# Gray Portland Cement and Clinker From Mexico: Final Results of Antidumping Duty Administrative Review

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## Record

- **Collection:** Federal Register
- **Document type:** Notice
- **Published:** April 9, 1997
- **Citation:** 62 FR 17148

## Text

DEPARTMENT OF COMMERCE

International Trade Administration
[A-201-802]

Gray Portland Cement and Clinker From Mexico: 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 3, 1996, the Department of Commerce (the
Department) published the preliminary results of its administrative
review of the antidumping duty order on gray portland cement and
clinker from Mexico. The review covers one manufacturer/exporter,
CEMEX, S.A. de C.V. (CEMEX), and its affiliated party Cementos de
Chihuahua, S.A. de C.V. (CDC), and the period August 1, 1994, through
July 31, 1995. We gave interested parties an opportunity to comment on
the preliminary results. We received comments from petitioners and
respondent. We received rebuttal

[[Page 17149]]

comments from the petitioners and respondent.

EFFECTIVE DATE: April 9, 1997.

FOR FURTHER INFORMATION CONTACT: Nithya Nagarajan or Dorothy Woster,
Import Administration, International Trade Administration, U.S.
Department of Commerce, 14th Street and Constitution Avenue N.W.,
Washington, D.C. 20230; telephone: (202) 482-3793.

SUPPLEMENTARY INFORMATION:

Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute are
references to the provisions effective January 1, 1995, the effective
date of the amendments made to the Tariff Act of 1930 (the Act) by the
Uruguay Round Agreements Act (URAA). In addition, unless otherwise
indicated, all citations to the Department's regulations are to the
current regulations, as amended by the interim regulations published in
the Federal Register on May 11, 1995 (60 FR 25130).

Background

On October 3, 1996, the Department published in the Federal
Register (61 FR 51676) the preliminary results of its administrative
review of the antidumping duty order on gray portland cement and
clinker from Mexico covering the period August 1, 1994 through July 31,
1995. The Department has now completed this review in accordance with
section 751(a) of the Tariff Act of 1930 as amended.

Scope of the Review

The products covered by this review include gray portland cement
and clinker. Gray portland cement is a hydraulic cement and the primary
component of concrete. Clinker, an intermediate material product
produced when manufacturing cement, has no use other than being ground
into finished cement. Gray portland cement is currently classifiable
under the Harmonized Tariff Schedule (HTS) item number 2523.29 and
cement clinker is currently classifiable under HTS item number 2523.10.
Gray portland cement has also been entered under HTS item number
2523.90 as ``other hydraulic cements.'' The HTS subheadings are
provided for convenience and U.S. Customs Service purposes only. Our
written description of the scope of the order remains dispositive.

Verification

In accordance with section 353.25(c)(2)(ii) of the Department's
regulations, we verified information provided by CEMEX and CDC using
standard verification procedures, including on-site inspection of the
manufacturer's facilities, the examination of relevant sales and
financial records, and selection of original documentation containing
relevant information.

Analysis of Comments Received

The Ad Hoc Committee of AZ-NM-TX-FL Producers of Gray Portland
Cement and the National Cement Company of California (petitioners), and
CEMEX and CDC submitted case briefs on November 4, 1996, and rebuttal
briefs on November 27, 1996. A public hearing was held on December 11,
1996.

Revocation of the Underlying Order

Comment 1: CEMEX contends that the antidumping duty order should be
revoked and considered void ab initio due to the Department's alleged
failure to investigate petitioners' standing in the original less-than-
fair-value (LTFV) investigation. Specifically, CEMEX argues that ``[a]t
the time of the original investigation, the relevant U.S. statute that
prescribed the requirement to establish standing to file an antidumping
petition contained no express language addressing the degree of support
necessary for a petition to be filed in a regional industry case * * *
the statute simply required that the petition be filed `on behalf of'
an industry but provided no express guidance on how compliance with
this criterion was to be determined.'' Faced with this lacuna in the
statute, CEMEX asserts, the Department is compelled by the decision in
Murray v. Schooner Charming Betsy, 6 U.S. 64, 2 Cranch 64 (1804), to
reinterpret U.S. law in accordance with the international obligations
of the United States. In the opinion of CEMEX, this means that the
Department is required (in the fifth review) to revisit the issue of
initiation in the original investigation and abide by a July 9, 1992,
ruling by a three-member panel convened under the auspices of the 1947
General Agreement on Tariffs and Trade (``1947 GATT''). See Report of
the Panel, United States--Anti-Dumping Duties on Gray Portland Cement
and Cement Clinker From Mexico, GATT Doc. ADP/82 (July 9, 1992) (``GATT
Report''). According to CEMEX, this panel held that the initiation of
the original investigation contravened the requirements of the 1979
GATT Antidumping Code (``GATT AD Code'') because the Department
``failed properly to ascertain'' that ``all or almost all'' of the
regional industry supported the original petition. If the Department
revisited the issue of initiation in light of the GATT Report, CEMEX
maintains, it would revoke the order ab initio, terminate all
proceedings, and refund ``at the very least, all cash deposits posted
during the POR.''
CEMEX further maintains that the Department has the authority to
revoke the antidumping order at this stage of the proceeding. Citing
Gilmore Steel Corp. v. United States, 583 F. Supp. 607 (CIT 1984),
CEMEX argues that government agencies (like the Department) have the
authority to correct ``jurisdictional defects'' at any time. CEMEX also
argues that the decision in Ceramica Regiomontana S.A. v. United
States, 64 F.3d 1579 (Fed. Cir. 1995) provides ``specific legal
precedent to revoke the order in this case'' and that its failure to
challenge the Department's determination on industry support for the
petition during the original LTFV investigation should be excused given
the ``exception to the doctrine of exhaustion of administrative
remedies upheld in Rhone Poulenc v. United States, 583 F. Supp. 607
(CIT 1984).''
The petitioners claim, in response, that these are the same
arguments the Department considered and rejected in the third
administrative review of this order. Since ``CEMEX has presented no new
arguments or information about any change in circumstances that would
justify a departure from the Department's reasoning in the third
administrative review,'' Petitioners assert that the Department should
reject CEMEX's arguments in this review.
Petitioners note that the GATT Report was never adopted by the GATT
Antidumping Code Committee. Therefore, given the legal framework of the
1947 GATT, it imposed no international legal obligation upon the United
States which might trigger the doctrine of statutory construction
articulated in the Charming Betsy case.
Petitioners also contend that U.S. law takes precedence over the
1947 GATT. ``Accordingly, even adopted GATT panel decisions are not
binding on the United States to the extent that such decisions are
inconsistent with U.S. law or with the intent of Congress.''
Petitioners further note that the Department initiated the
antidumping investigation in accordance with U.S. law. According to
petitioners, neither the courts nor the Congress has required the
Department to affirmatively establish prior to the initiation of
regional-industry cases that the petition is supported by ``all or
almost all'' of the relevant industry. Indeed, petitioners assert, the
Department's longstanding practice of presuming industry support

[[Page 17150]]

for a petition in the absence of evidence to the contrary has been
upheld by numerous courts, including the Court of Appeals for the
Federal Circuit (``Federal Circuit'') in Suramerica de Aleaciones
Laminadas, C.A. v. United States, 966 F.2d 660, 663 (Fed. Cir. 1992).
Finally, petitioners assert that the Department lacks the authority
to revoke the order or otherwise rescind its 1989 initiation of the
LTFV investigation. Quoting from the final results of the third
administrative review, the petitioners argue that CEMEX failed to
challenge the Department's determination on industry support for the
petition before the Court of International Trade (``CIT'') and,
accordingly, under sections 514(b) and 516A(c)(1) of the Act, ``that
determination is final and binding on all persons, including the
Department.''
Department's Position: For the following reasons, CEMEX's arguments
are without merit. First, like the GATT itself, panel reports under the
1947 GATT are not self-executing and thus have no direct legal effect
under U.S. law.
Second, neither the 1947 GATT nor the GATT AD Code obligates the
United States to affirmatively establish prior to the initiation of a
regional-industry case that all or almost all of the producers in the
region support the petition. There certainly is no suggestion in either
instrument that the standing requirements in regional-industry cases
are any more rigorous than the standing requirements in national-
industry cases. Furthermore, a GATT panel report, such as the present
one, has no legal effect or formal status unless and until it is
adopted by the GATT Council or, in the case of antidumping actions, the
GATT Antidumping Code Committee. This follows from the fact that the
1947 GATT has, throughout its history, operated on the basis of
consensus for purposes of decision-making in general and, the
resolution of disputes, in particular. In the present case, it is
undisputed that the GATT Report has never been adopted by the
Antidumping Code Committee. Thus, the recommendations contained in the
report are not binding, do not impose any international obligations
upon the United States, and do not trigger the rule of statutory
construction set forth in the Charming Betsy case.
Third, the object of CEMEX's comment is not the preliminary results
of this review. Rather, CEMEX complains about an event which occurred
over seven years ago--the initiation of the original LTFV
investigation. The time to voice such objections before the Department
was during the investigation. Instead, CEMEX, as well as the other
Mexican cement producers that participated in the original
investigation (Apasco, S.A. de C.V. and Cementos Hidalgo) sat silent
before the Department. See Final Determination of Sales at Less Than
Fair Value, Gray Portland Cement and Clinker From Mexico 55 Fed. Reg.
29244 (1990) (hereinafter ``Final LTFV Determination''). Moreover,
neither CEMEX nor any other party appealed the agency's final
affirmative LTFV determination (including the decision to initiate) to
the appropriate court, and the statute of limitations for doing so has
long expired. See 19 U.S.C. Sec. 1516a(a)(2)(A).
The only party that appealed the Department's final LTFV
Determination was the petitioners. They challenged certain aspects of
the Department's final determination before the CIT and the Federal
Circuit. See Ad Hoc Committee Of AZ-NM-TX-FL Producers of Gray Portland
Cement v. United States, Slip Op. 94-152 (CIT), aff'd, 68 F.3d 487
(Fed. Cir. 1995). CEMEX participated in that litigation as an
intervenor on the side of the Department. On October 10, 1995, the
Federal Circuit issued an opinion which disposed of the last issue in
that case.
Therefore, even if the Department, of its own volition, were to
reinterpret U.S. law in light of the GATT Report, it lacks the legal
authority in this review to revoke the order or otherwise rescind the
initiation of the underlying investigation. As we stated in the final
results of the third administrative review and reaffirm here:

``* * * the Department has no authority to rescind its
initiation of the LTFV investigation. Under sections 514(b) and
516A(c)(1) of the Act, a LTFV determination regarding initiation
becomes final and binding unless a court challenge to that
determination is timely initiated under 516A. Even if judicial
review of a determination is timely sought, the Department's
determination continues to control until there is a resulting court
decision `not in harmony with that determination'.'' See 19 U.S.C.
Sec. 1516a(c)(1).

