Remand AR: 94-95 Public Version IA:II/5/KJ
REDETERMINATION ON REMAND
CERTAIN PORCELAIN-ON-STEEL COOKWARE FROM MEXICO:
FINAL RESULTS OF ANTIDUMPING DUTY ADMINISTRATIVE REVIEW
In the Matter of: Porcelain-on-Steel Cookware from Mexico, Final Results of the Ninth Antidumping Duty Administrative Review (December 1, 1994 - November 30, 1995),
Secretariat File No. USA-97-1904-07 (NAFTA Panel Decision, April 30, 1999)
In accordance with the Panel's remand instructions in the above-referenced case, we have determined that the use of an indirect selling expense ratio for affiliated importer Global Imports, Inc. ("Global"), rather than the indirect selling expense ratio for affiliated importer and reseller Yamaka China ("Yamaka") in calculating the margin for Yamaka's sales of porcelain-on-steel ("POS") cookware produced by Esmaltaciones de Norte America, S.A. de C.V. ("ENASA"), was in fact a ministerial error, and have therefore corrected that error and explained the basis for the correction in detail, specifically addressing comments on the proper calculation. This decision results in a weighted-average margin of 16.97 percent for ENASA. The margin for Cinsa, S.A. de C.V. ("Cinsa") is not affected by this remand, because the sales through Yamaka consisted solely of ENASA-produced merchandise.
During the ninth review of the antidumping duty order on POS Cookware from Mexico, Cinsa and ENASA maintained that ENASA's sales through Yamaka were indirect EP sales. For that reason, respondents did not provide an indirect selling expense factor for Yamaka. Respondents claimed that, because Yamaka's main business was selling dinnerware, any indirect selling expense ratio for Yamaka would allocate a disproportionate share of expenses to cookware. See Cinsa/ENASA's questionnaire response of November 19, 1996, Pub. Doc. 46, at 17. In the preliminary determination, Commerce treated these sales as indirect EP sales. In its case brief of March 3, 1997, Prop. Doc. 19, petitioner argued that all of respondents' sales should be reclassified as CEP sales, and provided, at Exhibit 12 of that submission, indirect selling expense factor calculations for each of the three affiliated importers active during the period of review, including a Yamaka factor of [ * * * ] and a Global factor of [ * * * ]. These ratios were based on financial report data for these companies provided by respondents. Cinsa and ENASA rebutted petitioner's arguments with respect to CEP classification in its rebuttal brief of March 11, 1997, Pub. Doc. 69, but did not then address the appropriateness of the Yamaka indirect selling expense ratio.
On August 7, 1997, the Department issued its final results in the ninth review, finding a weighted-average margin of 2.74 percent for ENASA. In the final results, Commerce found that the sales of ENASA merchandise made through Yamaka should be treated as CEP sales (62 FR at 42500). Because Cinsa and ENASA had not objected to petitioner's proposed ratio for Yamaka, the Department did not discuss the use of this ratio in its final results. In the computer program calculating the margin for the CEP sales made through Yamaka, Commerce inadvertently calculated the final margin using the indirect selling expense ratio based on data for Global, rather than that for Yamaka.
On August 25, 1997, following the publication of the final results, petitioner filed a timely request for correction of ministerial errors, including an allegation that Commerce should have used, for the sales through Yamaka, an indirect selling expense ratio based on Yamaka data, rather than on Global data. See Prop. Doc. 38; see also CHP Brf. at 59 n. 7 .
Cinsa and ENASA timely responded on September 2, 1997. See Prop. Doc.39; see also Cinsa/ENASA Response Brf. at 34. In that letter, they acknowledged that Commerce had used the Global ratio in calculating the Yamaka margin, but argued that, because the only Yamaka ratio on record was that submitted by petitioner which was "plainly erroneous," it should not be used. Cinsa and ENASA also argued that, if Commerce did determine to use a Yamaka factor, the submitted factor should be recalculated by removing "financial expenses" and "other expenses" from the numerator of the ratio. These adjustments would yield a Yamaka indirect selling expense factor of [ * * * ]. As noted by the Panel, the Department did not respond, during the administrative proceeding, to either the August 24, 1997, request by petitioner or the September 2, 1997 comments by Cinsa and ENASA. See Panel Opinion at 24.
