Preliminary Results of Antidumping Duty Administrative Review Gray Portland Cement and Clinker From Mexico

DEPARTMENT OF COMMERCE

International Trade Administration

[A-201-802]

Preliminary Results of Antidumping Duty Administrative Review

Gray Portland Cement and Clinker From Mexico

AGENCY: International Trade Administration/Import Administration/

Department of Commerce.

ACTION: Notice of preliminary results of antidumping duty

administrative review.

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SUMMARY: In response to requests from interested parties, the

Department of Commerce (the Department) is conducting an administrative

review of the antidumping duty order on gray portland cement and

clinker from Mexico. The review covers exports of subject merchandise

to the United States during the period August 1, 1996 through July 31,

1997 and one firm, CEMEX, S.A. de C.V. (CEMEX) and its affiliate

Cementos de Chihuahua, S.A. de C.V. (CDC). See section below entitled

``Collapsing.'' The results of this review indicate the existence of

dumping margins for the period.

We invite interested parties to comment on these preliminary

results. Parties who submit arguments in this proceeding are requested

to submit with the argument (1) a statement of the issue, and (2) a

brief summary of the argument.

EFFECTIVE DATE: September 10, 1998.

FOR FURTHER INFORMATION CONTACT: Steven Presing, Nithya Nagarajan or

John Totaro, Office VII, Import Administration, International Trade

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

Constitution Avenue, N.W., Washington, DC 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

regulations at 19 CFR Part 351, published in the Federal Register on

May 19, 1997. 62 FR 27296.

Background

On August 4, 1997, the Department published in the Federal Register

a Notice of Opportunity to Request Administrative Review of the

antidumping duty order on gray portland cement and clinker from Mexico.

61 FR 41925 (August 4, 1997). In accordance with 19 CFR 351.213, CEMEX,

and the petitioner, the Southern Tier Cement Committee (``STCC''),

requested a review of CEMEX and its affiliate, CDC. On September 25,

1997, the Department published a Notice of Initiation of Antidumping

Review. 62 FR 50292 (September 25, 1997). The Department is now

conducting a review of these companies pursuant to section 751 of the

Act.

Scope of 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 of 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 number

2523.10. Gray portland cement has also been entered under number

2523.90 as ``other hydraulic cements.'' The HTS subheadings are

provided for convenience and U.S. Customs Service (the Customs Service)

purposes only. Our written description remains dispositive as to the

scope of the product coverage.

Verification

As provided in Section 782(i) of the Act, we verified information

provided by the CEMEX and CDC using standard verification procedures,

including on-site inspection of manufacturing facilities, the

examination of relevant

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sales and financial records, and selection of original documentation

containing relevant information. Our verification results are outlined

in public versions of the verification reports.

Collapsing

Section 351.401(f) of the Department's new regulations, 62 FR at

27410, describes when the Department will treat two or more producers

as a single entity (i.e., ``collapse'' the firms) for purposes of

calculating a dumping margin. See also Gray Portland Cement and Clinker

from Mexico; Final Results of Antidumping Duty Administrative Review,

63 FR 12764, 12773 (March 16, 1998). The regulations provide that the

Department will treat two or more producers as a single entity where

(1) the producers are affiliated; (2) the producers have production

facilities that are sufficiently similar so that a shift in production

would not require substantial retooling; and (3) there is a significant

potential for the manipulation of price or production. For this last

criterion, the Department may consider (a) the level of common

ownership; (b) whether managerial employees or board members of one of

the affiliated producers sit on the board of the other affiliated

producer; and (c) whether operations are intertwined, such as through

the sharing of sales information, involvement in production and pricing

decisions, the sharing of facilities or employees, or significant

transactions between affiliated producers. In the current review,

CEMEX's equity ownership in CDC exceeded 5 percent; therefore, we have

preliminarily found that the two companies are affiliated. In addition,

CDC and CEMEX have production processes and facilities sufficiently

similar so that a shift in production would not require substantial

retooling. Finally in regards to the last criterion, the Department

reviewed levels of common ownership, shared board members, and

intertwined business relations, and found a significant potential for

the manipulation of price or production. As a result, the Department

has preliminarily concluded that these affiliated producers should be

treated as a single entity and that a single, weighted-average margin

should be calculated for these companies. (A complete analysis of this

issue is contained in the Memorandum from Roland L. MacDonald to Joseph

A. Spetrini, (August 31, 1998), located in the official file of this

case (``collapsing memorandum''). Therefore, throughout this notice,

references to ``respondent'' should be read to mean the collapsed

entity.

Transactions Reviewed

In accordance with section 751 of the Act, the Department is

required to determine the normal value (NV) and export price (EP) or

constructed export price (CEP) of each entry of subject merchandise.

