Professional Electric Cutting Tools From Japan: Preliminary Results of Antidumping Duty Administrative Review and Intent To Revoke Order in Part

DEPARTMENT OF COMMERCE

International Trade Administration

[A-588-823]

Professional Electric Cutting Tools From Japan: Preliminary

Results of Antidumping Duty Administrative Review and Intent To Revoke

Order in Part

AGENCY: Import Administration, International Trade Administration, U.S.

Department of Commerce.

ACTION: Notice of preliminary results of antidumping duty

administrative review and intent to revoke order in part.

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SUMMARY: In response to a request by the respondents, Makita

Corporation and Makita U.S.A., Inc., the U.S. Department of Commerce is

conducting an administrative review of the antidumping duty order on

professional electric cutting tools from Japan. The period of review is

July 1, 1997, through June 30, 1998.

We have preliminarily found that no sales of subject merchandise

have been made below normal value. If these preliminary results are

adopted in our final results of administrative review, we will instruct

the Customs Service not to assess antidumping duties on the subject

merchandise exported by Makita Corporation. Furthermore, if these

preliminary results are adopted in our final results of this

administrative review, we intend to revoke the antidumping duty order

with respect to Makita Corporation, based on three consecutive review

periods of sales at not less than normal value (see 19 CFR

351.222(b)(i)). See Intent to Revoke section of this notice.

EFFECTIVE DATE: August 10, 1999.

FOR FURTHER INFORMATION CONTACT: Brian Smith, at (202) 482-1766,

Barbara Wojcik-Betancourt at (202) 482-0629, or Brian Ledgerwood, at

(202) 482-3836, Import Administration, International Trade

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

Constitution Avenue, Washington, DC 20230.

SUPPLEMENTARY INFORMATION:

The 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, as amended

(``the Act''), by the Uruguay Round Agreements Act (``URAA''). In

addition, unless otherwise indicated, all references are made to the

U.S. Department of Commerce's (``the Department's'') final regulations

at 19 CFR Part 351 (1998).

Case History

On July 12, 1993, the Department published in the Federal Register

an antidumping duty order on professional electric cutting tools from

Japan. See 58 FR 37461. On July 1, 1998, the Department published a

notice providing an opportunity to request an administrative review of

this order for the period July 1, 1997, through June 30, 1998 (63 FR

35909). On July 24, 1998, we received a timely request for an

administrative review from Makita Corporation (``Makita Japan'') and

Makita U.S.A. Inc. (``Makita USA''), Makita Japan's affiliated selling

agent in the United States. In addition, Makita

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Japan and Makita USA (hereafter ``Makita'' when referenced

collectively) requested that the Department revoke the antidumping duty

order with respect to Makita. On August 27, 1998, we published the

notice of initiation of this review (63 FR 45796).

On August 31, 1998, we issued an antidumping questionnaire to

Makita. Because the Department disregarded sales below the cost of

production (``COP'') in the last completed review (see Notice of Final

Results of Fourth Antidumping Duty Review: Professional Electric

Cutting Tools from Japan, 63 FR 54441 (October 9, 1998)), the

Department had reasonable grounds to believe or suspect that sales of

the foreign like product under consideration for the determination of

normal value (``NV'') in this review may have been made at prices below

the COP as provided by section 773(b)(2)(A)(ii) of the Act. Therefore,

pursuant to section 773(b)(1) of the Act, we initiated an investigation

to determine whether Makita Japan made home market sales during the POR

at prices below its COP, and required Makita Japan to respond to the

COP section of the questionnaire issued in August 1988.

The Department received the questionnaire responses in October

1998. We issued supplemental questionnaires in January 1999. We

received responses to these questionnaires in February 1999. Because

Makita requested revocation of the order, the Department verified the

company's response pursuant to section 782(i)(2) of the Act.

In December 1998, the Department requested submissions of factual

information regarding revocation of the antidumping order in part. Such

submissions were received from the petitioner and Makita in February

and March, 1999, and were also verified by the Department.

On March 5, 1999, the Department published a notice postponing the

preliminary results of this review until August 2, 1999 (64 FR 10621).

Scope of Review

Imports covered by this review are shipments of professional

electric cutting tools (``PECTs'') from Japan. PECTs may be assembled

or unassembled, and corded or cordless.

The term ``electric'' encompasses electromechanical devices,

including tools with electronic variable speed features. The term

``assembled'' includes unfinished or incomplete articles, which have

the essential characteristics of the finished or complete tool. The

term ``unassembled'' means components which, when taken as a whole, can

be converted into the finished or unfinished or incomplete tool through

simple assembly operations (e.g., kits).

