FINAL RESULTS OF REDETERMINATION
PURSUANT TO PANEL REMAND
IN THE MATTER OF
GRAY PORTLAND CEMENT AND CLINKER FROM MEXICO
Final Results of the Fifth Antidumping Administrative Review
(August 1, 1994, through July 31, 1995)
Secretariat File No. USA-97-1904-01
The Department of Commerce has prepared these final results of redetermination pursuant to the June 18, 1999, remand order of the Panel in the above-captioned case. In accordance with the Panel's instructions, we have recalculated certain aspects of Gray Portland Cement and Clinker From Mexico: Final Results of Antidumping Duty Administrative Review, 62 FR 17148 (April 9, 1997) (amended May 5, 1997). Specifically, (1) we excluded respondents' home-market sales of bagged Type I cement from our calculation of normal value, (2) we re-examined, and reversed, our original denial of the requested constructed export price offset adjustment, and (3) we corrected certain ministerial errors. We have recalculated the weighted-average dumping margin for CEMEX, S.A. de C.V., and Cementos de Chihuahua, S.A. de C.V., which are collapsed for purposes of the antidumping analysis, accordingly.
CEMEX, S.A. de C.V. ("CEMEX"), Cementos de Chihuahua, S.A. de C.V. ("CDC"), and domestic producers of the like product, the Southern Tier Cement Committee ("STCC" or "petitioner"), contested various aspects of the Department of Commerce's ("the Department's") Gray Portland Cement and Clinker From Mexico: Final Results of Antidumping Duty Administrative Review, 62 FR 17148 (April 9, 1997) (amended May 5, 1997) ("Fifth Review Final Results"), pursuant to Chapter 19 of the North American Free Trade Agreement ("NAFTA"). The Fifth Review Final Results cover the period of review ("POR") August 1, 1994, through July 31, 1995, and thereby represent the first segment of the antidumping proceeding on gray portland cement and clinker from Mexico conducted pursuant to the provisions of the Tariff Act of 1930 as amended by the Uruguay Round Agreements Act ("URAA").
In its June 18, 1999, Opinion and Order ("Panel Decision"), the Panel affirmed most of the contested aspects of the Fifth Review Final Results. With respect to several issues, however, the Panel remanded the Department's determination. We addressed each of these issues in our Draft Results of Redetermination Pursuant to Panel Remand ("Draft Remand Redetermination"), issued to the parties on October 27, 1999. On November 2, 1999, we received comments from all parties which are addressed below in the Interested Parties Comments section of these final results of redetermination.
First, the Panel held that the Department improperly considered both bagged and bulk Type I cement to constitute the most similar foreign like product pursuant to 19 U.S.C. § 1677(16)(B).(1) See Panel Decision at 91-105. We have implemented the Panel's ruling and revised our calculations to exclude home-market sales of bagged cement from the calculation of normal value.
The second issue remanded by the Panel involves respondents' requests during the underlying review that normal value be adjusted for differences in level of trade pursuant to 19 U.S.C. § 1677b(a)(7). See Panel Decision at 127-132. In its final results, the Department determined that, because all home-market and U.S. sales were made at the same level of trade, it was not appropriate to make any kind of adjustment to normal value for differences in levels of trade. See Fifth Review Final Results, 62 FR at 17156. While the Panel did not reject the Department's conclusions of law or findings of fact, it remanded this issue to the Department for further consideration. Specifically, the Panel "decided to remand the issue to the Department for a more detailed explanation of the 'qualitative and quantitative' aspects of the data supplied by the [sic] CEMEX and CDC as well as, to a more limited extent, certain aspects of the law related to this issue." Panel Decision at 127. We have set forth our answers to the Panel's questions below and have determined, upon careful reconsideration of the record evidence and the applicable legal standards, to make an offset adjustment to normal value for certain sales comparisons, pursuant to 19 U.S.C. § 1677b(a)(7).
Third, the Panel remanded the Fifth Review Final Results for the correction of certain ministerial errors identified by CEMEX in its May 9, 1997, letter to the Department.
III. PANEL INSTRUCTIONS
A. Home-Market Sales of Bagged Type I Cement
Pursuant to the Panel's order, we have recalculated normal value to exclude home-market sales of bagged cement by both CEMEX and CDC.(2) See Draft Remand Determination Analysis Memorandum to the File.
While we have implemented the Panel's ruling, we respectfully note that we are troubled by the Panel's disposition of the bulk/bagged issue and agree with certain aspects of Panelist Endsley's dissent. Our concerns are explained in the Draft Remand Redetermination and discussed further below in the Interested Party Comments section of these final results of redetermination.
B. Level of Trade
As a preliminary matter, we reiterate that the fifth administrative review was the first segment of the underlying antidumping proceeding conducted pursuant to the statute as amended by the URAA. Importantly, the Department's post-URAA regulations, published in the Federal Register on May 19, 1997, did not control the Department's conduct of this review, initiated in September 1995. As explained at 19 C.F.R. § 351.701, the regulations implementing the URAA apply only to administrative reviews initiated pursuant to requests made on or after July 1, 1997. Nevertheless, in answering the Panel's questions concerning level of trade, the new regulations (to which many of the Panel's questions relate) - including their preamble - provide considerable insight into the Department's interpretation of its obligations under the statute, as amended by the URAA.
As indicated above, we have carefully reconsidered the level-of-trade information submitted by CEMEX and CDC in light of the applicable law. We have concluded that, with respect to those transactions involving constructed export price ("CEP"), CEP offset adjustments to normal value are warranted. In these final results of redetermination, we respond to the Panel's questions concerning the development of the factual record with respect to level of trade and the applicable law, and summarize our level-of-trade analysis. (See The Level-of-Trade Analysis Memorandum for the 1994/95 Remand on Gray Portland Cement and Clinker from Mexico ("Level-of-Trade Memorandum") for detailed analysis.)
1. Information on the Record
For the Panel's convenience, we have reproduced its questions concerning record information below and answer each in turn.
In Part A [of the Department's February 14, 1996, supplemental questionnaire], we note that the Department asked for specific differences and similarities "in selling functions and/or support services" between the various channels of distribution in the home market and in the U.S. A list of 10 different information items is set out. Please indicate whether the Department regards each of these items to be a "selling function." If a legal distinction is to be drawn between "selling functions" and "support services," which are the former and which are the latter? Are all or some of these the "selling activities" referred to in the statute (19 U.S.C. § 1677b(a)(7)(A)(i))?