In its initial brief before the Panel, petitioner again argued that the margin for ENASA's sales through Yamaka was understated because Commerce used in that calculation the lower indirect selling expense ratio corresponding to Global, and again requested that Commerce correct this error by substituting their submitted Yamaka ratio for the Global ratio in the margin calculation for the sales made through Yamaka. See CHP Brf. of May 15, 1998, at 58-59.
In response, Cinsa and ENASA argued that Commerce should not change the computer programming because "Commerce's calculation methodology was consistent with its intended results." See Cinsa/ENASA Response Brief of September 17, 1998, at 34. Thereby, Cinsa and ENASA implied that the Department had found the submitted Yamaka factor to be flawed, and had thus used the Global factor as a surrogate for it. In addition, Cinsa and ENASA argued that (1) the submitted factor was not representative of selling expenses for sales of subject merchandise because Yamaka's main business is selling dinnerware (china), not cookware (September 17, 1998, Brf. at 34), and that (2) a "proper calculation" would be based on the formula it set forth in its September 2, 1997 letter, i.e., one which excluded "financial expenses" and "other expenses" from the numerator of the ratio (id., at 35, n.11).
In its own Response Brief of September 17, 1998, Commerce clarified that the use of the Global factor had been inadvertent, that this clerical error should be corrected on remand, and that it intended to use, for such purpose, the submitted Yamaka ratio. See DOC Brf. at 56.
In its Reply Brief of October 2, 1998, at 33-35, petitioner argued that the Panel should grant the Department's request for remand because its use of the Global ratio was clearly inadvertent. Petitioner also argued that, if Cinsa and ENASA disagreed with the calculation of the Yamaka ratio, they should have amended their complaint to object to the use of this ratio after the Department acknowledged, in its Notice of Appearance on October 17, 1997, that it should have used the Yamaka factor rather than the Global factor, for the Yamaka sales. Finally, petitioner argued that Cinsa and ENASA cannot now object to the Yamaka factor petitioner provided during the administrative review, because, since ENASA failed to submit a Yamaka factor itself, this ratio, which they describe as accurate and based on Yamaka's financial statement, is the only evidence on record as to Yamaka's indirect selling expense ratio. Cinsa and ENASA, in their own Reply Brief of October 2, 1998, chose not to comment further on Commerce's request that the Panel remand for it to use the submitted Yamaka expense ratio. See Cinsa/ENASA Reply Brf. at 2.
Because the Department had failed to address the issue during the administrative proceeding, the Panel remanded the issue to the Department to: "(1) determine, after addressing both GHC's ministerial error letter and Cinsa's submission opposing GHC's letter, whether it did in fact make a ministerial error; (2) if it did, to correct the error; and (3) in making any correction, to consider comments from the parties on the proper calculation, [referencing, in a footnote, 'e.g., Cinsa/ENASA September 17, 1998, Response Brief at footnote 11; CHP
October 2, 1998, Reply Brief at pp. 33-35'], specifically address those comments in its remand determination, and explain the basis for the correction in detail." Decision of the Panel, at 24.
Analysis and Redetermination
A "ministerial error" is defined at 19 CFR 351.224(f) as "an error in addition, subtraction, or other arithmetic function, clerical error resulting from inaccurate copying, duplication, or the like, and any other similar type of unintentional error which the Secretary considers ministerial." In accordance with the Panel's order, we first examined whether the Department's use of the Global ratio for Yamaka sales met this criterion.
We agree with petitioner that we inadvertently applied the Global indirect selling expense factor in our CEP calculation for sales made by Yamaka. It is the Department's practice to use company-specific data whenever possible for such purposes. Thus, we intended to use the Yamaka indirect selling expense factor provided by the petitioner in Exhibit 12 of its March 3, 1997 brief, because the sales at issue were Yamaka, not Global, sales. Because the use of the Global factor in the Yamaka calculation program was a calculation error, and was done inadvertently, it should be corrected as a ministerial error. Thus, we disagree with Cinsa's and ENASA's unsupported claim that the use of the Global ratio "was consistent with [the Department's] intended results." See Cinsa/ENASA Response Brief, at 34.
