from Mexico. This review covers the period December 1, 1993,

through November 30, 1994.

We gave interested parties an opportunity to comment on the

preliminary results. Based on our analysis of the comments received and

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

changed the preliminary results, as described below in the comments

section of this notice.

EFFECTIVE DATE: May 12, 1997.

FOR FURTHER INFORMATION CONTACT: Katherine Johnson or Mary Jenkins,

Import Administration, International Trade Administration, U.S.

Department of Commerce, 14th Street and Constitution Avenue, N.W.,

Washington, D.C. 20230; telephone, (202) 482-4929 or (202) 482-1756,

respectively.

SUPPLEMENTARY INFORMATION:

Background

On November 24, 1995, the Department published in the Federal

Register the Notice of Preliminary Results of Administrative Review:

Porcelain-on-Steel Cookware from Mexico (60 FR 58044) (Preliminary

Results). The Department has now completed that administrative review

in accordance with section 751 of the Tariff Act of 1930, as amended

(the Act).

Scope of the Review

The merchandise covered by this review is porcelain-on-steel

cookware, including tea kettles that do not have self-contained

electric heating elements. All of the foregoing are constructed of

steel and are enameled or glazed with vitreous glasses. This

merchandise is currently classifiable under Harmonized Tariff Schedule

of the United States (HTSUS) subheading 7323.94.00. Kitchenware

currently entering under HTSUS subheading 7323.94.00.30 is not subject

to the order. Although the HTSUS subheadings are provided for

convenience and Customs purposes, our written description of the scope

of this proceeding is dispositive.

The period of review (POR) is December 1, 1993, to November 30,

1994. The review covers one manufacturer/exporter of Mexican POS

cookware, Cinsa, S.A. de C.V. (Cinsa).

Applicable Statute and Regulations

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

Department's regulations are in reference to the provisions as they

existed on December 31, 1994.

Product Comparisons

In accordance with the Department's standard methodology, we

calculated transaction-specific U.S. prices for Cinsa based on purchase

price (PP), and compared these U.S. sales to foreign market values

(FMVs) based on either monthly weighted-average home market prices or

constructed value (CV). For price-to-price comparisons, we made

comparisons based on the following product characteristics: gauge

(i.e., whether heavy or light), quality, product configuration/size

(e.g., frying pan, roaster), number of enamel coats, and color.

We have determined that heavy gauge (HG) and light gauge (LG)

cookware are not such or similar merchandise (see Final Analysis

Changes for the 8th Review of Porcelain-on-Steel Cookware from Mexico,

Memorandum from the Team to Louis Apple, Acting Director, Group II, AD/

CVD Enforcement dated February 21, 1997, (Final Analysis Memorandum)).

For this reason, and because Cinsa made no home market sales of HG

merchandise and there were no CV data on the record for Cinsa's sales

of HG merchandise, we assigned these HG sales the weighted average of

all margins calculated for Cinsa's U.S. sales of LG cookware. See

Comments 1-4.

Verification

As provided in section 776(b) of the Tariff Act, we verified

information provided by Cinsa using standard verification procedures,

including onsite inspection of the manufacturers' facilities, the

examination of relevant sales and financial records, and selection of

original documentation containing relevant information. Although

primarily engaged in the production and sale of LG cookware,

[[Page 25909]]

Cinsa also made a few U.S. sales of HG cookware produced by ENASA, a

manufacturer of HG cookware. Cinsa did not make any home market sales

of HG cookware.

United States Price

We calculated PP based on the same methodology used in the

Preliminary Results, except in the following instances: (1) we used a

revised U.S. interest rate to calculate imputed credit expenses; and

(2) we calculated U.S. imputed credit expenses on sales to U.S.

customers who paid by letter of credit. See Comment 9.

Foreign Market Value

We calculated FMV based on the same methodology used in the

Preliminary Results, except in the following instances: (1) We

recalculated home market credit expenses using the revised interest

rate reported in the July 26, 1995, supplemental response; (2) for

sales in the home market with missing payment dates, we applied a

credit expense calculated using the average period between shipment and

payment for those sales where payment date was reported; and (3) we

deducted home market commissions and added U.S. indirect selling

expenses capped by the amount of home market commissions, in accordance

with 19 CFR 353.56.

Cost of Production

As discussed in the Preliminary Results, the Department conducted a

test of home market sales made during the POR to determine if sales

were made at prices below Cinsa's cost of production (COP) within the

meaning of section 773(b) of the Act. For home market models which

would have been the best match for a U.S. model but for which there

were insufficient home market sales at or above the COP, we compared

USP to CV.

A. Calculation of COP

We calculated COP based on the sum of respondent's cost of

materials, fabrication, and general expenses, in accordance with 19 CFR

353.51(c), and as described in the Preliminary Results.