Because there can be a significant lag between entry date and sale date

for CEP sales, it has been the Department's practice to examine CEP

sales during the period of review (POR). See Gray Portland Cement and

Clinker from Japan; Final Results of Antidumping Duty Administrative

Review, 58 FR 48826 (September 20, 1993) (Department did not consider

ESP (now CEP) entries which were sold after the POR). The Court of

International Trade (CIT) has upheld the Department's practice in this

regard. See The Ad Hoc Committee of Southern California Producers of

Gray Portland Cement v. United States, 914 F. Supp. 535 (CIT 1995.)

Fair Value Comparisons

To determine whether sales of gray portland cement by respondent to

the United States were made at less than fair value, we compared the EP

or CEP to the NV as described in the ``Export Price and Constructed

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

accordance with section 777A(d)(2), we calculated monthly weighted-

average prices for NV and compared these to individual U.S.

transactions, during the same month and at the same level of trade.

Export Price and Constructed Export Price

We used EP, in accordance with subsections 772(a) and (c) of the

Act, where the subject merchandise was sold directly or indirectly to

the first unaffiliated purchaser in the United States prior to

importation and CEP was not otherwise warranted based on the facts in

the record. In addition, we used CEP in accordance with subsections

772(b), (c), and (d) of the Act, for those sales to the first

unaffiliated purchaser that took place after importation into the

United States.

We calculated EP based on delivered prices to unaffiliated

customers in the United States. Where appropriate, we made adjustments

from the starting price for early payment discounts, foreign inland

freight, foreign brokerage and handling, international freight, U.S.

inland freight, U.S. brokerage and handling, and U.S. customs duties.

We also adjusted the starting price for billing adjustments to the

invoice price.

We calculated CEP sales based on delivered prices to unaffiliated

customers. Where appropriate, we made adjustments for early payment

discounts, credit expenses, and direct selling expenses. We deducted

those selling expenses, including inventory carrying costs, that were

related to economic activity in the United States. We also made

deductions for foreign brokerage and handling, foreign inland freight,

international freight, U.S. inland freight, U.S. brokerage and

handling, and U.S. duty. We adjusted the starting price for billing

adjustments to the invoice price. Finally, we made an adjustment for

CEP profit in accordance with section 772(d)(3) of the Act.

Further Manufacturing

With respect to subject merchandise to which value was added in the

United States prior to sale to unaffiliated U.S. customers (e.g.,

cement that was imported and further processed into finished concrete

by U.S. affiliates of foreign exporters), we preliminarily determined

that the special rule for merchandise with value added after

importation under section 772(e) of the Act was applicable.

Section 772(e) of the Act provides that, where the subject

merchandise is imported by an affiliated person and the value added in

the United States by the affiliated person is likely to exceed

substantially the value of the subject merchandise, we shall determine

the CEP for such merchandise using the price of identical or other

subject merchandise if there is a sufficient quantity of sales to

provide a reasonable basis for comparison and we determine that the use

of such sales is appropriate. If there is not a sufficient quantity of

such sales or if we determine that using the price of identical or

other subject merchandise is not appropriate, we may use any other

reasonable basis to determine the CEP.

To determine whether the value added is likely to exceed

substantially the value of the subject merchandise, we estimated the

value added based on the difference between the averages of the prices

charged to the first unaffiliated purchaser for the merchandise as sold

in the United States and the averages of the prices paid for subject

merchandise by the affiliated person. Based on this analysis, we

estimate that the value added was at least 65 percent of the price

charged to the first unaffiliated purchaser for the merchandise as sold

in the United States. Therefore, we have preliminarily determined that

the value added is likely to exceed substantially the value of the

subject merchandise. Accordingly, for purposes of

[[Page 48473]]

determining dumping margins for these sales, we have used the weighted-

average CEP calculated on sales of identical or other subject

merchandise sold to unaffiliated persons. No other adjustments to EP or

CEP were claimed or allowed.

Normal Value

In order to determine whether there was a sufficient volume of

sales in the home market to serve as a viable basis for calculating NV,

we compared respondent's volume of home market sales of the foreign

like product to the volume of U.S. sales of the subject merchandise in

accordance with section 773(a)(1)(C) of the Act. Since respondent's

aggregate volume of home market sales of the foreign like product was

greater than five percent of its aggregate volume of U.S. sales for the

subject merchandise, we determined the home market was viable.

Therefore, we have based NV on home market sales.

In particular, we based NV on home market sales of Type I cement by

CEMEX and CDC. The statute expresses a preference for matching U.S.

sales to identical merchandise in the home market. However, in

situations where identical product types cannot be matched, the statute

expresses a preference for basing NV on sales of similar merchandise.