Gray Portland Cement and Clinker from Mexico; Final Results Third
Review, 60 FR 26865 (1995).
In this case, no one challenged the Department's determination on
standing before the CIT. Therefore, that determination is final and
binding on all persons, including the Department. (emphasis added).
Fourth, no court, including the court in Gilmore Steel, has ever
held that the Department has the authority, in an administrative review
under section 751(a) of the Act, to reach back more than seven years
and reexamine the issue of industry support for the original petition.
Gilmore Steel involved a challenge to the termination of a pending
investigation based upon information obtained in the course of that
investigation. In particular, the petitioner, in that case, contended
that the Department lacked the authority to rescind the investigation
based upon insufficient industry support for the petition after the 20-
day period provided for in section 732(c) of the Act (19 U.S.C.
Sec. 1673a(c)) had elapsed. 585 F. Supp. at 673. In upholding the
Department's determination, the court recognized that administrative
officers have the authority to correct errors, such as ``jurisdictional
defects,'' at anytime during the proceeding. Id. at 674-75. The court
did not state or imply that a change in legal interpretation (in this
case a non-binding one) authorizes administrative officers to reopen
prior agency decisions which are otherwise final. The court simply held
that the administering authority may, in the context of the original
investigation, rescind an ongoing proceeding after expiration of the
20-day initiation period.
Similarly, in Ceramica Regiomontana, S.A. v. United States, 64 F.3d
1579 (Fed. Cir. 1995), the respondent did not ask the Department to
reconsider and rescind a decision made in a prior proceeding. Indeed,
the court's entire analysis was based upon the belief that the prior
decision--the issuance of a countervailing duty order under former
section 303(a)(1) of the Act against ceramic tile from Mexico--was in
accordance with law (i.e., ``properly issued''). Ceramica Regiomontana
concerned the authority of the Department to assess duties pursuant to
a valid order after Mexico became a ``country under the Agreement''
which entitled it to an injury test under section 701 of the Act. The
court held that the Department lacked such authority and ordered the
agency, on remand, to revoke the order as to all unliquidated entries
occurring after this date. Id. at 1583.
CEMEX also errs when it relies on Rhone Poulenc v. United States to
support its claim that ``an exception to the doctrine of exhaustion of
administrative remedies'' permits the ``retroactive application of the
1992 GATT decision.'' 583 F. Supp. 607 (CIT 1984) (a party may raise a
new issue on appeal if the applicable law has changed due to a judicial
decision that arose after the lower court or agency issued the
contested determination). First of all, whether CEMEX's claim is barred
by the

[[Page 17151]]

doctrine of exhaustion of administrative remedies is a matter more
properly decided by a reviewing court or binational panel under Chapter
19 of the North American Free Trade Agreement. Secondly, even if the
issue is timely, the exception claimed by CEMEX does not apply. The
GATT Report is not a judicial decision and it did not change U.S. law.
In fact, as we explain above, it did not even effect a change in the
law on the international plane (i.e., as between Mexico and the United
States).
Finally, we note, as we did in the final results of the third
review, that numerous courts have upheld the Department's practice of
assuming, in the absence of evidence to the contrary, that a petition
filed on behalf of a regional or national industry is supported by that
industry. See, e.g., NTN Bearing Corp. v. United States, 757 F. Supp.
1425, 1427-30 (CIT 1991); Citrosuco Paulista v. United States, 704 F.
Supp. 1074, 1085 (CIT 1988); Comeau Seafoods v. United States, 724 F.
Supp. 1407, 1410-12 (CIT 1994).
Indeed, the very issue raised by CEMEX in this review was before
the Federal Circuit in the Suramerica case. 966 F.2d at 665 & 667. In
Suramerica the appellees challenged the Department's interpretation of
the phrase ``on behalf of'' which applies to both national-and
regional-industry cases. Specifically, the appellees argued that the
Department's practice of presuming industry support for a petition was
contrary to the statute and an unadopted GATT panel report involving
the U.S. antidumping order on certain stainless steel hollow products
from Sweden. In affirming the Department's practice, the Federal
Circuit observed that the phrase ``on behalf of'' was not defined in
the statute. Id. at 666-67. The statute was, in fact, open ``to several
possible interpretations.'' In the opinion of the court, the
Department's practice with regard to standing and industry support for
a petition reflected a reasonable ``middle position.'' 966 F.2d at 667.
While there was a gap in the statute, the court stated, ``Congress did
make [one thing] clear--Commerce has broad discretion in deciding when
to pursue an investigation, and when to terminate one.'' Id.
The court then dismissed the argument that the gap in the statute
must be interpreted in a manner that is consistent with the 1947 GATT
or the GATT panel ruling:
Appellees next argue that the statutory provisions should be
interpreted to be consistent with the obligations of the United States
as a signatory country of the GATT. Appellees argue that the
legislative history of the statute demonstrates Congress's intent to
comply with the GATT in formulating these provisions. Appellees refer
also to a GATT panel--a group of experts convened under the GATT to
resolve disputes--which ``recently rejected [Commerce's] views on the
meaning of `on behalf of.' ''

We reject this argument. First, the GATT panel itself
acknowledged and declared that its examination and decision were
limited in scope to the case before it. The panel also acknowledged
that it was not faced with the issue of whether, even in the case
before it, Commerce had acted in conformity with U.S. domestic
legislation. Second, even if we were convinced that Commerce's
interpretation conflicts with the GATT, which we are not, the GATT
is not controlling. While we acknowledge Congress's interest in
complying with U.S. responsibilities under the GATT, we are bound
not by what we think Congress should or perhaps wanted to do, but by
what Congress in fact did. The GATT does not trump domestic
legislation; if the statutory provisions at issue here are
inconsistent with the GATT, it is a matter for Congress and not this
court to decide and remedy. See 19 U.S.C. Sec. 2504(a); Algoma Steel
Corp. v. United States, 865 F.2d 240, 242 . . . (Fed. Cir. 1989).

Id. at 667-68.

Ordinary Course of Trade

Comment 2: CEMEX contends that the Department improperly concluded
that CEMEX's home market sales of Type II cement were outside the
ordinary course of trade. In particular, CEMEX contends that the
ordinary course of trade provision does not contemplate the elimination
of an entire category of identical or similar merchandise from the
calculation of normal value. Pointing to language in the statute and
the Statement of Administrative Action for the URAA, CEMEX asserts that
references to ``sales,'' ``transactions,'' and ``types of
transactions'' evidence congressional intent to bar the Department from
disregarding ``an entire merchandise category, particularly a category
of merchandise identical to the merchandise sold in the United
States.'' Rather, CEMEX maintains that the purpose behind the ordinary
course of trade provision is to exclude certain individual sales or
transactions of comparison merchandise which are unrepresentative of
sales in general.
CEMEX suggests that the Department has confused the ordinary course
of trade provision with the ``fictitious market'' provision, which
according to CEMEX, has sufficient scope to serve as the basis for
excluding an entire category of such or similar merchandise. This is
because, CEMEX contends, the fictitious market provision refers to
sales made to create a ``fictitious market'' and thus, by its nature,
may encompass all home market sales as opposed to merely individual
sales or transactions. CEMEX argues that the ordinary course of trade
provision, on the other hand, is limited to excluding only certain home
market sales of comparison merchandise.
CEMEX concludes that if the Department continues to interpret the
statute as permitting the entire universe of identical merchandise to
be disregarded, the statute requires the Department to rely upon normal
value calculated on the basis of constructed value rather than home
market prices of similar merchandise. This is because, CEMEX maintains,
19 U.S.C. Sec. 1677(b)(a)(4) provides that if ``normal value cannot be
determined by use of home market prices, the (Department) should resort
to constructed value.''
In addition, CEMEX claims that even if the Department continues to
apply the ordinary course of trade provision to determine whether to
exclude CEMEX's universe of home market sales of identical merchandise,
the administrative record demonstrates that CEMEX's home market sales
of Type II cement were made within the ordinary course of trade during
the fifth administrative review. To support this argument, CEMEX
maintains that the Department should focus on the actual sale terms and
practices surrounding the sales of Type II cement as compared to other
cement types subject to the order (Type I cement and Type V cement.) In
this regard, CEMEX notes that shipping terms for all cement types were
identical (C.I.F. or F.O.B.) which is ``indicative'' of sales in the
ordinary course of trade. Moreover, CEMEX notes that all pre-sale
freight expenses absorbed by CEMEX for Type II sales were incurred in
precisely the same manner as pre-sale freight expenses for all other
cement types, including Type I cement.
CEMEX further argues that the Department should not have focused on
shipping distances to the customer. According to CEMEX, shipping
distance is not a relevant factor in the ordinary course of trade
determination. Moreover, CEMEX contends, even if shipping distance was
relevant ``the administrative record established that it was not
extraordinary to ship cement distances greater than what Department has
characterized as an optimum maximum distance of 150 miles from a given
plant and to absorb such transportation costs.''
Next, CEMEX argues that in the current review, relative
profitability was

[[Page 17152]]

the only factor supporting a finding that home market sales of Type II
cement were outside the ordinary course of trade. CEMEX contends,
however, that this fact is an insufficient basis to determine that
sales of Type II cement are outside the ordinary course of trade and
was given too much weight in the preliminary determination. CEMEX
argues that ``divergent profit levels are neither necessary nor
sufficient to sustain an `outside the ordinary course of trade
decision' absent other supporting factors.'' Citing Certain Welded
Carbon Steel Standard Pipes and Tubes from India, CEMEX notes that
``the Department has not imposed a requirement that sales be made at a
different level of profit in order to be considered outside the
ordinary course of trade.'' 56 FR At 64,755. Likewise, in Certain
Circular Welded Carbon Steel Pipes and Tubes from Thailand, 61 FR 1328
(1996), CEMEX maintains the Department ``reversed (a) preliminary
finding that sales * * * were outside the ordinary course of trade * *
* despite the existence of a profit disparity between the two types of
pipe analyzed.''
CEMEX also argues that the fact that home market sales of Type II
cement promote CEMEX's corporate image does not indicate that such
sales are outside the ordinary course of trade. According to CEMEX,
promotion of corporate image is not a relevant factor in the
Department's ordinary course of trade determination.
CEMEX also argues that the relative sales volume of Type II cement
as compared to other cement types is not indicative of Type II cement
being sold outside the ordinary course of trade. In particular, CEMEX
argues, Department precedent establishes that low relative sales volume
is a factor indicative of sales outside the ordinary course trade only
in situations where there is no bona fide demand or ready market for
the product. For example, in Certain Circular Welded Carbon Steel Pipes
and Tubes from Thailand, CEMEX asserts that the Department found
certain sales to be in the ordinary course of trade not withstanding
low relative sales volume because there was a bona fide demand for the
product in the home market. CEMEX maintains that the administrative
record in this case establishes both a significant volume of home
market sales for Type II cement in absolute terms and the existence of
a bona fide home market demand of Type II cement. Therefore, CEMEX
maintains ``the existence of a bona fide home market for Type II cement
negates any possible inference that a low sales volume relative to
other cement types indicates that such sales are outside the ordinary
course of trade.''
Likewise, CEMEX argues that the historical sales trends indicate
that CEMEX's home market sales of Type II cement were made within the
ordinary course of trade. CEMEX contends that it began to manufacture
and sell Type II cement in Mexico in the mid 1980's, at the same time
manufacture and sale of Type II cement began for export. This is
consistent, CEMEX maintains, with the definition of ordinary course of
trade which provides ``the conditions and practices for which, for a
reasonable time prior to the exportation of the merchandise which is
the subject of an investigation, have been normal in the trade under
consideration.''
Petitioners maintain that the Department correctly applied the
statute by excluding all home market sales of Type II cement from
normal value. In particular, petitioners argue that CEMEX incorrectly
asserts that the statute and the SAA preclude the Department from
excluding an entire category of sales. Rather, petitioners explain,
``Congress nowhere expressed a limitation on the number of sales or
transaction that may be excluded from normal value.'' Therefore,
petitioners conclude that the sales or transactions in question may be
a handful of sales or all the sales of a particular type of
merchandise.
Petitioners also argue that the Department correctly applied the
statute by basing normal value on sales of Type I cement. Petitioners
note that in CEMEX S.A. v. United States, Slip Op. 95-72, at 24-28 (CIT
1995), the court rejected the Department's use of the constructed value
of Type II cement as the basis for foreign market value, rather than
home market sales of Type I cement, after the Department excluded Type
II sales as outside the ordinary course of trade. Petitioners point out
that the court found the use of similar merchandise was dictated by the
statute. Therefore, petitioners conclude that constructed value can
only be used if the Department determines that the normal value of the
subject merchandise cannot be determined on the basis of home market
sales of the foreign like product. In other words, petitioners argue
that ``as long as there are home market sales of similar merchandise
within the ordinary course of trade--in this case sales of Type I
cement--the Department is required to compare those sales to CEMEX's
U.S. sales.'' Finally, petitioners point out that the statutory
provision cited by CEMEX (19 U.S.C. 1677(b)(1)) directs the Department
to use constructed value only when all sales of the comparison
merchandise are disregarded as being below cost.
In addition, petitioners argue that there is sufficient evidence on
the record to support the Department's determination that sales of Type
II cement are outside the ordinary course of trade. First, petitioners
note that the Department correctly found in the preliminary results
that CEMEX's home market shipping arrangements for Type II cement were
unusual compared to its shipments of other types of cement. In
particular, petitioners argue that during the period of review, CEMEX
shipped Type II cement greater distances and absorbed the freight
expense. To support this claim petitioners point out that prior to the
antidumping order, CEMEX produced Type II cement at 11 plants
throughout Mexico. In direct response to the antidumping order,
however, petitioners claim that CEMEX radically altered its production
and distribution arrangements for Type II cement by consolidating
production at Hermosillo despite the fact that home market demand for
this cement type is centered in the Mexico City area.
Petitioners assert that CEMEX's claim that shipping terms were
identical for all cement types is misleading. Petitioners argue that
CEMEX's claim is ``merely an attempt to divert the Department's
attention from the fact that CEMEX's shipping arrangements for Type II
cement--not its `shipping terms'--were highly unusual compared to sales
of other cement types.'' Quoting the CIT in the CEMEX case, petitioners
argue, ``the statute ... focuses not on the company's similarity of
product treatment but on whether the treatment of the particular
product at issue, here Types II and V cement, is `normal in trade.' ''
Slip Op. 95-72 at 10. Petitioners point out that CEMEX makes all of its
long distance sales of Type II cement C.I.F. Moreover, a significant
number of CEMEX's plants sold Type I cement on a F.O.B. basis. In
addition, petitioners argue that CEMEX's statement that shipping
distances are not relevant to the ordinary course of trade
determination is both factually and legally wrong. First, petitioners
contend that the record demonstrates that CEMEX consolidated production
at Hermosillo in direct response to the antidumping order with the
intention of circumventing the order. Further, petitioners state that
``as a matter of law, shipping distances--like all other `conditions
and practices' relevant to the trade under consideration with respect
to merchandise of the same class or kind, 19 U.S.C. Sec. 1677(15) are
plainly relevant to the Department's consideration of sales outside the