PECTs have blades or other cutting devices used for cutting wood,

metal, and other materials. PECTs include chop saws, circular saws, jig

saws, reciprocating saws, miter saws, portable bank saws, cut-off

machines, shears, nibblers, planers, routers, joiners, jointers, metal

cutting saws, and similar cutting tools.

The products subject to this order include all hand-held PECTs and

certain bench-top, hand-operated PECTs. Hand-operated tools are

designed so that only the functional or moving part is held and moved

by hand while in use, the whole being designed to rest on a table top,

bench, or other surface. Bench-top tools are small stationary tools

that can be mounted or placed on a table or bench. These are generally

distinguishable from other stationary tools by size and ease of

movement.

The scope of the PECTs order includes only the following bench-top,

hand-operated tools: cut-off saws; PVC saws; chop saws; cut-off

machines, currently classifiable under subheading 8461 of the

Harmonized Tariff Schedule of the United States (HTSUS); all types of

miter saws, including slide compound miter saws and compound miter

saws, currently classifiable under subheading 8465 of the HTSUS; and

portable band saws with detachable bases, also currently classifiable

under subheading 8465 of the HTSUS.

This order does not include: professional sanding/grinding tools;

professional electric drilling/fastening tools; lawn and garden tools;

heat guns; paint and wallpaper strippers; and chain saws, currently

classifiable under subheading 8508 of the HTSUS.

Parts or components of PECTs when they are imported as kits, or as

accessories imported together with covered tools, are included within

the scope of this order.

``Corded'' and ``cordless'' PECTs are included within the scope of

this order. ``Corded'' PECTs, which are driven by electric current

passed through a power cord, are, for purposes of this order, defined

as power tools which have at least five of the following seven

characteristics:

1. The predominate use of ball, needle, or roller bearings (i.e., a

majority or greater number of the bearings in the tool are ball,

needle, or roller bearings);

2. Helical, spiral bevel, or worm gearing;

3. Rubber (or some equivalent material which meets UL's

specifications S or SJ) jacketed power supply cord with a length of 8

feet or more;

4. Power supply cord with a separate cord protector;

5. Externally accessible motor brushes;

6. The predominate use of heat treated transmission parts (i.e., a

majority or greater number of the transmission parts in the tool are

heat treated); and

7. The presence of more than one coil per slot armature.

If only six of the above seven characteristics are applicable to a

particular ``corded'' tool, then that tool must have at least four of

the six characteristics to be considered a ``corded'' PECT.

``Cordless'' PECTs, for the purposes of this order, consist of

those cordless electric power tools having a voltage greater than 7.2

volts and a battery recharge time of one hour or less.

PECTs are currently classifiable under the following subheadings of

the HTSUS: 8508.20.00.20, 8508.20.00.70, 8508.20.00.90, 8461.50.00.20,

8465.91.00.35, 85.80.00.55, 8508.80.00.65 and 8508.80.00.90. Although

the HTSUS subheading is provided for convenience and customs purposes,

the written description of the merchandise under review is dispositive.

This review covers one company, Makita, and the period July 1, 1997

through June 30, 1998.

Verification

As provided in section 782(i)(2) of the Act, we verified

information provided by Makita. We used standard verification

procedures, including on-site inspection of the manufacturer's

facilities and examination of relevant sales and financial records. Our

verification results are outlined in the verification reports placed in

the case file.

Duty Absorption

On September 24, 1998, the petitioner requested that the Department

determine whether antidumping duties had been absorbed during the POR.

Section 751(a)(4) of the Act provides for the Department, if requested,

to determine during an administrative review initiated two or four

years after the publication of the order, whether antidumping duties

have been absorbed by a foreign producer or exporter, if the subject

merchandise is sold in the United States through an affiliated

importer. In this case, Makita Japan sold to the United States through

an importer that is affiliated within the meaning of section 771(33) of

the Act.

[[Page 43348]]

Section 351.213(j)(2) of the Department's regulations provides that

for transition orders (i.e., orders in effect on January 1, 1995), the

Department will conduct duty absorption reviews, if requested, for

administrative reviews initiated in 1996 or 1998. Because the order

underlying this review was issued prior to January 1, 1995, and this

review was initiated in 1998, we will make a duty absorption

determination in this segment of the proceeding. As we have

preliminarily found that there is no dumping margin for Makita with

respect to its U.S. sales, we have also preliminarily found that there

is no duty absorption. See Preliminary Results of Antidumping

Administrative Review: Certain Hot-Rolled Lead and Bismuth Carbon Steel

Products from Germany, 64 FR 16703 (April 6, 1999).

Fair Value Comparisons

We compared the constructed export price (``CEP'') to the NV, as

described in the Constructed Export Price and Normal Value sections of

this notice. Pursuant to section 777A(d)(2) of the Act, we compared the

CEPs of individual transactions to contemporaneous monthly weighted-

average prices of sales of the foreign like product (where there were

sales that passed the COP test, as discussed in the Cost of Production

Analysis section below, and were otherwise in the ordinary course of

trade).