See section 773(a)(1)(B) and 771(16) of the Act. The history of this

order demonstrates that, of the various types of cement subject to the

order on Mexican cement, Type I cement is most similar to Type II and

Type V cement, and pozzolanic cement is the least similar.

During the POR, CDC only sold one type of cement in Mexico subject

to the antidumping order--Type I cement. CEMEX, on the other hand, sold

four basic types of cement in Mexico during the POR--Type I, Type II,

Type V and pozzolanic. However, prior to the commencement of

verification, CEMEX notified the Department that the merchandise

produced at its Hidalgo plant was either Type V or Type I, although all

data from this plant was reported as relating to sales or production of

only Type I cement. See CEMEX's June 3, 1998, submission explaining the

discovery of mis-reported sales at Hidalgo. In other words, a certain

portion of the cement sold as Type I from this plant was actually Type

V. CEMEX filed a submission on June 16, 1998, revising the home market

sales database for sales of Type V cement from Hidalgo. The Department

issued a letter on June 25, 1998, rejecting the filing as an untimely

response to the Department's questionnaire under section 351.201(b)(2).

Section 776(a) of the Act requires that the Department use facts

otherwise available when necessary information is not on the record, or

an interested party withholds requested information, fails to provide

such information in a timely manner, significantly impedes a

proceeding, or provides information that cannot be verified. Section

776(b) of the Act authorizes the Department to use an adverse inference

in determining the facts otherwise available whenever an interested

party has failed to cooperate with the Department by not acting to the

best of its ability to comply with requests for information.

Since the Department was notified that the information on the

record regarding sales of cement produced at Hidalgo is inaccurate, we

determined that these sales do not provide an appropriate basis for

calculating NV. In short, our sales and cost database for cement

produced at Hidalgo is extremely flawed. Therefore, in accordance with

section 776(b) of the statute, the Department, as facts available, is

substituting the highest calculated NV in this review for all sales of

cement produced at Hidalgo.

As for CEMEX's home market sales of Type II and Type V cement, and

certain home market sales of Type I cement, during the POR, the

Department has preliminarily determined that they are outside the

ordinary course of trade. As more fully described in the ``Ordinary

Course of Trade'' section of this notice, these sales are not

representative of CEMEX's home market sales. See also Memorandum from

Roland L. MacDonald to Joseph A. Spetrini (August 31, 1998).

Where appropriate, we adjusted home market sales of Type I cement

for discounts, credit expenses, inland freight, and inland insurance.

We also adjusted the starting price for billing adjustments to the

invoice price. In addition, in accordance with section 773(a)(6), we

deducted home market packing costs and added U.S. packing costs.

We made adjustments, where appropriate, for physical differences in

merchandise (DIFMER) in accordance with section 773(a)(6)(C)(ii) of the

Act. For CDC's sales, we calculated a DIFMER adjustment using plant-

specific cost data reported by CDC. For sales made by CEMEX, we

preliminarily determine, in accordance with section 776 of the Act,

that the use of partial facts available for a DIFMER adjustment is

appropriate. For the reasons discussed below we have preliminarily

determined that the most appropriate basis for a facts available DIFMER

is the actual cost differences in producing Type I cement sold in the

home market and Type V cement sold in the U.S. market. As facts

available, and in order to minimize the effect of varying plant

efficiencies, the Department has compared CEMEX's variable costs of

manufacturing (VCOM) to produce cement at the Hermosillo plants (sold

as Types I, II, and V) with the lowest VCOM reported by a CEMEX Type I

facility. This calculation is based upon the same methodology used to

calculate a DIFMER adjustment for CEMEX in the sixth review (see Final

Results of Administrative Review: Gray Portland Cement and Clinker from

Mexico, 63 FR 12764, 12778 (March 16, 1998)), and results in an upward

adjustment to home market prices.

As stated above, section 776(a) of the Act authorizes the

Department to use facts otherwise available when necessary information

is not on the record, or an interested party withholds requested

information, fails to provide such information in a timely manner,

significantly impedes a proceeding, or provides information that cannot

be verified. In the instant review, the Department first requested

DIFMER information from CEMEX on September 25, 1997. CEMEX was asked to

base its DIFMER calculations on differences in physical characteristics

between Type I cement sold in Mexico and the type of cement being

exported to the United States. CEMEX did not supply DIFMER information

in response to this request. On February 17, 1998, in a supplemental

questionnaire, the Department requested for the second time that CEMEX

submit DIFMER information. On March 20, 1998, CEMEX reported the

variable cost information for Type I cement at 11 plants, and

information for Type V cement for the Campana and Yaqui facilities. On

April 4, 1998, the Department requested interested parties to submit

information to assist the Department in determining the most

appropriate basis for a DIFMER adjustment in the instant review. In

response, CEMEX stated that there were no physical differences between

Types I and V cement produced in the home market; therefore, it

withdrew its request for a DIFMER adjustment in the instant review. In

addition, the Department did not receive any additional information

from interested parties demonstrating the most appropriate basis for a

DIFMER adjustment.

