IMPORT ADMINISTRATION POLICY BULLETIN

Number 92/1

Date of Issue  July 29, 1992

Topic: Matching at Levels of Trade.

Author: Mark Lunn 

Approved:  (signed)
         Alan Dunn
         Assistant Secretary For
           Import Administration

Statement of Issue

Whether, as a general rule, to match sales in the U.S. and home markets 
at comparable levels of trade (LOT), and, if a party contests matching 
at the reported LOT, how to determine if foreign market value (FMV), 
and ultimately the dumping margin, is affected by matching at LOT?

Analysis

The regulatory references to level of trade are set forth in 
19 CFR 353.58 which reads:

The Secretary normally will calculate foreign market value and United 
States price based on sales at the same commercial level of trade.  
If sales at the same commercial level of trade are insufficient in 
number to permit an adequate comparison, the Secretary will calculate 
foreign market value based on sales of such or similar merchandise at 
the most comparable commercial level of trade as sales of the 
merchandise [under investigation] and make appropriate adjustments for 
differences affecting price comparability.

19 CFR 353.58 (1991)

In the questionnaire, the Department asks respondents to list the 
categories of customers (which have been accepted as LOT) to which 
they sell the merchandise under investigation.  The use of this 
information has varied throughout IA.  In some cases, the levels of 
trade have been automatically accepted and matches were made at 
comparable levels of trade when possible.  In other cases, analysts 
have first tried to determine if there was a correlation between 
level of trade and price.  If the analyst did not find a correlation, 
they would not consider LOT when making sales comparisons.

In asking for LOT information, the Department is trying to determine 
where in the distribution chain the respondent's customer falls (end 
user, distributor, retailer)  The presumption is that the net price 
and/or selling expenses and, therefore, the foreign market value (FMV) 
are different at each LOT.  Therefore, it appears reasonable to match 
at LOT if the different customer categories have different functions.  
In other words, if the respondent reports LOT with distinct, discernible
functions, the Department will, when possible, make matches at the same 
level of trade, unless there is evidence to rebut the assumption that 
FMV is affected by LOT.

The next question is, how can parties rebut the underlying assumption?  
In the past the Department has articulated a price correlation test 
and has been upheld in the courts.  Upon further consideration we find 
that the test should encompass both prices and selling expenses, 
because selling expenses also affect the foreign market value.  
Therefore, only if a contesting party has shown that there is not a 
significant correlation between prices and selling expenses on the 
one hand, and levels of trade on the other, will we disregard the 
level of trade when making sales comparisons in cases where different 
functional levels of trade exist.

Statement of Policy

In our questionnaire we will request that respondents list the levels 
of trade at which they sell the merchandise under investigation.  The 
respondent will also be asked to explain what function each level of 
trade performs.  Initially, the analyst will have to determine, based on 
the reported functions, if the respondent sells to distinct, discernable 
levels of trade.  Either party will have an opportunity to contest the 
reported levels of trade by presenting evidence that there is not a 
significant correlation between prices and selling expenses on one hand, 
and levels of trade on the other.  The information on level of trade 
will be subject to the same verification requirements as other 
information presented to the Department.

If the respondent sells merchandise to distinct discernible levels of 
trade, assuming this is not contested by either party, the Department 
will match if possible at the same LOT.  The following hierarchy will 
be used for the purpose of matching:

     First: Identical merchandise at the same level of trade.

     Second: Identical merchandise at the next most similar level of trade.

     Third: Similar merchandise at the same level of trade.

     Forth: Similar merchandise at the next most similar level of trade.


If a party wishes to contest matching at LOT, the party will either have 
to rebut the claim that there are discernable functions or will have to 
show that there is no correlation between prices and selling expenses on 
the one hand, and LOT on the other.

Implementation

This policy will be implemented in all future cases and outstanding 
administrative reviews where the necessary information can be gathered 
and used in the preliminary results without delaying the completion of 
the review.