B. Test of Home Market Sales Prices

As stated in the Preliminary Results, we used Cinsa's adjusted cost

data. We compared the weighted average product specific COP figures to

home market sales of the foreign like product as required under section

773(b) of the Act. We tested whether a substantial quantity of

respondent's home market sales of subject merchandise were made at

prices below COP over an extended period of time. On a product-specific

basis, we compared the COP to the reported home market prices, less any

applicable movement charges and rebates. We made the following changes

to the COP calculation used in the Preliminary Results: (a) as COP was

calculated exclusive of packing expenses, we deducted these expenses

from the net home market sales price used to determine whether sales

were below the COP; and (b) we corrected the COP calculation to

eliminate double counting of commission expenses in the COP selling

expenses.

To satisfy the requirement of section 773(b)(1) of the Act that

below-cost sales be disregarded only if made in substantial quantities,

we applied the following methodology. If, by quantity, over 90 percent

of the respondent's sales of a given product were at prices equal to or

greater than the COP, we did not disregard any below-cost sales of that

product because we determined that the below-cost sales were not made

in substantial quantities. If between 10 and 90 percent of the

respondent's sales of a given product were at prices equal to or

greater than the COP, and sales of that product were also found to be

made over an extended period of time, we disregarded only the below-

cost sales. Where we found that more than 90 percent of the

respondent's sales of a product were at prices below the COP, and the

sales were made over an extended period of time, we disregarded all

sales of that product, and calculated FMV based on CV, in accordance

with section 773(b) of the Act.

In accordance with section 773(b)(1) of the Act, in order to

determine whether below-cost sales had been made over an extended

period of time, we compared the number of months in which below-cost

sales occurred for each product to the number of months in the POR in

which that product was sold. If a product was sold in three or more

months of the POR, we do not exclude below-cost sales unless there were

below-cost sales in at least three months during the POR. When we found

that sales of a product only occurred in one or two months, the number

of months in which the sales occurred constituted the extended period

of time, i.e., where sales of a product were made in only two months,

the extended period of time was two months; where sales of a product

were made in only one month, the extended period of time was one month.

See Final Determination of Sales at Less Than Fair Value: Certain

Carbon Steel Butt-Weld Pipe Fittings from the United Kingdom, 60 FR

10558, 10560 (February 27, 1995).

C. Results of COP Test

We found that for certain products, between 10 and 90 percent of

Cinsa's home market sales were sold at below-COP prices over an

extended period of time. Because Cinsa provided no indication that the

disregarded sales were at prices that would permit recovery of all

costs within a reasonable period of time in the normal course of trade,

in accordance with section 773(b) of the Act, we based FMV on CV for

all U.S. sales left without a home market sales match as a result of

our application of the COP test.

D. Calculation of CV

In accordance with section 773(e)(1) of the Act, we calculated CV

based on the sum of respondent's cost of materials, fabrication,

general expenses, packing costs, and profit. In accordance with section

773(e)(1)(B)(i) and (ii), we used: (1) The actual amount of general

expenses because those amounts were greater than the statutory minimum

of ten percent and (2) the actual amount of profit where it exceeded

the statutory minimum of eight percent on above-cost sales.

Price-to-CV Comparisons

Where we made CV to PP comparisons, we made a circumstance-of-sale

(COS) adjustment, where appropriate, for differences in credit expenses

and bank fees between the two markets. We deducted home market

commissions and added U.S. indirect selling expenses capped by the

amount of home market commissions, in accordance with 19 CFR 353.56.

Interested Party Comments

Comment 1: Whether or not Cinsa and ENASA Should be Collapsed

Petitioner argues that the Department's determination in the

Preliminary Results not to collapse Cinsa and ENASA, a related

manufacturer of HG cookware, is contrary to its long-standing practice

with respect to collapsing related parties. Petitioner claims that, in

the instant review, Cinsa and ENASA are so closely intertwined that

there is a strong possibility of manipulation of prices and/or

production decisions. Petitioner further argues that the Department

must use a ``totality of the circumstances'' test in its collapsing

analysis as opposed to determining that the ability to shift production

between related parties without retooling is the determinative factor.

Cinsa states that it would not contest a finding by the Department

that the two companies should be collapsed and

[[Page 25910]]

treated as a single entity given their common ownership, and shared

board members and managerial employees. However, Cinsa also maintains

that sufficient evidence exists on the administrative record in this

case to support the Department's determination in the preliminary

results not to collapse the two companies. Cinsa argues that the

administrative record, including the Department's verification of the

physical differences between HG and LG merchandise, the separate

production facilities, and the different production processes provide

sufficient evidence to support the substantial evidence standard for

determining that the two companies should not be collapsed and treated

as a single entity.

DOC Position: The Department will collapse two producers if each of

three requirements are met: (1) the producers must be ``affiliated'';

(2) they must have manufacturing facilities sufficiently similar that

no substantial retooling would be needed to restructure manufacturing

priorities with respect to the subject merchandise (i.e., that the

physical infrastructure exists for the two firms to act as one in

producing the merchandise), and (3) the Department concludes, based on

a series of listed factors, that there is a significant potential for

manipulation of price or production (i.e., that the control

infrastructure exists which would enable the firms to realize any

ability to shift production or price made possible by the overlapping

production facilities referred under the second requirement). See

Antidumping Duties: Countervailing Duties: Notice of Proposed Rule

Making and Request for Public Comments, 61 FR 7308, 7330 and 7381

(February 27, 1996), at section 351.401. This proposed regulation

represents the Department's current practice. The principles underlying

these criteria have been cited with approval in court decisions. See,

e.g., FAG Kugelfischer Georg Schafer KGaA v. United States, 932 F.