There is no legal distinction between the terms "selling functions," "support services," and "selling activities" (the only term used in the statute). Thus, each of the ten functions set forth in Part A of the Department's February 14, 1996, supplemental questionnaire may be viewed as a "selling function," a "support service," or a "selling activity."
As revealed by the Statement of Administrative Action accompanying the URAA, H.R. Doc. 103-316 (1994) ("SAA"), and the Department's practice, these terms are all used as generic references for the activities of firms in arranging for, or carrying out, the sale of merchandise. The SAA, for example, states that "Commerce will require evidence from the foreign producers that the functions performed by the sellers at the same level of trade in the U.S. and foreign markets are similar, and that different selling activities are actually performed at the allegedly different levels of trade." SAA at 159 (emphasis added).
The following passage from the preamble to 19 C.F.R. § 351.412 also reveals that the Department treated the terms "selling functions" and "selling activities" interchangeably in promulgating its post-URAA regulations:
[T]he statute uses the term "level of trade" as a concept distinct from selling activities. The SAA at 829 reinforces this point by explaining that the Department must analyze the functions performed by the sellers, but need not find that two levels involve no common selling activities before finding two levels of trade. In other words, the statute indicates that two sales with substantial differences in selling activities nevertheless may be at the same level of trade, and the SAA adds that two sales with some common selling activities nevertheless may be at different levels of trade. Taken together, the two points establish that an analysis of selling activities alone is insufficient to establish the [level of trade]. Rather, the Department must analyze selling functions to determine if levels of trade identified by a party are meaningful. In situations where some differences in selling activities are associated with different sales, whether that difference amounts to a difference in the levels of trade will have to be evaluated in the context of the seller's whole scheme of marketing.
Antidumping Duties; Countervailing Duties; Final Rule, 62 FR 27296, 27371 (May 19, 1997) (emphasis added). Likewise, the Department typically refers to both "selling functions and/or support services" and "selling activities" in its case-specific analyses in an interchangeable manner. See, e.g., Certain Circular Welded Carbon Steel Pipes and Tubes From Taiwan: Preliminary Results of Antidumping Duty Administrative Review and Partial Rescission of Review, 64 FR 30306, 30308 (June 7, 1999) ("In implementing these [level-of-trade] principles in this review, we asked the respondents to identify the specific differences and similarities in selling functions and/or support services between all phases of marketing in the home market and the United States. [Respondent] provided information with respect to its selling activities associated with home market sales. . . ").
In Part B, we also note that the Department asked for, among other things, "a chart showing all selling functions provided for each channel of distribution..." A sample chart is set out which lists items which are significantly different, at least in language, than the list set out in Part A. Why is the Part B list different from the Part A list? Is the Part B list the "selling activities" referred to in the statute? If the Part B list is intended to be the same as the Part A list, what is their concordance?
While the Part A and Part B lists are different, it was not the Department's intent to indicate that the functions on the Part A list are the only functions that a company may report in describing its levels of trade, nor does the Part B list represent the entire universe of "selling activities." Neither list is exhaustive and, as explained above, "selling functions," "support services," and "selling activities" can be interchangeable terms. We recognize that the supplemental questionnaire may have been confusing and reiterate that the fifth administrative review of the antidumping duty order on cement from Mexico was the first segment of the proceeding to be conducted pursuant to the law as amended by the URAA. Nevertheless, the Department's questionnaires were clear enough - and the parties' answers comprehensive enough - to enable us upon remand to conclude, as explained below, that CEP offsets are warranted.
In the Final Results, the Department addresses a number of data fields, including INVCARH, INDIRSH, DISWARH, DINVCARH, DINDIRSU, and DISWARU. How does the information supplied in response to Parts A and B (individually or collectively) relate to these data fields? What is their concordance? Put another way, how do the reported "inventory maintenance costs," "pre-sale warehousing," and "other indirect selling expenses," all of which were included in an express finding by the Department in the Final Results, relate to Parts A and B?
The selling functions reported by CEMEX and CDC do not, in all instances, correspond to the expense categories represented by the expense-data fields identified by the Panel. For example, while both respondents reported that they performed "inventory maintenance" with respect to their home-market and U.S. selling channels, the data fields representing inventory- carrying costs capture imputed time-value costs and do not necessarily correspond to the "inventory maintenance" selling function that CEMEX reported in its selling-function chart. As explained in the Department's questionnaire, U.S. inventory-carrying costs represent the unit opportunity cost incurred from the time of final production to the time of arrival in the United States. Similarly, home-market inventory-carrying costs represent the cost incurred to maintain inventory for sale in the comparison market. See November 1, 1995, Questionnaire at B-17, C-16.
Another factor relevant to the Panel's question with respect to pre-sale warehousing expenses is that, before the post-URAA regulations entered into effect, the Department distinguished between direct and indirect pre-sale warehousing expenses. That is, the Department requested respondents to report in the pre-sale warehousing field (DISWARH) the direct cost of pre-sale warehousing expenses incurred with respect to a distribution warehouse not located at the factory that produced the merchandise. The Department also requested respondents to report the indirect cost of such warehousing in the field for indirect selling expenses (INDIRSH). Thus, where a respondent indicated that it performed pre-sale warehousing or inventory-maintenance functions in its selling process, the Department could presume that the respondent reported corresponding expenses in the field for pre-sale warehousing expenses. However, under such circumstances, absent additional information, the Department would not be able to presume a direct correlation between reported selling functions for purposes of the level-of-trade analysis and reported expenses.
The correlation between the selling functions reported by respondents and the data fields listed by the Panel may be stronger in the case of indirect selling expenses. Functions such as communication services, market research, strategic and economic planning, and computer assistance are general activities performed by various company personnel. Because of their general nature, expenses arising from the performance of these functions would be reported in the field for indirect selling expenses. Similarly, where a company provides technical services such as repair or consultation that relates directly to the merchandise under review, then the company would report a technical-service or technical-advice selling function in its list or chart of selling functions. The direct expenses arising from the performance of technical-service activities would be captured under the TECHSERH/U fields in the company's sales file. However, if a company listed a technical-service or technical-advice selling function in its list or chart of selling functions but did not report expenses under the TECHSERH/U fields, this might lead to further inquiry as to whether the company incurred such expenses during the period under review. The same is true with respect to freight and delivery selling functions. Where a respondent indicates that these functions are performed, it would be expected that the respondent reported the corresponding expenses in the expense fields such as INLFTWH (factory to distribution warehouse) and INLFTCH (warehouse to customer).
