66 FR 11557, February 26, 2001 A-428-821 AR 9/1/98-8/31/99 Public Document MEMORANDUM TO: Bernard T. Carreau, fulfilling the duties of Assistant Secretary for Import Administration FROM: Richard W. Moreland Deputy Assistant Secretary, Group 1 Office of AD/CVD Enforcement SUBJECT: Issues and Decision Memorandum for the Antidumping Duty Administrative Reviews on Large Newspaper Printing Presses and Components Thereof, Whether Assembled or Unassembled, from Germany - September 1, 1998, through August 31, 1999 Summary We have analyzed the comments of the interested parties in the 1998-1999 administrative review of the antidumping duty order covering large newspaper printing presses and components thereof, whether assembled or unassembled, from Germany. As a result of our analysis of the comments received from interested parties, we have made changes in the margin calculations as discussed in the "Margin Calculations" section of this memorandum. We also recommend that you approve the positions we have developed in the "Discussion of the Issues" section of this memorandum. Below is the complete list of the issues in this administrative review for which we received comments from parties: Date of Sale Classification of MAN Roland's U.S. Sale CEP Offset Adjustment Calculation of Imputed Credit Expenses Affiliated Party Commissions Home Market Warranty Expenses U.S. Indirect Selling Expenses Incurred in Germany Allocation of General and Administrative Expenses to Further Manufacturing Treatment of Installation Costs Incurred in the United States Calculation of Constructed Value Profit Inclusion of Home Market Installation Expenses in Home Market Cost of Manufacture for Profit Calculations Background On October 19, 2000, the Department of Commerce (the Department) published the preliminary results of the administrative review of the antidumping duty order on large newspaper printing presses and components thereof, whether assembled or unassembled, (LNPP) from Germany. See Large Newspaper Printing Presses and Components Thereof, Whether Assembled or Unassembled, From Germany: Preliminary Results and Rescission in Part of Antidumping Duty Administrative Reviews and Final Determinations of Scope Inquiries, 65 FR 62695 (Oct. 19, 2000) (Preliminary Results). The product covered by this order is LNPP. The period of review (POR) is September 1, 1998, through August 31, 1999. We invited parties to comment on our preliminary results of review. Based on our analysis of the comments received, we have changed the results from those presented in the preliminary results. Margin Calculations We calculated constructed export price (CEP) and normal value using the same methodology stated in the preliminary results, except as follows: 標e used the updated, actual cost and payment data submitted in January 2001, in lieu of the estimated amounts that were used in the preliminary results. 標e corrected the calculation of the constructed value (CV) profit, indirect selling expense and imputed credit expense ratios by including home market installation expenses in the denominator of our calculations. See Comment 10. 標e corrected an error in the calculation of the home market cost of manufacture (COM) used for purposes of the sales-below-cost test and the derivation of the CV profit and selling expense ratios, as well as the CEP profit ratio, where we had incorrectly understated the home market COM by deducting installation expenses in the preliminary results. See Comment 11. 標e corrected the calculation of indirect selling expenses used in constructed value by applying the expense percentage to the constructed value COM plus general and administrative expenses, plus interest (COPCV), which is the equivalent basis on which the percentage was calculated. (In the preliminary results, we applied the expense percentage only to the COM.) 標e corrected the calculation of constructed value profit by applying the constructed value profit ratio to a COPCV as described above. (In the preliminary results, we applied the profit ratio to a cost of production figure that also included indirect selling and imputed credit expenses.) See Comment 10. 標e corrected the calculation of the constructed value credit adjustment by applying the imputed credit ratio to the COPCV as described above. (In the preliminary results, we applied the credit adjustment ratio to a cost of production figure that also included indirect selling expenses.) 標e corrected the operation sign error (- instead of +) in our constructed value credit adjustment for normal value. 標e revised the general and administrative (G&A) expense attributable to the U.S. further manufacturing costs of the U.S. affiliate, MAN Roland Inc. (MRU), by applying the G&A rate to the cost of production for the imported press, as well as to the MRU further manufacturing costs. We also allocated a portion of MRU's parent company's G&A expenses to MRU's general expenses. See Comment 8. 標e revised the calculation of net home market price for the sales-below- cost test and the calculation of CV profit and selling expense ratios to deduct commission expenses paid to unaffiliated commissionaires only. See Comment 5. 標e revised the calculation of the net home market sales prices used in the sales-below-cost test and the calculation of CV profit by deducting the full on-time delivery guaranty expense from the prices of those home market sales on which the expense was actually incurred, and we disallowed the allocated deduction from all other sales. (In the preliminary results, we deducted MAN Roland's reported allocated amount from all home market sales prices.) See Comment 6. 標e revised the calculation of CEP by deducting only certain indirect selling expenses incurred by MAN Roland Druckmaschinen AG (MRD) in Germany that may have been associated with economic activity in the United States, based on facts available. See Comment 7. 標e recalculated U.S. imputed credit expenses to apply a German mark- based short-term interest rate for the net difference between receipts and expenditures, including installation and other further manufacturing expenses, for each month of the time period between the beginning of production and the completion of installation. Thereafter, we calculated credit on the amount of the unpaid balance of the sales price, using a U.S. dollar- denominated interest rate. In addition, we revised the home market imputed credit expense to calculate the net difference between receipts and expenditures for each month of the time period between the beginning of production and the completion of installation. (In the preliminary results, we calculated the net difference only until shipment date.) See Comment 4. 筆AN Roland did not report installation and further manufacturing costs on a monthly basis as it did for the other production costs. To incorporate these costs, as well as movement expenses, into the imputed credit calculations for both home market and U.S. sales, we adjusted the production financing portion of the calculation by the percentage difference between the production costs included in MAN Roland's credit calculation, and the additional movement, pre-commercial activity installation and further manufacturing expenses (see also February 15, 2001, Memorandum to the File "Final Results Calculation Worksheets for MAN Roland" (Calculation Memo)). Discussion of the Issues Comment 1: Date of Sale In the preliminary results, the Department used the date of the original contract as the date of sale of the press system to the Des Moines Register, the sole U.S. sale under review. The petitioner argues that the Department should fix the date of sale to the Des Moines Register as the date of contract amendment because of the allegedly significant changes made to the terms of sale (i.e., certain physical specifications, price and payments terms) subsequent to the initial contract date. The petitioner cites Large Newspaper Printing Presses and Components Thereof, Whether Assembled or Unassembled, from Japan: Preliminary Results of Antidumping Duty Administrative Reviews, 64 DR 55243, 55245, October 12, 1999 (LNPPs from Japan Review), and Certain Internal-Combustion Forklift Trucks from Japan: Final Results of Antidumping Duty Administrative Review, 62 FR 34216, 34227, June 25, 1997 (Forklifts from Japan), in support of its claim that the Department has ruled in other cases that a change in the essential terms of the contract alters the date of sale from the date of the original contract to the date that the changes were made. The petitioner further argues that correcting the date of sale has at least two important implications with respect to calculating a dumping margin on the sale to the Des Moines Register. First, the