Supp. 315, 323 (CIT 1996).

The verification report states that Cinsa makes only LG cookware

and ENASA makes only HG cookware, and that extensive and expensive

retooling appeared to be necessary for Cinsa to produce HG products or

for ENASA to produce LG products (see November 27, 1995, Verification

Report at .4). Accordingly, we have determined that the physical

infrastructures of the two firms are insufficiently similar to meet the

second requirement of the collapsing test. Further, having made this

determination, we do not need to examine the questions of significant

common ownership and interlocking directors and managers. Therefore, it

is not appropriate to treat these firms as a single entity for the

purpose of assigning an antidumping margin. However, should changes in

production occur in the future, we may reexamine this issue in the

context of subsequent reviews.

Comment 2: Inclusion of HG Cookware Sales to the United States in the

Review

Petitioner argues that Cinsa's sales of ENASA-produced HG cookware

to the United States were made during the POR and therefore should be

included in the margin calculation. Petitioner contends that the facts

concerning the appropriate date of sale for these U.S. sales are not in

dispute, and that Cinsa's contention that the date of sale should be

the date of ultimate reconciliation contradicts the fact that the sales

contract was signed during the POR. Petitioner states that almost all

shipments to the United States, pursuant to the contract, occurred

during the POR, the subject merchandise was resold to end users during

the POR, and end users were actually cooking with the merchandise

during the POR. Petitioner also claims that, because the questionnaire

states that there can be no new dates of sale after shipment, the date

of sale for these U.S. sales must be either the date of the contract or

the dates of shipment to the United States.

Cinsa contends that the sales in question were not made during the

POR. Cinsa argues that the Department's definition of date of sale

expressly contemplates situations where a date ``subsequent to the date

of shipment * * * may be the appropriate date of sale,'' particularly

when the quantity terms change subsequent to the date of contract or

the date of shipment. Cinsa cites Toho Titanium Co., Ltd. v. United

States (``Toho''), 14 CIT 500, 501 (1990), for the proposition that the

sale is complete when the essential terms of the transaction are set.

Cinsa does not dispute that the contract was signed and shipments were

made during the POR. However, in this particular instance, the quantity

of HG cookware to be purchased by the customer was to be based solely

upon the amount of merchandise used by the customer in a promotional

program that ended outside the POR. Cinsa argues that because the final

reconciliation of the contract occurred outside the POR, the date of

sale for all sales of HG cookware was also outside the POR.

DOC Position: We agree with petitioner. We consider the date of the

contract between Cinsa's related sales entity, Yamaka China Co., Inc.

(``Yamaka''), and its unrelated customer to be the date of sale for

Yamaka's U.S. sales of HG cookware manufactured by ENASA during the

POR. Thus we have included these sales in our analysis for this review.

Cinsa has argued that Yamaka's customer had the ability to affect

the quantity ultimately sold, based on its management of the logistics

of the promotion. The contract between Yamaka and its unrelated

customer established the terms on which the quantity to be sold would

be set: the amount of goods sold through the promotion. Under the

contract, the customer did not have the discretion to alter or

renegotiate those terms. In the end, the quantity of goods which is

sold and not returned will be decided by how much cookware the public

buys during the promotion. Although the precise amount to be sold was

not known at the time of the contract, the contract clearly spelled out

the basis on which it would be determined; hence the contract is

consummated and the sale made as of June 1994. The situation in this

review can be distinguished from the situation underlying the CIT's

decision in Toho. In that case, the contract at issue required a

minimum purchase and gave the buyer the option of purchasing additional

product at the same price. The CIT upheld Commerce's decision that the

quantity in the contract became ``set'' only when the customer issued

delivery instructions on each optional shipment, since it could have,

had it chosen, renegotiated the contract price based on its total

discretion to order beyond the minimum amount. In the instant case,

there was no minimum purchase requirement in the contract, and the

customer had no explicit discretion to set quantity that could serve as

the basis of a future negotiation. Thus, whereas the seller in Toho

contracted for a minimum amount and made a binding offer as to further

sales, Yamaka entered into a binding contract for whatever business the

promotion would generate.

The fact that Yamaka at the same time contracted to, and later did,

``repurchase'' cookware which its customer was unable to resell during

the promotion does not mean that the sales of the cookware eventually

repurchased were not made. The very fact that the contract refers to

``repurchase'' rather than to return prior to invoicing, together with

the fact that partial payment was received on these goods, indicates

that this was a sale-and-refund arrangement, rather than a sale only of

those items which were never returned.