With respect to the selling functions chart, what legal significance does the Department place on the indicators "M" (moderate degree) or "L" (small degree)? Does [sic] these relate, for example, to the requirement that a selling function be applied to "at least the vast majority of customers?" Would an "M" or "L" designation fail that legal standard, and would a "H" indicator (great degree) comply with that legal standard? In addition, how does this legal standard apply in the case of the "Y" indicator, which states only that a selling function "is performed[?]" Is it expected that a "Y" response would have to be elsewhere quantified, but an "H," "M" or "L" response would not have to be[?] More generally, are these indicators intended by the Department to be a complete response to its requested quantification of the selling functions, allowing the respondent the opportunity of a short-form reply, or is additional narrative expected? Since even a minuscule level of activity would justify a "Y" response, does the "Y" indicator actually reflect a meaningful piece of information? Were the selling function charts verified?
Because each level-of-trade analysis necessarily involves unique facts, the Department has not issued detailed guidelines on the legal significance of the "L" (small degree), "M" (moderate degree), and "H" (high degree) designations parties use in the selling-functions charts they present to the Department. Rather, the Department attempts to ascertain the extent or degree to which individual selling functions are performed in order to develop a more complete picture of each respondent's selling practices. As explained in the preamble to the post-URAA regulations, "where some differences in selling activities are associated with different sales, whether that difference amounts to a difference in the levels of trade will have to be evaluated in the context of the seller's whole scheme of marketing." Final Rule, 62 FR at 27371. Analysis of a "scheme of marketing" of course includes examination of the degree or extent to which certain functions are performed. Whether the Department will require additional quantification of the performance of such functions depends on the development of each case.
In practice, differences in the degree of performance of certain selling functions have, in certain instances, been found to be dispositive. In one recent determination, for example, the Department found that a Japanese respondent performed some of the same selling functions with respect to two categories of customers in its home market but that the degree of performance of these functions differed considerably. Based on this finding, the Department determined that the respondent sold at two home-market levels of trade.
In comparing the two home market [levels of trade] claimed by Makita (i.e., wholesaler, subwholesaler or retailers), we noted that, although Makita Japan performs some of the same selling functions in both [levels of trade], 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. . . Therefore, we preliminarily determine that sales to wholesalers/subwholesalers and sales to retailers constitute separate [levels of trade].
Professional Electric Cutting Tools From Japan: Preliminary Results of Antidumping Duty Administrative Review and Intent To Revoke Order in Part, 64 FR 43346, 43349 (August 10, 1999).
In the administrative review at issue here, the Department verified the level-of-trade information submitted by respondents. See July 22, 1996, Verification Report at 26-27, 95-96. Based on a reappraisal of the selling functions performed by CEMEX and CDC with respect to their home-market customers (including the extent to which they are performed), we have concluded, as explained further below, that the CEMEX and CDC channels of trade in the home market in fact represent two distinct levels of trade, both of which are more advanced than the CEP level of trade.
It may be worth indicating to the Department that the Panel is tending to the conclusion that the above-referenced questionnaires were quite confusing and that particularly CDC, but probably also CEMEX, in fact responded to the questionnaires to an adequate degree, if not to the best of their ability. More particularly, the respondents appear to have provided the information requested by the Department in the form in which the Department wanted to receive it. The Panel, therefore, will be particularly interested in understanding precisely why the Department believes the two respondents failed in this respect.
As explained above, the administrative review at issue here was the first conducted by the Department pursuant to the antidumping law as amended by the URAA. To the extent that the Panel finds the Department's questionnaires to be confusing, that may reflect the Department's lack of experience with the new level-of-trade provisions when it initiated the 94/95 review. As the Department explained in the preamble to its new regulations, "[t]he Department will develop its practice in this area in the course of administrative proceedings . . ." Final Rule, 62 FR at 27371. At any rate, we have, as more fully described below, reconsidered the level-of-trade information submitted by CEMEX and CDC during the fifth administrative review and find that CEP offsets are warranted.
In light of the foregoing, please summarize the record evidence concerning the qualitative and quantitative aspects of the selling functions performed by the respondents in the home market and in the U.S. market, as adjusted. Please indicate the selling functions that are not included in the level of trade analysis either because of the adjustments made pursuant to section 772(d) of the Act, or because they are quantitatively insufficient to comply with the standards of the Act, or (if different) because they are not applied to the "vast majority of customers." Please note the record evidence (or lack thereof) of selling functions which are other than those reported in the data fields for "inventory maintenance costs," "pre-sale warehousing," and "other indirect selling expenses." What data fields, if any, apply to these "other" selling functions? Please confirm, if it is the case, that the Department regards "other indirect selling expenses" as evidence of a selling function.
The level-of-trade memorandum accompanying these final results of determination details the qualitative aspects of the selling-function information submitted by respondents and reveals that the Department considered the extent to which respondents performed certain selling functions. However, the revised level-of-trade analysis does not include a quantitative analysis per se (i.e., it does not consider expense amounts reported by respondents in the expense-data fields).
Upon re-examination of the record in this case, we found the home-market levels of trade for both the CEMEX and CDC channels of distribution to be more advanced than the adjusted CEP level of trade. The record evidence supporting this conclusion is unambiguous, such that it was not necessary to resort to additional quantitative analysis. This comports with the Department's usual approach, which is to examine a company's level-of-trade claims using a qualitative analysis (which includes consideration of the extent to which selling functions are performed). This is not to say, however, that factual scenarios will not arise in which an additional quantitative analysis must be undertaken to develop an accurate picture of a company's overall scheme of marketing and distribution, particularly in situations where the claimed levels of trade are difficult to distinguish from one another. Finally, we note that nothing in the statute, the SAA, or the post-URAA regulations instructs us to consider quantitative data where the record information describing a respondent's selling process is satisfactory.
Please address the language contained in the September 27, 1996 Analysis Memorandum which states that "we found no significant differences between customers as well as selling functions performed by CEMEX to end-users in the home market and end-users in the U.S." Since the Panel understands that the appropriate comparison on the U.S. side is at the adjusted CEP level (i.e., the sale to the affiliated importer), is this statement consistent with the law? Does the Analysis Memorandum reflect how the Department actually made the comparison in the Final Results?
We agree with the Panel that the language of the Analysis Memorandum regarding level of trade is difficult to reconcile with our normal method of establishing the CEP level of trade, which requires the normal-value level of trade to be compared to the level of trade of the CEP, as adjusted.(3) Our revised level-of-trade analysis compares the CEMEX and CDC normal-value levels of trade to the level of the CEP, as adjusted for the U.S. expenses identified at 19 U.S.C. § 1677(d).