petitioner asserts that the Department should use the exchange rate prevailing on the date of the contract amendment to make all currency conversions. Second, correcting the date of sale alters the universe of home market sales used for purposes of calculating constructed value profit. Because MAN Roland did not report all of its home market sales falling within this new universe, the petitioner contends that, as facts available, the Department should include in its calculation of constructed value profit, the sales that have dates of sale falling within the new universe that were reported by MAN Roland. According to the petitioner, these transactions are representative of MAN Roland's home market selling practices during the appropriate time period. MAN Roland disagrees, maintaining that the sole basis for the petitioner's date of sale argument is the fact that there was a change in the specifications of the U.S. sale at issue, which resulted in only a small price adjustment relative to the total sales price. MAN Roland takes issue with the petitioner's characterization of the Department's past practice, arguing that the Department's past decisions have recognized that the date of sale issues for large, custom-made equipment are different from the date of sale issues for fungible merchandise. The respondent argues that the Department's past decisions have also recognized that minor specification changes are routine for large, custom- made merchandise, and that the existence of such changes does not affect the determination of the date of sale. MAN Roland believes that the changes under consideration in LNPPs from Japan Review were far more substantial than a change in one of the specifications of the LNPP. Finally, with regard to the petitioner's contention that the use of facts available is appropriate in this instance, MAN Roland argues that it provided complete responses to all of the Department's questionnaires and made it clear from the very beginning of this review that it intended to treat the date of the initial contract as the date of sale for the U.S. sale under review, despite the existence of the subsequent minor specification change, and determined home market sales reporting on this basis. In short, MAN Roland argues that before the Department may penalize a respondent for providing a "non-conforming" response, it must first give the respondent notice of the non-conformity and an opportunity to correct it. Department's Position: We agree with MAN Roland and have continued to use the date of original contract as the appropriate date of sale in this review because we find that this date best reflects the earliest date on which the essential terms of sale were established. Although the term "sale" is not defined in either the Tariff Act of 1930, as amended (the Act), or the Department's regulations, the Department finds that a sale exists when the parties agree upon the basic terms of their commercial arrangement. See Final Determination of Sales at Less Than Fair Value: Mechanical Transfer Presses from Japan, 55 FR 335, 341, January 4, 1990 (MTPs from Japan) and 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, 38182 (July 23, 1996) (LNPP from Germany Final Determination). The Department normally uses the date of invoice, recorded in an exporter's or producer's records which have been kept in the ordinary course of business, as the date of sale for subject merchandise or foreign like product. See 19 CFR 351.401(i). However, according to the Department's regulations, "the Secretary may use a date other than the date of invoice if the Secretary is satisfied that a different date better reflects the date on which the exporter or producer establishes the material terms of sale." See id. When defining the material terms of sale, the Department usually focuses on when the price and quantity for a particular product are set. See, e.g., Final Determination of Sales at Less Than Fair Value: Polyvinyl Alcohol from Taiwan, b61 FR 14064, 14067 (Mar. 29, 1996). However, the Department makes determinations as to what constitutes the material terms of sale on a case-by-case basis. In the LTFV investigation, the Department determined that the following were the essential (i.e., having the ability to materially affect the net pricing of the product) material terms of sale for LNPPs: specifications, price, payment terms, warranty terms, and installation requirements. See LNPP from Germany Final Determination, 61 FR at 38182. In this case, all of the essential terms of sale identified above were set in the original contract with the exception of a few minor changes primarily with respect to some of the product specifications, one of which was specifically contemplated in the original contract (see page 11 of Exhibit K to the sales contract, included at Appendix A-4 of the Section A response). While the change in the specifications at issue did result in a minor change in price and the corresponding payment, the Department has determined that the changes did not materially affect the terms of the original contract. For other more fungible products, a change in product specifications and price may justify altering the date of sale. However, due to the custom nature of LNPPs and the protracted sales, production, and installation process, minor design changes and appropriate accompanying price adjustments are expected and indeed unavoidable. Therefore in the case of LNPPs, setting the date of sale on the date of the last minor change in the middle of the production process would be arbitrary and ignores the fact that the parties committed themselves to the sale and process at an earlier date. With regard to the petitioner's argument that the Department has ruled in other cases that a change in the essential terms of the contract alters the date of sale from the date of the original contract to the date that the changes were made, we note that fact patterns in the cases cited by the petitioners were different than those in the instant review. With regard to Forklifts from Japan, which involved a more fungible product than LNPPs, the date of sale issue involved whether the order date or the shipment date was the appropriate date of sale. In that case, the Department determined that the material terms of sale were agreed to on the date of shipment, which was the date recorded in the respondent's records. With respect to the LNPPs from Japan Review, the changes to Mitsubishi Heavy Industries, Ltd's (MHI's) original contract for the sale to the Washington Post were generally more substantial than those under consideration in the instant review (i.e., they involved significant changes to price and other essential sales terms) as described further below. Specifically, in MHI's case, the Department used the revised contract date, rather than the date of the original contract, as the date of sale, because based on our analysis of the record in that review, we determined that the essential terms of the sale were not established until the revised contract date. (1) Specifically, the new contract for the Washington Post sale substantially revised the contract price, substantially altered the payment schedule, and revised other terms, such as service agreements, that materially affected the net price to the customer. In sum, the revised contract related to the MHI sale involved significant changes from the original contract, unlike the minor specification changes relevant to Man Roland's sale in the instant review. Accordingly, in this case we determined that the appropriate date of sale is the date of the original contract. Comment 2: Classification of MAN Roland's U.S. Sale In the preliminary results, the Department classified MAN Roland's U.S. sale as a CEP sale because the contract governing the U.S. sale was executed in the United States by MAN Roland's affiliated sales agent and the affiliated sales agent coordinated rigging and installation support, which we classified as further manufacturing. The respondent argues that the Department's explanation is flawed in two respects. First, according to MAN Roland, the identity of the party that executed the contract is not dispositive under the statute as to whether the sale should be classified as export price or CEP. Instead, according to MAN Roland, the statute requires an analysis of the circumstances of the transaction to determine which actor "caused or promoted" the sale, and the Department's preliminary results analysis failed to address this issue. Secondly, according to MAN Roland, the fact that the Department classified certain costs as further manufacturing is irrelevant to the classification of the sale under the statutory test. While MAN Roland agrees that