Product Comparisons

In accordance with section 771(16) of the Act, we considered all

products produced by Makita Japan covered by the description in the

Scope of the Review section, above, to be foreign like products for

purposes of determining appropriate product comparisons to U.S. sales.

We compared U.S. sales to sales made in the home market, where

appropriate, in a month within the contemporaneous window period, which

extends from three months prior to the U.S. sale until two months after

the sale. Where there were no sales of identical merchandise in the

home market made in the ordinary course of trade to compare to U.S.

sales, we compared U.S. sales to sales of the most similar foreign like

product made in the ordinary course of trade. In making the product

comparisons, we matched foreign like products based on the physical

characteristics reported by the respondents in the following order of

importance: configuration, capacity, number of battery cells, power,

speed, housing type and size.

Level of Trade/CEP Offset

In accordance with section 773(a)(7) of the Act, to the extent

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

the same level of trade (``LOT'') as the EP or CEP transaction. The NV

LOT is that of the starting-price sales in the comparison market or,

when NV is based on CV, that of the sales from which we derive selling,

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

sales, the U.S. LOT is also the level of the starting-price sale, which

is usually from the exporter to the importer. For CEP sales, it is the

level of the constructed sale from the exporter to the importer.

To determine whether NV sales are at a different LOT than EP or CEP

sales, we examine the 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 LOT, 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 LOT of

the export transaction, we make a LOT 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 61731 (November 19, 1997).

In order to determine whether Makita warrants a LOT adjustment or

CEP offset, as claimed, we compared the CEP sales to the HM sales in

accordance with the principles discussed above. For purposes of our

analysis, we examined information regarding the distribution systems in

both the United States and Japanese markets, including the selling

functions, classes of customers, and selling expenses for the company.

In this review, Makita Japan reported two channels of distribution

in the home market: (1) Sales made at the wholesale/distributor price

level; and (2) sales made at the dealer/retail price level. Makita

Japan based the channels of distribution on the entity (i.e.,

wholesaler, subwholesaler or retailers) in the distribution chain to

which Makita Japan had billed or shipped the merchandise. We

preliminarily determine that these sales constitute two LOTs in the

home market. As explained below, we found that while Makita Japan

performs some of the same selling functions for both distribution

channels, the level of activities performed varies.

Makita Japan reported only CEP sales in the U.S. market. For the

U.S. market, Makita reported three channels of distribution from Makita

USA to unaffiliated customers, as follows: (1) Sales made at the

wholesaler price level; (2) sales made at the retailer price level, and

(3) sales made directly to the end user. However, the LOT of the CEP

sales was based on sales made by Makita Japan to its wholly-owned U.S.

subsidiary, Makita USA. Because Makita Japan's sales to the United

States were all CEP sales made by an affiliated company, we considered

only the parent company's selling activities reflected in the price

after the deduction of expenses and profit, pursuant to section 772(d)

of the Act, and determined that they were the same for all three

reported channels of distribution. Therefore, we preliminarily

determine that all CEP sales constitute a single LOT in the United

States.

To determine whether sales in the comparison market were at a

different LOT than CEP sales, we first compared the relevant selling

functions performed in the different channels of distribution in the

home market. We then examined the relevant selling functions performed

at the CEP level and compared those selling functions to the selling

functions performed in each home market LOT.

Makita Japan reported thirteen separate selling functions which it

performed with respect to sales in the home market and five selling

functions performed in the United States at the CEP level (see chart in

Addendum 1 to Section A of Makita's October 26, 1998 questionnaire

response). The home market selling functions are: (1) Inventory

maintenance, (2) market research, (3) after sales service and

warranties, (4) technical advice, (5) advertising, (6) R&D/product

development, (7) freight/delivery arrangement, (8) procurement and

sourcing, (9) competitive pricing (offering discounts, rebates, and

other price incentives), (10) pricing negotiations with customers, (11)

sales calls and demonstrations, (12) interaction with end users, and

(13) processing of daily order updates.

In contrast, Makita Japan only performs the following selling

functions in the U.S. market: (1) Inventory maintenance, (2) technical

advice, (3) R&D/product development, (4) procurement and sourcing, and

(5)

[[Page 43349]]

processing daily order updates. Thus, Makita Japan performs eight

selling functions with respect to its home market channels of

distribution that it does not perform in the U.S. market. (See, Makita

Japan / Makita USA Sales and Cost Verification report dated July 9,

1999, at pages 24-33; hereafter ``Sales Verification Report.'')

