This second remand determination, submitted in accordance with the Court's March 16, 1999, opinion involves challenges to the antidumping duty determination of the International Trade Administration, U.S. Department of Commerce ("the Department"), in Large Newspaper Printing Presses and Components Thereof, Whether Assembled or Unassembled, ("LNPP") from Germany.(1) In Slip Op. 99-25, the Department was ordered to reconsider its final determination with respect to the decision not to combine certain LNPP production costs of MAN Roland Druckmaschinen AG ("MRD") with those incurred by its wholly-owned subsidiary, MAN Plamag Druckmaschinen AG ("MAN Plamag"), when calculating the cost of production ("COP") and constructed value ("CV") of the subject merchandise, by addressing the threshold question of whether MRD and its affiliate should be collapsed. Specifically, according to the Court, in order to properly determine whether these costs should be averaged, the Department must first apply its collapsing practice as codified at 19 C.F.R. §351.401(f).
In response to the Court's instructions, Slip Op. 99-25 at 16, we have reconsidered this matter. Specifically, we have collapsed MRD and MAN Plamag for purposes of our margin analysis and have recalculated CV accordingly. The recalculation of the CV changed MRD's final dumping margin from 39.60 percent (the margin calculated based upon the Department's September 18, 1998 Final Results of Redetermination Pursuant to Court Remand ("Redetermination")) to 39.53 percent. In line with our collapsing practice, we intend to apply this revised margin to entries of subject merchandise produced/exported by either MRD or MAN Plamag, if affirmed by the Court.
On July 23, 1996, the Department issued its final determination that MRD had been selling LNPPs in the United States at less than fair value during an investigation covering the period from July 1, 1993 through June 30, 1995. See Final Determination.(2) In the Final Determination, MRD asserted that the Department should make a "multiple facilities adjustment" to its CV calculations, whereby MRD's manufacturing costs for labor and overhead would be combined with that of its affiliate, MAN Plamag. The Department declined to make this adjustment. See Final Determination, Comment 13, 61 FR at 38187-38188.
MRD challenged the Department's final determination with respect to the cost-averaging issue in the CIT. On June 23, 1998, the Court issued an order remanding this issue to the Department. See Slip Op. 98-83 at 28-30, 40-43. In its remand instructions, the Court ordered the Department to reconsider its decision not to combine certain production costs for MRD and MAN Plamag.
On September 18, 1998, the Department filed its Redetermination. Upon remand, the Department revisited the cost-averaging issue, articulating its general policy and declining to change its original position that MRD's and MAN Plamag's costs should not be combined because the companies failed to satisfy the fundamental condition for averaging costs - that the products manufactured at various respondent facilities be sufficiently similar in physical characteristics, such that they could be considered "identical" for product comparison purposes. See Redetermination at 7, and Defendant's Response to MRD's Comments on Redetermination Pursuant to Court Remand (November 13, 1998) at 6.
On March 16, 1999, the CIT ruled that:
Commerce has not demonstrated that the identical merchandise requirement is its established practice in the context of affiliated parties. Moreover, the only context in which the discussion of whether to average the production costs of affiliated parties does occur is in the context of collapsing. Here, Commerce never addressed the threshold question of whether MAN Roland and MAN Plamag should be collapsed. Therefore, to properly determine whether MAN Roland's and MAN Plamag's production costs should be averaged, Commerce should apply its collapsing practice as it then existed and was later codified at 19 C.F.R. §351.401(f). Commerce has not made the required finding. Therefore, this Court remands the matter for a determination consistent with this Court's opinion. Koenig & Bauer-Albert A.G. et al. v. United States, Consol. Court No. 96-10-02298, Slip Op. 99-25 (CIT March 16, 1999) at 16.
On June 23, 1999, the Department provided to MRD, the respondent, and Goss Graphic Systems, Inc. (Goss), the petitioner, the draft results of redetermination pursuant to Court remand for comment. MRD filed its comments on June 30, 1999. Goss did not file any comments on this remand.
Upon further review, the Department finds that MRD and MAN Plamag should have been collapsed as a single entity in performing its antidumping analysis in accordance with 19 C.F.R.§351.401(f).