the Department could not have made an adjustment for further manufacturing costs if it had classified the sale as an export price sale, it contends that this fact does not provide any basis under the statute for classifying the sale as a CEP sale. MAN Roland claims that in the instant case, record evidence indicates that the LNPP at issue was first sold or agreed to be sold to the unaffiliated U.S. customer by MAN Roland Druckmaschinen AG (MRD), not its U.S. affiliate MAN Roland Inc. (MRU), and, therefore, should be classified as an export price sale - whether or not any further manufacturing occurred. Moreover, MAN Roland points out that it was MRD's commencement of production that created the enforceable contract and MRD actually signed the final sales contract as a guarantor of MRU's performance. Consequently, according to MAN Roland, MRU's limited supporting role in this process was entirely insufficient to support the conclusion that MRU "sold" the presses to the customer. Finally, MAN Roland contends that the recent decision by the United States Court of Appeals for the Federal Circuit (CAFC) in AK Steel Corp. et al v. United States, 226 F.3rd 1361 (CAFC September 12, 2000) (AK Steel) does not require the Department to limit its analysis to the identity and location of the party that executed the contract. Accordingly, MAN Roland believes that, for purposes of the final results, the Department should classify MAN Roland's U.S. sale as an export price sale. The petitioner argues that MAN Roland's U.S. sale is clearly a CEP sale under the new, controlling AK Steel test, because MAN Roland's U.S. affiliate, not the foreign producer itself, sold the press to the unaffiliated U.S. customer. According to the petitioner, AK Steel precludes the classification of a sale between two U.S. entities (i.e., a U.S. affiliate of the producer and a U.S. purchaser) as an export price sale. Therefore, as a factual and legal matter, the petitioner concludes that MAN Roland's U.S. sale is a CEP sale. Department's Position: We agree with the petitioner. In accordance with the Court in AK Steel and the definition of CEP under section 772(b) of the Act, we have continued to classify MAN Roland's U.S. sale as a CEP sale because it occurred in the United States. Contrary to MAN Roland's interpretation, the CAFC in the AK Steel case ruled that the statutory definition, pursuant to the 1994 Uruguay Round Agreements Act amendments, made clear that if the sale or agreement to sell occurred in the United States via a seller affiliated with the foreign producer/exporter, regardless of the specific activities or role of the U.S. affiliate versus the role of the foreign producer/exporter in the sales process, then that sale must be classified as a CEP sale. See AK Steel at 1367-1374. In other words, the CAFC found that it is appropriate to use CEP when a sale or contract for sale is executed in the United States. In the instant review, MAN Roland's U.S. sale was, in fact, executed in the United States by its U.S. affiliate MRU (see Appendix A-4 of MAN Roland's Section A response). More specifically, the sale was contracted in the United States, and the payments were to be made to MRU. Comment 3: CEP Offset Adjustment In the preliminary results, the Department denied MAN Roland's claim for a CEP offset adjustment to normal value because, despite our requests, MAN Roland did not submit sufficient information pertaining to selling functions in the U.S. market. MAN Roland claims that the Department's preliminary decision was without a basis in the record and contrary to the explicit requirements of the statute. MAN Roland argues that the Department did not ask for the information about its selling functions more than once and therefore, according to the statute, the Department is not permitted to proceed immediately to penalize the party. According to MAN Roland, the Department is required to inform the party of the deficiency and then provide an opportunity to remedy the deficiency. However, in the instant case, MAN Roland believes that there is sufficient information on the record demonstrating that the "constructed" level of trade (LOT) for MAN Roland's U.S. sales (incomplete, uninstalled press) was less advanced than the actual LOT for its home market sales (completely finished, delivered, and installed). The petitioner argues that it is unreasonable for the Department to issue multiple requests for information on every deficiency, citing the SAA and Mitsubishi Heavy Industries, Ltd., v. United States, 15 F.Supp.2d at 820 (CIT 1998), in which the Court of International Trade (CIT) found that the Department only has to request the information once for the respondent to incur the duty to respond fully. The petitioner also cites Large Newspaper Printing Presses and Components Thereof, Whether Assembled or Unassembled, from Japan: Final Determination of Sales at Less Than Fair Value, 61 FR 38139, 38143 (July 23, 1996), among other cases, in its assertion that respondents must prove that they merit any requested adjustment. Moreover, the petitioner argues that even if MAN Roland is correct in its claim that a LOT comparison must be based on the U.S. CEP, after adjustments, it has not demonstrated any differences in functions or services in both markets, other than those that are already accounted for as circumstance-of-sale or movement adjustments. Department's Position: We agree with the petitioner and have continued to deny MAN Roland's claim for a CEP offset adjustment in the final results. In accordance with section 773(a)(1)(B) of the Act, to the extent practicable, we determine normal value based on sales in the comparison market at the same LOT as the export price or CEP transaction. The normal value LOT is that of the starting-price sales in the comparison market or, when normal value is based on constructed value, that of the sales from which we derive selling, general and administrative (SG&A) expenses and profit. For export price, the U.S. LOT is also the level of the starting-price sale, which is usually from the exporter to an unaffiliated U.S. customer. For CEP, it is the level of the constructed sale from the exporter to an affiliated importer, after the deductions required under section 772(d) of the Act. (2) To determine whether normal value sales are at a different LOT than export price or CEP, we examine stages in the marketing process and selling functions along the chain of distribution between the producer and the unaffiliated customer. If the comparison-market sales are at a different LOT, and the difference affects price comparability, as manifested in a pattern of consistent price differences between the sales on which normal value is based and comparison-market sales at the LOT of the export transaction, we make an LOT adjustment under section 773(a)(7)(A) of the Act. Finally, for CEP sales, if the normal value level is more remote from the factory than the CEP level and there is no basis for determining whether the difference in the levels between normal value and CEP affects price comparability, we adjust normal value under section 773(a)(7)(B) of the Act (the CEP offset provision). See Notice of Final Determination of Sales at Less Than Fair Value: Certain Cut-to-Length Carbon Steel Plate from South Africa, 62 FR 61731 (November 19, 1997). In this review, MAN Roland reported one channel of distribution in the home market and in the United States: direct sales to the ultimate users of the presses. Furthermore, according to MAN Roland's Section B response at page 14, "the sales to the unaffiliated customers in the United States and home market appear to have been made at the same level of trade." However, MAN Roland contends that, in the event that the Department classifies its U.S. sale as a CEP sale, then a LOT adjustment is appropriate to account for the differences between the actual LOT of the home market sales and the constructed LOT of the U.S. sale. As discussed above in Comment 2, we have determined that MAN Roland's U.S. sale under review is properly classified as a CEP sale. To determine whether sales in the comparison market were at a different LOT than CEP sales, we normally examine the selling functions performed at the CEP level, after making the appropriate deductions under section 772(d) of the Act, and compare those selling functions to the selling functions performed in the home market LOT. Upon further analysis, since the preliminary results, of the information on the record, after making the appropriate deductions under section 772(d) of the Act, there are basically three selling activities associated with MAN Roland's sales to MRU reflected in the CEP: (1) sales and marketing, (2) customer