In comparing the two home market LOTs claimed by Makita (i.e.,

wholesaler, subwholesaler or retailers), we noted that, although Makita

Japan performs some of the same selling functions in both LOTs, the

level of activities performed varies. For example, Makita Japan's

interaction with retailers is higher in the following sales functions

than for wholesalers and subwholesalers: inventory maintenance,

freight/delivery arrangements, and sales calls and demonstrations (see

Sales Verification Report at pages 24-33). Therefore, we preliminarily

determine that sales to wholesalers/subwholesalers and sales to

retailers constitute separate LOTs.

When we compare the CEP LOT to either the home market wholesale LOT

or the home market retail LOT, we note that there is only one selling

function which is similar in both function and level of activity

performed: R&D/product development (see Sales Verification Report at

pages 31-33). We noted at verification that of the five selling

functions performed in the United States, four of those functions

involved substantially less selling activity than in the home market.

For example, evidence reviewed at verification indicates that inventory

maintenance is an important function in the home market, where products

are frequently purchased (by both retailers and wholesalers/

subwholesalers) directly from inventory. In contrast, we found at

verification that inventory maintenance activities are minimal in the

U.S. market, since production is primarily requested through specific

purchase orders (i.e., produced to order). Similarly, with respect to

technical advice, procurement and sourcing, and processing of daily

order updates, we found that Makita Japan performs more significant

activities in the home market (for sales to both wholesalers and

retailers) than in the U.S. market (see Sales Verification Report at

pages 24--33). Based on our analysis of the selling functions, which

include differences in levels of activity performed, we find that both

home market LOTs are at a more advanced stage of distribution than that

of the CEP level. Therefore, we agree with Makita Japan's assertion

that there is no home market level equivalent to the CEP LOT.

Based on our verification findings and the data on this record, the

Department determines for the preliminary results that (1) significant

differences exist in the selling functions associated with each of the

two home market LOTs, and the CEP LOT, and (2) the CEP LOT is at a less

advanced stage of distribution than either home market LOT. Because

there is not a common LOT between the two home market and the CEP LOTs,

we were unable to quantify a LOT adjustment in accordance with section

773(a)(7)(A) of the Act. Consequently, we have granted Makita's request

for a CEP offset adjustment in accordance with section 773 (a)(7)(B) of

the Act (the CEP offset provision).

Constructed Export Price

We calculated CEP, in accordance with section 772(b) of the Act,

because the sale to the first unaffiliated purchaser took place after

importation to the United States. We based CEP on packed and delivered

prices to all unaffiliated purchasers in the United States. Where

appropriate, we added to the starting price revenues earned from drop-

ship fees. Where appropriate, we made deductions from the starting

price for discounts and rebates. We also made deductions, where

appropriate, for movement expenses in accordance with section

772(c)(2)(A) of the Act. These expenses included foreign and U.S.

inland freight, ocean freight, foreign and U.S. brokerage, and handling

expenses.

In accordance with section 772(d)(1) of the Act, we deducted from

CEP those direct and indirect selling expenses associated with Makita

Japan's economic activities occurring in the United States. These

expenses included credit expenses, inventory carrying costs, and other

indirect selling expenses. Finally, in accordance with section

772(d)(3) of the Act, we deducted from CEP an amount for profit.

Normal Value

1. Home Market Viability

In order to determine whether there is a sufficient volume of sales

in the home market to serve as a viable basis for calculating NV (i.e.,

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

is equal to or greater than five percent of the aggregate volume of

U.S. sales), we compared Makita Japan'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.

Because Makita Japan'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 that

the home market was viable, and, in accordance with section

773(a)(1)(B)(i) of the Act, we based NV on the prices at which the

foreign like products were first sold for consumption in Japan.

2. Affiliated-Party Transactions and Arm's-Length Test

It is the Department's practice, in situations where home market

sales are made to affiliated parties, to determine whether such sales

to affiliated parties are appropriate to use as the basis for

calculating NV (i.e., whether such sales are made at arm's-length

prices). See Final Results of Antidumping Duty Administrative Reviews,

Partial termination of Administrative Reviews, and Revocation in Part

of Antidumping Duty Orders; Antifriction bearings (Other Than Tapered

Roller Bearings) and Parts Thereof from France, et al., 60 FR 10899,

10900 (February 28, 1995) and 19 CFR 351.403(c). To test whether Makita

Japan's sales to affiliated parties were made at arm's-length prices,

we compared, on a model-specific basis, prices of sales to its

affiliated and unaffiliated customers at the same LOT net of all

movement charges, direct selling expenses, discounts, and packing.