[[Page 17153]]

ordinary course of trade.'' Again citing the CEMEX case, petitioners
argue that ``it is not unusual for the court to consider shipping
arrangements in determining whether sales are outside the ordinary
course of trade.'' Slip Op. 95-72, at 10, citing Porcelain-On-Steel
Cookware From Mexico, 51 Fed. Reg. 36 435, 36 437 (1986.)
Petitioners also distinguish the current fifth review from the
administrative reviews involving antifriction bearings from Thailand.
Petitioners argue that shipping distances were raised as an issue by
the petitioner in that case. Moreover, petitioners note that bearings
are not fungible commodities with a low value ratio; therefore, there
is no reason to believe that the bearings are not ordinarily shipped
long distances.
Petitioners also argue that there is no evidence on the record to
support CEMEX's argument that shipping distances of Type II cement are
not extraordinary compared to sales of other cement types. For example,
petitioners contend that there is no information on the record to show
that Type V cement has always been shipped long distances. Moreover,
petitioners note, Type V sales were found to be outside the ordinary
course of trade in the second administrative review; therefore, sales
of Type V hardly buttress CEMEX's claim that Type II sales were within
the ordinary course of trade. Likewise, petitioners maintain that CEMEX
has not cited specific instances in the record demonstrating that Type
I and pozzolanic cement is normally shipped long distances.
Additionally, petitioners argue that ``CEMEX's manipulation of its
production and distribution arrangements for Type II cement to increase
the freight cost continue to result in CEMEX attaining an unusually low
profit on Type II sales during the fifth review period'' in comparison
to profits on all cement types. Moreover, petitioners contend that the
Department did not just look at profit when making its ordinary course
of trade determination in the preliminary results; rather, the
Department considered all pertinent factors. Therefore, petitioners
question CEMEX's statement that relative profitability is the only
factor supporting the Department's determination of sales outside the
ordinary course of trade because it fails to explain how the other four
factors vanished from the record of the review. Finally, petitioners
maintain that the ``Department correctly determined in the preliminary
results that, based on the evidence of record in this review, the five
factors the Department relied upon in the second administrative review
in determining that CEMEX's sales of Type II cement were outside the
ordinary course of trade continued to be present during the fifth
review period.''
Petitioners also argue that the Department was correct in its
finding that sales of Type II cement have a promotional quality to
them. Petitioners points out that the Department requested information
regarding the promotional aspect of Type II cement sales on July 9,
1996, but CEMEX failed to provide it. This determination is further
supported by the fact that Type II was found to be sold for promotional
reasons in the second review, and CEMEX conceded the promotional aspect
of Type II cement in the fourth review. Moreover, petitioners contend
``CEMEX's case brief does not contest the Department's finding that
CEMEX continued to sell Type II cement for reasons other than profit.''
In addition, petitioners argue that CEMEX restricted sales of Type
II cement during the fifth review period. Petitioners contend that
after the imposition of the antidumping order, CEMEX restricted sales
of Type II cement to only those customers that specifically requested
it and could demonstrate a need. According to petitioners the fact that
CEMEX ``artificially restricted its home market sales of Type II
cement'' is further established by the uncontested evidence that CEMEX
produced Type II Low Alkali (LA) cement at no fewer than six plants
other than the one at Hermosillo prior to the antidumping order.
Moreover, petitioners maintain that CEMEX ``produced cement meeting the
specifications of Type II LA cement at plants other than Campana and
Yaqui during the period of review, but that it restricted sales of
cement reported as Type II cement by selling the cement as Type I or
Type I modified cement.''
Department's Position: Consistent with the preliminary
determination, in examining CEMEX's reported home market sales, the
Department has determined that CEMEX's sales of Type II cement were
outside the ordinary course of trade during the fifth review. Section
773(A)(1)(B) of the Act states that the normal value of the subject
merchandise is ``the price at which the foreign like product is first
sold (or, in absence of a sales, offered for sale) for consumption in
the exporting country, in the usual commercial quantities and in the
ordinary course of trade.'' Section 771(15) defines ordinary course of
trade as ``the conditions and practice which, for a reasonable time
prior to the exportation of the subject merchandise have been normal in
the trade under consideration with respect to merchandise of the same
class or kind.'' The SAA, which accompanied the passage of the URAA,
further clarifies this portion of the statute, stating: ``Commerce may
consider other types of sales or transactions to be outside the
ordinary course of trade when such sales or transactions have
characteristics that are not ordinary as compared to sales or
transactions generally made in the same market.'' SAA, at 164. Thus,
the statute and SAA are clear that a determination of whether sales
(other than those specifically addressed in section 771(15)) are in the
ordinary course of trade must be based on an analysis comparing the
sales in question with sales of merchandise of the same class or kind
generally made in the home market, i.e., (the Department must consider
whether certain cement home market sales are ordinary in comparison
with other home market sales of cement.)
An ordinary course of trade determination requires evaluation of
sales in each review on ``an individual basis taking into account all
of the relevant facts of each case.'' Nachi-Fujikishi Corp. v. United
States, 798F. Supp. 716, 719 (CIT 1992). This means that the Department
must review all circumstances particular to the sales in question.
Therefore, in the fifth review the Department considered the totality
of circumstances surrounding CEMEX's reported home market sales. A full
discussion of our conclusions, requiring reference to proprietary
information, is contained in a Department memorandum in the official
file for this case (a public version of this memorandum is on file in
room B-099 of the Department's main building). Generally, however, we
have found: (1) The volume of Type II home market sales is extremely
small compared to sales of other cement types, (2) shipping distances
and freight costs for Type II home market sales were significantly
greater than for sales of other cement types, with CEMEX absorbing
these costs, and (3) CEMEX's profit on Type II sales is small in
comparison to its profits on all cement types. In addition, there are
two items, historical sales trends and the ``promotional quality'' of
Type II cement sales, which were cited previously as factors in the
second review ordinary course analysis, but which are not discussed
above. On July 9, 1996 the Department issued a questionnaire that
requested CEMEX to support its position that home market Type II cement
sales are in the ordinary course of trade by addressing, among

[[Page 17154]]

other things, ``historical sales trends'' and ``marketing reasons for
sales other than profit.'' CEMEX's response addressed all items in the
questionnaire except these two items. Thus, the Department assumes that
the facts regarding these items have not changed since the second
review and that: (a) CEMEX did not sell Type II until it began
production for export in the mid-eighties, despite the fact that a
small domestic demand for such existed prior to that time; and (b)
sales of Type II cement continue to exhibit a promotional quality that
is not evidenced in CEMEX's ordinary sales of cement.
For the reasons stated above, the Department has determined that
CEMEX's home market sales of Type II cement during the current review
are not representative of its sales of such or similar merchandise in
Mexico. We note that while our decision is based solely upon the facts
established in the record of the fifth review, those facts are very
similar to the facts which led the Department to determine in the
second review that home market sales of Type II cement were outside the
ordinary course of trade. This determination, as noted above, was
affirmed by the CIT in the CEMEX case. (``Commerce's determination that
CEMEX's sales were outside the ordinary course of trade involved a
weighing of data and is supported by substantial evidence.'' CEMEX,
Slip Op. 95-72 at 14.
The Department disagrees with CEMEX's argument that the ordinary
course of trade provision in the statute precludes the exclusion of an
entire category of sales. Importantly, the statute provides no limits
on the number of sales or transactions that may be excluded from normal
value. Moreover, the SAA notes that ``Commerce will interpret section
771(15) in a manner which will avoid basing normal value on sales which
are extraordinary for the market in question, particularly when the use
of such sales would lead to irrational or unrepresentative results.''
As petitioners point out and the Department agrees, failure to exclude
all sales of Type II cement would violate this intent because normal
value would be based on Type II sales despite evidence that those sales
were made under unusual and unrepresentative conditions.
The Department also disagrees with CEMEX's claim that if the
Department continues to disregard all Type II sales, the statute
requires the Department to base normal value on constructed value
rather than home market prices of similar merchandise. In examining the
universe of CEMEX's home market sales, the Department has found that
sales of Type II cement are extraordinary, unusual, and
unrepresentative transactions, and, therefore, are outside the ordinary
course of trade. As a result, such sales could not constitute the
foreign like product. However, sales of Type I cement are usable for
identifying the foreign like product, and subsequently in calculating
NV. In situations where identical product types cannot be matched, the
statute expresses a preference for basing normal value on similar
merchandise (see section 773(a)(1)(A) of the Act and section 353.46(a)
of the Department's regulations). Gray Portland Cement and Clinker from
Mexico, 58 Fed. Reg. 47253, 47255 (1993); see also CEMEX, Slip Op. 95-
72 at 26. ``Constructed value should only be used where Commerce has
made a determination that the exporter's home market prices are
inadequate or unavailable for the purposes of calculating FMV.'' CEMEX,
Supra at 26, citing H.R. Rep. No. 317, 96th Cong., 1st Sess. 76 (1979).
In the fifth review, there are home market sales of similar merchandise
(Type I cement) as well as sales of identical merchandise (Type II
cement.) For the reasons stated above, we have not based our
calculation of normal value upon market sales of Type II cement.
However, the Department has followed the dictates of the statute and
our regulations and compared sales of similar merchandise (i.e., Type I
cement) to the product sold in the United States, adjusted for DIFMER
(see Comment 6, below).
Comment 3: Petitioners claim that CEMEX established a fictitious
niche market for home market sales of Type II cement. In particular,
petitioners argue that CEMEX, in reaction to the antidumping order,
created an artificial and highly restricted niche market and channel
for Type II cement with the intention of manipulating normal value of
identical merchandise ``to mask the fact that the average home market
price of the entire class of subject merchandise covered by the order
(including Type I cement and pozzolanic cement) continued to greatly
exceed the U.S. price of the imported merchandise.'' As a result,
petitioners claim that CEMEX's dumping is disguised.
CEMEX, on the other hand, argues that the Department was correct
not to initiate a fictitious market investigation during the context of
the fifth administrative review. CEMEX maintains that since the
Department disregarded ``CEMEX's home market sales of Type II cement in
the preliminary results on the basis of their being outside the
ordinary course of trade, other basis for disregarding those sales,
such as (petitioner's) fictitious market allegation and its allegation
that Type II cement was sold at prices below production costs, became
moot and did not have to be further addressed by the (Department) in
the preliminary results.''
Department's Position: Since the sales in question have been found
to be outside the ordinary course of trade, and accordingly will not be
used in the calculation of normal value, it is not necessary for us to
address this issue for these final results.