Because the June 1994 contract constitutes a binding agreement in

the nature of a requirements contract, whereby Yamaka and its customer

[[Page 25911]]

agreed upon the price and quantity (whatever was sold in connection

with the promotion, with a guarantee of repurchase for items not sold

at retail), the date of this contract is the appropriate date of sale

for all cookware sold to the United States in connection with the

promotion.

Comment 3: Reporting of ENASA's Home Market Sales of HG Cookware Sets

Petitioner states that during this review the Department sent a

letter to Cinsa requiring it to report ``all sales of such or similar

merchandise sold by ENASA in the home market during the 90/60 day

period surrounding the date of each of ENASA's sales to the United

States.'' Petitioner maintains that Cinsa did not comply with this

request because it only submitted ENASA's home market sales of HG open

stock (i.e., single piece) cookware and did not submit ENASA's home

market sales of HG cookware sets. The issue, according to petitioner,

is whether the Department should compare the individual pieces in the

sets sold in the home market to open stock items sold in the United

States.

Cinsa states that, even if the Department concludes that its sales

of ENASA-produced HG open stock cookware to the United States were made

during the POR, the Department should decide that reporting was

properly limited to home market sales of HG cookware that ENASA sold as

open stock.

Cinsa further contends that there is no basis to require reporting

of sales of HG cookware sets since no HG sets were sold to the United

States. Further, Cinsa argues that the cost of manufacture of a set of

HG cookware would exceed that of a single piece by more than the

Department's twenty percent limit on adjustments for differences in

merchandise when comparing non-identical products.

DOC Position: Because we decided not to collapse Cinsa and ENASA,

we compared the prices of sales by Cinsa only to prices of other sales

by Cinsa. The only HG cookware sold by Cinsa during the POR was open

stock U.S. sales of cookware manufactured by ENASA. Because Cinsa made

no home market sales of HG cookware sets during the POR, and only

Cinsa's sales are being reviewed for this POR, we need not address the

issue of whether sales of open stock cookware manufactured by ENASA and

sold by Cinsa should be compared to individual components of HG

cookware sets (which were sold only by ENASA). Furthermore, because we

have determined that HG cookware is not properly compared to LG

cookware (see Product Comparison section of this notice), we need not

address the issue of whether Cinsa's U.S. sales of HG open stock

cookware should be compared to Cinsa's sales of LG sets in the home

market. (For a full discussion of set-splitting see Final Analysis

Memorandum, page 9).

Comment 4: Cinsa's Failure To Submit COP and CV Data for HG Cookware

Petitioner contends that Cinsa failed to report cost data with

respect to sales of (ENASA-manufactured) HG cookware despite being

required to do so by the questionnaire. Petitioner believes that the

Department must resort to BIA (suggesting the highest margin calculated

for any U.S. sale of LG cookware made during the POR) to calculate the

dumping margin for each HG sale made to the United States.

Alternatively, petitioner believes that the Department should reopen

the record, collect cost data for all HG products sold in both the home

market and the United States, and incorporate these data into the model

matching, sales-below-cost, and CV analyses used in the final results.

Cinsa contests petitioner's argument that the Department should use

BIA in the absence of ENASA's cost information with respect to HG

cookware. Cinsa states that the statute, at 19 U.S.C. 1677e(b),

``requires noncompliance with an information request before resorting

to the best information rule is justified.''

Cinsa also states that 19 CFR 353.31(c)(i)(ii) specifically

requires that allegations of below-cost sales must be made in a timely

manner, in any event prior to the Department's verification and the

issuance of the preliminary results. Therefore, Cinsa argues that,

given that the Department never requested cost information for ENASA

merchandise, and that prior to the preliminary results petitioner

neither objected to the Department's limited information request nor

alleged in a timely manner that ENASA's home market sales were made

below cost, application of BIA would be inappropriate.

DOC Position: We disagree with petitioner. In its June 5, 1995,

supplemental questionnaire to Cinsa, the Department requested that

Cinsa provide ENASA's home market and U.S. sales data as well as start

up costs for ENASA's production of HG cookware. In response, Cinsa

argued that reporting home market sales, cost and CV data was

unnecessary because Cinsa's only sales of ENASA-produced HG cookware

were made outside the POR. Because the date of sale issue remained

unresolved for some time and because a review had not been initiated

for ENASA, we did not pursue our request for ENASA's cost information.

However, we subsequently determined that these U.S. sales of HG

cookware were made within the POR (see Comment 2). Rather than unduly

delay the review at this point to seek cost information for these

sales, and because the sales of HG cookware constituted only a small

part of Cinsa's total sales to the United States during the POR, we

based the margin for these sales of HG cookware on the weighted average

of all margins calculated for Cinsa's sales of LG cookware to the

United States.

Comment 5: Inclusion of Home Market Sales of Second-Quality Merchandise

in the Cost Test

Petitioner asserts that the exclusion of sales of second-quality

merchandise from the preliminary cost test is inconsistent with

standard practice, including the Department's previous practice in

reviews of imports subject to this order. Accordingly, petitioner

claims that the Department should revise its preliminary results and

include Cinsa's home market sales of second-quality merchandise in the

sales-below-cost test for purposes of the final results.