service and installation, and (3) freight and delivery arrangement, which are essentially the same functions as those performed in the home market. Because we find no differences in selling functions between the two markets, we find no differences in LOT. Accordingly, no LOT adjustment under section 773(a)(7)(A) of the Act is warranted and no basis for a CEP offset under section 773(a)(7)(B) of the Act exists. Furthermore, in response to MAN Roland's argument that we did not request the missing information more than once, the SAA states at 829 that "if a respondent claims an adjustment to decrease normal value, as with all adjustments which benefit a responding firm, the respondent must demonstrate the appropriateness of such adjustment." Moreover, contrary to MAN Roland's assertions, the Department's April 6, 2000, supplemental questionnaire requested that MAN Roland provide information related to selling functions-i.e., it requested that MAN Roland "explain in more detail the sales, distribution, and installation activities conducted by MRD's affiliate, MAN Roland Inc. (MRU) in support of sales of the subject merchandise..." This questionnaire also requested specific information as to the division of responsibilities between MRD and MRU with respect to installation expenses. For the final results we conducted an analysis of the information on the record and determined that the CEP and home market levels of trade are the same. Finally, based on MAN Roland's argument, MAN Roland appears to have the misconception that the Department is comparing an incomplete, uninstalled press system with a complete and installed press system. We note that the Department compared an uninstalled constructed value to an uninstalled constructed export price. Accordingly, as discussed above, because we find that the CEP and home market levels of trade are the same, neither a LOT adjustment nor a CEP offset adjustment to normal value is justified. Comment 4: Calculation of Imputed Credit In the preliminary results, we calculated imputed credit expenses for MAN Roland's U.S. and home market sales using a "project financing" approach generally consistent with that employed the LTFV investigation. Under this methodology, we calculated the net difference between receipts and expenditures for each month, as reported by MAN Roland, between the time that production of the LNPP systems began and the LNPP was shipped. We then calculated an imputed financing expense related to this difference using a short-term interest rate denominated in the currency of the sale (i.e., the German mark rate for home market sales and the U.S. dollar rate for U.S. sales). For the period from shipment to payment, we calculated imputed interest using our normal methodology of applying the short-term interest rate to the outstanding balance, and added that amount to the pre- shipment project financing amount to arrive at the total imputed credit expense for each sale. The petitioner contends that the Department should change the methodology for calculating imputed credit by applying the German mark interest rate to the net imputed financing cost prior to shipment. The petitioner asserts that, as the costs of production are primarily incurred in the home market currency, the imputed financing expense for that phase of the project financing should be calculated based on the home market currency interest rate. In addition, the petitioner contends that the expense calculated for the pre-shipment phase should be based on the costs of all G&A expenses and all costs incurred by MRU, such as installation costs, in addition to the MRD cost of manufacturing and the movement expenses. Finally, the petitioner contends that the Department's preliminary results imputed credit calculation did not include post-shipment financing costs. While MAN Roland agrees with the petitioner's argument that the home market interest rate should be applied to calculate the financing expense for pre-shipment production costs, it disagrees with respect to pre- shipment payments. According to MAN Roland, because these payments are received in U.S. dollars, the imputed financing income arising from these payments must be calculated using a U.S. dollar interest rate. MAN Roland argues that, because money is fungible, it is illogical to assume that the dollars received from a U.S. customer were necessarily converted into German marks to pay for the production costs on that sale. MAN Roland adds that, as it does, in fact, have U.S.dollar-based bank accounts, it is therefore possible that payments received in U.S. dollars remained in a U.S. dollar-based account earning interest, and that separate German mark borrowings could be used to finance production costs. Accordingly, MAN Roland advocates the use of its proposed methodology that would apply the German mark interest rate to calculate the effect of German mark costs, and the U.S. dollar interest rate to calculate the effect of accelerated or delayed U.S. dollar-based payments. MAN Roland states that the petitioner misunderstood the Department's preliminary results calculation and that, in fact, the Department did account for post-shipment financing. MAN Roland adds that the petitioner's argument concerning the inclusion of additional MRD and MRU costs to the financing expense is inconsistent with the petitioner's position regarding post-shipment financing. Since the expenses identified by the petitioner are post-shipment expenses, MAN Roland states that they would not be included in the pre-shipment production financing phase of the calculation. Alternatively, MAN Roland continues, if the Department accepts the petitioner's argument, then the project financing phase of the calculation would have to continue beyond the shipment date. Department's Position: Based on the Department's consideration of comments received in this review and our continued examination of the LNPP industry throughout this proceeding, we have revised our methodology associated with calculating imputed credit and applied the calculation described above under Margin Calculations. As we have stated repeatedly throughout this proceeding, as well as the LNPPs from Japan proceeding, the Department's normal treatment of various issues and expenses may not be appropriate or applicable for proceedings involving large, customized merchandise in general, and for LNPPs in particular. With respect to the "normal" calculation of an imputed credit circumstance-of-sale adjustment, the Department's intent is to account for the opportunity cost incurred by the seller from the point at which its goods are removed from its finished goods inventory (normally the shipment date) until cash is received (payment date). This approach measures the cost of financing the accounts receivables between the time of shipment and payment. Unlike most products in antidumping duty proceedings, where production costs are financed independently of sales transactions and the manufacturer normally ships a finished good before the customer submits payment, each LNPP project requires substantial capital outlays during the production period, which may extend over two to three years including the design phase, and scheduled progress payments from the purchaser before the completion of the project. These payments serve to provide the manufacturer with the production financing necessary for this large, customized product. To account for both the production financing costs incurred and the pre-payments received, the Department developed a methodology in the LTFV investigation, which we applied in the preliminary results of this review, that offset the production costs incurred by the payments received. In applying this methodology, we used the interest rate corresponding to the currency of the accounts receivables in question to calculate the costs of both production and accounts receivable. Following our continued examination of this issue in the LNPP proceedings, we observe that, unlike with most other products, the manufacturer's production responsibility is not fulfilled when the LNPP is shipped from the factory. The manufacturer continues to work on the production of the LNPP until it is installed at the purchaser's site. Until that point, the manufacturer still incurs costs associated with the production and installation of the LNPP. Thus, in the unique case of LNPPs, it appears to be more appropriate to consider the installation completion date, rather than shipment date, as the point at which the manufacturer incurs an opportunity cost for the unpaid portion of the sale (i.e., where the unpaid balance becomes an accounts receivable). In line with this perspective, we find it appropriate to apply our normal