Please explain and clarify the statement in the Final Results, at p. 17157, as follows: "However, we were unable to utilize the analysis submitted by the respondent (CEMEX and CDC) due to the fact that it reported the selling functions performed by the producer/exporter to the unaffiliated purchaser in the home market, as compared to the selling functions performed by the related reseller to the unaffiliated purchaser in the U.S. market."
Upon re-examination of the information submitted by CEMEX and CDC, we have determined that the available information does permit comparison of the home-market levels of trade with the adjusted CEP level of trade. This, too, is explained further below.
2. Applicable Law
In addition to its questions regarding the administrative record, the Panel sought clarification of certain legal standards governing the level-of-trade analysis. For the Panel's convenience, we have again reproduced its questions and respond to each in turn.
First, is it the case that the phrase in 19 U.S.C. § 1677b(a)(7)(B) stating "the data available do not provide an appropriate basis to determine under subparagraph (A)(ii) a level of trade adjustment" contemplates a larger universe of possibilities than the phrase in paragraph (A) stating "[not] demonstrated to affect price comparability"? While the SAA does speak to this point, what situations are likely to be covered by Paragraph (B) but not Paragraph (A)? On the contrary, based on a reading of 19 C.F.R. § 351.412(f)(3), is it to be understood that the Department focuses on "price comparability" in both the situations of Paragraphs (A) and (B), despite the different statutory language used in the two situations?
In accordance with 19 U.S.C. § 1677b(a)(1)(B), to the extent practicable, we determine normal value based on sales in the comparison market at the same level of trade as the export price ("EP") or the CEP. However, when we compare sales at different levels of trade, we will adjust the normal value only if the difference in level of trade is demonstrated to affect price comparability. The language in 19 U.S.C. § 1677b(a)(7)(A) contemplates those situations in which price comparability data are placed on the record and analyzed. If the data demonstrate a pattern of consistent price differences between the sales on which normal value is based and comparison-market sales at the level of trade of the export transaction, the Department will make a level-of-trade adjustment.(4) If the data do notdemonstrate a price effect, we do not make an adjustment.
In contrast, section 1677b(a)(7)(B) contemplates situations in which a CEP sale is compared to a normal value at a different level of trade, but the available data are insufficient to determine if the difference in level of trade affects price comparability, i.e., the price-effect analysis cannot be performed. For example, normally any effect on price comparability is determined by comparing two levels of trade in the comparison market, i.e., the level of trade of the U.S. sale and the level of trade of the comparison sale. However, if the level of trade of the CEP sale does not exist in the comparison market, the available data are normally insufficient to determine whether and to what extent the difference in level of trade affects price comparability.(5) In such a case, a CEP offset is warranted if the level of trade of the comparison sale is at a more advanced stage of distribution than the CEP level of trade.(6) Thus, in general, it may be more accurate to say that the cited phrase in paragraph (B) contemplates a different universe of possibilities than the phrase in paragraph (A), rather than a broader universe.
Second, 19 C.F.R. § 351.412(c)(2) states that "Substantial differences in selling activities are a necessary, but not sufficient, condition for determining that there is a difference in the stage of marketing." Is this language consistent with the statute, 19 U.S.C. § 1677b(a)(7)(A)(i), which speaks to only "selling activities"? If something more than selling activities is required,
where does the law define what those might be? What, in the Department's judgment, could these be?
As explained in the preamble to the Department's post-URAA regulations, the statute itself suggests that mere differences in selling activities, by themselves, may not support a finding of different levels of trade:
In the Department's view, while neither the statute nor SAA defines level of trade, section 773(a)(7)(A)(i) of the Act provides for [level-of-trade] adjustments where there is a difference in levels of trade and the difference "involves" the performance of different selling activities. Thus, the statute uses the term "level of trade" as a concept distinct from selling activities. The SAA at 829 reinforces this point by explaining that the Department must analyze the functions performed by the sellers, but need not find that two levels involve no common selling activities before finding two levels of trade. In other words, the statute indicates that two sales with substantial differences in selling activities nevertheless may be at the same level of trade, and the SAA adds that two sales with some common selling activities nevertheless may be at different levels of trade. Taken together, the two points establish that analysis of selling activities alone is insufficient to establish the [level of trade]. Rather, the Department must analyze selling functions to determine if levels of trade identified by a party are meaningful. In situations where some differences in selling activities are associated with different sales, whether that difference amounts to a difference in the levels of trade will have to be evaluated in the context of the seller's whole scheme of marketing.
Final Rule, 62 FR at 27371. Thus, upon careful examination of both the statute and the SAA, the Department reasonably concluded in promulgating its post-URAA regulations that differences in selling functions, by themselves, do not necessarily establish the existence of different levels of trade. Accordingly, the regulations clarify at 19 C.F.R. § 351.412(c)(2) that sales are made at different levels of trade "if they are made at different marketing stages (or their equivalent)." As also explained in the preamble to the Department's post-URAA regulations:
Each more remote level must be characterized by an additional layer of selling activities, amounting in the aggregate to a substantially different selling function. Substantial differences in the amount of selling expenses associated with two groups of sales also may indicate that the two groups are at different levels of trade.
Final Rule, 62 FR at 27371.
Third, the SAA, at 159, states that "Commerce will require evidence from the foreign producers that the functions performed by the sellers at the same level of trade in the U.S. and foreign markets are similar, and that different selling activities are actually performed at the allegedly different levels of trade." In context, should the word "similar" be changed to "dissimilar"?
This passage is best understood when its constituent parts are examined separately. The first clause, regarding functions performed by sellers in the two markets "at the same level of trade," assumes a claim by the respondent that there is indeed a common level of trade in the two markets. The second clause, regarding "allegedly different levels of trade," assumes a claim by the respondent that it sells at different levels of trade. The excerpted SAA passage thus states that, either way (e.g., whether a respondent claims one level of trade or different levels of trade), the Department must ensure that the respondent provides adequate information supporting its claim.
3. Redetermination in this Case
Upon careful re-examination of the record evidence and applicable legal standards, we have determined that CEP offsets as originally requested by CEMEX and CDC are warranted. Our redetermination is explained in detail in the accompanying Level-of-Trade Memorandum and summarized below.
During the underlying administrative review, the Department conducted producer-specific comparisons in calculating a weighted-average dumping margin for CEMEX and CDC. See Fifth Review Final Results, 62 FR at 17158. Accordingly, we conducted our level-of-trade analysis upon remand on a producer-specific basis.
Based on our analysis of CEMEX's sales, we found that its home-market sales occurred at a more advanced stage of distribution than its CEP sales. Consequently, we could not match CEMEX's CEP sales to its sales in the home market nor could we determine a level-of-trade adjustment based on CEMEX's home-market sales of merchandise under review. Therefore, we have made a CEP-offset adjustment to normal value in accordance with the CEP-offset provision of the statute.