Cinsa contends that the Department has determined in this and all

prior administrative reviews in this case that second-quality articles

sold in the home market are not comparable to the first-quality

articles sold to the United States. Thus, according to Cinsa, the

Department has always excluded second-quality articles from the FMV

calculation without regard to the results of the Department's cost

test, which only serves to eliminate first quality home market sales

sold below cost from consideration in the FMV calculation. Cinsa

further adds that, since the second-quality articles are never used for

comparison with any U.S. sales, there is no practical reason for the

Department to use them to perform the cost test.

DOC Position: We agree with petitioner and have included in the

cost test all home market sales of both first and second quality

merchandise. There are no production cost differences between first and

second quality merchandise that is otherwise identical. See IPSCO, Inc.

v. United States, 965 F.2d 1056, 1060-61 (Fed. Cir. 1992). Although in

certain circumstances Commerce may choose to reduce its own

administrative burden and simplify reporting by not requiring parties

to report home market sales of types of merchandise unlikely to be

matched to

[[Page 25912]]

any U.S. sales, data for second quality merchandise is already on the

record of this review. Second quality merchandise can be compared to

first quality merchandise if there are insufficient matches of first

quality merchandise, and therefore second quality merchandise on the

record is properly included in the cost test, just as similar

merchandise is included in the cost test even when there are ample

identical matches.

As we did in the fourth review (See Porcelain-on-Steel Cooking Ware

From Mexico: Final Results of Antidumping Duty Administrative Review,

58 FR 43327 (August 16, 1993)), we compared only first quality

merchandise sold in the U.S. market with first quality merchandise sold

in the home market. We did not in calculating FMV use sales of second

quality merchandise in the instant review because there were no sales

of second quality merchandise in the United States--unlike in the

fourth review where second quality merchandise sold in the United

States was compared with second quality merchandise sold in the home

market-- nor were there any instances where available first quality

home market sales were not adequate for matching purposes.

Comment 6: Calculation of General and Administrative Expenses

Petitioner argues that, consistent with its practice, the

Department should have based Cinsa's G&A expenses on the consolidated

G&A expenses of Grupo Industrial Saltillo, S.A. de C.V. (GIS), not

Cinsa-specific G&A expenses. Accordingly, petitioner argues that the

Department should modify its COP/CV calculations and use the ratio of

GIS's 1993 consolidated G&A expenses to GIS's 1993 consolidated cost of

goods sold, instead of the Cinsa-specific rate allocable to each

product sold.

Cinsa states that the statute requires that the COP and CV of

merchandise subject to review be calculated in a manner that reflects

the expenses attributable to the class or kind of merchandise, citing

19 U.S.C. 1677b(e)(1)(B). In this instance, Cinsa maintains that it is

the manufacturer, seller, shipper, and exporter of the subject

merchandise, and that only the G&A expenses borne directly by Cinsa

itself may be used to calculate COP and CV. Therefore, since GIS is not

directly involved in any of Cinsa's production or sales activities

concerning the subject merchandise, attributing all of GIS's G&A

expenses to the subject merchandise would be inappropriate. Cinsa notes

that the financial statements of GIS state that the entire household

division of GIS, which includes Cinsa as well as other producers, only

accounts for approximately one-third of the consolidated sales value of

GIS. Cinsa further states that comparison of the total G&A expenses of

Cinsa to the G&A expense of GIS establishes that the vast majority of

the G&A expenses recorded in the consolidated GIS financial statement

is attributable to activities other than Cinsa's production and sales

of the subject merchandise.

Cinsa maintains that, in the event the Department uses GIS's G&A

expenses, the Department should base that calculation on GIS's 1993 and

1994 financial statements, which were submitted as Appendix 24 to

Cinsa's July 10, 1995, supplemental response.

DOC Position: We disagree with petitioner. The petitioner's

suggestion that the Department modify the COP/CV calculations and use

the ratio of GIS's 1993 consolidated G&A expenses to GIS's 1993

consolidated cost of goods sold, is contrary to Department practice. We

only include a portion of these expenses if the parent performs

services for the affiliated company (See Final Determination of Sales

at Less Than Fair Value: Welded Stainless Steel Pipe from Malaysia, 59

FR 4023, 4027 (January 28, 1994)). Based on the information on the

record of this review, we used Cinsa's reported G&A factor for the

final results. The record evidence does not indicate the value of

services provided by GIS.

Comment 7: The ``Extended Period of Time'' Used in the Cost Test

Petitioner states that Import Administration Policy Bulletin No.

94.3 (March 25, 1994) states that the Department will consider below-

cost sales to have been made over an extended period of time only if:

(a) the respondent sold a model in only one month of the POR and

certain or all of those sales of the model in that month were below

cost;

(b) the respondent sold a model in two months of the POR and

certain or all of those sales of that model in each of the two

months were below cost; or

(c) the respondent sold a model during three or more months of

the POR and certain or all of those sales of that model in at least

three of those months were below cost.