Also in accordance with the Panel's order, we next examined whether the Yamaka factor submitted by petitioner calculates those expenses on an appropriate basis. The Yamaka sales ratio submitted by petitioner and adopted by the Department is based on Yamaka's December 1995 income statements submitted by respondents on October 1, 1996. The accuracy of these values has not been contested. The indirect selling expense factor used by the Department is a measure of what percentage of its sales value, on average, a company expends in making its sales. The income statement line items which petitioner included in the numerator of this calculation were "selling expenses," "administrative expenses," "financial expenses," and "other expenses." The recalculation proposed by respondents in their September 2, 1997, response to the clerical error allegation challenged only the inclusion of the latter two categories.
We do not agree that "financial expenses" and "other expenses" should be excluded from this calculation. Yamaka is not a producer of subject merchandise or any other merchandise, but rather a U.S. reseller of merchandise produced by its affiliates. Therefore, all Yamaka expenses not otherwise accounted for as direct selling expenses would be categorized as indirect selling expenses, since Yamaka's sole function is to serve as a sales entity. This is the same position the Department has taken in other reviews when this issue was raised. See, e.g., the Department's final determination in the tenth review of this order, at Comment 9, Tab 96 in the Panel Review Appendix. Because Yamaka's "financial expenses" and "other expenses" are not otherwise captured in our analysis via inclusion of GIS' consolidated general and administrative (G&A) expenses in our margin calculation (see Exhibit D-14 of respondents' November 19, 1996, submission), and there is no indication in Yamaka's income statement that these expenses are not indirect selling expenses, we properly included both of these groups of expenses in the calculation of Yamaka's indirect selling expense factor.
We disagree with respondents' argument that the fact that Yamaka's main business is selling china dinnerware, rather than cookware, makes this ratio inappropriate for use with respect to Yamaka's sales of cookware. The ratio measures the overall level of indirect sales effort the company expended to make its sales, including sales of cookware. Because this ratio is then applied to the sales value of the subject merchandise, the resulting indirect selling expense corresponds to the subject merchandise. In other words, the Department is not assuming that all of Yamaka's expenses were incurred on cookware, but only that this is a reasonable method to allocate an appropriate portion of Yamaka's expenses to sales of cookware, which respondents chose not to break out. Further, there is no indication on the record that Yamaka incurred a higher ratio of sales expenses to revenues on dinnerware than on cookware. Indeed, given that Yamaka's cookware sales were, as respondents themselves described them, "unsuccessful" (November 19, 1997, response, at 17), it is likely that Yamaka's sales-expense-to-revenue ratio on cookware was greater than that on dinnerware, such that the submitted ratio would understate, rather than overstate, the actual level of indirect selling expenses on cookware.
Finally, we also disagree with petitioner's claim that Cinsa and ENASA should have amended their complaint if they wished to contest the submitted Yamaka ratio, once it became clear from the Department's Notice of Appearance that the Department agreed with petitioner that the submitted Yamaka factor should be substituted for the submitted Global factor in the margin calculations affected by ENASA's Yamaka sales. Cinsa and ENASA can only "complain" about something the Department has already done, not what it has expressed an intent to do upon remand. Therefore, Commerce's acknowledgment of this ministerial error in its Notice of Appearance neither required nor permitted adding a new count to this litigation through an amended complaint. Thus, respondents properly addressed this question in their NAFTA Panel brief in response to petitioner's clerical error count in its May 15, 1998, NAFTA Panel brief.
Based on the above reasons, we have used the Yamaka indirect selling expense factor of [ * * * ], as submitted in petitioner's case brief at Exhibit 12, as the indirect selling expense factor for U.S. sales made through Yamaka, and have corrected our final results based on that value.
The recalculated weighted-average dumping margins are as follows:
Cinsa 6.90% (unchanged)
If the Panel affirms this redetermination, we will publish a notice in the Federal Register, and pursuant to section 516(e)(2) of the Tariff Act of 1930, as amended, will instruct the U.S. Customs Service to liquidate the covered entries of the subject merchandise.
Richard W. Moreland
Acting Assistant Secretary
for Import Administration