The Department has determined that the DIFMER information filed by

CEMEX on April 20, 1998, and April 27, 1998, (withdrawing its request

for a DIFMER adjustment) is contrary to the

[[Page 48474]]

data reported by CEMEX in its December 8, 1997, and March 20, 1998,

submissions in the reported VCOMH and VCOMU fields. The existing data

and product information on the record indicates that there are

differences in the physical characteristics of Type I cement and Type V

cement. These physical differences were originally made apparent in

CEMEX's reported variable manufacturing costs of producing Type I and

Type V cement in the home market. In addition, CEMEX's statement on

April 20, 1998, is contrary to the facts placed on the record of prior

reviews (currently on the record of the instant review), wherein CEMEX

states that there are differences in the physical characteristics of

Type I and V cement which contribute to a difference in the production

costs of the two types of cement. Based on the fact that record

evidence indicates that there are physical differences between Type I

and Type V cement and the fact that interested parties did not submit

viable bases for a DIFMER adjustment, the Department has calculated a

DIFMER adjustment based upon facts otherwise available.

The Department preliminarily determines that CEMEX's reported

DIFMER information, which is flawed and inconsistent with other facts

on the record of this case, is unusable. Furthermore, it is not

appropriate to use other information on the record as a basis for a

DIFMER adjustment. We determined in the fifth administrative review

that it is not appropriate to use the weighted-average VCOM of all

plants producing Type I and the VCOM of the U.S. merchandise due to

efficiency differences between plants. Thus, we relied in that review

on the purported VCOM differences for merchandise produced at Yaqui,

under the assumption that Yaqui produced both physically Type I and

physically Type II cement. In the final results of the sixth

administrative review, we determined that Yaqui and Campana only

produced a physically Type V cement and not other types of cement.

Therefore, we calculated a DIFMER utilizing the most efficient plant

producing Type I cement as compared to the plants producing solely Type

V. However, in the current review the evidence on the record indicates

that any differences in the variable cost of manufacturing cement is

attributable, at least in a large part, to differences in plant

efficiencies. See Home Market Sales Verification Report dated August

21, 1998. In addition, the record evidence indicates, and CEMEX has

argued in various submissions, that differences in costs due to plant

efficiencies cannot be isolated from other variable costs to calculate

a DIFMER consistent with section 773(a)(6) of the statute. Because of

different plant efficiencies, the Department is unable to compare the

variable costs at the Yaqui and Campana facilities with the average

variable costs at CEMEX's numerous facilities producing Type I cement.

Therefore, as facts available, and in order to minimize the effect of

varying plant efficiencies, the Department has compared CEMEX's VCOM to

produce cement at the Hermosillo plants (sold as Types I, II, and V but

are physically Type V) with the lowest variable costs reported by a

CEMEX Type I facility. This calculation is based upon the same

methodology used to calculate a DIFMER adjustment for CEMEX in the

sixth review and results in an upward adjustment to home market prices.

Additionally, consistent with our prior practice, we have applied to

CDC's home market sales a calculated DIFMER based upon plant-specific

reported data.

A. Arm's-Length Sales

Sales to affiliated customers in the home market not made at arm's

length were excluded from our analysis. To test whether these sales

were made at arm's length, we compared the starting prices of sales to

affiliated and unaffiliated customers, net of all movement charges,

direct selling expenses, discounts and packing. Where the price to the

affiliated party was on average 99.5 percent or more of the price to

the unaffiliated parties, we determined that the sales made to the

affiliated party were at arm's length.

B. Cost of Production Analysis

Petitioner alleged, on January 9, 1998, that CEMEX and its

affiliate, CDC, sold gray portland cement and clinker in the home

market at prices below their cost of production (COP.) Based on these

allegations, the Department determined, on February 3, 1998, that it

had reasonable grounds to believe or suspect that CEMEX had sold the

subject merchandise in the home market at prices below the COP.

Therefore, pursuant to section 773(b)(1) of the Act, we initiated a COP

investigation in order to determine whether CEMEX and CDC made home

market sales during the POR at prices below their COP.

In accordance with section 773(b)(3) of the Act, we calculated an

average monthly COP based on the sum of the costs of materials and

fabrication employed in producing the foreign like product plus

selling, general and administrative (SG&A) expenses and all costs and

expenses incidental to placing the foreign like product in condition

ready for shipment. In our COP analysis, we used the home market sales

and COP information provided by the respondent in its questionnaire

responses.