Where, for the tested models, prices to the affiliated party were on

average 99.5 percent or more of the price to the unaffiliated parties,

we determined that sales made to the affiliated party were at arm's

length. See Final Results of Antidumping Duty Administrative Review;

Certain Welded Carbon Steel Pipes and Tubes from Thailand, 62 FR 5308,

53817 (October 16, 1997); 19 CFR 351.403(c); and Antidumping Duties;

Countervailing Duties; Final Rule, 62 FR 27296, 27355 (May 19, 1997)

(preamble to the Department's regulations). In this instance all sales

to affiliated parties passed the arm's-length test.

3. Cost-of-Production Analysis

As we stated above in the Case History section, because we

disregarded sales below the COP in the last completed segment of the

proceeding (i.e., the fourth administrative review), we had reasonable

grounds to believe or suspect that sales of the foreign like product

under consideration for the determination of NV in this review may have

been made at prices below the COP, as provided by section

773(b)(2)(A)(ii) of the Act. Therefore, pursuant to section 773(b)(1)

of the Act, we initiated a COP investigation of sales by Makita Japan

in the home market. We

[[Page 43350]]

conducted the COP analysis described below.

A. Calculation of COP

We calculated the COP based on the sum of Makita Japan's cost of

materials and fabrication for the foreign like product, plus amounts

for home market SG&A expenses and packing costs in accordance with

section 773(b)(3) of the Act. We generally relied on the COP

information provided by Makita Japan it its questionnaire responses.

However, based on our verification findings, we adjusted the reported

COP amounts to correct errors made in calculating cost of manufacturing

(``COM''), including factory overhead expenses (see Sales Verification

Report at page 5).

B. Test of Home Market Prices

We compared the weighted-average COP for Makita Japan, adjusted

where appropriate, to home market sales of the foreign like product as

required under section 773(b) of the Act. In determining whether to

disregard home market sales at prices below the 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. On a product-specific basis, we compared the COP to the home

market prices, less any applicable movement charges, discounts and

rebates.

C. Results of the COP Test

Pursuant to 773(b)(2)(C)(i) of the Act, where less than 20 percent

of the respondent's sales of a given product are at prices less than

the COP, we do not disregard any below-cost sales of that product

because we determine that the below-cost sales are not being made in

``substantial quantities.'' Where 20 percent or more of the

respondent's sales of a given product during the POI are at prices less

than the COP, we determine such sales to have been made in

``substantial quantities'' within an extended period of time in

accordance with section 773(b)(2)(B) of the Act. In such cases, because

we are comparing prices to POR-average costs, we also determine that

such sales are not made at prices which would permit recovery of all

costs within a reasonable period of time, in accordance with section

773(b)(2)(D) of the Act. Therefore, we disregard the below-cost sales.

In this case, we found that, for certain models of PECTs, more than

20 percent of Makita Japan's home market sales within an extended

period of time were at prices less than the COP. Further, the prices

did not provide for the recovery of costs within a reasonable period of

time. We therefore disregarded the below-cost sales and used the

remaining sales as the basis for determining NV, in accordance with

section 773(b)(1). For those U.S. sales of PECTs for which there were

no comparable home market sales in the ordinary course of trade, we

compared CEPs to constructed value (``CV'') in accordance with section

773(a)(4) of the Act.

Calculation of CV

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

based on the sum of the Makita Japan's cost of materials, fabrication,

SG&A (including interest expenses), U.S. packing costs, and profit. As

noted above, we adjusted Makita Japan's COP by recalculating total COM,

including factory overhead expenses (see Sales Verification Report at

page 5).

In accordance with section 773(e)(2)(A) of the Act, we based SG&A

and profit on the amounts incurred and realized by Makita Japan in

connection with the production and sale of the foreign like product in

the ordinary course of trade for consumption in Japan. We used the

weighted-average home market selling expenses.

Price-to-Price Comparisons

We based NV on packed, delivered prices to unaffiliated home market

customers and prices to affiliated customers that we have determined to

be at arm's length. We made adjustments to the starting price for

discounts and rebates, where appropriate. We also made deductions,

where appropriate, for inland freight (i.e., plant to warehouse and

warehouse to customer) pursuant to section 773(a)(6(B) of the Act. In

addition, we made adjustments for differences in the merchandise in

accordance with section 773(a)(6)(C)(ii) of the Act. We also deducted

the home market direct selling expenses, including credit, in

accordance with section 773 (a)(6)(C)(iii) of the Act. Finally, we

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

accordance with section 773(a)(6) of the Act.

For the reasons stated in the LOT/CEP Offset section of this notice

and pursuant to section 773(a)(7)(B) of the Act, we have allowed a CEP

offset for comparisons made at different levels of trade. To calculate

the CEP offset, we deducted from NV the indirect selling expenses

included on home market sales which were compared to CEP sales. We

limited the home market indirect selling expense deduction by the

amount of the indirect selling expenses deducted in calculating the CEP

under section 772(d)(1)(D) of the Act.