Based on our analysis of CDC's sales, we found that CDC had two levels of trade in the United States - one for CEP sales and one for EP sales. We found that its home-market sales occurred at a single and more advanced stage of distribution than its EP and CEP sales. Because home-market sales were further advanced than either U.S. level of trade, we could not determine a level-of-trade adjustment. Therefore, we adjusted normal value using the CEP offset in CEP comparisons. Because there is only one level of trade in the home market, we could not make a level-of-trade adjustment to normal value in our analysis of CDC's EP sales.
The accompanying Level-of-Trade Memorandum describes our analysis of CEMEX's and CDC's claimed levels of trade.
C. Ministerial Errors
As outlined in the Draft Remand Analysis Memorandum to the File, we have corrected ministerial errors Numbers 1, A and B, and Number 2, as alleged in CEMEX's May 9, 1997, letter to the Department.
IV. INTERESTED PARTY COMMENTS
On October 27, 1999, we released the Draft Remand Redetermination and all disclosure documents to CEMEX, CDC, and the petitioner. On November 2, 1999, we received comments from all parties.
Comment 1: Home-Market Sales of Bagged Type I Cement - Ministerial Error
CEMEX comments that the Department revised the margin program properly to exclude home-market sales of bagged Type I cement from the calculation of normal value. However, CDC claims that, in excluding CDC's home-market sales of bagged Type I cement, the Department excluded five sales of bulk Type I cement from its calculation inadvertently.
We agree with CDC that in revising the calculation of normal value, we excluded five sales of bulk Type I cement incorrectly. We have revised our calculation to correct this error. Comment 2: Home-Market Sales of Bagged Type I Cement - Panel's Remand Decision
Both CEMEX and CDC disagree with the Department's concerns about the Panel's decision with respect to this issue. Specifically, CEMEX and CDC argue that, contrary to the Department's view, the Panel did not reweigh the record evidence in making its decision. According to CEMEX and CDC, the Panel used its discretion and authority appropriately to admit into evidence CEMEX's "Exhibit 4" and consider the data contained in the document in weighing CEMEX's claim. CEMEX contends further that the cases the Department cited in its Draft Remand Redetermination do not compel the Panel to give the Department an opportunity to reconsider the record evidence. Finally, CEMEX argues that the Panel found correctly in this case that the best indication of "commercial value," as that term is used in the statute, is the price in the marketplace, not the cost of production.
The petitioner urges the Department to challenge the Panel's determination and request an opportunity to make a new determination on remand with respect to comparing U.S. sales of bulk cement to normal value based on home-market sales of bagged and bulk cement. According to the petitioner, the Panel violated the standard of review by directing the Department improperly to issue its remand results in accordance with the Panel's own factual findings and interpretations of the statute. Citing Chevron U.S.A. v. National Resources Defense Council, 467 U.S. 837, 842 (1984), the petitioner emphasizes that it is the initial responsibility of the Department to interpret and apply the statute in the first instance. In this instance, the petitioner contends, the Panel overstepped its proper role and has acted in place of the Department as the primary interpreter of the law and the finder of fact. Furthermore, the petitioner argues that the Panel's action disregarded precedent established by the Court of Appeals for the Federal Circuit in Koyo Seiko Co. v. United States, 66 F.3d 1204, 1209 (Fed. Cir. 1995), in which the court held that substantial deference should be given to the Department's model-matching methodology.
The petitioner asserts further that the Panel allowed and considered CEMEX's "Exhibit 4" improperly without giving the petitioner and the Department any opportunity to examine and weigh the data contained in the document. Moreover, the petitioner claims that the price information contained in "Exhibit 4" is, in and of itself, misleading and irrelevant to the determination of the foreign like product.
The petitioner argues that the Panel erred in its interpretation and application of three key factors defining the foreign like product for purposes of 19 U.S.C. § 1677(16)(B): similarity of component materials, similarity of purposes for which used, and similarity of commercial value. With respect to the purposes for which bagged Type I cement is used, the petitioner claims that the Panel inferred erroneously that there are different purposes for which bulk and bagged cement are used based on the types of customers. According to the petitioner, the term "use" can only refer to the applications to which a product is put, not to the stages in the chain of distribution.
With respect to similarity of commercial value, the petitioner argues that the Panel's interpretation of the term "commercial value" to mean "price" conflicts with the Department's longstanding practice and the intent of the statute. The petitioner points to the Department's application of a difference-in-merchandise adjustment and claims that the Department uses differences in production cost, rather than price, to measure whether products are approximately equal in commercial value. Moreover, the petitioner notes that, under 19 U.S.C. § 1677(16)(B)(iii), the Department is required to focus on differences in commercial value between home-market merchandise and merchandise sold in the United States, not differences among different products sold in the home market.
The petitioner also contests the Panel's conclusion that bulk and bagged cement are not like in component materials. The determination of whether two products are like in component materials, the petitioner asserts, should be based on consideration only of the physical characteristics and materials inherent to the product. However, the petitioner argues, the Panel relied on factors it considered in other parts of its foreign-like-product analysis (price, customer type, and the purposes for which the merchandise is used) in determining whether bulk and bagged cement are similar in component materials.
According to the petitioner, CEMEX's home-market sales of Type I cement, both bulk and bagged, satisfy the requirements of 19 U.S.C. § 1677(16)(B). The petitioner observes that, in the fifth review, the Department found correctly that bulk and bagged cement constitute physically identical merchandise and that the only difference between the two products is the manner in which the cement is packed. The petitioner also asserts that the Department's methodology of making product comparisons without regard to packing form is consistent with the statutory requirements and the Department's practice in proceedings involving other products.
In sum, the petitioner argues that the Panel's conclusions are based on erroneous interpretations of the statute and factual information that distorted the evidence of record with respect to the relative pricing of bulk and bagged Type I cement. Additionally, the petitioner claims that the Panel's decision not to remand the issue to the Department for reconsideration of the evidence disregarded the applicable standard of review. Consequently, the petitioner concludes the Department should request a remand for reconsideration of the statutory factors and the entirety of the record evidence with respect to this issue.
As we explained in the Draft Remand Redetermination, while we respectfully disagree with the Panel's disposition of the bulk/bagged issue, we have implemented its order fully and have excluded all home-market sales of bagged Type I cement by CEMEX and CDC from our normal-value calculations. The parties commented extensively on this aspect of the Department's Draft Remand Redetermination. Recognizing the limited scope of the Panel's order regarding the exclusion of bagged sales, we respond to these comments below.