After calculating an average monthly COP, we tested whether home

market sales of cement were made at prices below COP within an extended

period of time in substantial quantities and whether such prices permit

recovery of all costs within a reasonable period of time. We compared

model-specific average monthly COPs to the reported home market prices

less any applicable movement charges, discounts and rebates. In

determining whether to disregard home market sales made at prices below

the average COP, we examined (1) whether, within an extended period of

time, such sales were made in substantial quantities, and (2) whether

such sales were made at prices which permitted the recovery of all

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

Pursuant to section 773(b)(2)(C) of the Act, because less than 20

percent of the respondent's sales of the foreign like product under

consideration for the determination of NV were at prices less than COP,

we did not disregard any below-cost sales of the product.

C. Inflation

Mexico experienced significant inflation during the POR, as

measured by the consumer price index published in International

Financial Statistics and the consumer price index from the Bank of

Mexico. This data indicated that the annual inflation rate in Mexico

during the POR exceeded 40 percent. In accordance with our practice, to

avoid the distortions caused by the effects of this level of inflation

in prices, we limited our comparisons to sales in the same month. See

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

Steel Concrete Reinforcing Bars from Turkey 62 FR 9738 (March 4, 1997).

When the rate of home market inflation is significant, as it is in this

case, it is important that we use as a basis for NV home market prices

that are as contemporaneous as possible with the date of the U.S. sale.

This is to minimize the extent to which calculated dumping margins are

overstated or understated solely due to price inflation that occurred

in the intervening time period between the U.S. and home market sales.

We have also used monthly cost of production data for this reason.

[[Page 48475]]

D. Currency Conversion

The Department's preferred source for daily exchange rates is the

Federal Reserve Bank. For purposes of the preliminary results, we made

currency conversions based on the official exchange rates in effect on

the dates of the U.S. sales as certified by the Federal Reserve Bank of

New York pursuant to section 773(a) of the Act.

Section 773A(a) directs the Department to use a daily exchange rate

in order to convert foreign currencies into U.S. dollars, ignoring any

``fluctuations.'' We determine that a fluctuation exists when the daily

exchange rate differs from a bench mark rate by 2.25 percent or more.

The benchmark rate is defined as the rolling average of the rates for

the past 40 business days as reported by the Federal Reserve Bank of

New York. When we determine that a fluctuation existed, we substitute

the benchmark rate for the daily rate. For a complete discussion of the

Department's exchange rate methodology, see Change in Policy Regarding

Currency Conversions, 61 FR 9434 (March 8, 1996).

E. Produced As vs. Sold As

Section 771(16)(A) of the Act expresses a clear preference for

matching sales in the United States with sales in the home market of

merchandise that is ``identical in physical characteristics.'' See

CEMEX, S.A. v. United States, 133 F.3d 897 (Fed. Cir. 1998). When

circumstances require the Department to compare non-identical

merchandise, the statute, at section 773(a)(6)(C)(ii) of the Act,

provides for an adjustment for price differences attributable to

differences in physical characteristics.

Since the inception of this proceeding, we have seen that all

cement generally conforms to the standards established by the ASTM.

These standards tend to classify cement according to its physical

characteristics, dimensional characteristics, and/or performance

properties. Also from the outset, interested parties and the Department

have used ASTM standards to identify merchandise subject to this

antidumping order and to inform how, and on what basis, we match sales

of identical or similar merchandise. Specifically, the Department has

sought, wherever possible, to match sales of ASTM standard Type II to

Type II, ASTM standard Type V to Type V, and so forth.

During the period covered by the original investigation, the

Department discovered one or more instances where Mexican producers

sold cement meeting one ASTM standard as if it were cement meeting a

lower (included) ASTM standard. However, in the final determination,

the Department described these sales as a mistake and not ``the

ordinary practice in the industry.'' Final Determination of Sales at

Less Than Fair Value, Gray Portland Cement and Clinker from Mexico, 55

FR 29244, 29248 (1990). Therefore, based on the fact that it was the

normal industry practice to produce and sell on the same basis, the

Department accepted that ``matching by ASTM standard was the most

reasonable basis for making equitable identical merchandise

comparisons.'' Id. at 29248.

Devising a methodology for matching sales is often a difficult task

and the courts have recognized that the Department has broad discretion

``to choose the manner in which * * * merchandise shall be selected.''

Koyo Seiko Co. v. United States, 66 F.3d 1204, 1209 (Fed. Cir. 1995).