No other adjustments to NV were claimed or allowed.

Price-to-CV Comparisons

For price-to-CV comparisons, we made adjustments to CV in

accordance with section 773(a)(8) of the Act. Where CV was compared to

CEP, we deducted from CV the weighted-average home market direct

selling expenses, including credit, in accordance with section

773(a)(6)(C)(iii) of the Act. Also, pursuant to section 773(a)(7)(B) of

the Act, we made a CEP offset adjustment as described above in the

Price-to-Price Comparisons section above.

Intent To Revoke

On July 24, 1998, Makita Japan requested that, pursuant to 19 CFR

351.222(b), the Department revoke the antidumping duty order in the

above-referenced proceeding with respect to Makita Japan at the

conclusion of this administrative review. Makita Japan submitted along

with its revocation request a certification stating that: (1) the

company sold subject merchandise at not less than NV during the POR,

and that in the future it would not sell such merchandise at less than

NV (see 19 CFR 351.222(e)(i)); (2) the company has sold the subject

merchandise to the United States in commercial quantities during each

of the past three years (see 19 CFR 351.222(e)(ii)); and (3) the

company agrees to immediate reinstatement of the order, if the

Department concludes that the company, subsequent to revocation, sold

the subject merchandise at less than NV (see 19 CFR 351.222(b)(iii)).

The Department ``may revoke, in whole or in part'' an antidumping

duty order upon completion of a review under section 751 of the Act.

While Congress has not specified the procedures that the Department

must follow in revoking an order, the Department has developed a

procedure for revocation that is described in 19 CFR 351.222. This

regulation requires, inter alia, that a company requesting revocation

must submit the following: (1) a certification that the company has

sold the subject merchandise at not less than NV in the current review

period and that the company will not sell at less than NV in the

future; (2) a certification that the company sold the subject

merchandise in each of the three years forming the basis of the request

in commercial quantities; and (3) an agreement to reinstatement of the

order if the Department concludes that the company, subsequent to the

revocation,

[[Page 43351]]

sold subject merchandise at less than NV. (See 19 CFR 351.222(e)(1).)

Upon receipt of such a request, the Department may revoke an order, in

part, if it concludes that: (1) The company in question has sold

subject merchandise at not less than NV for a period of at least three

consecutive years; (2) it is not likely that the company will in the

future sell the subject merchandise at less than NV; and (3) the

company has agreed to immediate reinstatement of the order if the

Department concludes that the company, subsequent to the revocation,

sold subject merchandise at less than NV. See 19 CFR 351.222(b)(2). See

Final Results of Antidumping Duty Administrative Review and

Determination Not To Revoke Order in Part: Pure Magnesium from Canada

(``Pure Magnesium''), 64 FR 12977, 12982 (March 16, 1999).

We allowed parties to comment on Makita Japan's request for

revocation. Petitioner opposes the request for revocation, arguing that

it is likely that Makita Japan will resume selling subject merchandise

below NV if the order is revoked. Specifically, petitioner argues that

Makita Japan has avoided dumping margins in the past by drastically

reducing its import volumes, and Makita Japan's pricing practices and

loss in market share indicate that Makita Japan is not able to compete

effectively in the U.S. market without lowering prices. Additionally,

petitioner argues that Makita Japan could easily expand its production

capacity in Japan in order to begin selling at below NV in the future.

Finally, petitioner purports that market demand in Japan is in decline,

thereby increasing Makita's dependance on the U.S. market. As these

comments and the relevant analysis require discussion of proprietary

information, please see the Memorandum Regarding Revocation of the

Antidumping Duty Order on Professional Electric Cutting Tools from

Japan (August 2, 1999).

In response, Makita Japan argues that its sales have in fact been

in commercial quantities, and that the record clearly indicates that it

is not likely that Makita Japan will sell at below NV in the future if

the order were revoked. In particular, Makita Japan argues that it has

experienced a drastic change in circumstance as a result of the

building of its U.S. manufacturing facility, where a majority of Makita

Japan's electric cutting tools are now produced. Thus, Makita Japan

stresses, most of its production of ``subject merchandise'' occurs in

the United States, and consequently such products are no longer subject

to the antidumping duty order. Makita Japan notes that it has made

substantial investment in the U.S. facility, and that maintaining the

U.S. facility is consistent with the company's objective of producing

in close proximity to its customers. Finally, Makita Japan states that,

while it has expanding capacity in its U.S. production facility, it has

limited remaining production capacity in its facilities in Japan. As

such, Makita Japan claims that it is not likely that Makita Japan would

ever shift production of its power tools back to Japan.