We agree, in large part, with the petitioner's comments concerning the Panel's application of the appropriate standard of review in connection with the bulk/bagged issue. As we explained in the Draft Remand Redetermination at 5, we are troubled that the Panel has reweighed record evidence and substituted its own judgment for that of the agency when it should have remanded the bulk/bagged issue to the Department for reconsideration consistent with the Panel's decision. See NAFTA Article 1908(8) ("The panel may uphold a final determination, or remand it for action not inconsistent with the panel's decision."). The petitioner notes correctly that, contrary to the standard of review, the Panel conducted its own factual analysis under 19 U.S.C. § 1677(16)(B) and then subjected its own analysis to the substantial-evidence test. Indeed, the Panel issued findings of fact regarding (1) the purposes for which bagged and bulk cement are purchased, (2) differences in prices between the bagged and bulk presentations, and (3) the impact of packaging on the marketability of the cement; it then affirmed its own findings. See Panel Decision at 100-102.
CEMEX claims that the Department's comments regarding the standard of review amount to a request for "another bite at the apple" and suggests that a remand for the Department's resolution of the bulk/bagged issue would have amounted to an "empty ritual." These remarks overlook the crucial fact that the standard of review for NAFTA Panels reviewing antidumping determinations is circumscribed narrowly. As the Panel itself noted in its own exposition of the applicable standard of review, "binational panels may not engage in de novo review and, consistent with that directive, may not make new factual findings that would amend the agency record." Panel Decision at 16 (citing Ceramica Regiomontana, S.A. v. United States, 636 F. Supp. 961, 965 (Ct. Int'l Trade 1986), aff'd per curiam, 810 F.2d 1137 (Fed. Cir. 1987)). Yet, as explained above, the Panel departed from the very standard of review that it articulated. Consistent with the holding of the Court of Appeals for the Federal Circuit in Trent Tube Division v. Avesta Sandvik Tube AB, 975 F.2d 807, 814 (Fed. Cir. 1992), the Panel, upon finding fault in the agency's application of "statutory mandatory factors," should have remanded the bulk/bagged issue to the Department "for further evaluation in light of" such factors.
Given the Panel's departure from the applicable standard of review, the petitioner recommends that the Department request a second remand to conduct a foreign-like-product analysis pursuant to 19 U.S.C. § 1677(16)(B). We see little utility in making such a request. The Panel's order that the Department exclude bagged sales of Type I cement from the normal-value calculations was explicit, leaving no room for the Department to reconsider its model-match methodology. Moreover, the NAFTA Rules contemplate other procedures for contesting Panel decisions. Therefore, we do not seek a second remand from the Panel at this point in the proceeding.
We also agree with the petitioner that the Panel should not have accepted CEMEX's "Exhibit 4," which, as we emphasized in the Draft Remand Redetermination, was never submitted to the agency during the administrative review. As such, CEMEX deprived both the Department and the petitioner of any opportunity to consider the data presented therein and asked the Panel impermissibly to function as the primary fact-finder. CEMEX stresses that "Exhibit 4" merely summarizes data already on the record. This argument, however, is unpersuasive, as data in an antidumping proceeding may be "summarized" in myriad ways to support a variety of arguments. At any rate, as the petitioner points out, the Panel never afforded the Department and the petitioner the opportunity to comment on CEMEX's summary of record evidence and, as a consequence, never considered rebuttal evidence or argument.
To cite the Panel's own statement of the applicable standard of review, "the focal point for judicial review should be the administrative record already in existence, not some new record made initially in the reviewing court." Panel Decision at 16, n. 45 (quoting Florida Power & Light Co. v. Lorion, 470 U.S. 729, 743-744 (1984)). As recognized by Panelist Endsley in his dissenting opinion, the Panel's acceptance of the "price comparisons" improvised by CEMEX for purposes of panel review "has made it impossible for the Department (the administering authority) to check and verify the 'evidence' and has made it impossible for Southern Tier to argue against the relevance, interpretation or weight of such 'evidence.'" Endsley Dissent at 27.
Finally, we are concerned that the Panel misinterpreted the model-match requirements set forth at 19 U.S.C. § 1677(16)(B) in several respects. For example, we disagree with the Panel and with CEMEX that "commercial value" for purposes of section 1677(16)(B)(iii) necessarily means the price at which merchandise is sold. As we explained in our Draft Remand Redetermination, Congress cannot have intended that commercial value and price are synonymous for the simple reason that significant differences in prices may reflect dumping rather than any actual difference in the commercial value of the comparison product. As we explained in Final Results of Antidumping Duty Administrative Review: Certain Forged Steel Crankshafts From the United Kingdom, 56 FR 5975 (February 14, 1991), "[t]here are many reasons why prices may differ, including the existence of dumping."
Moreover, in practice, the Department has often explained that application of the 20% difference-in-merchandise test or "safety net" ensures matches with merchandise of "approximately equal commercial value." See, e.g., Final Determinations of Sales at Less Than Fair Value: Certain Hot-Rolled Carbon Steel Flat Products, Certain Cold-Rolled Carbon Steel Flat Products, Certain Corrosion-Resistant Carbon Steel Flat Products, and Certain Cut-to-Length Carbon Steel Plate From Canada, 58 FR 37099, 37109 (July 9, 1993). Thus, while prices may be relevant in some cases, depending on the circumstances of each case, "commercial value" may be revealed by cost, by price, or by a combination of considerations.
Therefore, we respectfully object to the Panel's legal framework in resolving the bulk/bagged issue.
Comment 3: Level of Trade
The petitioner argues that the level-of-trade methodology the Department used in its draft results of redetermination is contrary to law. It claims that, first, the Department based the level-of-trade determination entirely on its analysis of selling functions and did not make a determination about the respondents' stages of distribution. Second, the petitioner claims, in determining the level of trade of the respondents' CEP transactions, the Department reviewed the selling functions associated with transactions after making deductions under 19 U.S.C. § 1677a(d) as opposed to those associated with transactions before the deductions as required by the statute.
The petitioner explains that the Department has adopted a two-part approach in its practice of identifying levels of trade: (1) it considers whether the merchandise has been sold at distinct stages in the chain of distribution, and (2) it considers whether (and to what degree) differences in selling functions are associated with the distinct stages of distribution. The petitioner contends that the Department omitted the first part of the analysis in the Draft Remand Redetermination by not making a determination about stages of distribution independently of its consideration of selling functions. Citing the Department's Level-of-Trade Memorandum, the petitioner asserts that, for CEMEX's CEP and CDC's CEP sales, the Department simply found that the home-market levels are at a more advanced stage of distribution and are more remote from the factory than the CEP levels without an explanation of how the channels of distribution for CEP sales were distinct from the channels of distribution for home-market sales.