We have sought, throughout each of the past seven reviews, including

the present one, to (i) match based on physical characteristics, (ii)

rely on ASTM standards to distinguish one type of cement from another,

and (iii) rely on sales documentation as a convenient surrogate for

more direct evidence (e.g., mill test certificates) of cement type.

In the instant review, the Department requested CEMEX to report

home market and U.S. sales data on both an ``as produced'' basis (i.e.,

reporting the physical properties of each product sold), and on an ``as

sold'' basis. CEMEX reported that it produced cement meeting the

physical specifications of Type V cement, and sold this cement in the

home market as Types I, II, and V cement. This Type V cement was

produced by CEMEX's Yaqui and Campana plants, which are located in the

Hermosillo region. CEMEX noted, and the record reflects, that Yaqui and

Campana are the only two CEMEX plants which, on a consistent basis,

produce cement meeting the physical requirements of one type of cement

and sell that cement as another type of cement.

Under these circumstances, we believe it would be unreasonable to

match merchandise on a ``sold as'' basis. First, it would make any cost

of production or DIFMER calculations more difficult, if not impossible.

Moreover, such an approach would not address any sales that were merely

labeled ``gray portland cement'' or ``cement.'' Finally, a ``sold as''

approach would lend itself to the type of product manipulation about

which petitioner has so often expressed concern. Therefore, for

purposes of the instant review, the Department has matched based on the

products as produced.

F. Ordinary Course of Trade

Section 773(a)(1)(B) of the Act requires the Department to base NV

on ``the price at which the foreign like product is first sold (or in

the absence of sales, offered for sale) for consumption in the

exporting country, in the usual commercial quantities and in the

ordinary course of trade.'' Ordinary course of trade is defined as

``the conditions and practices 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 purpose of the ordinary course of trade provision ``is to

prevent dumping margins from being based on sales which are not

representative'' of the home market. Monsanto Co. v. United States, 698

F. Supp. 275, 278 (CIT 1988). By basing the determination of NV upon

representative sales, the provision helps to ensure that the comparison

between NV and U.S. sales is done on an ``apples to apples'' basis.

Apart from identifying certain sales that are below cost (section

773(b)(1)) or between affiliated persons (section 773(f)(2)), Congress

has not specified any criteria that the Department should use in

determining the appropriate ``conditions and practices'' which are

``normal in the trade under consideration.'' Therefore, ``Commerce, in

its discretion, chooses how best to analyze the many factors involved

in a determination of whether sales are made within the ordinary course

of trade.'' Thai Pineapple Public Co. v. United States, 946 F. Supp.

11, 14-17 (CIT 1996).

The Department's ordinary course of trade inquiry is far-reaching.

It evaluates not just `` `one factor taken in isolation but rather * *

* all the circumstances particular to the sales in question.' '' Murata

Mfg. Co. v. United States, 820 F. Supp. 603, 607 (CIT 1993). In short,

we examine the totality of the facts in each case to determine if sales

are being made for ``unusual reasons'' or under ``unusual

circumstances.'' Electrolytic Manganese Dioxide from Japan; Final

Results of Antidumping Duty Administrative Review, 58 FR 28551, 28552

(1993).

In the second administrative review of this order, the Department

determined that CEMEX's sales of Type II and Type V cement were outside

the ordinary course of trade and, therefore, could not be used in the

calculation of NV (then referred to as ``foreign market value''). See

Gray Portland Cement and Clinker

[[Page 48476]]

from Mexico: Final Results of Antidumping Duty Administrative Review,

58 FR 47253, 27254 (Sept. 8, 1993). In making this determination, the

Department considered, inter alia, shipping distances and costs, sales

volume, profit levels, sales history, home market demand and the

promotional aspect of sales. See Decision Memorandum to Joseph A.

Spetrini, August 31, 1994; see also Memorandum from Holly A. Kuga to

Joseph A. Spetrini, August 31, 1993 (public versions of these memoranda

are on file in Room B-099 of the Department's main building). Based

upon similar facts and using a similar analysis, the Department reached

the same conclusion in the final results of the fifth and sixth

administrative reviews for certain sales of Type II and Type V cement

by CEMEX in Mexico. Gray Portland Cement and Clinker from Mexico: Final

Results of Antidumping Duty Administrative Review, 62 FR 17148, 17151

(April 9 1997); Gray Portland Cement and Clinker from Mexico: Final

Results of Antidumping Duty Administrative Review 63 FR 12764, 12768

(March 16, 1998).