Collapsing

Comment 4: CDC contends that the Department's decision to collapse
it and CEMEX is contrary to administrative practice and is not
justified by the record. CDC concedes that it is affiliated with CEMEX;
however, CDC does not believe that the two affiliated companies should
be collapsed. CDC asserts that collapsing two affiliated parties is the
exception, not the rule. CDC asserts that the Department's policy is
based on the principle that a company's liability under the antidumping
law should be based on the company's own pricing decisions. The
Department has consistently relied on factors other than percentage
ownership and common board members, the two factors relied upon in this
case, when considering whether to collapse two companies. CDC cites
Nihon Cement Co. v. United States, 17 CIT 400 (1993), in which the
Department summarizes the factors it considers to be relevant in its
determination to collapse affiliated entities, and FAG Kugelfischer
Georg Schafer KGaA v. United States, 932 F. Supp. 315 (CIT 1996), in
which the court reversed the Department's decision to collapse two
sister companies because it determined that there was not a strong
possibility of price manipulation.
CDC asserts that the possibility of price manipulation which could
undermine the effectiveness of the order is insignificant. CDC centers
its argument around the three factors the Department considers to be
evidence of the potential for price manipulation: stock ownership,
management/director overlap, and intertwined business operations. CDC
contends that stock ownership does not necessarily indicate control.
CDC claims the record establishes that CEMEX has no control over CDC's
business operations, as evidenced by the following factors: (1) Sales
listings for sections B and C demonstrate that there is no correlation

[[Page 17155]]

in CEMEX and CDC's pricing. (2) CDC has its own facilities,
distribution, sales, and marketing network in Mexico and in the United
States. CDC states that it does not share information with CEMEX on
possible sales opportunities in the U.S. or Mexico. (3) There is no
coordination between CEMEX and CDC of sales, pricing, or marketing
policies in the Mexican market; CDC claims that because of the regional
nature of the cement market, the natural markets of CDC and CEMEX do
not overlap. Moreover, CDC claims that the high cost of freight and the
fact that CDC's facilities are in the land-locked state of Chihuahua
prohibits CDC from switching its production to meet the needs of
CEMEX's U.S. and Mexican customers. (4) No commercial transactions
between CDC and CEMEX support a ``strong possibility'' of price
manipulation. In addition, the companies do not supply any material
inputs for the subject merchandise to each other. (5) The companies are
listed separately on the Mexican stock exchange.
CDC argues that in the absence of any possibility of price
manipulation, there is no policy reason in this case to collapse CEMEX
and CDC. CDC claims that it cannot increase its operations beyond its
natural geographic markets of Chihuahua in Mexico, and Texas and New
Mexico in the United States, due to prohibitively high freight costs.
CDC also asserts that the possibility of price and production
manipulation is small, due to the corporate structure. CDC claims it is
being penalized for occurrences of dumping over which it has no
control, but which it must pay for. CDC contends that as the Department
has full access to both CDC and CEMEX pricing, cost and production
information through its questionnaires and verification, it could
decide to collapse the companies in future annual reviews if warranted
by evidence of manipulation. CDC insists that there would be no
incentive for its owners or managers to agree to any plan that would
result in unpredictable monetary liability for CDC's past imports.
Petitioners contend that the Department's preliminary results
analyzed all relevant factors and correctly determined that CEMEX and
CDC should be collapsed. Petitioners note that cement is a bulk
commodity which cannot be distinguished from producer to producer; thus
the potential for production manipulation is much greater for cement
than for differentiated products. Petitioners argue that both CEMEX and
CDC produce the subject merchandise, and have similar production
facilities that could be easily retooled to restructure manufacturing.
Petitioners stress that the correct focus of analysis is the
potential for future price manipulation, and that CEMEX's and CDC's
relationship harbors significant potential for price manipulation, as
evidenced by the following factors: (1) According to petitioner,
CEMEX's level of stock ownership of CDC is more than sufficient to
warrant collapsing the two companies. Petitioners hold that CDC has not
established on the record that CEMEX has no ability to influence CDC's
pricing and production decisions, either at present or in the future.
(2) Petitioners claim control over the board of directors is not
necessary to warrant collapsing; however, the cross-board membership
between CEMEX and CDC clearly presents ``potential sharing of
information.'' (3) The record contains substantial evidence of
intertwined business operations between CEMEX and CDC. (4) Petitioners
contend that ``control'' of one party over another is not a condition
precedent to a decision to collapse affiliated parties. Petitioners
cite Nihon Cement, 17 CIT at 425, Notice of Final Determination of
Sales at Less than Fair Value: Certain Pasta from Italy, 61 FR 30326,
30352 (June 14, 1996) (``Certain Pasta From Italy''), and Certain Hot-
Rolled Carbon Steel Flat Products, Certain Cold-Rolled Carbon Steel
Flat Products, and Certain Corrosion-Resistant Carbon Steel Flat
Products From Japan, 58 Fed. Reg. 37154, 37159 (1993) (``Japanese
Steel''), to support this argument. (5) Petitioners refute CDC's claim
that price manipulation between CEMEX and CDC is unlikely to occur
because CDC could not extend its market beyond its current geographical
area. Moreover, petitioners state that CDC and CEMEX could easily
maximize their combined profits by increasing CDC's shares of U.S.
sales and increasing CEMEX's share of Mexican sales.
Department's Position: The Department agrees with CDC that it must
consider all relevant factors when collapsing two affiliated parties.
Section 351.401(f) of the Proposed Rules, 61 FR at 7330, describes the
Department's current policy regarding when it will treat two or more
affiliated producers as a single entity (i.e., ``collapse'' the firms)
for purposes of calculating a dumping margin. In order for the
Department to treat two or more producers as a single entity, (1) The
producers must be affiliated; (2) the producers must have production
facilities that are sufficiently similar so that a shift in production
would not require substantial retooling; and (3) there must be a
significant potential for the manipulation of price or production.
First, because CEMEX indirectly owns more than five percent of the
outstanding voting shares of CDC, the Department considers CEMEX and
CDC to be affiliated within the meaning of section 771(33) (F) of the
Act. The Department also finds that CEMEX and CDC are affiliated within
the meaning of section 771(33)(G) of the Act, as detailed in the
Proposed Regulations. CEMEX is ``in a position to exercise restraint or
direction'' over CDC via the following means of control: (1) cross-
board of directors membership between CEMEX and CDC and/or its
affiliates and (2) joint activities between CDC and CEMEX. In addition,
both CEMEX and CDC manufactured Type I and Type II cement during the
period of review. Second, as CDC and CEMEX have similar production
processes and facilities, a shift in production would not require
substantial retooling. Record evidence for the fifth administrative
review also reveals intertwined business operations between CDC and
CEMEX. (A complete analysis surrounding the Department's decision to
collapse CDC and CEMEX, requiring reference to proprietary information,
is contained in the Department's Memorandum from Roland L. MacDonald to
Joseph A. Spetrini, dated March 24, 1997, located in the official file
for this case.
A public version of this memorandum is on file in room B-099 of the
Department's main building.)
Third, no aspect of CDC and CEMEX's affiliation via stock ownership
and cross board members, nor the location of their facilities and
distribution network, precludes the potential for price manipulation.
Given the level of common ownership and cross board members, which
provides a mechanism for the two parties to share pertinent pricing and
production information, similar production facilities that would not
require substantial retooling, as well as intertwined business
operations, the Department finds that if CDC and CEMEX are not
collapsed, there is significant potential for price manipulation which
could undermine the effectiveness of the order.

Level of Trade (LOT)/ CEP Offset

Comment 5: Petitioners argue that a CEP offset adjustment should
not be granted. Petitioners cite the SAA which establishes two
conditions for a CEP offset: first that ``different functions at
different levels of trade are established under section 773
(a)(7)(A)(i)''; and second, that the ``data do not form an appropriate
basis for determining a level of trade adjustment under section 773

[[Page 17156]]

(a)(7)(A)(ii).'' Petitioners assert that it is not sufficient for a
respondent to establish that sales in the home and U.S. markets are at
different levels of trade, thus satisfying the first criteria.
Petitioners state that the respondent must also establish that the
different levels of trade affect the comparability of prices, based on
19 U.S.C. 1677b(a)(7)(A)(ii). Petitioners assert that neither CDC nor
CEMEX has satisfied the criteria, and are not entitled to a CEP offset
adjustment.
CDC argues that under the URAA, the CEP offset should be granted
when there is an unquantifiable difference in level of trade between
the home and U.S. markets. The Department must consider those
differences in selling functions that exist after the deduction from
the U.S. price of selling expenses associated with selling functions in
the United States. CDC asserts that the Department verified that the
majority of selling functions performed in the home market were not
performed for CEP sales; thus the home market LOT is different from,
and more advanced than the CEP LOT, which satisfies the first criteria
for the CEP offset. Second, CDC asserts that under section
773(a)(7)(A), a price adjustment can only be quantified where there are
at least two different levels of trade in the home market. As the
Department found that CDC reported only one level of trade in the home
market, CDC claims it has satisfied the second criteria for a CEP
offset (i.e., the available data does not provide an appropriate basis
for a LOT price adjustment).
Similarly, CEMEX argues that its claim for a level of trade
adjustment should be analyzed under 19 U.S.C. 1677b(a)(7)(B), which
authorizes the CEP offset. The Department's Proposed Regulations at 19
CFR 351.412(b)(2) instruct the Department to ``identify the level of
trade based on the price after the deduction of expenses and profit
under section 772(d) of the Act.'' CEMEX claims that while the starting
prices for U.S. and home market sales were initially made at the same
level of trade, significant differences in selling functions exist
between U.S. and home market sales, when the CEP, with all indirect
selling expenses incurred for selling functions deducted under the
statute, is compared to normal value.
Department's Position: In accordance with section 773(a)(7)(A) of
the Act, to the extent practicable, we determine normal value for sales
at the same level of trade as the U.S. sales (either export price (EP)
or constructed export price (CEP)). When there are no sales at the same
level of trade we compare U.S. sales to home market sales at a
different level of trade. The normal value (NV) level of trade is that
of the starting-price sales in the home market. When NV is based on
constructed value (CV), the level of trade is that of the sales from
which we derive selling, general and administrative expenses, and
profit.
For both EP and CEP the relevant transaction for level of trade is
the sale from the exporter to the importer. While the starting price
for CEP is that of a subsequent resale to an unaffiliated buyer, the
construction of the EP results in a price that would have been charged
if the importer had not been affiliated. We calculate the CEP by
removing from the first resale to an independent U.S. customer the
expenses specified in section 772(d) of the Tariff Act and the profit
associated with these expenses. These expenses represent activities
undertaken by, or on behalf of, the affiliated importer. As such they
tend to occur after the transaction between the exporter and the
importer for which we construct CEP. Because the expenses deducted
under section 772(d) represent selling activities in the United States,
the deduction of these expenses normally yields a different level of
trade for the CEP than for the later resale (which we use for the
starting price). Movement charges, duties and taxes deducted under
section 772(c) do not represent activities of the affiliated importer,
and we do not remove them to obtain the CEP level of trade.
To determine whether home market sales are at a different level of
trade than U.S. sales, we examine whether the home market sales are at
different stages in the marketing process than the U.S. sales. The
marketing process in both markets begins with goods being sold by the
producer and extends to the sale to the final user, regardless of
whether the final user is an individual consumer or an industrial user.
The chain of distribution between the producer and the final user may
have many or few links, and each respondent's sales occur somewhere
along this chain. In the United States this is generally to an importer
whether independent or affiliated. We review and compare the
distribution systems in the home market and U.S. export markets,
including selling functions, class of customer, and the extent and
level of selling expenses for each claimed level of trade. Customer
categories such as distributor, OEM, or wholesaler are useful as they
are commonly used to describe levels of trade by respondents; however,
without substantiation, these categories are insufficient to establish
that a claimed level of trade is valid. An analysis of the chain of
distribution and of the selling functions substantiates or invalidates
claimed customer classification levels. If the claimed customer levels
are different, the selling functions performed in selling to each level
should also be different. Conversely, if customer levels are nominally
the same, the selling functions performed should also be the same.
Different levels of trade necessarily involve differences in selling
functions, but differences in selling functions, even substantial ones,
are not alone sufficient to establish a difference in the level of
trade. A different level of trade is characterized by purchasers at
different places in the chain of distribution and sellers performing
qualitatively or quantitatively different functions in selling to them.
When we compare home market sales at a different level of trade
than U.S. sales, we make a level of trade adjustment, if the difference
in level of trade affects price comparability.
We determine any effect on price comparability by examining sales
at different levels of trade in a single market (i.e., the home
market). Any price effect must be manifested in a pattern of consistent
price differences between home market sales used for comparison and
sales at the equivalent level of trade of the export transaction. To
quantify the price differences, we calculate the difference in the
weighted average of the net prices of the same models sold at different
levels of trade. Net prices are used because any difference will be due
to differences in level of trade rather than other factors. The average
percentage difference between these weighted averages is used to adjust
the normal value when it is different from the level of trade of the
export sale. If there is no pattern, then the difference in level of
trade does not have a price effect, and no adjustment is necessary.
In terms of granting a CEP offset, the statute also provides for an
adjustment to normal value if it is compared to U.S. sales at a
different level of trade, provided the normal value is more remote from
the factory than the CEP sales, and we are unable to determine whether
the difference in levels of trade between CEP and NV affects the
comparability of their prices. This latter situation can occur where
there is no home market level of trade equivalent to the U.S. sales
level, or where there is an equivalent home market level, but the data
are insufficient to support a conclusion on price effect. This
adjustment, the CEP offset, is identified in section 773(7)(B) and is
the lower of the: (1) Indirect selling expenses on the home market
sale; or (2) indirect selling expenses deducted from the starting