The petitioner points out that CEMEX sold to end-users, cement distributors, and ready-mixers in both markets and that CDC sold to ready-mix end-users and industrial end-users/ concrete-product manufacturers in the home market and to ready-mixers and industrial end users/concrete-product manufacturers in the U.S. market. Therefore, no difference exists between the U.S. and home-market stages of distribution, the petitioner claims, since the customer types in both markets are virtually identical. The petitioner requests that the Department (1) revise its Draft Remand Redetermination by determining that both CEMEX and CDC have not demonstrated differences in the stages of distribution for their home-market and CEP sales, and then (2) deny any adjustment or offset to normal value for differences in levels of trade.
Furthermore, the petitioner argues that, if the Department finds it appropriate to consider selling functions, then it must determine the level of trade of each U.S. transaction for CEMEX and CDC prior to making deductions identified in 19 U.S.C. § 16177a(d). It argues that, in the draft redetermination, the Department identified levels of trade for these transactions using the selling activities associated with the expenses that remained after deductions and that this methodology its contrary to law. Citing Borden Inc. v. United States, 4 F.Supp.2d 1221, 1241 (Ct. Int'l Trade 1998), and Micron Technology, Inc. v. United States, 40 F.Supp.2d 481, 485-86 (Ct. Int'l Trade 1999), the petitioner points out that the Court of International Trade has reversed the Department on this issue and has required on remand that the Department identify levels of trade prior to making CEP adjustments. The petitioner argues that, on an unadjusted basis, CEMEX and CDC perform the same selling function in each market and, therefore, in the event that the Department reaches the analysis of selling functions in the final results of redetermination, it should consider all functions associated with both normal-value and CEP transactions.
CEMEX comments that the Department's re-examination of the record and its determination that CEMEX's home-market sales occurred at a more advanced stage of distribution than its CEP sales is supported fully by substantial evidence on the record. It also notes that the Department's determination is consistent with every post-URAA administrative review of this order.
We disagree with the petitioner that we determined CEMEX's and CDC's levels of trade based solely on selling activities without taking into consideration the various stages of distribution. The petitioner has identified the customer types in the home market inaccurately as being equivalent to the customer types in the United States for the purposes of determining the different stages of distribution. Although the customer types CEMEX and CDC reported in both markets are virtually the same, after adjusting CEP pursuant to 19 U.S.C. § 1677a(d), the few remaining selling activities are the ones performed by CEMEX and CDC in selling to their affiliated U.S. importer. In other words, we compared the many customer types at the home-market level of trade for CEMEX (end-users, cement distributors, and ready-mixers) or CDC (ready-mixers, ready-mix end-users, and industrial end-users/concrete-product manufacturers) to the one customer type for the constructed U.S. sale used in the margin calculation, which is the affiliated importer (reseller/distributor). Furthermore, in reviewing CEMEX's and CDC's home-market sales of bulk cement, we found that the majority of CEMEX's sales were to end-users and ready-mixers and that none of CDC's sales were to distributors. When comparing the stages of distribution using the statutorily appropriate customer types and taking into consideration selling functions in the two markets, it is clear that the stages of distribution in the home market differ from the stages of distribution in the United States. Therefore, we believe that our analysis is accurate and have not changed our analysis for these final results of redetermination.
We cannot accept the petitioner's argument that the Department is required to use the unadjusted CEP starting price in identifying the U.S. level of trade because the statute specifies, at section 1677b(a)(7)(B), that the U.S. level of trade is "the level of trade of the constructed export price." The "constructed export price," in turn, is defined in section 1677a(b) as the U.S. price "as adjusted under subsections (c) and (d) of this section." Accordingly, the Department has not acquiesced in the conflicting statutory interpretation advanced by the Court of International Trade in Borden. At any rate, we will not reargue the Department's statutory interpretation in these final results of redetermination because the Department's practice was already expressly affirmed by the Panel. See Panel Decision at 130 ("the Panel understands that
the appropriate comparison on the U.S. side is at the adjusted CEP level (i.e., the sale to the affiliated importer)").
Comment 4: CEP Offset
The petitioner argues that, because CEMEX and CDC did not demonstrate that their home-market and CEP sales were at different levels of trade, the Department erred in finding that CEMEX and CDC were entitled to a CEP-offset adjustment to normal value. In the preamble to 19 C.F.R. § 351.412, the petitioner notes, the Department states that "[it] will grant a CEP offset only where a respondent has succeeded in establishing that there is a difference in the levels of trade." The petitioner also cites Mechanical Transfer Presses from Japan: Final Results of Antidumping Administrative Review, 61 FR 52910, 52915 (October 9, 1996), where the Department stated that the respondent bears the burden of demonstrating that such an offset is warranted. The petitioner asserts that neither CEMEX nor CDC has met this burden in this review. Specifically, the petitioner argues, the Department instructed both companies to provide a chart of selling functions which lists the expenses deducted under 19 U.S.C. § 1677a(d) separately. The petitioner claims that, instead, the respondents provided a list of all alleged selling functions and were unable or unwilling to provide essential information that the Department needed to make a determination as to whether they were entitled to CEP-offset adjustments.
Moreover, the petitioner claims that the following facts affect the Department's analysis: (1) CEMEX did not itemize or quantify certain expenses associated with its alleged home-market indirect selling functions; (2) CEMEX performed the vast majority of selling functions the
Department considered for both CEP and home-market transactions; (3) the Department's draft finding that CEMEX only provided market research and personnel training with respect to home-market transactions is unsupported by the record; (4) CEMEX provided no meaningful information about its alleged personnel-training and market-research selling functions. The petitioner concludes that the Department should disregard CEMEX's claimed functions concerning personnel training and market research and disregard any expenses associated with CEMEX's alleged home-market indirect selling functions. Similarly, the petitioner claims that CDC has neither demonstrated the basis for, nor explained the nature of, its alleged selling functions and that none of the selling functions upon which CDC's claim is based was performed with respect to "at least the vast majority of customers and sales," citing Pasta from Italy, 61 FR at 30338. The petitioner argues that the Department should find that, for CDC, there is no basis for the identification of different levels of trade in the two markets and, therefore, no basis for a CEP-offset adjustment to normal value.
Both CEMEX and CDC assert that the Department's decision to grant a CEP offset is reasonable and note that it is consistent with the Department's determinations in the 95/96, 96/97 and 97/98 reviews of this order.