In the instant review, the petitioner alleged, as it did in the

second, fifth, and sixth reviews, that CEMEX's sales of Type II and V

(produced solely as Type V from the Hermosillo region) cement in Mexico

were outside the ordinary course of trade. Pursuant to section

773(a)(1)(B) of the Act, the Department has examined the totality of

the circumstances surrounding CEMEX's sales of cement in Mexico that

are produced as Type V cement and marketed as Types I, II, and V (which

are identical in physical characteristics to the cement that CEMEX

sells in the United States). Therefore, based on petitioner's

allegation and the relevant findings in the prior review, the

Department determined that it had reasonable grounds to believe or

suspect that CEMEX's home market sales of cement meeting the physical

specifications of Type V cement were outside the ordinary course of

trade.

A full discussion of our preliminary conclusions, requiring

reference to proprietary information, is contained in a Departmental

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: (i) the volume of Type V home market

sales is extremely small compared to sales of other cement types, (ii)

the number and type of customers purchasing Type V cement is

substantially different from other cement types, (iii) shipping

distances and freight costs for Type V home market sales tends to be

significantly greater than for sales of other cement types, and (iv)

CEMEX's profit on Type V sales tends to be small in comparison to its

profits on other cement types.

There are two other factors, historical sales trends and the

``promotional quality'' of Type V cement sales, which were considered

by the Department in the second administrative review. On September 25,

1997, the Department issued a questionnaire requesting CEMEX to support

its position that home market sales of Type V cement were in the

ordinary course of trade by addressing, among other things,

``historical sales trends'' and ``marketing reasons for sales other

than profit.'' CEMEX's response (copies of its submission from the

fifth and sixth administrative reviews) failed to address these two

items. Thus, as facts available, the Department finds that the facts

regarding these items have not changed since the second review and

that: (i) CEMEX did not sell Type V cement 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 (ii) sales of Type V

cement continue to exhibit a promotional quality that is not evidenced

in CEMEX's ordinary sales of cement (see memorandum from Holy A. Kuga

to Joseph A. Spetrini, dated August 31, 1993). A public version of this

memorandum is on file in room B-099 of the Department's main building.

For the reasons stated above, the Department has preliminarily

determined that CEMEX's home market sales of Type V cement during the

review period were outside the ordinary course of trade. We note that

the facts established in the record of this review are very similar to

the facts which led the Department to determine in the second, fifth

and sixth reviews that home market sales of Type V cement were outside

the ordinary course of trade. The determination involving the second

review, as noted above, was affirmed by the CIT in the CEMEX case. Slip

Op. 95-72 at 14.

In conclusion, the decision to exclude sales of Type V cement from

the calculation of NV centers around the unusual nature and

characteristics of these sales compared to the vast majority of CEMEX's

other home market sales. Based upon these differences, the Department

has preliminarily determined that they are not representative of

CEMEX's home market sales. Stated differently, these sales were not

within CEMEX's ordinary course of trade.

F. Fictitious Market

Petitioner has also claimed that CEMEX established a fictitious

market in Mexico for its sales of ``Type II'' cement. Since the sales

in question have preliminarily been found to be outside the ordinary

course of trade and, accordingly, will not be used in the calculation

of NV, it is not necessary for us to address this issue for these

preliminary results.

G. Level of Trade/CEP Offset

In accordance with section 773(a)(1)(B) of the Act, to the extent

practicable, we determine NV based on sales in the comparison market at

the same level of trade as the EP or CEP. The NV level of trade is that

of the starting-price sales in the comparison market, or, when NV is

based on constructed value (CV), that of sales from which we derive

selling, general and administrative (SG&A) expenses and profit. For EP,

the U.S. level of trade is also the level of the starting-price sale,

which is usually from exporter to importer. For CEP, it is the level of

the constructed sales from the exporter to the importer.

To determine whether NV sales are at a different level of trade

than EP or CEP, we examine stages in the marketing process and selling

functions along the chain of distribution between the producer and the

unaffiliated customer. If the comparison-market sales are at a

different level of trade, and the difference affects price

comparability, as manifested in a pattern of consistent price

differences between the sales on which NV is based and comparison-

market sales at the level of trade of the export transaction, we make a

level of trade adjustment under section 773(a)(7)(A) of the Act.

Finally, for CEP sales, if the NV level is more remote from the factory

than the CEP level and there is no basis for determining whether the

difference in the levels between NV and CEP affects price

comparability, we adjust NV under section 773(a)(7)(B) of the Act (the

CEP offset provision). See Notice of Final Determination of Sales at

Less Than Fair Value: Certain Cut-to-Length Carbon Steel Plate from

South Africa, 62 FR 61971 (November 19, 1997).

First, based upon a review of the selling functions performed by

CEMEX and CDC along the chain of distribution, we have determined that

CEMEX's and CDC's Type I home market sales are at different levels of

trade. Second, we determined that CEMEX's and CDC's Type I home market

sales are also at different levels of trade from CEMEX's CEP sales and

CDC's CEP and EP sales.