[[Page 17157]]

price used to calculate CEP. The CEP offset is not automatic each time
export price is constructed. The CEP offset is made only when the level
of trade of the home market sale is more advanced than the level of
trade of the U.S. (CEP) sales and there is not an appropriate basis for
determining whether there is an effect on price comparability.
In implementing this principle in this review, we examined
information regarding the selling activities of the producers/exporters
associated with each stage of marketing, or the equivalent. However, we
were unable to utilize the analysis submitted by the respondent (CEMEX
and CDC) due to the fact that it reported the selling functions
performed by the producer/exporter to the unaffiliated purchaser in the
home market, as compared to the selling functions performed by the
related reseller to the unaffiliated purchaser in the U.S. market. The
statute directs the Department to determine normal value at the level
of trade of the CEP sales, which includes any CEP deductions under
section 772(d) of the Act, (i.e, the price as reflected by the ``sale''
from the producer/exporter to the U.S. affiliate). As such, the CEP
reflects a price exclusive of those selling expenses and profit
associated with economic activities in the United States. See SAA at
823.
In reviewing the selling functions reported by CEMEX and CDC, we
considered the selling functions performed by CEMEX and CDC to its
customers in the home market (as reported in the variables, INVCARH,
INDIRSH, and DISWARH), and the selling functions performed by CEMEX and
CDC, in the home market on its ``sales'', to its affiliated reseller in
the United States (as reported in the variables, DINVCARH, DINDIRSU,
and DISWARU). In analyzing whether separate LOTs existed in this
review, we found that no single selling activity in the cement industry
was sufficient to warrant a separate LOT (see Notice of Proposed
Rulemaking and Request for Public Comments, 61 FR 7307 (February 27,
1996). For this review, we determined that the following selling
functions and activities occur in relation to CEMEX and CDC's sales of
cement: (1) Inventory maintenance, (2) presale warehousing, and (3)
other indirect selling expenses. We did not consider packing
arrangements to be a selling function since packing is accounted for in
the Department's calculations as a separate adjustment.

CEMEX

CEMEX claimed that it has two LOTs in the home market--bulk sales
and bagged sales of cement. It also reported two LOTs in the U.S.
market--sales of bulk cement to end-users and ready-mixers. We disagree
with CEMEX that there are two LOTs in the home market and two LOTs in
the U.S. market. Therefore, based on our practice, as stated in Steel
from Canada, we have determined, for the reasons described below, that
CEMEX sells to one level of trade in the home market and one level of
trade in the U.S. market.
First, we looked for different stages of marketing. We found that
there is one stage of marketing--sales of cement shipped to end-users
and ready mixers in bulk and bagged form. After determining the number
of marketing stages, we then examined whether the selling functions
performed by the seller support CEMEX's claimed LOTs or the marketing
stages determined by the Department. For the claimed LOTs in the home
market, we did not find that there were two distinct sets of selling
functions performed by the seller. Rather, we found one distinct set of
selling functions performed by CEMEX which reflect the one stage of
marketing determined by the Department. Both in terms of their amount
and nature. CEMEX essentially performed the same selling functions in
the home market on both its end-users and ready-mixer sales.
Specifically, these functions were pre-sale warehousing (DISWARH and
DISWARU), inventory maintenance (INVCARH and DINVCARU), and other
indirect selling functions (INDIRSH and DINDIRSU).
Next we examined the selling functions performed by CEMEX with
respect to both markets to determine if U.S. sales can be matched to
home market sales at the same LOT. For the U.S. market, CEMEX reported
that all sales were made on a CEP basis. The level of trade of the U.S.
sales is determined for the CEP rather than for the starting price. In
the instant review, the CEP sales reflect certain selling functions
such as inventory maintenance, pre-sale warehouse expenses, and
indirect selling expenses incurred in the home market for the U.S.
sale. As explained above, these same selling functions are also
reflected in CEMEX's home market sales to end-users and ready-mixers.
Therefore, the selling functions performed for CEMEX's CEP sales are
not sufficiently different from those performed for CEMEX's home market
sales to consider CEP sales and home market sales to be at a different
level of trade. Although there may be differences between the marketing
stages, these differences are not borne out by an analysis of the
selling functions for the home market and CEP sales, which are largely
the same. Therefore, we have determined that there are no differences
in levels of trade and neither a level of trade adjustment nor a CEP
offset was warranted in the instant review.

CDC

CDC has claimed two levels of trade in the home market--sales of
bulk cement to end-users and ready-mixers, and bagged cement sales to
end-users. CDC has also reported two LOTs for its U.S. sales--bulk
cement to end-users and ready-mixers. We disagree with CDC that there
are two LOTs for its home market sales and two LOTs for its U.S. sales.
Therefore, based on our practice, as stated Steel from Canada, we have
determined, for the reasons described below, that there is one level of
trade in the home market and one level of trade in the U.S. market.
First, we looked for different stages of marketing. We found that
there is one stage of marketing--sales of cement shipped to end-users
and ready-mixers in bulk and bagged form. After determining the number
of marketing stages, we then examined whether the selling functions
performed by the seller support CDC's claimed LOTs or the marketing
stages determined by the Department. For the claimed LOTs in the home
market, we did not find that there were two distinct sets of selling
functions performed by the seller. Rather, we found one distinct set of
selling functions performed by CDC which reflect the one stage of
marketing determined by the Department. Both in terms of their amount
and nature, CDC essentially performs the same selling functions in the
home market on both its end-user and ready-mixer sales. Specifically,
these functions were pre-sale warehousing (DISWARH and DISWARU),
inventory maintenance (INVCARH and DINVCARU), and other indirect
selling functions (INDIRSH and DINDIRSU).
Next we examined the selling functions performed by the seller with
respect to both markets to determine if U.S. sales can be matched to
home market sales at the same LOT. For the U.S. market, we examined
those sales that CDC reported were made on a CEP basis. The level of
trade of the U.S. sales is determined for the CEP rather than for the
starting price. In the instant review, the CEP sales reflect certain
selling functions such as inventory maintenance, pre-sale warehouse
expenses, and indirect selling expenses

[[Page 17158]]

incurred in the home market for the U.S. sale. As explained above,
these same selling functions are also reflected in CDC's home market
sales to end-users and ready-mixers. Therefore, the selling functions
performed for CDC's CEP sales are not sufficiently different from those
performed for CDC's home market sales to consider CEP sales and home
market sales to be at a different level of trade. Although there
appears to be differences between the marketing stages, this difference
is not borne out by an analysis of the selling functions for the home
market and CEP sales, which are largely the same. Therefore, we have
determined that there are no differences in levels of trade and neither
a level of trade adjustment nor a CEP offset was warranted in the
instant review.
Although we are ``collapsing'' CEMEX and CDC as explained above
(see Comment 4), we are not comparing CEMEX home market sales to CDC
U.S. sales, nor are we comparing CDC home market sales to CEMEX U.S.
sales. This is due to the fact that there were enough comparable sales
(i.e., CEMEX to CEMEX, and CDC to CDC) to enable the Department to make
an accurate comparative analysis.

Differences in Merchandise (DIFMER)

Comment 6: CDC asserts that the Department incorrectly weight-
averaged CDC's DIFMER with that of CEMEX. CDC claims that the
Department's decision to weight-average DIFMER information penalizes
CDC unfairly, when CDC fully cooperated with the Department.
Petitioners argue that the Department should use an adverse 20
percent DIFMER adjustment based on facts available for CDC as well as
for CEMEX. Petitioners claim that CDC failed to provide a detailed
listing of all expenses in order to satisfy its burden of isolating and
quantifying the costs solely attributable to physical differences in
merchandise
Department's Position: As noted in CDC's home market verification
report, the Department verified that CDC uses the same kiln for
production of Type I and Type II cement. Moreover, CDC provided a
detailed listing of differences in raw material inputs and variable
overhead at all facilities for Type I and Type II cement, which
sufficiently explained the differences in costs attributable to the
physical differences of Type I and Type II cement. Differences in plant
efficiencies are not an issue for CDC, as CDC produces both Type I and
Type II cement at only one plant, and has based its DIFMER on the
differences between costs of production at this single facility. In
short, CDC sufficiently isolated and quantified its costs solely
attributable to the physical differences in comparison merchandise, and
has calculated DIFMER using the variable cost of manufacturing
information from the one plant which produced both Type I and Type II
cement. As CDC and CEMEX have been ``collapsed'' for purposes of this
review (see Comment 4 above), the Department holds that it
appropriately weight-averaged CDC and CEMEX's DIFMER information,
consistent with its calculation of monthly weight-averaged costs for
use in the cost of production analysis.
Comment 7: CEMEX claims that the Department improperly made a
DIFMER adjustment based on facts available equal to 20 percent of total
cost of manufacturing. CEMEX claims that it has established that there
were physical differences between Type I and Type II by providing all
supporting documentation for the reported weight-averaged VCOM for Type
I and Type II for each plant, which the Department then verified. CEMEX
also claims that the Department's own reporting requirements for COP
and CV require the weight-averaged costs incurred at all facilities to
be reported, and that the Department has granted claimed DIFMER
adjustments in other cases when such adjustments were based on weighted
average costs at several facilities. Therefore, CEMEX should not be
penalized for not being able to exclude from its DIFMER data costs
associated with differences in production efficiencies at the different
plants. CEMEX cites Gray Portland Cement and Clinker from Japan, 60 FR
43761, 762-763 (1995), in which the Department granted the respondent a
DIFMER adjustment, as the Department was satisfied that the respondent
reasonably tied cost differences to physical differences in
merchandise, not withstanding reported differences in plant
efficiencies. CEMEX further contends that even if the Department relies
on facts available, alternate facts available should be used. CEMEX
contends that the Department's upward adjustment of 20 percent is
punitive, when verified information established CEMEX's entitlement to
a downward adjustment. Moreover, it is the Department's policy to use
verified information to the greatest extent possible. CEMEX proposes
one of the following alternatives for its DIFMER adjustment: 1) As
CEMEX claimed a downward adjustment, the Department should make no
DIFMER adjustment; 2) the Department could limit the DIFMER adjustment
to only those components it believes are attributable solely to
differences in physical characteristics and the production process
(i.e., base the DIFMER adjustment only on verified raw material
differences); 3) the Department could use verified cost differences
from only one plant (i.e., the Yaqui plant, which produces both Type I
and Type II); or 4) the Department could substitute CDC's verified
DIFMER for CEMEX.
Petitioners maintain that CEMEX did not provide information to
isolate the costs attributable solely to physical differences in
merchandise, as opposed to plant efficiencies, despite repeated
Department requests for such information. Petitioners rebut CEMEX's
claim that its reported DIFMER adjustment information is similar to the
DIFMER information in Japanese Cement. Petitioners argue that the
DIFMER information provided in the Japanese case was vastly more
detailed (respondent's information included actual chemical and
physical characteristics, as well as plant-by-plant and product-by-
product cost data) than the information provided by CEMEX. Furthermore,
whereas in the Japanese case no record evidence demonstrated that cost
differences were attributable to factors other than physical
differences between the products, CEMEX has indicated on the record
that the costs of its products vary from plant to plant according to
the availability of raw material inputs. In the same exhibit,
petitioners note that CEMEX also indicates that cost is affected by the
amount of energy required to grind the clinker. Petitioners concede
that there are physical differences between Type I and Type II cement;
however, the tighter specifications, longer grinding time, and higher
kiln temperatures for Type II cement result in higher variable costs of
producing Type II cement. Therefore, any DIFMER adjustment should be
unfavorable to CEMEX.
Petitioners further argue that the Department correctly selected an
adverse 20 percent DIFMER adjustment as facts available. Petitioners
note that the court affirmed the Department's use of a 20 percent
DIFMER adjustment as BIA in the second review. Petitioners further
insist that the Department must apply an adverse DIFMER adjustment as
facts available under 19 U.S.C. 1677e(b) because CEMEX failed to comply
with the Department's requests for information. Finally, petitioners
dismiss CEMEX's argument that any DIFMER adjustment would be small
(less than 3 percent of total manufacturing costs), as well as CEMEX's
suggestions for alternate choices of facts available because these
amounts do not represent