In analyzing the issue of collapsing MRD and MAN Plamag, we note that the Department's long-standing practice is to calculate a separate dumping margin for each manufacturer or exporter investigated. See Final Determination of Sales at Less Than Fair Value: Certain Hot-Rolled Carbon Steel Flat Products, Certain Cold-Rolled Carbon Steel Flat Products, and Certain Corrosion-Resistant Carbon Steel Flat Products from Japan, 58 FR 37154, 37159 (July 9, 1993). Because we calculate margins on a company-by-company basis, we must ensure that we review the entire producer or reseller, not merely a part of it, due to our concerns regarding price and cost manipulation. To address these concerns, we examine the question of whether companies "constitute separate manufacturers or exporters for purposes of the dumping law." See Final Determination of Sales at Less Than Fair Value: Certain Granite Products from Spain, 53 FR 24335, 24337 (June 28, 1988). We note that in this case both MRD and MAN Plamag produced LNPPs during the period of investigation ("POI"), but only MRD exported such merchandise to the United States during this period.
Pursuant to the Department's practice, as later codified in 19 C.F.R. §351.401(f), the Department will collapse producers and treat them as a single entity for purposes of calculating the dumping margin where (1) those producers are affiliated within the meaning of section 771(33) of the Tariff Act of 1930, as amended ("the Act"), (2) the producers have production facilities for producing similar or identical products that would not require substantial retooling of either facility in order to restructure manufacturing priorities, and (3) there is a significant potential for manipulation of price or production. In determining whether a significant potential for manipulation exists, the Department will consider (1) the level of common ownership, (2) the existence of interlocking officers or directors (i.e., the extent to which managerial employees or board members of one producer (or an affiliate) sit on the board of directors of the affiliated producer (or an affiliate), and (3) whether the operations of the affiliated producers are intertwined. (See e.g., Nihon Cement Co., Ltd. v. United States, Slip Op. 93-80 (CIT May 25, 1993); and Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel Wire Rod from Sweden, 63 FR 40449, 40453 (July 29, 1998)). Based on a totality of the circumstances, the Department will collapse affiliated producers and treat them as a single entity where the criteria of 19 C.F.R. §351.401(f) are met. Id.
In this case, we find that MRD and MAN Plamag satisfy all three criteria enumerated above based on the totality of the facts relevant during the POI. First, they are affiliated with each other under section 771(33)(E) of the Act, as MAN Plamag is a wholly-owned subsidiary of MRD (see MRD's September 27, 1995 Submission at 30). Second, while the companies did not produce similar or identical LNPPs during the POI,(3) both companies have production facilities that are capable of producing similar or identical merchandise without substantial retooling.(4) Third, significant potential for manipulation of price and production exists based on the fact that (1) MAN Plamag is a wholly-owned subsidiary of MRD, (2) several members of MRD's executive management board sit on the supervisory board of MAN Plamag, and (3) their operations are intertwined such that, among other things, MAN Plamag supplied MRD with certain LNPP components (primarily reel tension pasters ("RTPs")) for use in the production of LNPPs sold to the United States and in the home market during the POI. (See Appendix D-6-A and D-6-B of MRD's December 13, 1995 questionnaire response; and MRD's January 31, 1996 supplemental questionnaire response at 56-58.) Therefore, we have collapsed the companies in accordance with our practice as codified under 19 C.F.R. §351.401(f).
Treating these affiliated companies as a single entity necessitates that inputs transferred between them also be valued based on the group as a whole. As such, we find that among collapsed entities, sections 773(f)(2) and (3) of the Act (i.e., the "transactions disregarded" and "major-input" provisions, respectively) are not controlling. Thus, for cost reporting purposes, we consider MRD and MAN Plamag to be one producer, with inputs transferred between the companies to be valued at the cost of producing the input. As a result, the RTP used in the Rochester sale, which was acquired by MRD from MAN Plamag,(5) should be valued based on MAN Plamag's actual COP rather than the transfer price between the two companies that was used in the Final Determination. Therefore, for purposes of this remand, we adjusted the CV for the Rochester sale accordingly. (See June 10, 1999 Memorandum to The File Re. Adjustment Calculations for the Second Remand.)