Petitioner argues that the Department's policy is arbitrary, unfair to

petitioner and internally inconsistent. Petitioner believes that a more

reasonable approach would be to consider below-cost sales made in at

least 25 percent of the months in which a model was sold to have been

made ``over an extended period of time.''

Cinsa points out that the Department's three month test is an

established Department administrative practice, adopted over two years

ago and used consistently since that time. Cinsa cites numerous recent

administrative and court proceedings to support its argument. Cinsa

contends that petitioner's arguments have been considered repeatedly by

the Department and the reviewing courts and have been consistently

rejected. Therefore, Cinsa argues that, for purposes of the final

results, the Department should continue to apply its standard test to

determine whether below cost sales have been made over an extended

period of time.

DOC Position: We agree with Cinsa. The Department's three month

test is an established administrative practice which has been affirmed

by the U.S. Court of International Trade. See, e.g., NTN Bearing Corp.

v. United States (``NTN Bearing Corp.''), 881 F. Supp. 595, 602 (1995).

Accordingly, for purposes of the final results, we have applied our

standard cost test to determine whether below cost sales have been made

over an extended period of time.

Comment 8: Cinsa's October 3, 1995, Correction to its Home Market Sales

Listing

Cinsa argues that the Department's preliminary results incorrectly

did not reflect the October 3, 1995, revision to the quantity and unit

price for one transaction in its home market sales listing. Cinsa

argues that because it notified the Department of the revision,

including documentary support, approximately seven weeks prior to the

issuance of the preliminary results, the preliminary results should

have incorporated this correction.

Cinsa further argues that petitioner's assertion that Cinsa's

revision was untimely filed should be disregarded given the decision in

NTN Bearing Corporation v. United States (``NTN Bearing Corp''), 74

F.3d 1204 (December 11, 1995). Cinsa argues that the Court of Appeals

for the Federal Circuit held that the Department has the authority to

correct inadvertent data input errors made by, and then later

discovered by a respondent, when such errors were brought to the

attention of the Department in a timely manner during the comment

period subsequent to the preliminary results. Cinsa also notes that the

general 180-day time limit applies to new factual information being

placed in the administrative record. Cinsa contends that the revision

to its home market sales listing did not add additional sales or new

information to

[[Page 25913]]

the record. Moreover, Cinsa claims that the revision is properly part

of the administrative record and should be taken into account in the

final results because the Department did not reject the submission

despite a specific request for rejection by the petitioner. Finally,

Cinsa argues that under similar circumstances in the fifth

administrative review, when Cinsa brought corrections to the

Department's attention prior to the preliminary results, and such

corrections were not incorporated into the preliminary results, the

Department agreed with Cinsa over the objection of the petitioner and

incorporated the necessary corrections into the final results.

Accordingly, Cinsa argues that since it notified the Department of this

error prior to the issuance of the preliminary results, the final

results should incorporate this correction.

Petitioner argues that the opinion of the Federal Circuit in NTN

Bearing Corp. simply does not apply in this situation. Petitioner

states that NTN Bearing Corp. involved an antidumping administrative

review in which there was no verification. Thus, all information

submitted in that review was unverified, and the Department was not

required by the statute to have verified all information relied upon in

the final results. Petitioner contends that in contrast, the Department

has no such discretion in this review. Petitioner argues that in this

review the alleged clerical error represents new, untimely, unsolicited

information that the Department has not verified; thus, under 19 U.S.C.

1677e(b), the Department may not use this information, because it would

be unlawful to rely upon unverified information in the final results of

this review. Petitioner also believes that even if the Department could

change this data, Cinsa has not established that any error was made

because the invoice for this sale, which is the best evidence of the

transaction, reflects that the unit price used in the preliminary

results was correct.

DOC Position: Cinsa's submission of October 3, 1995, does not

adequately demonstrate why the reported information is incorrect, or

that its post-verification revision is correct. In fact, the

documentary evidence submitted in support of the proposed revision

appears to support the reported information. Without clear documentary

evidence that the response information is incorrect, and given that

verification had already occurred at the time of the submission, the

Department has no means to confirm Cinsa's claim. This situation is

distinguishable from NTN Bearings Corp., in which supporting

documentation in NTN's post-disclosure submission clearly indicated

that an error had, in fact, been made. Merely deciding not to reject a

submission does not constitute acceptance of the arguments put forth in

the document. Because Cinsa is not able to establish that the reported

quantity and unit price are actually erroneous, no revision is

appropriate.

Comment 9: Inclusion of U.S. Imputed Credit Expenses on Sales to U.S.

Customers Who Paid by Letter of Credit

Cinsa argues that the Department's preliminary results improperly

adjusted for U.S. imputed credit expenses on sales to U.S. customers

who paid by letter of credit. Cinsa states that its revised U.S. sales

listing mistakenly failed to list this expense as zero for the sales in

question. According to Cinsa, the Department verified that two U.S.

customers paid by letter of credit and did not incur imputed credit

expenses. Cinsa argues that the final results should incorporate the

verified information even though Cinsa failed to report it properly.