With regard to the market conditions and pricing levels, Makita

Japan argues that it has no need to sell at below NV, because the U.S.

electric power tool and electric cutting tool markets are healthy,

growing, and stable, and the Japanese electric power tool market is

relatively stable. Makita Japan further argues that it is able to

charge premium prices because of its reputation for quality. Thus,

Makita Japan contends, it can make sales in the U.S. market, even when

its prices are higher than its competitors' prices. As these comments

and the relevant analysis require discussion of proprietary

information, please see the Memorandum Regarding Revocation of the

Antidumping Duty Order on Professional Electric Cutting Tools from

Japan (August 2, 1999).

Upon review of the three criteria outlined at section 351.222(b) of

the Department's regulations, the comments of the parties, and all of

the evidence in the record, we have preliminarily determined that the

Department's requirements for revocation have been met. Based on the

preliminary results in this review and the final results of the two

preceding reviews, Makita Japan has preliminarily demonstrated three

consecutive years of sales at not less than NV. Furthermore, we find

that Makita Japan's aggregate sales to the United States have been made

in commercial quantities during all segments of this proceeding.

Finally, our review of the record and the comments of the parties

indicates that it is not likely that Makita Japan will sell at below NV

in the future.

First, although Makita Japan's sales to the United States have

decreased substantially since the imposition of the antidumping order,

its exports to the United States remain significant. Thus, regardless

of any decrease in shipments during the course of this proceeding,

Makita Japan is currently selling in commercial quantities.

Additionally, Makita has maintained consistent sales levels since 1995.

(See Sales Verification Report at pages 34-40, and Appendices 2 and 4

of Makita's March 15, 1999, submission). Based on these facts

(confirmed at verification) and our review of Makita Japan's sales

practices, we find that we can reasonably conclude that the de minimis

margins calculated for Makita Japan are reflective of the company's

normal commercial experience. Compare Pure Magnesium 64 FR 12977, 12982

(March 16, 1999) (finding that because sales and volume figures were so

small, both in absolute terms and in comparison with the period of

investigation (``POI''), the Department could not conclude that the

reviews were reflective of what the company's normal commercial

experience would be without the discipline of an antidumping duty

order); see also Memorandum Regarding Revocation of the Antidumping

Duty Order on Professional Electric Cutting Tools from Japan (August 2,

1999), at 10-11.

With respect to whether it is not likely that Makita Japan will in

the future sell merchandise at less than NV, we have considered various

factors. As we stated in Brass Sheet and Strip from Germany, Final

Results of Antidumping Administrative Review and Determination to

Revoke in Part, 61 FR 49728, 49731 (Sept. 23, 1996), ``[i]n prior cases

where revocation was under consideration and the likelihood of

resumption of dumped sales was at issue, the Department has considered,

in addition to the respondent's prices and margins in the preceding

periods, such other factors as conditions and trends in the domestic

and home market industries, currency movements, and the ability of the

foreign entity to compete in the U.S. marketplace without LTFV sales.''

See also Brass Sheet and Strip from Canada: Preliminary Results of

Antidumping Duty Administrative Review and Notice of Intent to Revoke

Order in Part, 63 FR 6519, 6523 (Feb. 9, 1998).

Based upon the relevant factors in this case, we find that it is

not likely that Makita Japan will sell at less than NV if the order is

revoked. First, the record indicates that the electric power tool

industry, including PECTs, in the United States and around the world is

stable and/or growing, as applicable (see Sales Verification Report at

pages 34-39; the July 13, 1999, Makita Corporation of America (``MCA'')

verification report at pages 14; Makita's February 9, 1999, submission

at pages 33-42; and Memorandum Regarding Revocation of the Antidumping

Duty Order on Professional Electric Cutting Tools from Japan (August 2,

1999), at 14-15). Thus, the price stability characteristic of the

electric power tool industry mitigates against the heightened

possibility of dumping, as

[[Page 43352]]

compared to other industries where market prices are volatile.

Second, with regard to capacity utilization, the record establishes

that Makita Japan has very limited remaining capacity in its Japanese

facilities, while it has significant (and growing) remaining capacity

at MCA. Makita has made significant investments in its U.S. facility,

and all evidence in the record indicates that MCA intends to produce

PECTs in the United States for the long-term. The majority of the

cutting tools sold by Makita USA is now being produced in the United

States. Moreover, as confirmed at verification, Makita Japan has never

shifted production of any tool from MCA back to Japan. Additionally,

Makita Japan is currently producing only specialty tools for export to

the U.S. market, and there is no evidence on the record indicating that

it would be economically advantageous for Makita to shift existing

production in Japan, which is primarily geared toward production for

the home market, to production of non-specialty tools for export to the

United States.

Third, with respect to specialty tools (imports from Makita Japan),

Makita has consistently priced its products higher than its competition

in the United States. Thus, the record indicates that Makita has not

needed to lower prices of its Japan-produced tools in order to remain

competitive or to maintain a consistent level of sales (i.e.,

quantity). Although Makita has lost U.S. market share in recent years,

it has maintained consistent annual sales in significant quantities.