[[Page 17159]]

the use of adverse facts available, which petitioners argue is required
in this case due to CEMEX's failure to cooperate.
Department's Position: We have reconsidered our decision in the
preliminary results of this review determination in which we applied an
adverse 20 percent DIFMER adjustment to CEMEX's reported home market
sales of Type I cement due to the fact that upon review of the
administrative record, we found evidence to support CEMEX's claim for a
DIFMER adjustment based on cost differences at the Yaqui facility.
Evidence on the record shows that CEMEX's Yaqui facility produces both
Type I and Type II cement using a single production line. Therefore,
consistent with the Department's treatment of CEMEX's affiliated party,
CDC, we have allowed CEMEX a DIFMER adjustment based on the differences
between the variable costs incurred by CEMEX in producing Type I and
Type II cement at its Yaqui facility. Although CEMEX's claimed DIFMER
adjustment was based on the weight-averaged difference in variable
costs from all its facilities, the DIFMER adjustment utilized in this
instant review is based on the differences in the variable cost of
manufacturing incurred at a single producing facility. By relying on
the differences in variable costs incurred at a single facility, we
have accounted for differences in plant efficiencies if they are the
source of the cost differences identified by CEMEX. Cost differences at
the single facility are more likely to be due to differences in
material inputs and the physical differences which result from
different production processes.
First, the Department compared the Type II cement sold in the
United States with the Type I cement sold in the home market. The
specific differences in costs among the cement types are due to varying
costs of the inputs, including material inputs (limestone, clay,
silica, etc.), fuel inputs (fuel oil, coal, etc.) and electricity
(mixing, grinding, burning, etc.). For example, Type I cement contain
clinker, gypsum, and minor grinding agents, whereas Type II cement
contains, clinker, gypsum, minor grinding agents, and additives.
Additionally, Type I cement has a lower tricalcium aluminate level than
Type II.
Second, for the purposes of this final analysis, the Department
utilized the verified cost of producing Type II cement at the Yaqui
facility and found these costs to be an accurate representation of the
relevant variable costs of production as reflected in CEMEX's actual
cost accounting records and compared the costs of producing Type II to
the costs of producing Type I cement at the same facility. Therefore,
the calculated DIFMER adjustment is based on the relative costs of
producing Type I and Type II cement at a single facility. 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 CEMEX has reasonably tied cost differences to physical differences
in merchandise.
In those months where a calculated DIFMER adjustment could not be
determined for CEMEX's Yaqui facility, we have utilized the relevant
DIFMER adjustment for CEMEX's affiliated party, CDC, as the facts
otherwise available.
Comment 8: Respondent claims that the Department incorrectly
quantified and calculated the DIFMER adjustment in its preliminary
results. CDC and CEMEX claim that the Department incorrectly omitted
CDC's July, 1995, DIFMER information from its calculations. CEMEX also
argues that the Department incorrectly calculated CDC's DIFMER, and
that the correct calculation should subtract the variable cost of
manufacturing of Type I cement (VCOMH) from the variable cost of
manufacturing Type II (VCOMU). CEMEX further claims that because the
individual DIFMER percentages were calculated by dividing DIFMER by the
total cost of manufacturing for the U.S. product (Type II) (TOTCOMU),
the DIFMER percentage should be multiplied by the total cost of
manufacturing for Type II.
Petitioners argue that DIFMER information for CDC and CEMEX should
be weight averaged based on relative production quantities of Type I,
not Type II cement. Petitioners argue that the appropriate methodology
is to base the weight average on the relative production of the product
used as the basis for normal value (i.e., Type I cement). Petitioners
argue that the Department correctly applied the DIFMER percentage to
the cost of manufacture of the home market comparison product, Type I
cement.
Department's Position: We agree that CDC's July 1995 cost data, as
provided in the response, was incorrectly omitted from the DIFMER
calculation. We have accounted for this error in our final results. We
agree with respondents that DIFMER is correctly calculated by
subtracting the variable cost of manufacturing for the product sold in
the home market (Type I) from the variable cost of manufacturing for
the product sold in the U.S. market (Type II). Following standard
Department practice, this difference in variable cost of manufacturing
is not to exceed 20 percent of the total cost of manufacturing of the
product sold in the U.S. market. We disagree with petitioners that CDC
and CEMEX's DIFMER should be weight-averaged based on relative
production quantities of Type I cement. Because the individual DIFMER
percentages were calculated by dividing differences in variable
manufacturing costs by the total cost of manufacturing for the U.S.
product (Type II), CDC and CEMEX's DIFMER information should be weight-
averaged by the relative production of Type II cement. Finally, the
Department has recalculated the DIFMER adjustment to normal value for
its final results. The weight averaged DIFMER percentage has been
multiplied by the total cost of manufacturing of the U.S. product (Type
II) used in the comparison to normal value. This amount was then added
to normal value.

Cost of Production (COP)

Comment 9: Petitioners contend that COP should be based entirely on
facts available because CEMEX failed to provide the costs incurred at
all of its plants during the period of review. Petitioners argue that
CEMEX failed to provide any cost data (including shutdown costs) for
the Atoyac plant for the entire period of review. Because CEMEX did not
even provide information on the tons produced at the Atoyac plant, the
Department cannot weight average the reported costs with those of other
producing plants. Petitioners argue that the Department should base the
cost of manufacture for the Atoyac plant on the highest monthly cost of
manufacture reported for any other plant.
CEMEX states that in its May 20, 1996, supplemental cost
questionnaire response, it provided costs for the Atoyac plant for
those months in which there was production. CEMEX contends that any
shutdown costs incurred while the Atoyac plant was producing cement
were included in CEMEX's production cost for that period. CEMEX further
contends that it reported other incidental costs of the shutdown as
general and administrative expenses on the company's financial
statements.
Department's Position: We agree with CEMEX. At verification we
reviewed CEMEX's reported costs of production and found only minor
errors as stated in our verification report dated July 22, 1996. In
addition, as stated in the same verification report, we verified that
all costs associated with the shutdown of the Atoyac facility were
properly reported as a component of cost of

[[Page 17160]]

manufacturing, and the incidental costs were captured in the reported
general and administrative expenses. Therefore, we are utilizing the
verified costs that were reported to the Department.
Comment 10: Petitioners argue that the Department should
recalculate CEMEX's reported financial expenses to include all foreign
exchange translation losses on long-term foreign currency denominated
debt. Petitioners assert that the Department's failure to do so is
inconsistent with its past practice, and distorts actual interest
expense. Citing Certain Pasta from Italy; Semiconductors from the
Republic of Korea; Certain Flat Rolled Steel Products and Plate from
Korea; and Micron Technology, Inc. v. United States, petitioners assert
that the Department should include all costs incurred during the period
of review, including those losses that are deferred to a future time.
CEMEX argues that there is no basis in law or administrative
practice to attribute all foreign exchange translation losses to
interest expense. CEMEX argues that it treated foreign exchange losses
associated with foreign currency denominated debt incurred to purchase
foreign subsidiaries as a reduction of the foreign exchange gain
recognized on the translation of the subsidiaries financial statements.
According to CEMEX, this comported with Mexican GAAP, the Statement of
International Accounting Standards No. 21, and Financial Accounting
Standards Board No. 52. CEMEX argues that if the Department decided
that foreign exchange loss on the debt associated with assets held
outside Mexico should be included in cost of production, then both the
foreign exchange gain and the associated loss should be included in the
reported income and cost of production. CEMEX argues that unlike in
Micron Technology Inc. v. United States, CEMEX's independent auditor
determined that the foreign currency losses reflected in CEMEX's
financial statement were loans directly related to foreign assets
located in countries other than the U.S. or Mexico.
Department's Position: We agree in part with CEMEX and in part with
petitioners. The Department has included foreign-exchange translations
gains and losses in net interest expense. The translation gains and
losses at issue are related to the cost of acquiring debt and thus are
related to production and are properly included in the calculation of
CEMEX's consolidated financing expense. The CIT has upheld this
practice, stating in Micron that ``[t]o the extent that respondent's
translation losses resulted from debt associated with production of the
subject merchandise, such losses are a legitimate component of COP.''
See Micron at 33. In addition, in the past we have found that
translation losses represent an increase in the actual amount of cash
needed by respondent to retire their foreign-currency-denominated loan
balances. See, e.g., Notice of Final Determination of Sales at Less
than Fair Value: Fresh Cut Roses from Ecuador, 24 FR 7019, 7039
(February 6, 1995). Using the same reasoning, for purposes of these
final results we have included CEMEX's net gains on foreign-currency
translations in COP as an offset to financing cost, since the gains
represent a decrease in the actual amount of cash needed by respondent
to retire their foreign-currency-denominated loan balances. Therefore,
we have included total gains and losses associated with foreign-
currency denominated debt in the calculation of consolidated financing
expense.
Comment 11: Petitioners contend that CEMEX's claimed monetary
position gain as an offset to financial expense should not be granted.
Petitioners claim that CEMEX's total monetary position gain is based on
transactions with unconsolidated affiliates, notably loans from
Cementos del Norte and CEMEX Control, that are not at arm's length.
Furthermore, petitioners argue that denying the offset would be
consistent with the Department's well-established practice of denying
interest income on long-term investments as an offset to interest
expense. Petitioners claim that the monetary position gain earned by
CEMEX from electing to hold long-term debt reflects income derived from
investment-type activities that are unrelated to the product under
review.
CEMEX argues that the Department was correct to include CEMEX's
claimed monetary position gain in the calculation of net financial
expense. CEMEX argues that the Department's actions in this review were
in accord with the Department's practice, as established in the first
and second administrative reviews of this case, as well as in
Porcelain-on-Steel Cookware from Mexico. CEMEX further argues that
Cementos del Norte and CEMEX Control are included in CEMEX's
consolidated financial statements and the effect of transactions
between these entities are eliminated in consolidation. CEMEX also
dismisses petitioners' argument that the Department should treat
monetary gain like interest income on long-term investment. CEMEX
argues that monetary gains are related to liabilities and financial
expenses, and are completely unrelated to assets that generate short-
term and long-term interest revenue. Because monetary position gains
are generated by liabilities, the Department should treat monetary
position gain in the same way that it treats interest expenses that
arise from those same liabilities (i.e., include them in the
calculation of net financial expense).
Department's Position: We agree with CEMEX. It is the Department's
longstanding practice to calculate the respondent's net interest
expense based on the financing expenses incurred on behalf of the
consolidated entity, CEMEX. In general, this practice recognizes the
fungible nature of invested capital resources (i.e., debt and equity)
within a consolidated group of companies. In Camargo Correa Meais, S.A.
v. United States, Slip Op. 93-163 (CIT 1993), the Court of
International Trade ruled that the Department's practice of allocating
financial expense on a consolidated basis due to the fungible nature of
debt and equity was reasonable. The court specifically quoted the
following from Final Determination of Sales at Less than Fair Value:
Certain Small Business Telephone Systems and Subassemblies Thereof from
Korea, 54 Fed. Reg. 53,141, 53149 (1989):

``The Department recognizes the fungible nature of a
corporation's invested capital resources, including both debt and
equity, and does not allocate corporate finances to individual
divisions of a corporation ... Instead, [Commerce] allocates the
interest expense related to the debt portion of the capitalization
of the corporation, as appropriate, to the total operations of the
consolidated corporation.''