methodology used to calculate imputed credit to the period from the installation completion date to final payment date (3). Prior to the installation completion date, the net difference between production costs incurred and payments received represent production financing expense (or revenue, if payments to date exceed costs to date). Following this reasoning, we agree with both parties and have further revised our methodology to apply the home market interest rate to the production financing portion of the imputed credit calculation for the U.S. sale since it is the home market currency in which most of the production expenses are incurred. (In this case, we note that the U.S. dollar portion of further manufacturing costs are relatively small as compared to the German mark costs). We have continued to apply the interest rate corresponding to the currency of the accounts receivable (i.e., the sale currency) for the portion of the imputed credit expense subsequent to the installation completion date. We have made similar revisions to the home market imputed credit expense calculation in the final results. We disagree with MAN Roland that the U.S. dollar interest rate should be applied to U.S. dollar payments made prior to the installation date. Consistent with the practice expressed in Final Determination of Sales at Less Than Fair Value: Large Newspaper Printing Presses and Components Thereof, Whether Assembled or Unassembled, From Japan 61 FR 38139, 38160 (July 23, 1996), and the Final Determination of Sales at LTFV: Oil Country Tubular Goods from Austria, 60 FR 33551, 33555 (June 28, 1995), the interest rate should be tied to the currency in which the account is denominated. Since MAN Roland's production costs are denominated in German marks, the imputed expense or revenue should be based on the interest rate of that currency. After installation, when the sale is carried as part of the accounts receivable, the appropriate interest rate for the dollar- denominated U.S. sale is the U.S. dollar rate. In addition, as MAN Roland has noted, the petitioner appears to have misunderstood the preliminary results imputed credit calculation in that we did, in fact, include the post-shipment expense or revenue, based on the outstanding portion of the sales value, in our calculations. The final results methodology is consistent with the preliminary results in this respect, with the difference that we have used installation date, rather than shipment date, as the point in which we based the credit expense or revenue on sales value. Comment 5: Affiliated Party Commissions In the preliminary results, the Department deducted commissions paid to affiliated parties on certain home market sales for purposes of calculating the net home market price to be compared to the corresponding cost of production. The purpose of these comparisons was to establish the proper basis for the CV profit, indirect selling expense, and imputed credit expense ratios. The petitioner contends that the Department should reject the reported commissions to affiliates because, according to the petitioner, the payments to these affiliates do not constitute commissions but rather financial transfers to the affiliates. If the Department nevertheless continues to accept the affiliated party payments as commissions, the petitioner argues that the respondent failed to demonstrate the arm's- length nature of these commissions in a manner consistent with standard Department practice. The petitioner claims that MAN Roland's regression analysis submitted to demonstrate that the commissions are at arm's length (May 15, 2000, supplemental response at Exhibit SB-2-A) is faulty because it compares commissions based on "expected profitability," rather than total sales value. Such an analysis, the petitioner continues, is subject to manipulation because it is not based on the respondent's actual costs or official accounting records, and is contrary to Department practice. Moreover, the petitioner claims the data in the regression analysis appear to contradict MAN Roland's claim that the commissions are at arm's length. In addition, the petitioner points out that MAN Roland failed to provide the Department with the "T statistic" for its regression results, which the petitioner contends is required to demonstrate a valid statistical relationship for such data. MAN Roland responds that its regression analysis shows no meaningful difference between commissions paid to unaffiliated and affiliated customers. It explains that the expected profitability figures used in the analysis were taken directly from its normal cost estimates, as provided in its initial section D response. MAN Roland notes that the only relevance of these commissions to the Department's margin analysis is with respect to the calculation of the home market profit rate applied to the constructed value and that the petitioner has not pointed to any precedent or statutory provision that requires that commissions paid to affiliated sales agents be excluded from the calculation of home market profit. Department's Position: We agree with the petitioner that MAN Roland has failed to demonstrate that affiliated commissions were made at arm's length. The Department's practice is to treat payments to affiliated parties providing services that relate to the sale of merchandise as commissions if they are actual expenditures resulting from specific sales and are not intra-company transfers. The Department allows these expenses as direct deductions to price if they are at arm's length and tie directly to sales. To establish whether commissions are made at arm's-length, the Department normally compares the commissions paid to affiliated selling agents to those paid by the respondent to any unaffiliated selling agents in the same market (exporting or U.S.) or in any third-country market (see Final Determination of Sales at Less Than Fair Value: Coated Groundwood Paper from Finland, France, Germany and the United Kingdom, 56 FR 56359, 56363 (November 4, 1991).) In this case, we have no evidence suggesting that the affiliated party payments at issue are intra-company transfers, as they are actual expenditures tied to specific sales. Therefore, we are accepting them as commissions and must determine their arm's-length nature in accordance with our normal practice. MAN Roland claimed at page 18 of its May 15, 2000, supplemental questionnaire response that commission payments "are often tied to the estimated profitability of the sale." However, there is no information on the record to support this claim. In the one example of a commission agreement that MAN Roland provided for the record, the German- language agreement includes a commission rate schedule for that sales agent that is tied to the net sales value of the transaction (see page 6 of Appendix B-11-C to the Section B questionnaire response). The information reported for one of the home market sales, HM-12, included a commission paid to the affiliated agent in that agreement which ties to the sales value percentage specified in the commission agreement. Furthermore, MAN Roland's contention that commissions are based on estimated profitability is undercut by its own regression analysis. MAN Roland notes in the May 15, 2000, response that an agent may agree to lower its commission rate if estimated profit is low. However, the regression analysis shows that commissions were paid even if the estimated profit was less than zero. It does not appear logical that estimated profitability determined the commission rate in those cases. The petitioner provided an analysis of MAN Roland's average commission percentage paid to affiliated and unaffiliated sales agents based on contract price in its November 27, 2000, case brief. We performed our own analysis based on both contract price and net sales revenue (i.e. final contract price less discounts; see Calculation Memo). In both of our analyses, the average commission percentage paid to affiliates was also significantly different than the commission percentage paid to unaffiliated agents. Consequently, we have determined that MAN Roland has failed to demonstrate that commissions paid to affiliates were at arm's length. Accordingly, we have revised the home market profit and selling expense calculations and not deducted affiliated commissions from the home market price. Comment 6: Home Market Warranty Expenses In the preliminary results, the Department deducted warranty expenses for purposes of calculating the net home market price to be compared to the corresponding cost of production. The purpose of these comparisons was to establish the proper basis for the CV profit, indirect selling expense, and imputed credit expense. The warranty