[[Page 48477]]

For a complete discussion of the Department's LOT analysis, see

Memorandum to the File regarding Level of Trade, dated August 31, 1998.

In summary, we found that: (1) there are quantitative and qualitative

differences in the selling functions performed by CEMEX in the home

market as compared to CEMEX's CEP sales, CDC's CEP sales, and CDC's EP

sales; (2) there are also quantitative and qualitative differences in

the selling functions performed by CDC in the home market as compared

to CEMEX's CEP sales, CDC's CEP sales, and CDC's EP sales; (3) each of

the above-mentioned levels of trade are separate and distinct levels;

(4) we do not have information which would allow us to examine pricing

patterns based on CEMEX's or CDC's sales of other products at the same

level as the U.S. CEP sales (CEMEX and CDC) or U.S. EP sales (CDC) to

make a level of trade adjustment; and (5) we have determined that

CEMEX's NV and CDC's NV are at more advanced levels of trade than

CEMEX's CEP and CDC's CEP level of trade. Therefore, in accordance with

section 773(a)(7)(B) of the Act, we granted a CEP offset for CEP sales

made by CEMEX and CDC. As stated above in point (2) we determined that

CDC's EP sales are at a different level of trade as compared to CEMEX's

home market and CDC's home market sales, however we made no similar

offset, since neither the Act nor the regulations envision this type of

adjustment for EP sales. Finally, record evidence indicates that CEMEX

and CDC sell physically different products in the U.S. market. In other

words, CEMEX sells physically Type V cement in the U.S., whereas CDC

sells physically Type II cement. Therefore, for purposes of this

administrative review, we have determined that the most accurate means

of comparison would be on a company-specific basis. For purposes of our

margin calculation, we compared CEMEX's home market sales to CEMEX's

CEP sales, and we compared CDC's home market sales to CDC's CEP and EP

sales. This approach allows us to calculate the most accurate DIFMER

adjustment. See DIFMER section of notice above.

Preliminary Results of Review

As a result of our review, we preliminarily determine the dumping

margin for CEMEX for the period August 1, 1996, through July 31, 1997,

to be 56.89 percent. Interested parties may request disclosure within

five days of the date of publication of this notice. Any interested

party may request a hearing within 30 days of publication. Any hearing,

if requested, will be held 44 days after the date of publication or the

first business day thereafter. Case briefs and/or other written

comments from interested parties may be submitted not later than 30

days after the date of publication. Rebuttal briefs and rebuttals to

written comments, limited to issues raised in those comments, may be

filed not later than 37 days after the date of publication of this

notice. The Department will publish its final results of this

administrative review, including its analysis of issues raised in any

written comments or at a hearing, not later than 180 days after the

date of publication of this notice.

Upon completion of this review, the Department shall determine, and

the Customs Service shall assess, antidumping duties on all appropriate

entries. The Department will issue appropriate appraisement

instructions directly to the Customs Service upon completion of this

review. The final results of this review shall be the basis for the

assessment of antidumping duties on entries of merchandise covered by

the determination and for future deposits of estimated duties. We will

base the assessment of antidumping duties on the entered value of the

covered merchandise.

Furthermore, the following deposit requirements will be effective

for all shipments of the subject merchandise entered, or withdrawn from

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

final results of review, as provided by section 751(a)(1) of the Act:

(1) The cash deposit rate for the reviewed company will be the rate

determined in the final results of review; (2) for previously reviewed

or investigated companies not mentioned above, the cash deposit rate

will continue to be the company-specific rate published for the most

recent period; (3) if the exporter is not a firm covered in this

review, a prior review, or in the original LTFV investigation, but the

manufacturer is, the cash deposit rate will be the rate established for

the most recent period for the manufacture of the merchandise; and (4)

the cash deposit rate for all other manufacturers or exporters will be

61.85 percent, the all others rate from the LTFV investigation.

These deposit requirements, when imposed, shall remain in effect

until publication of the final results of the next administrative

review. This notice also serves as a preliminary reminder to importers

of their responsibility under 19 CFR 351.402(f) to file a certificate

regarding the reimbursement of antidumping duties prior to liquidation

of the relevant entries during this review period. Failure to comply

with this requirement could result in the Secretary's presumption that

reimbursement of antidumping duties occurred and the subsequent

assessment of double dumping duties.

This administrative review and notice are in accordance with

sections 751(a)(1) and 777(i)(1) of the Act.

Dated: August 31, 1998.

Joseph A. Spetrini,

Acting Assistant Secretary for Import Administration.

[FR Doc. 98-24347 Filed 9-9-98; 8:45 am]

BILLING CODE 3510-DS-P