We maintain our position stated in the Draft Remand Redetermination that CEMEX and CDC are entitled to a CEP-offset adjustment. First, the petitioner argues that we should disregard any selling functions associated with certain home-market indirect selling expenses since CEMEX did not itemize or quantify these expenses. We disagree with the petitioner's
argument because, as fully explained above and in the Draft Remand Redetermination, the Department need not in most instances identify the actual expenses associated with each selling function in order to develop a comprehensive picture of a respondent's selling process for purposes of the level-of-trade analysis.
All other arguments the petitioner makes with respect to CEMEX involve the comparison of home-market selling activities to U.S. selling activities that we adjust for pursuant to 19 U.S.C. § 1677a(d). See our response to Comment 2 above. For example, the petitioner argues that CEMEX performed personnel training and market research in both markets such that we should not have found differences in selling functions in the two markets. Because the re-evaluation of these activities would not affect our level-of-trade analysis and, subsequently, our CEP-offset determination, these comments are moot and require no further consideration.
Furthermore, regarding the petitioner's comments about CDC's reported selling activities, because we were not clear in our supplemental questionnaire that a more detailed description was required for certain selling activities and because we have no reason to believe from the record that certain activities were captured under "other discounts" or "other adjustments" as suggested by the petitioner (at page 44 of its response to our Draft Remand Redetermination), we relied on the nature of the activities as reported by CEMEX and CDC. Therefore, we have not re-evaluated these selling activities for our final results of redetermination.
Comment 5: Calculation of the CEP-Profit Ratio
The petitioner claims that the Department calculated the CEP profit ratio incorrectly in its Draft Remand Redetermination. First, the petitioner argues that the Department included
imputed expenses (credit expenses and inventory carrying expenses) as part of total selling expenses in the CEP- profit calculation even though the Department's consistent practice is to exclude imputed expenses in making this calculation. Second, the petitioner argues that the Department included home-market sales of Type II cement in the profit ratio calculation erroneously. According to the petitioner, because the Department found sales of Type II cement to be outside the ordinary course of trade and the Department excluded them from the normal-value calculation and the arm's-length test, they should also be excluded from the CEP-profit calculation.
These arguments presented by the petitioner do not pertain to issues which the Panel remanded to the Department. In the Department's amended final results, the imputed expenses in question and the home-market sales of Type II cement were included in the calculation of the CEP-profit ratio. In the complaints filed with the Panel, neither the respondents nor the petitioner contested these two specific aspects of the Department's calculation of CEP profit. Therefore, because the issues raised by the petitioner are outside the scope of the Panel's remand instructions, we have not revised our calculations as requested by the petitioner.
V. FINAL RESULTS OF REDETERMINATION
In accordance with the Panel's instructions, we have (1) excluded respondents' home-market sales of bagged Type I cement from our calculation of normal value, (2) re-examined, and reversed, our original denial of the requested CEP offset adjustment, and (3) corrected certain ministerial errors. See Draft Remand Analysis Memorandum to the File dated October 27, 1999. Finally, we have corrected a clerical error in the Draft Remand Redetermination which CDC identified in its November 2, 1999, comments.
As a result of this redetermination, we have recalculated the dumping margin for CEMEX and CDC. The weighted-average dumping margin for the period August 1, 1994, through July 31, 1995, is 44.89 percent.
Robert S. LaRussa
for Import Administration
signed November 15, 1999
1. Panelist Endsley did not join in the Panel's resolution of this issue. See Dissenting Views of Panelist Endsley Concerning the Issue Whether the Department's Determination to Base Normal Value on both Bagged and Bulk Home Market Sales of the Foreign Like Product was Supported by Substantial Evidence and was Otherwise in Accordance with Law ("Endsley Dissent"), appended to Panel Decision
2. While the bulk/bagged issue was raised only by CEMEX, we note that the Panel ruling is broadly worded and understand it as applying to both respondents. See Panel Decision at 5 ("A Panel majority determines that bagged Type I cement should not have been included within the foreign like product and remands the issue to the Department for a determination consistent with this opinion."). This interpretation of the Panel's ruling accords with the separate determination - affirmed by the Panel - to collapse CEMEX and CDC for purposes of calculating the weighted-average dumping margin.
3. The Court of International Trade, in Borden, Inc. v. United States, 4 F. Supp. 2d 1221, 1240 (CIT 1998), held this interpretation of the statute to be impermissible ("The statute leaves no room for Commerce's ostensible discretion to pre-adjust for selling expenses in the United States through the automatic deduction of § 1677a(d) selling expenses prior to the [level-of-trade] analysis in all CEP cases."). As explained in recent determinations, however, the Department has not acquiesced in this decision and is appealing Borden to the Court of Appeals for the Federal Circuit. See, e.g., Notice of Preliminary Results and Partial Rescission of Antidumping Duty Administrative Review: Certain Pasta From Italy, 64 FR 43152, 43153 (August 9, 1999).
The SAA explains how the Department is to quantify differences in level of trade:
The effect on price comparability is measured by examining price differences between goods sold to different levels of trade in the foreign market where normal value is being established. Commerce will measure any effect on price comparability by determining if there is a pattern of price differences between sales at the different levels of trade in the foreign market. While the pattern of pricing at the two levels of trade under section 773(a)(7)(A) must be different, the prices at the levels need not be mutually exclusive; there may be some overlap between prices at the different levels of trade.SAA at 160. This methodology is codified in the Department's new regulations at 19 C.F.R. § 351.412(d) and (f)(3).
5. To cite one such example, in Professional Electric Cutting Tools From Japan: Preliminary Results of Administrative Review, 64 FR 43346, 43349 (August 10, 1999), the Department determined that there were two levels of trade in the home market but that neither of these levels of trade was comparable to the CEP level of trade. Specifically, the Department found the adjusted CEP level of trade to be at a less advanced stage of distribution than either of the home-market levels of trade. As the Department explained, "[b]ecause there is not a common [level of trade] between the two home market and the CEP [levels of trade], we were unable to quantify a [level-of-trade] adjustment in accordance with section 773(a)(7)(A) of the Act. Consequently, we have granted [respondent's] request for a CEP offset adjustment in accordance with section 773(a)(7)(B). . ." Id.
6. As explained in the preamble to section 351.412(f)(3) of the Department's regulations, "[t]he Department will grant a CEP offset only where: (1) normal value is determined at a more remote level of trade than CEP sales; and (2) despite the fact that a respondent cooperated to the best of its ability, the data available do not provide an appropriate basis to determine whether the difference in levels of trade affects price comparability." Final Rule, 62 FR at 27371.