expense reported included an allocated amount for costs incurred for guaranteeing on-time delivery. The petitioner argues that the Department should reject MAN Roland's claimed adjustment for home market warranty expenses because the expenses related to on-time delivery guarantee are transaction-specific circumstance-of-sale adjustments. Accordingly, since these expenses were not reported on a transaction-specific basis, the petitioner advocates the exclusion of these warranty expenses from the calculation of home market profit. MAN Roland contends that the petitioner's assumption that the only warranty a seller can provide relates to product breakdowns, failures or other defects, is incorrect. MAN Roland argues that in normal legal usage, any promise that is made in a contract is a "warranty," which requires the seller to indemnify the buyer in case the promise is not kept. In this light, MAN Roland asserts that the costs incurred by MAN Roland for guaranteeing on-time delivery are properly treated as warranty expenses. Further, consistent with the Department's long-standing practice of calculating warranty expenses based on the ratio of expenses incurred to sales made during the period, MAN Roland claims that these expenses should also be included in that ratio. MAN Roland asserts that a sale-specific adjustment would not properly measure the effect of the warranty term on the price charged by the seller. MAN Roland adds that a sale-specific adjustment would penalize or reward a seller for circumstances beyond its control. Department's Position: While we agree with MAN Roland that the expense for guaranteeing on-time delivery should be deducted from the home market price as a direct selling expense, we also agree with the petitioner that this particular expense should be calculated and applied on a transaction-specific basis. The Department allows adjustments to price for differences in warranty and guarantee expenses provided that they are directly related to the sales under consideration. Normally, these expenses are based on the cost of repairing or replacing a defective item. Since many warranties and guarantees extend over a period of time that is longer than the POR, the Department accepts an expense based on historical data. A portion of MAN Roland's reported warranty expense derives from such equipment or repair costs, and is calculated on the appropriate historical basis. Therefore, we have continued to deduct these warranty expenses from the home market price in order to derive the home market profit ratio. While we accept MAN Roland's assertion that expenses guaranteeing on-time delivery should be treated as a direct selling expense, we disagree that these expenses are warranty or guarantee expenses as described above. These are sale-specific expenses and therefore should be applied to the specific transaction for which they are incurred. Unlike the performance of equipment operated by the buyer for periods that may extend well beyond the installation date of the LNPP, on-time delivery performance is more likely within the control of the seller and the responsibility for meeting such a requirement ends at or around the installation date. Moreover, the payments for failing to meet this requirement are specifically tied to a particular sale and likely to be affected by the specific circumstances associated with the sale, including negotiation for that sale. Finally, we note that the warranty descriptions submitted by MAN Roland at Appendix B- 12 to the Section B response contain specific terms for guaranteeing equipment performance, but do not specify the terms for guaranteeing on- time delivery or the penalties for non-performance of delivery schedules. Based on the foregoing analysis, we have deducted from home market prices the on-time delivery expenses at issue on a transaction-specific basis for those home market sales on which the expense was actually incurred, based on the information reported at page 25 of the May 15, 2000, supplemental questionnaire response. As stated above, for all home market sales, we have deducted from home market prices the other warranty expenses reported based on an allocation. Comment 7: U.S. Indirect Selling Expenses Incurred in Germany In the preliminary results, we deducted the entire amount of indirect selling expenses incurred by MRD in Germany to calculate CEP. We stated in the preliminary results that, as MAN Roland did not respond to the Department's questionnaire request to identify which portion of the expense was related to economic activity in the United States, we assumed that the entire amount was related to U.S. economic activity. MAN Roland argues that these indirect selling expenses should not be deducted from CEP for the final results. MAN Roland contends that penalizing it for its alleged failure to respond to the Department's request for information regarding the relationship of the reported German selling expenses to economic activity in the United States is unfair and contrary to the express requirements of the statute. MAN Roland asserts that, subsequent to the questionnaire, the Department never asked it any additional questions about this issue. Nevertheless, MAN Roland maintains that the record contains sufficient evidence for the Department to conclude that the indirect selling expenses incurred by MRD were not related to economic activity in the United States. Finally, MAN Roland submits that if there is uncertainty surrounding this issue, the Department is obligated to afford the respondent an opportunity to remedy the alleged deficiency in its responses. The petitioner argues that the Department had no choice but to deduct all U.S. indirect selling expenses incurred in Germany since MAN Roland failed to demonstrate that any portion of the total was entirely unrelated to U.S. economic activity, as requested in the questionnaire. The petitioner contends that MAN Roland has been well aware of the Department's attention to and treatment of this expense as it was the subject of much debate in the LTFV investigation, as well as subsequent litigation, and has since become standard Department practice. Furthermore, the petitioner asserts that MAN Roland's description in its Section A response of MRD's substantial involvement in the U.S. market directly contradicts its contention that German indirect selling expense accounts did not contain any costs associated with U.S. economic activity. Department's Position: We agree with the petitioner that, based on MAN Roland's failure to respond to the questionnaire with respect to this expense item, MAN Roland's awareness of the significance of the issue from the LTFV investigation, and MAN Roland's descriptions of the role of its German sales offices in its responses in this review, we properly assumed for purposes of the preliminary results that all of these German indirect selling expenses were incurred in support of U.S. economic activity. However, we acknowledge MAN Roland's argument that the Department has at least some information on the record to determine whether or not specific German indirect selling expense items are related to U.S. economic activity. In accordance with the Department's Remand Determination in Mitsubishi Heavy Industries, Ltd. v. United States (CIT 96-10-02292, Slip Op. 99-46 (May 26, 1999)), dealing with the LTFV Final Determination of LNPPs from Japan, we have examined the information in the questionnaire responses, including the worksheets for home market and U.S. indirect selling expenses in MAN Roland's Section B and C questionnaire responses, Appendix SB-5 of the May 15, 2000, supplemental response, and MAN Roland's explanations at page 21 of the November 27, 2000, case brief. We note that the majority of the indirect selling expenses incurred in Germany - the expenses incurred for Common Sales Support and Parts Sales and Service cost centers - were reported both for the U.S. and for home market sales. These expenses, as described by MAN Roland, do not appear to be associated with U.S. economic activity. On the other hand, the operating costs for Sales Center 3, which has sales responsibility for the United States and several other countries, may include expenses associated with economic activity in the United States, particularly given MAN Roland's description in the questionnaire responses of the significant role MRD plays in conducting LNPP sales activities in the United States. However, this portion of the indirect selling expenses obviously also include expenses related to economic activity outside the United States. Based on the information in the response, we are unable to determine which portion of these sales cost center expenses may be related to economic