Furthermore, the SAA and the URAA do not address any specific
change in the Department's practice of calculating financing expense.
Therefore, consistent with the approach outlined in Gray Portland
Cement and Clinker from Mexico; Final Results Antidumping Duty
Administrative Review, 58 FR 25803, 25806 (1993), and Gray Portland
Cement and Clinker from Mexico: Final Results of Antidumping Duty
Administrative Review, 58 FR 47253 (1993), we have included the effect
of the monetary gain in our calculation of the financing costs of
CEMEX.
Comment 12: Petitioners argue that CDC's foreign exchange
transaction gains should not be attributed to interest expense.
Petitioners contend that the Department only includes foreign exchange
transaction gains as an offset to interest expense if the gains are
directly related to the subject merchandise (for example, if the gains
are realized from the importation of raw materials or other inputs
needed to

[[Page 17161]]

produce the merchandise). Petitioners claim that CDC has made no effort
to link its foreign exchange transaction gains to the subject
merchandise.
CDC counters that these monetary gains are translation gains, and
not transaction gains, as petitioners have claimed. CDC argues that in
Silicomanganese from Venezuela, 59 FR 55436, 55440 (1996), the
Department determined that exchange gains and losses on financial
assets and liabilities should be included in COP and CV. CDC explains
that it has characterized this offset on the record as holdings in
dollars related to overall operations. CDC elected to hold a portion of
its assets in a foreign currency to hedge against devaluation of the
local currency. CDC argues that details in its financial statements
showing net exchange rate differences show that there is no basis for
petitioners' concern that CDC's foreign exchange gains may have been
generated entirely from transactions related to non-comparison or out-
of-scope merchandise.
Department's Position: We disagree with petitioners' assertion that
monetary position gains should be limited to the portion that can be
specifically tied to the cost of producing the subject merchandise. The
Department has long held the view that financing expenses are fungible.
Accordingly, consistent with past Departmental practice, we do not
distinguish whether interest expense is related or unrelated to the
merchandise under review (see, e.g., Final Determination of Sales at
Less than Fair Value; Steel Wire Rope from Korea, 58 FR 11035 (1993)).
Therefore, we have used CDC's reported financial expenses including
monetary corrections allocated over the cost of goods sold for all
products.
Furthermore, the SAA and the URAA do not address any specific
change in the Department's practice of calculating financing expense.
Therefore, consistent with the approach outlined in Gray Portland
Cement and Clinker from Mexico; Final Results Antidumping Duty
Administrative Review, 58 FR 25803, 25806, (1993), and Gray Portland
Cement and Clinker from Mexico: Final Results of Antidumping Duty
Administrative Review, 58 FR 47253 (1993) we have included the effect
of the monetary gain in our calculation of the financing costs of CDC.
Comment 13: Petitioners claim that the Department should use
partial facts available because CDC and CEMEX failed to demonstrate
that transfer prices for raw material inputs purchased from affiliated
producers were at arm's length and reflected market value. Moreover,
petitioners claim that CEMEX and CDC have not demonstrated that the
affiliated party costs are fully-absorbed costs of production, because
they do not demonstrate that reported costs included revalued
depreciation, profit-sharing expenses, depletion expenses, and
financial expenses. As partial facts available, petitioners suggest
that the Department add an amount for profit to reported transfer
prices. Petitioners suggest that this amount be determined by
multiplying the profit rate in CEMEX's consolidated financial
statement, by reported cost of production.
CEMEX argues that the Department should disregard petitioners'
argument based on the fact that CEMEX provided all information that the
Department requested with respect to raw material inputs, intermediate
product costs, and transfer prices. CEMEX argues that petitioners'
argument should be disregarded because the level of input materials
purchased from affiliated parties is far below the level at which such
purchases are considered by the Department to be material inputs and
can be considered to have a significant impact on the overall cost of
manufacture. In addition, CEMEX argues that its current reporting
methodology is consistent with that used in all prior reviews,
therefore the Department should not use facts available as a basis for
calculating raw material input costs.
CDC argues that in accordance with the statutory requirements of 19
U.S.C. Sec. 1677b(f)(3) and the Department's questionnaire, it
demonstrated that raw material inputs were purchased at arm's length.
CDC argues that for certain major inputs purchased from affiliates, it
provided transfer prices when the transfer price was greater than the
cost of production. In addition, it also provided the production costs
for those inputs where the average production cost was higher than the
purchase price from the affiliated party. CDC dismisses petitioners'
claim that the Department should have obtained market values in
addition to transfer prices and costs of production information. CDC
asserts that it fully complied with the Department's request to provide
cost of production information for all major inputs of production and,
therefore, the Department should utilize the cost of production
reported by CDC.
Department's Position: As noted in Antifriction Bearings (Other
than Tapered Roller Bearings) and Parts Thereof from France, et al;
Final Results of Antidumping Administrative Reviews, 62 FR 2081, 2115
(January 15, 1997), Section 773(f)(2) of the Tariff Act, which refers
to both minor and major inputs, states that, with regard to calculating
COP and CV * * *

A transaction * * * between affiliated persons may be
disregarded if, the amount representing that element does not fairly
reflect the amount usually reflected in sales of merchandise under
consideration in the market under consideration.

To the extent practicable, the Department generally prefers the use
of the transfer price of inputs purchased from an affiliated supplier
in determining COP and CV, provided that the transaction occurred at an
arm's-length price. In determining whether a transaction occurred at an
arm's-length price, we generally compare the transfer between the
affiliated parties to the price of similar merchandise between two
unaffiliated parties. If transactions of similar merchandise between
two unaffiliated parties are not available, we may use the affiliated
supplier's cost of production for that input as the information
available as to what the amount would have been if the transaction had
occurred between unaffiliated parties.
In the case of a transaction between affiliated persons involving a
major input, we will use the highest of the transfer price between the
affiliated parties, the market price between unaffiliated parties, and
the affiliated supplier's cost of producing the major input.
In the instant review CEMEX and CDC have provided all raw material
input data in accordance with the Department's methodology as discussed
above. In addition, the Department verified that respondent's reported
cost of production included either the higher of production costs or
transfer prices for raw material inputs purchased from affiliated
parties. Market prices for the raw material inputs were unavailable.
Therefore, in accordance with prior practice, the Department has
utilized CEMEX and CDC's reported cost of production in its analysis.
Comment 14: Petitioners argue that fixed overhead and labor costs
should be reallocated based on the clinker content of the finished
cement type. Whereas CEMEX based the allocation of variable overhead
costs on clinker volume, it allocated fixed overhead and labor on tons
produced of finished product. Petitioners claim that this allocation
methodology understates the actual cost of producing Type I cement by
shifting disproportionate amounts of the direct labor and fixed
overhead costs to the production of pozzolonic and other types of
cement, which contain less amounts of clinker. Petitioners maintain
that the production of clinker

[[Page 17162]]

incurs substantially more direct labor and fixed overhead costs than
either the acquisition or production of pozzolanic cement. In
particular, pozzolanic cement is never calcined in a kiln, unlike
clinker. Petitioners maintain that the kiln is a cement plant's
greatest capital asset, and that this stage constitutes a substantial
cost of production.
CEMEX rebuts petitioners' argument that fixed overhead and labor
should be reallocated based on clinker content of the finished cement
type. CEMEX claims that it followed the Department's instructions by
submitting fixed overhead costs that were based on the methods used in
the normal course of business to allocate costs to various cement
products. CEMEX also notes that the Department verified the accuracy of
CEMEX's reported fixed costs. In addition, CEMEX claims that it
provided an analysis showing that it was reasonable to use CEMEX's
methodology in its May 20, 1996, response and demonstrated that the
effect on the overall weighted-average fixed costs for Type I cement
was minimal.
Department's Position: We agree with CEMEX. The reported fixed
overhead costs and labor costs were reported in accordance with
Departmental methodology and verified by the Department during the
course of the cost verification. Accordingly, we accepted CEMEX's
submitted methodology which valued the cost of fixed overhead and labor
on the tons produced of finished cement.
Comment 15: Petitioners claim that CEMEX and CDC incorrectly
granted themselves a ``startup adjustment'' by amortizing their costs
over a period beyond the POR for operations at the Tepeaca and
Samalayuca plants, rather than including them as reported startup
costs. Petitioners claim that the burden is on respondents to establish
their entitlement to a startup adjustment (i.e., to demonstrate that
production levels were limited by technical factors associated with the
initial phase of commercial production). Petitioners claim that CDC and
CEMEX failed to do so for both plants mentioned above, thus the
Department should include all costs incurred by these plants in the
calculation of cost of production. Furthermore, petitioners state that
CDC used clinker purchased from other affiliated plants at Samalayuca
and that the Department should adjust these clinker costs to reflect
arm's length transactions.
CEMEX contends that it properly reported all start-up costs for the
Tepeaca plant. CEMEX states that the Tepeaca plant only produced Type I
cement during the first two months of production and never in
commercial quantities. Therefore, calculating a cost of producing Type
I at Tepeaca was not possible. In addition, CEMEX states that the
cement produced by Tepeaca was sold through the Atotonilco plant and
valued at the weighted-average cost of producing Type I cement by all
CEMEX's plants. CEMEX argues that the cost of producing Type I cement
at the new, efficient Tepeaca plant would presumably be lower than the
cost of producing cement at the older plants. Therefore, by not
including the cost of producing cement at the Tepeaca plant, CEMEX
claims it is overstating the overall weighted-average cost of
production.
CDC asserts that the Samalayuca plant did not produce any cement
during the POR. Therefore CDC did not include ``start-up'' costs for
the Samalayuca plant and did not grant itself a ``start-up'' adjustment
by amortizing the cost.
Department's Position: We agree with respondents. As stated in the
Department's verification report, the Type I cement produced at Tepeaca
and Samalayuca was only produced in testing quantities and not in
commercially viable quantities. In addition, the Department verified
that any start-up costs associated with the cost of producing the Type
I cement at Tepeaca was transferred to the Atotonilco facility and was
properly reported in CEMEX's cost of manufacturing. Second, due to the
fact that CDC's Samalayuca facility was not fully operational during
the POR (a fact verified by the Department), and did not incur any
start-up costs, and therefore, we were not able to include the cost of
producing cement at Samalayuca in our cost analysis. For purposes of
the instant review, we are utilizing the costs reported by CDC and
CEMEX and substantiated at verification in our final analysis.
Comment 16: Petitioners argue that the Department should include
CDC's employee profit sharing expense in COP as a labor expense. In the
preliminary results, these expenses were treated as part of G&A.
Petitioners note that the treatment of profit sharing expense affects
the calculation of DIFMER, which is a percentage of manufacturing
costs; while labor expenses are included in manufacturing costs, G&A is
excluded.
CDC responds that in light of the Department's previous decisions
regarding profit sharing distributions, CDC does not disagree with the
principle of including the profit sharing distributions in this case as
labor costs. However, CDC states that its unconsolidated income
statement shows that this expense is not included in cost of sales, and
must be added to cost of goods sold before calculating the G&A factor,
the CEP profit factor, the interest factor, and any other factor
calculated as a percentage of cost of sales. CDC asserts that the
Department must use this revised G&A factor if it adds employee profit
sharing to labor costs.
Department's Position: In the final results of Porcelain-on-Steel
Cookware From Mexico, 61 FR 54620 (1996), the Department included
employee profit-sharing expense in COP and CV because it ``relates to
the compensation of direct labor, a factor of production.'' The
Department agrees with petitioners and respondents that employee profit
sharing should be included as a direct labor cost and not as part of
G&A. Accordingly, cost of production, constructed value, DIFMER, the
CEP profit factor, and the interest factor have been recalculated for
the final results with the correct amounts for employee profit-sharing
included as a direct labor expense. We have also changed our
calculation of CEMEX's employee profit sharing expenses. In our
preliminary determination, we included employee profit sharing in G&A,
however, in our final analysis we have included employee profit sharing
as a portion of direct labor expense not as a part of G&A.