Based upon these factors, and other proprietary information

discussed in the Memorandum Regarding Revocation of the Antidumping

Duty Order on Professional Electric Cutting Tools from Japan (Aug. 2,

1999), at 11-16, we find that it is not likely that Makita will sell at

less than NV in the future.

Because all three requirements under the regulation have been

satisfied, we preliminarily intend to revoke the antidumping duty order

with respect to Makita Japan. If these preliminary findings are

affirmed in our final results, we intend to revoke the order with

respect to all PECTs produced by Makita Japan and that are also

exported by Makita Japan. In accordance with 19 CFR 351.222 (f)(3), we

will terminate the suspension of liquidation for any such merchandise

entered, or withdrawn from warehouse, for consumption on or after the

first day after the period under review, and will instruct Customs to

refund any cash deposit.

Preliminary Results of Review

As a result of this review, we preliminarily determine that the

following margin exists for the period July 1, 1997--June 30, 1998:

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

Manufacturer/exporter Margin (percent)

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

Makita Corporation................... 0.07 (de minimis).

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

Parties to the proceeding 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.

Issues raised in hearings will be limited to those raised in the

respective case briefs and rebuttal briefs. Case briefs from interested

parties and rebuttal briefs, limited to the issues raised in the

respective case briefs, may be submitted not later than 30 days and 37

days, respectively, from the date of publication of these preliminary

results. Parties who submit case briefs or rebuttal briefs in this

proceeding are requested to submit with each argument (1) a statement

of the issue and (2) a brief summary of the argument. Parties are also

encouraged to provide a summary of the arguments not to exceed five

pages and a table of statutes, regulations and cases cited.

The Department will subsequently issue the final results of this

administrative review, including the results of its analysis of issues

raised in any such written briefs or at the hearing, if held, not later

than 120 days after the date of publication of this notice.

Interested parties who wish to request a hearing or to participate

if one is requested, must submit a written request to the Assistant

Secretary for Import Administration, Room B-099, within 30 days of the

date of publication of this notice. Request should contain: (1) The

party's name, address and telephone number; (2) the number of

participants; and (3) a list of issues to be discussed.

Cash Deposit and Assessment Requirements

The Department shall determine, and the Customs Service shall

assess, antidumping duties on all appropriate entries. Upon completion

of this review, the Department will issue appraisement instructions

directly to the Customs Service. If these preliminary results are

adopted in our final results, we will instruct the Customs Service

liquidate all entries subject to this review without regard to

antidumping duties.

If these preliminary results are not adopted in the final results,

we will instruct the Customs Service to assess antidumping duties on

all appropriate entries covered by this review if any importer-specific

assessment rates calculated in the final results of this review are

above de minimis (i.e., at or above 0.5 percent). For assessment

purposes, we intend to calculate importer-specific assessment rates for

the subject merchandise by aggregating the antidumping duty margins

calculated for all U.S. sales examined and dividing the amount by the

total entered value of the sales examined.

Furthermore, the following deposit requirements will be effective

upon completion of the final results of this administrative review for

all shipments of PECTs from Japan that are entered, or withdrawn from

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

final results of this administrative review, as provided by section

751(a)(2)(c) of the Act: (1) No cash deposit will be required for PECTs

from Japan that are produced by Makita Corporation and that are also

exported by Makita Corporation (unless the margin established for the

company in the final results of this review is above de minimis); (2)

for previously reviewed or investigated companies noted 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 the less-than-fair-value (``LTFV'')

investigation, but the manufacturer is, the cash deposit rate will be

the rate established for the most recent period for the manufacturer of

the merchandise; and (4) if neither the exporter nor the manufacturer

is a firm covered in this or any previous review conducted by the

Department, the cash deposit rate will be 54.5 percent, the ``All

Others'' rate established in the LTFV investigation. These cash deposit

requirements, when imposed, shall remain in effect until publication of

the final results of the next administrative review.

Notification to Importers

This notice serves as a preliminary reminder to importers of their

responsibility under 19 CFR 351.402(f)(2) to file a certificate

regarding the reimbursement of antidumping duties prior to liquidation

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

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

reimbursement of antidumping duties occurred and the subsequent

assessment of double antidumping duties.

[[Page 43353]]

This administrative review and notice are in accordance with

sections 751(a)(1) of the Act and 19 CFR 351.213.

Dated: August 2, 1999.

Joseph A. Spetrini,

Acting Assistant Secretary for Import Administration.

[FR Doc. 99-20560 Filed 8-9-99; 8:45 am]

BILLING CODE 3510-DS-P