Furthermore, the Department's normal practice is to compute costs on a control-number- (CONNUM-) specific basis. (See, e.g., section D of the Department's standard antidumping questionnaire at D-1 and D-2, where the Department instructs respondents to report the total model-specific cost of the foreign like product and subject merchandise for purposes of calculating COP and CV, respectively, stating, at footnote 21, that "[t]here should be a single weighted-average cost for each unique product as represented by a specific matching control number.")(6) Therefore, in accordance with our normal practice, we next determined the CONNUM-specific, weighted-average cost of manufacturing ("COM") for all subject merchandise produced by MRD and MAN Plamag. Specifically, we first determined the CONNUM-specific, weighted-average COM for each factory individually. If the same CONNUM was produced at more than one factory, we would weight-average each factory's actual COM for that CONNUM using each factory's respective production quantity.(7) However, since it was determined at the outset of the less-than-fair-value investigation in this case that each LNPP produced and sold by MRD and MAN Plamag was unique in terms of physical characteristics and represented its own unique CONNUM (i.e., there was no identical merchandise produced at MRD and MAN Plamag) (see November 9, 1995 Memorandum from the Team to Richard W. Moreland regarding "Determining the Appropriate Basis for Normal Value (NV)"), there was no need to weight-average production costs between the two factories. We thus continue to disagree with MRD that its proposed multiple facility adjustment is appropriate.
Finally, because MAN Plamag made no sales of subject merchandise to the United States during the POI, our decision to collapse MRD and MAN Plamag did not necessitate any changes to the sales side of our margin analysis in the Final Determination. However, in contrast to the Final Determination, we have now applied the same margin, as amended based on the above-described cost adjustments, to both MRD and MAN Plamag.
For the reasons stated above, we have revised our determination of sales at less than fair value with respect to LNPPs from Germany. The revised antidumping margin for both MRD and MAN Plamag is 39.53 percent.
INTERESTED PARTY COMMENTS
MRD contends that while the Department addressed the threshold issue of collapsing the two production facilities in its draft redetermination, it has failed to consider the broader issue identified by the Court-that is, whether the Department should calculate the costs for non-identical merchandise produced at the two facilities based on the average manufacturing costs at the two facilities. Instead, according to MRD, the Department's draft redetermination simply repeats the assertion that its practice is to calculate average costs only when the identical merchandise (identified by the same CONNUM) is produced at both facilities, even though the CIT's March 16, 1999 decision specifically rejected this assertion. While MRD admits that the issue of cost averaging has little effect on the dumping margin in this case, it asserts that the Department's failure to consider the broader issue allegedly raised by the Court is an error that should be corrected.
We disagree with MRD. Contrary to MRD's interpretation, the Court, in its March16, 1999 decision, did not reject the Department's practice of weight-averaging costs for identical merchandise produced at multiple facilities. Rather, the Court stated that the Department's application of the requirement that the merchandise be identical for cost-averaging purposes appeared inconsistent with the Department's collapsing practice, as codified under 19 CFR §351.401. See Slip Op. 99-25 at14-15. Therefore, the Court instructed the Department to address the cost averaging issue in the context of collapsing. As reflected in these remand results, we agree with the Court that the Department's collapsing test relies, in part, upon the ability of two (or more) affiliated producers to produce identical or similar merchandise. However, the Department 's requirement for weight-averaging production costs in calculating COP and CV is actual production of identical (i.e., same CONNUM) products at both (or multiple) production facilities.
To further clarify the difference in the methodology employed by the Department in determining whether two or more affiliated producers should be collapsed, as opposed to determining how to calculate weighted-average production costs for multiple production facilities, it is important to understand how the two concepts relate to the dumping margin calculation. The collapsing issue deals with whether we should treat two or more affiliated producers as a single entity for dumping margin calculation purposes. That is, even though these companies are separate legal entities, we may treat them as a single entity if the requirements codified under 19 CFR §351.401 are met. The impact of collapsing multiple companies on the calculation of COP and CV is akin to the respondent, a single company, having multiple factories that produce subject merchandise which must be factored into the weighted-average, CONNUM-specific cost computation. For collapsing multiple companies, there is no requirement that the companies produce the identical products (i.e., the same CONNUMs), only that they produce (or have the ability to produce) similar products. By contrast in the context of calculating the COP of a product produced at multiple facilities, when computing a single, weighted-average COP for a respondent (whether it be two or more companies collapsed in accordance with 19 CFR §351.401 or a single entity which has multiple facilities that produce the subject merchandise), we compute a single, weighted-average cost for each CONNUM (i.e., each identical product based on the Department's product matching criteria) for the respondent as a whole. In computing a single, weighted-average, actual COP for each CONNUM, we first compute CONNUM-specific, actual costs of production at each facility (whether it be two or more companies collapsed in accordance with 19 CFR §351.401 or a single entity which has multiple facilities that produce the subject merchandise). For any identical CONNUM produced at multiple facilities, we weight-average the facility-specific, CONNUM-specific costs in order to compute a single, weighted-average, CONNUM-specific COP for the respondent as a whole.