activity in the United States. Because of MAN Roland's failure to provide the requested information, we have made an adverse assumption with respect to these sales cost center expenses and, as facts available, we have deducted all of the indirect selling expenses associated with this cost center in our final results. We have not deducted the remaining portion of the reported indirect selling expenses incurred in Germany, which we did deduct in the preliminary results. (See also Calculation Memo). Comment 8: Allocation of General and Administrative Expenses to Further Manufacturing The petitioner argues that the Department should reallocate MRU's general and administrative (G&A) expenses included in the further manufacturing calculation in order to eliminate the cost of imported components and services from the denominator used to calculate MRU's G&A expense rate. The petitioner contends that the denominator of the ratio should approximate as closely as possible the same body of expenses as the number to which the ratio is applied. According to the petitioner, the Department normally adjusts the denominator to make it consistent with the cost of manufacture (COM) to which it is applied (see Notice of Final Determination of Sales at Less Than Fair Value: Dynamic Random Access Memory Semiconductors of One Megabit and Above, 64 Fed. Reg. 56308, 56312 (October 19, 1999)). The petitioner states that, since the ratio is applied only to the U.S. further manufacturing expense, the Department should limit the denominator for the ratio calculation to the further manufacturing expenses incurred by MRU. Alternatively, the petitioner argues that, if the Department continues to use the total cost of goods sold as the further manufacturing G&A ratio denominator, then it should multiply the ratio by the sum of MRU further manufacturing costs and all costs of goods and services billed by MRD to MRU. The petitioner also asserts that the Department should allocate a portion of the G&A expense incurred by MAN Capital Corporation ("MCC") (MRU's U.S. holding company) in calculating the total G&A of MRU, because the record shows that MCC provided vital services to MRU. MAN Roland responds that no adjustment should be made to the denominator used to allocate MRU's G&A expenses because the denominator reflects the cost of goods sold reported in MRU's audited financial statements. In addition, MAN Roland states that an allocation based on that figure reflects the fact that MRU must provide administrative services on all aspects of its operations, including operations relating to the importation of subject merchandise. Finally, MAN Roland argues that, if the Department does make an adjustment to the denominator used to allocate MRU's G&A, it should do so using the information submitted on the record which shows that the imported subject merchandise accounted for only a small percentage of MRU's total cost of goods sold. With respect to the petitioner's claim concerning MCC expenses, MAN Roland argues that the Department should not allocate a portion of MCC's G&A expense to MRU. MAN Roland states that the G&A expenses incurred by MCC have no relationship to the further manufacturing activities of MRU. Department's Position: We agree with the petitioner that the denominator of the G&A expense ratio should approximate as closely as possible the same body of expenses as the number to which the ratio is applied. The denominator used for MRU's G&A expense ratio calculation is the cost of goods sold as reported in the financial statements, which includes both processing activities and the cost of imported goods which were resold. The Department's normal methodology is to calculate G&A based on the producing company as a whole. For the preliminary results, the G&A expense ratio was applied only to the further manufacturing costs performed by MRU, and not to the cost of the imported press on which the further manufacturing was performed. Therefore, the G&A expense was understated and we agree with the petitioner that the calculation must be corrected. We have applied the petitioner's alternate methodology because of the difficulties in excluding the imported parts costs from the denominator, including the lack of sufficient information on the record to make such an adjustment. Specifically, for the final determination, we applied the G&A expense rate to the U.S. further manufacturing costs plus the cost of production of the imported press to calculate the G&A expense. We also agree with the petitioner that a portion of the G&A expense incurred by MCC should be allocated to MRU in calculating the total G&A of MRU. For calculating G&A, it is the Department's long-standing practice to require a respondent to report not only its own G&A expenses, but also a proportional share of an affiliated party's G&A expense incurred on the reporting entity's behalf. See, e.g., Final Determination of Sales at Less Than Fair Value; Certain Steel Butt-Weld Pipe Fittings from the United Kingdom, 60 Fed. Reg. 10558, 10561 (February 27, 1995), where the Department adjusted a respondent's submitted data to include an allocated portion of the parent company's G&A expenses. The Department normally will allocate a portion of G&A expenses of the parent company if that company provided services for its subsidiary. Based on our analysis of the questionnaire response information, we determined that MCC provided services for MRU (see notes to the financial statements of MCC in Exhibit SSE-1 of the July 10, 2000, supplemental section D response). Accordingly, for the final results, we allocated a portion of MCC's G&A expenses to MRU's general expenses. Comment 9: Treatment of Installation Costs Incurred in the United States MAN Roland argues that the Department's preliminary methodology of treating the cost of installing the printing press in the United States as a further manufacturing cost, although consistent with the determination in the LTFV investigation, is inconsistent with the Department's earlier decisions in other cases involving similar products. MAN Roland cites Mechanical Transfer Presses from Japan: Final Results of Antidumping Duty Administrative Review, 61 FR 52910, 52911-12, October 9, 1996 (MTPs), in support of its position. MAN Roland continues to believe that the cost of installation is more appropriately treated as a movement expense, noting that the factual situation in the current review is significantly different from the situation addressed in the LTFV investigation. The respondent also claims that, in contrast to the instant review, the installation process in the investigation involved the addition of a number of significant items (including complete RTPs) purchased from suppliers in non-subject countries. MAN Roland further maintains that the classification of installation costs as further manufacturing costs will lead to absurd results where the sale at issue is classified as an export price sale because the statute does not permit adjustments for further manufacturing costs when an export price analysis is used. MAN Roland reasons that, even if the Department continues to treat its U.S. sale as a CEP sale, it is likely that at some point, it will have to address U.S. sales with similar installation processes that cannot be classified as CEP sales. In conclusion, MAN Roland believes the Department should return to its prior practice of classifying installation costs for large made-to- order merchandise as a movement expense. The petitioner disagrees with MAN Roland's assertion that the factual situation in this review differs from that in the original investigation in that the installation requirements subject to this review are not as extensive. The petitioner points out that in addition to installation of its own products, MAN Roland used non-subject materials purchased from unaffiliated U.S. suppliers during installation. Moreover, the petitioner contends that, despite the respondent's assertion to the contrary, installation is very complex work which the Department has long considered further manufacturing. In addition, the petitioner states that the CIT has found the Department's treatment of installation expenses as further manufacturing to be both reasonable and in accordance with law (see Koenig & Bauer-Albert AG v. United States, 15 F. Supp.2d 834, 853 (CIT 1998)). The petitioner also argues that MAN Roland cites only MTPs in support of its position; however, in Large Newspaper Printing Presses and Components Thereof, Whether Assembled or Unassembled, from Germany: Final Determination of Sales and Less than Fair Value, 61 FR at 38177, July 23, 1996, the Department explained why MAN Roland's interpretation of MTPs was incorrect. With