Normal Value

Comment 17: Petitioners argue that the Department should deny CEMEX
a freight deduction for home market sales of bulk Type I cement.
Petitioners base this argument on the following assertions; (1) CEMEX
did not report freight expenses on a transaction-specific, customer-
specific, plant, or company-specific basis. Petitioners contend that
freight expenses vary greatly from transaction to transaction depending
on the location of the plant, warehouse and customer, as well as the
mode of transportation used. The Department requested this information
in its November 1, 1995 questionnaire and its April 12, 1996, letter.
Petitioners note that CEMEX provided no explanation for its refusal to
provide such information. (2) CEMEX did not separate freight expenses
from plant to warehouse and from plant/warehouse to customer. (3) For
most bulk sales, CEMEX failed to report freight expenses specific to
Type I cement. Petitioners claim that CEMEX's calculated freight factor
was based on multiple types of cement for several companies. Moreover,
petitioners found that the shipment volumes used to calculate the

[[Page 17163]]

freight factor greatly exceeded the actual volume of bulk Type I cement
shipped, indicating that other types of cement were included in the
calculation. Petitioners also point to the Department's redetermination
on remand in the second administrative review of this order in which
the agency denied any adjustment where CEMEX's freight factor was based
on multiple cement types. (4) CEMEX included affiliated-company freight
expenses into the freight factor and failed to segregate expenses from
affiliated and unaffiliated companies. Furthermore, CEMEX failed to
demonstrate that transfer prices charged to CEMEX by affiliates were at
arm's length. Petitioners suggest that the Department disallow CEMEX's
home market freight deduction for companies whose freight factor
included affiliated freight charges. (5) CEMEX failed to demonstrate
that its allocation methodology is not distortive. Petitioners argue
that CEMEX did not demonstrate that its freight factors excluded Type
II cement, which necessarily distorts the freight allocation.
Petitioners also contend that CEMEX failed to demonstrate that
inclusion of non-subject merchandise in the freight allocation is not
distortive.
CEMEX, in turn, argues that the Department appropriately deducted
CEMEX's freight expenses on home market sales of Type I bulk cement in
the calculation of normal value.
CEMEX argues that the Department verified CEMEX's reported inland
freight expense, and that computing freight expense on a plant-specific
basis, as suggested by petitioners, would not result in a more precise
calculation of normal value.
Department's Position: We agree with CEMEX. The Department has
allowed a deduction for freight expenses for Type I bulk sales because
the reported expenses provided are in accordance with Departmental
methodology, consistent with the company's accounting practices, and
were substantiated at verification. (See July 22, 1996 Verification
Report). CEMEX has reported home market bulk Type I freight in
accordance with their accounting system and provided the data on a
company, cement type, and presentation specific basis. In fact, the
manner in which CEMEX reported the freight expenses, as verified by the
Department, tends to understate the per ton freight amounts deducted
from normal value. Based on our findings at verification, the
Department determined that respondent's reported freight costs for
sales of Type I bulk cement are not distortive and provide a
conservative estimate of actual transaction specific freight expenses.
Therefore, we are granting CEMEX the home market freight adjustment for
bulk Type I sales.
Comment 18: Petitioners argue that a credit expense adjustment
should not be granted because CEMEX and CDC have failed to prove that
its use of aggregate data to calculate credit expense is not
distortive. Petitioners contend that the total sales and total accounts
receivable data used by CEMEX and CDC to calculate average credit days
outstanding includes non-comparison, outside the ordinary course, and
out of scope merchandise for all customer categories and for affiliated
and unaffiliated customers. Petitioners claim that CEMEX and CDC have
also failed to use a transaction-specific, or even customer-specific
allocation methodology. Petitioners argue that, as demonstrated in
Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts
Thereof From France, et al., 58 FR 39729, 39747 (1993); Industrial
Belts and Components and Parts Thereof, Whether Cured or Uncured From
Japan, 58 FR 30018, 30023 (1993); and NSK Ltd. v. United States, 896 F.
Supp. 1263, 1274-76 (CIT 1995), the Department normally requires
transaction-specific methodology in the calculation of credit expense
and allows customer specific allocation methodology only in exceptional
cases.
CEMEX asserts, in response, that the Department properly granted
CEMEX's claimed credit expense adjustment, regardless of whether the
days were calculated on a transaction-specific basis or as average days
outstanding. CEMEX insists that it simply could not report actual
payment dates for all transactions. CEMEX notes that the Department
accepted and verified CEMEX's calculation of average credit days
outstanding for those sales for which transaction-specific data were
not available. CEMEX also notes that its calculation methodology for
average credit days outstanding based on total accounts receivable (as
opposed to customer-specific credit day calculations) is fully
consistent with the Department's administrative practice, as evidenced
in recent decisions in Fresh Cut Flowers from Mexico, 61 FR 40604
(1996), and Color Television Receivers from Korea, 56 FR 12701, 12708
(1991). To confirm that CEMEX's average credit day calculation was non-
distortive, CEMEX compares the average number of credit days it
calculated with the average number of credit days based on the August
9, 1996, home market sales tape.
CDC asserts that the guiding principle in evaluating this argument
must be the standard established in the statute for differences in
circumstance of sale, such as credit expenses--that is, the adjustment
must be established ``to the satisfaction of the administering
authority.'' 19 U.S.C. Sec. 1677b(a)(6)(C). CDC states that the
proposed rules (which petitioners refer to in their brief) simply
reiterate the Department's preference for transaction-specific
adjustments, and states the general rule that any alternative reporting
must not be distortive.
CDC claims that the Department may accept averages (as CDC has
provided) when a respondent can demonstrate that its books and records
do not permit reporting of the costs on an individual-sale basis, and
can demonstrate that the claimed adjustment is based upon a reasonable
allocation of costs involved. See Color Picture Tubes From Canada, 52
FR 44161 (1987). CDC states that given its accounting methods and the
way in which its customers make payments, transaction-specific
reporting is not feasible, and CDC had little alternative but to
calculate an average credit period for home market sales. CDC asserts
that in Antifriction Bearings (Other Than Tapered Roller Bearings) and
Parts Thereof From France, et al. (``AFBs''), 58 FR 39729 (1993) (
which petitioners cite in their brief), the respondent's accounting
system in that case permitted it to calculate customer-specific credit
periods, unlike CDC in this case. In Industrial Belts and Components
and Parts Thereof, Whether Cured or Uncured, From Japan, 58 FR 30018,
30023 (1993), CDC notes that the Department accepted the respondent's
weighted average allocation over the POR. Finally, CDC asserts that
there is no evidence in the record that the average method it used is
distortive.
Department's Position: We agree with respondent. The Department has
allowed CEMEX's and CDC's claimed credit expense adjustment for the
following reasons. For the purposes of calculating imputed credit
costs, it is our practice to calculate the number of credit days based
on the number of days between the date of shipment and the date of
payment. If actual payment dates are not readily accessible, we
normally allow respondents to base the number of credit days on the
average age of accounts receivables. See, e.g., Color Television
Receivers from the Republic of Korea; Final Results of Antidumping Duty
Administrative Review, 56 FR 12701, 12708 (Comment 28)(1991). Based on
our findings at verification, the Department determined that
respondent's use of the average age of accounts receivables to
calculate credit expenses is reasonable (See Fresh Cut

[[Page 17164]]

Flowers from Mexico; Final Results of Antidumping Duty Administrative
Review, 61 FR 6812 (Comment 2) (1996)).
Comment 19: Petitioners object to the Department's decision to
grant CDC's so-called ``other'' adjustments. The Department categorized
the other adjustments in the same manner as rebates and deducted them
as a direct expense. Petitioners argue that CDC has not demonstrated
that it is entitled to such an adjustment. ``Other'' adjustments
include three types of post-sale adjustments to selling price: (1) A
``concrete pavers incentive discount'' provided to CDC's ready-mix
customers as an incentive for municipalities to use concrete as a
pavement material; (2) a price protection adjustment for all bulk
cement customers in CDC's Juarez market in order to meet competition
from other cement producers in that market; and (3) billing errors
corrected subsequent to the sale.
Petitioners claim that the Department erred in granting an
adjustment for these items for the following reasons. (1) The
Department's uniform practice is to disallow a respondent's claim for a
rebate unless the respondent provides a written agreement or other
documentation that its customers were aware prior to the sale of both
the conditions to be fulfilled to qualify for the rebate, and the
amount of the rebate. Petitioners claim that CDC has provided no such
documentation. (2) CDC has not reported expenses on a transaction-
specific basis. Petitioners argue that the reported other adjustments
merely represent an average of three different types of post-sale
adjustments, none of which can be tied to a particular transaction. (3)
Petitioners claim that at least one of the other adjustments is a
direct selling expense for which an indirect selling adjustment may not
be granted, similar to the adjustment claimed by the respondent and
rejected by the court in Torrington Co. v. United States, 82 F.3d 1039
(Fed. Cir. 1996). (4) Petitioners claim that the ``concrete pavers
discount'' granted to CDC's customers actually benefits the downstream
customers on purchases of concrete, a product outside the scope of this
review.
In response, CDC asserts that it does not collect as revenue the
gross price listed on its invoices. CDC asserts that a normal value
based on anything other than the revenue generated from a sale is
unfair. CDC states that its claimed adjustments are product-specific
and customer-specific. CDC claims that while it is unable to tie the
adjustments to the specific invoices, there is no question that the
adjustments are directly related to sales of the subject merchandise.
As adjustments directly related to the sales and directly affecting the
price at which the subject merchandise is sold, the so-called ``other''
adjustments are properly treated as an adjustment to gross price.
Department's Position: We agree with CDC. The Department has
allowed CDC's claimed adjustments because these adjustments were
reported in accordance with Departmental methodology and substantiated
at verification. (See July 22, 1996 Verification Report.) As stated in
the verification report, CDC was able to allocate these adjustments on
a customer specific basis for the month in which the sale occurred.
Therefore, we are granting CDC these adjustments.
Comment 20: Petitioners argue that CEMEX's rebate adjustment should
not be granted. CEMEX failed to provide information and sample
documentation on its rebate policy and claimed adjustment. Petitioners
claim that the Department cannot, therefore, determine whether the
claimed rebates are direct or indirect expenses or whether they relate
to specific sales. Petitioners also note that CEMEX admitted at
verification that a large number of rebates were not granted on a
transaction-specific basis. Thus, petitioners suggest, the Department
should, at most, accept the rebates as an indirect selling expense.
CEMEX asserts that the Department properly deducted its reported
post-sale billing adjustments and post-sale rebates, allocated on a
company specific basis, from the calculation of normal value. CEMEX
states that the transaction-specific post-sale price adjustments
reported as rebates were fully verified by the Department. CEMEX
dismisses petitioners' suggestion that its customer-specific rebates
are, at most, an indirect selling expense because they are not
allocated on a transaction-specific basis. CEMEX counters that it has
properly claimed these rebates as direct adjustments to price. Relying
on Corrosion Resistant Carbon Steel Flat Products from Canada, 61 FR
13821 (1996), CEMEX asserts that rebates allocated on a customer-
specific basis may be treated as adjustments to price in the same
manner as rebates reported on a transaction-specific basis. In addition
to being customer-specific, CEMEX maintains that the allocation at
issue was made on a product-specific basis (Type I or Type II) and by
method of distribution (bagged or bulk). Moreover, CEMEX argues that
the calculation did not include non-subject merchandise, and that a
customer-specific allocation methodology ensures that the rebates are
directly related to sales of the merchandise at issue. Even if the
Department determines that rebates can be direct adjustments to price
only if they are incurred on a transaction-specific basis, CEMEX argues
that rebates should still be deducted from normal value as indirect
selling expenses pursuant to the CEP offset.
Department's Position: We agree with CEMEX. The Department has
allowed CEMEX's claimed rebate adjustments because the data was
submitted in accordance with Departmental methodology and was
substantiated at verification. While the Department prefers that
discounts, rebates and other price adjustments be reported on a
transaction-specific basis, the Department has long recognized that
some price adjustments are not granted to customers on that basis, and
thus cannot be reported on that basis. Generally, ``we have accepted
claims for discounts, rebates, and other billing adjustments as direct
adjustments

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A97-9123. Public record. Not legal advice.