In summary, collapsing, as it relates to computing COP, is a specific rule dealing with whether the Department should include facilities owned by an affiliate in its weighted-average, CONNUM-specific COP computation, whereas the weight-averaging issue deals with the general rule for computing a single, CONNUM-specific, weighted-average COP for all respondent facilities that produce subject merchandise.
We note further that MRD's proposed multiple facility adjustment results in a theoretical, rather than actual, weighted-average COP. Factoring in MAN Plamag's labor and overhead rates in order to compute the COP for each unique LNPP (i.e., CONNUM) produced only at MRD's factory fails to account for the reality of the production process. Given that each factory's operating results are affected by the merchandise actually produced, it would be unreasonable to adjust the actual cost of producing certain CONNUMs at one plant for the labor and overhead rates incurred at another plant to produce other merchandise. It ignores the reality that had the MAN Plamag factory attempted to produce the LNPPs sold to the United States during the POI, it may have operated less efficiently and/or required more-highly paid workers that are more technically qualified.
For the Final Results of Redetermination, in accordance with the Court's instructions, we have reconsidered the issue of combining MRD's and MAN Plamag's labor and overhead costs in the context of our collapsing practice. We have revised our determination of sales at less than fair value with respect to LNPPs from Germany by collapsing the two affiliated producers, as described above. However, for the reasons stated above, we have continued to compute a single, weighted-average, CONNUM-specific cost for the collapsed entity. Further, in accordance with our decision to collapse MRD and MAN Plamag, we have valued the input supplied to MRD by MAN Plamag based on the actual COP for the input. As a result of our recalculations pursuant to Court remand, the revised dumping margin for both MRD and MAN Plamag is 39.53 percent.
If the Court affirms this redetermination, we will publish notice of it in the Federal Register, and pursuant to section 516A(e) of the Act, will instruct the U.S. Customs Service to liquidate the covered entries of the subject merchandise at the revised margin rate, as appropriate.
Robert S. LaRussa
Assistant Secretary for
Date: August 10, 1999
1. See Notice of Final Determination of Sales at Less Than Fair Value: Large Newspaper Printing Presses and Components Thereof, Whether Assembled or Unassembled, From Germany, 61 FR 38166 (July 23, 1996) ("Final Determination"), as amended by Notice of Antidumping Duty Order and Amended Final Determination of Sales at Less Than Fair Value: Large Newspaper Printing Presses and Components Thereof, Whether Assembled or Unassembled, from Germany, 61 FR 46623 (September 4, 1996).
2. For procedural background on events prior to the Final Determination, see Defendant's Memorandum in Opposition to the Motion of MAN Roland Druckmaschinen A.G. and MAN Roland Inc. for Judgment on the Agency Record (July 14, 1997) (Public Version), at 2-3.
3. See November 9, 1995, Memorandum from the Team to Richard W. Moreland regarding "Determining the Appropriate Basis for Normal Value (NV)."
4. Given the highly customized nature of the subject merchandise, retooling is a normal production cost in the LNPP industry. Therefore, in this case, if MRD and MAN Plamag were to produce similar or identical merchandise in the future, no substantial or extraordinary retooling would be necessary. As MRD states in its June 3, 1996 case brief at 75, "the production at the two plants is interchangeable."
5. With respect to MRD's U.S. sales during the POI, MAN Plamag produced only the RTP that was used in the Rochester sale. MAN Plamag was not involved in the production of MRD's other U.S. sales. (See MRD's January 31, 1996 supplemental questionnaire response at 56.)
6. See, also, Stainless Steel Sheet and Strip in Coils from Korea, 64 FR 30664, 30679 (June 8, 1999), "The cost test compares the price and cost of all comparison market sales, by model (identified by control number, or 'CONNUM')."
7. The fundamental requirement for combining the costs of more than one respondent facility is that the products produced at each facility be sufficiently similar in physical characteristics, such that they could be considered "identical" for product comparison purposes. Identical products are identified by the same CONNUM.