Petitioner argues that it is too late in this instance for further

correction of data when the failure to correct the data is the result

of Cinsa's own negligence. Petitioner contends that permitting such

requests would be a disincentive to respondents to respond accurately

and a burden to administer for the Department.

DOC Position: We verified that two U.S. customers paid by letter of

credit and have included the associated bank fees for these letters of

credit as a COS adjustment. However, Cinsa did not receive payment for

these sales from its bank immediately upon shipment, but rather some

time later. In accordance with our standard practice, we have also

imputed credit expenses for these letter of credit sales for the days

payment was outstanding between shipment and payment.

Comment 10: Revalued Versus Historical Depreciation

Cinsa argues that the use of revalued rather than historical

depreciation distorts Cinsa's COP and is contrary to law because it

distorts Cinsa's actual fixed overhead cost incurred in producing the

subject merchandise. Cinsa further states that, in this review, the

Department verified that revalued depreciation was used for financial

purposes only, and that historical depreciation is used in company

records for income tax purposes. Consequently, according to Cinsa, the

use of revalued depreciation in this case would overstate the actual

depreciation expenses incurred in producing the subject merchandise,

since Cinsa's cost and accounting records are maintained using

historical, not revalued, depreciation.

Petitioner maintains that the Department uses revalued depreciation

in its calculation of COP/CV because use of historical acquisition

costs, unadjusted for high inflation, would distort the measure of

Cinsa's current depreciation cost. Petitioner cites numerous court

proceedings to support its argument. Petitioner further states that,

contrary to Cinsa's argument, the Department's use of revalued

depreciation costs actually prevents distortion, by ensuring that

Cinsa's depreciation costs are not understated due to currency

devaluation resulting from inflation.

DOC Position: We agree with petitioner and have included Cinsa's

revalued depreciation expense in the company's COP and CV. We disagree

with Cinsa's assertion that this methodology distorts the actual

production costs of subject merchandise. See Results of Redetermination

Pursuant to Court Remand in Aimcor, Alabama Silicon, Inc. v. United

States, Ct. No. 93-07-00428 (May 15, 1995) (upheld by Order of the CIT,

September 15, 1995), and Fresh Cut Roses from Ecuador, 60 FR 7019, 7029

(February 6, 1995). It is the Department's policy to adhere to the home

market Generally Accepted Accounting Principles (GAAP) as long as they

reflect actual costs. Mexican GAAP require Cinsa to use revalued

depreciation in its financial statements. In this case, we find the use

of revalued depreciation reasonably reflects Cinsa's actual costs.

Thus, Mexican GAAP recognize the effect of inflation upon the value of

assets and require companies to revalue assets to compensate for the

change. Depreciation enables companies to spread large expenditures on

purchases of machinery and equipment over the expected useful lives of

these assets. Not adjusting for the deflation of currency due to

inflation results in the depreciation deferred to future years being

understated in constant currency terms and, therefore, distorts the

Department's COP and CV calculations. Thus, in light of the rate of

inflation in Mexico during the POR, it would be distortive to use

historical depreciation in this case.

The Department's determination to use revalued rather than

historical depreciation in accordance with home market GAAP was upheld

by the Court of International Trade in Laclede Steel Co. v. United

States, 18 CIT 965 (October 12, 1994). In Laclede Steel, the

[[Page 25914]]

Court found that depreciation expense based on the historical method

rather than depreciation expense based on the revalued method would

distort the production costs of the company because such a methodology

would overlook the significant impact that revaluing the assets had on

the company. We find the Court's analysis in Laclede Steel instructive

with respect to the instant review. Due to the revaluation of assets as

reflected on Cinsa's financial statements, Cinsa would enjoy an

increase to its equity values reflected on the Company's balance sheet,

a potentially enhanced stock value resulting from greater equity, and

an improved ability to borrow or acquire capital. Therefore, the

Department followed Mexican GAAP and adjusted CINSA's COP data to

reflect the revalued depreciation. We note, although it is not binding

precedent, that a NAFTA Panel has affirmed the Department's use of

revalued depreciation for Cinsa in the fifth administrative review. In

the Matter of Porcelain-on-Steel Cookware From Mexico (``POS Cookware

NAFTA decision''), USA-95-1904-01 (April 30, 1996), at 31.

Comment 11: Inclusion of Profit Sharing Payments in COP and CV

Cinsa argues that the inclusion of profit sharing payments as a

component expense of Cinsa's COP and CV is contrary to law. Cinsa

asserts that although the statutory definition of CV includes profit,

the inclusion of an amount for profit, plus an additional amount

(derived from Cinsa's profit) to account for profit sharing, results in

the double counting of profits earned. Cinsa argues that in this

review, profit sharing was inextricably linked to the amount of profit

earned by Cinsa and was not dependent upon production of the subject

merchandise. In addition, according to Cinsa, because both profit and

profit sharing payments are determined at the close of the fiscal

period, profit sharing payments were not incurred upon the production

of the subject merchandise and were not incurred prior to exportation

of the subject merchandise, as required by the statute if included as a

cost. Finally, Cinsa claims that this payment is similar to dividend

distributions or income tax payments, which are not included in COP and

CV.

Petitioner argues that, consistent with the Department's practice

in previous administrative reviews of this order, the Department should

continue to include profit sharing expenses in its calculation of

Cinsa's COP and CV. Petitioner states that such payments are treated

like bonuses for accounting purposes, and the Department's practice is

to treat bonuses as labor costs. See, e.g., Certain Hot-Rolled Carbon

Steel Flat Products, Certain Corrosion-Resistant Carbon Steel Flat

Products, and Certain Cut-To-Length Carbon Steel from Canada, 58 FR

37099, 37113-14 (July 9, 1993).

Petitioner maintains that Cinsa's argument that profit sharing

expenses are analogous to income taxes and are ``unrelated to the

production of the subject merchandise'' is incorrect. Petitioner states

that profit sharing expenses are more related to production than some

other forms of compensation, such as health or pension benefits,

because they are a function of gross revenue and profit, which

generally vary according to production.

Petitioner also refutes Cinsa's argument that the inclusion of both

profit sharing expenses and profit in the CV calculation results in the

double-counting of profits. Petitioner states that profit sharing

expenses are not profit, but expenses, i.e., a reduction to profit.

Petitioner states that the profit that is included in Cinsa's CV is the

profit that remains after profit sharing expenses have been deducted.

Therefore, the Department's inclusion of profit sharing expenses in the

calculation of CV does not double-count profit.

DOC Position: We disagree with the respondent and have included

Cinsa's profit sharing expense in COP and CV because it relates to the

compensation of direct labor, a factor of production. We treat profit-

sharing distributions to employees in a manner similar to bonuses.

Further, we disagree with Cinsa's argument that the profit-sharing

expense is similar to profit, dividends, and income tax.

Profit-sharing is not profit because it is an expense which is a

reduction to profit. Therefore, profit-sharing is not explicitly

excluded from COP calculations under 19 CFR 353.51(c). As for Cinsa's

concern that we double counted profit in its CV, we note that profit-

sharing expense is not part of the Company's ``profit'' included in CV.

The ``profit'' that is included in Cinsa's CV represents the amount

that remains after reductions to income, such as the profit-sharing

expense.

Cinsa's profit-sharing expense is distinct from dividends in two

key respects. First, Cinsa's profit-sharing payments represent a legal

obligation to a productive factor in the manufacturing process and not

a distribution of profits to the owners of Cinsa. Second, the right to

participate in profit-sharing conveys no ownership rights in Cinsa.

Cinsa's profit-sharing expense is unlike an income tax because it

is paid to labor. Thus, unlike income taxes paid to the government,

profit sharing payments flow directly to a factor of production. Also,

Cinsa's income tax is based on taxable income that is net of Cinsa's

profit-sharing expense.

We note that, although it is not binding precedent, a NAFTA Panel

has affirmed the Department's inclusion of Cinsa's profit-sharing in

COP and CV in the fifth administrative review. See POS Cookware NAFTA

Decision, at 37-39.

Final Results of Review

As a result of our review, we determine that the following margin

exists for the period December 1, 1993, through November 30, 1994:

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

Margin

Manufacturer/exporter Review period (percent)

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

Cinsa 1................................. 12/1/93-11/30/94 6.55

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

1 Includes sales by Cinsa of HG merchandise manufactured by ENASA. No

review was requested of any sales which ENASA may have had to the

United States for this POR.

The Department shall determine, and the Customs Service shall

assess, antidumping duties on all appropriate entries. Individual

differences between USP and FMV may vary from the percentages stated

above. The Department will issue appraisement instructions directly to

the Customs Service.

Further, the following deposit requirement will be effective for

all shipments of subject merchandise from Mexico entered, or withdrawn

from warehouse, for consumption on or after the publication date of the

final results of this administrative review, as provided by section

751(a)(1) of the Tariff Act: (1) The cash deposit rate for the reviewed

company will be as outlined above; (2) for merchandise exported by

manufacturers or exporters not covered in this review but covered in

previous reviews 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, an earlier review,

or the LTFV investigation, but the manufacturer is, the cash deposit

rate will be that established for the manufacturer of the merchandise

in the final results of this review, earlier reviews, or the LTFV

investigation, whichever is the most recent; (4) the cash deposit rate

for all other manufacturers or exporters, including ENASA, will be

29.52 percent, the ``all others'' rate established

[[Page 25915]]

in the original LTFV investigation by the Department.

These cash 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 the only reminder to parties subject to

administrative protective order (APO) 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 terms of the APO is a sanctionable violation.

This administrative review and notice are in accordance with

section 751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1)) and 19 CFR

353.22.

Dated: May 5, 1997.

Robert S. LaRussa,

Acting Assistant Secretary for Import Administration.

[FR Doc. 97-12396 Filed 5-9-97; 8:45 am]

BILLING CODE 3510-DS-P