regard to MAN Roland's contention that the treatment of installation expenses as further manufacturing would create absurd results, the petitioner maintains that the Department routinely alters its adjustments or uses different adjustments entirely when costs are incurred by affiliated rather than unaffiliated companies. In sum, the petitioner asserts that like the CIT, the Department should reject MAN Roland's argument that installation costs be treated as movement costs for purposes of the final results. Department's Position: We agree with the petitioner that the LNPP installation expenses are properly classified as further manufacturing expenses. The U.S. installation process involves extensive technical and mechanical services, the integration of subject and non-subject merchandise at the customer locations, and integration of the merchandise into the physical and electrical plant at the customer's installation site. From the activities described above, it is clear that significant value is added to the LNPP in the installation process. These activities are further manufacturing because the press cannot operate until all of this activity is completed. Consistent with past precedent, if the installation process involves adding value and the use of non-subject parts, such expenses qualify as value added from further manufacturing. See Final Determination of Sales at Less Than Fair Value; Certain Internal-Combustion, Industrial Forklift Trucks From Japan, 53 Fed. Reg. 12552, 12565 (April 15, 1988)(involving the installation and switching of various options on forklifts sold in the United States); see also Final Determination of Sales at Less Than Fair Value: Certain Small Business Telephone Systems and Subassemblies Thereof From Korea, 54 Fed. Reg. 53141, 53151 (December 27, 1989)(involving the installation of small business telephone systems with characteristics added by non-subject merchandise). MAN Roland improperly relies on the MTPs case as precedent for treating installation expenses as movement expenses. The factual basis of the MTPs case is very different from that of LNPPs. In MTPs, the mechanical transfer presses were fully assembled and tested in the country of manufacture and then subsequently disassembled, shipped to the customers location and reassembled. The disassembly and assembly were done in order to transport the completed merchandise to the customer's location and were thus appropriately treated a movement expenses. There was no further manufacturing or value added as with LNPPs. Finally, Man Roland's argument that the treatment of installation expenses as further manufacturing expenses will lead to absurd results because the statute provides for a deduction of further manufacturing expenses from CEP sales, but provides no such deduction if the sale is EP, ignores the statutory scheme. It is important to recognize that the purpose of the adjustments specified in 772 (c) and (d) of the Act in calculation CEP is to "calculate . . . as closely as possible, the price corresponding to an export price [EP] between non-affiliated exporters and importers." SAA at 153. Therefore, in the typical EP sales situation, the expenses for which CEP sales prices are adjusted will normally not have been incurred; thus, no adjustment of EP is necessary. In the unusual circumstances in which such CEP-type expenses are incurred in an EP situation, the statute provides various mechanisms under both the EP and normal value sections of the statute to ensure that the comparison will be appropriate. See e.g., sections 772 (c) and 773(a)(6) of the Act. Comment 10: Calculation of Profit Used in Constructed Value The petitioner argues that the Department erred in its preliminary margin calculation by departing from its standard methodology to calculate constructed value profit. The petitioner states that the Department should have added direct selling expenses to the cost of production for constructed value, and applied the constructed value profit rate to that sum. The petitioner adds that the Department should then deduct the direct selling expenses from the constructed value. MAN Roland agrees with the petitioner that there is an error in the calculation of the constructed value profit, but disagrees with the petitioner's description of the error. MAN Roland states that, in the preliminary results, the Department calculated a ratio for constructed value profit that excluded installation expenses, imputed credit expenses, and indirect selling expenses from the cost of production used for the denominator. However, according to MAN Roland, this ratio was applied to a constructed value cost of production that included indirect selling and imputed credit expenses, thus the profit calculation is arithmetically incorrect. MAN Roland argues that the denominator used to calculate the profit rate should be calculated in the same manner as the number to which the profit rate will be applied. MAN Roland adds that the deduction of the installation costs from the denominator of the profit calculation is inconsistent with the Department's position that U.S. installation expenses constitute further manufacturing expenses. To be consistent, MAN Roland contends home market installation expenses should be included in the denominator as these expenses would be considered part of the cost of manufacture. Department's Position: We agree with MAN Roland that the constructed value profit ratio was applied incorrectly. We also agree that the ratio was calculated incorrectly by excluding installation expenses from the denominator. As MAN Roland notes, the Department's methodology is to calculate constructed value profit and selling expense rates from the home market cost of production data on the same basis as the constructed value costs to which the rates will be applied. The Department's normal methodology is to calculate profit based on the difference between net revenue (i.e., net price after deducting all price adjustments, movement expenses, selling expenses, and packing expenses) and total costs (i.e., the sum of a manufacturer's cost of materials, fabrication, and G&A expenses). This result is divided by the total cost, as just described, to determine the profit ratio. Selling expense ratios are calculated in the same manner. We note that, while the definition of constructed value under section 773(e) of the Act includes all selling expenses incurred by the foreign producer/exporter in connection with the production and sale of the foreign like product in the ordinary course of trade for consumption in the foreign country (in this case the home market), for computation ease in this and many other cases, we did not calculate CV profit and selling expense ratios that include direct selling expenses because these expenses must ultimately be deducted from constructed value when compared against the CEP. Accordingly, this methodology results in an apples-to-apples comparison. This calculation provides the same mathematical result as that contemplated by the statute. In the LTFV segment of this proceeding, as well as in the LTFV and previous administrative review segments of the LNPPs from Japan proceeding, we calculated the constructed value profit and selling expense ratios using a denominator inclusive of installation expenses. However, in the preliminary results of this administrative review and the concurrent LNPP from Japan review, we removed the installation expenses from the denominator based on our normal practice of calculating profit and selling expense ratios using a denominator that includes the same cost components as the constructed value to which it is applied. However, by subtracting these expenses from the denominator, we introduced a clerical error into our calculation program by double-counting profit attributable to U.S. operations. For the final results, we have recalculated the constructed value profit ratio, as well as the indirect selling and imputed credit expense ratios, based on a denominator consisting of the cost of manufacture (including installation expenses), G&A expenses, and interest expenses, consistent with our normal practice. We have applied the ratios to a cost of production consisting of the cost of manufacture exclusive of installation and other further manufacturing expenses, and selling expenses. We account for the profit and selling expenses attributable to U.S. operations (including installation) separately through our calculation of CEP profit and CEP selling expenses, respectively. Comment 11: Inclusion of Home Market Installation Expenses in Home Market Cost of Manufacture for Profit Calculations MAN Roland contends that the Department erred in the preliminary results by assuming that home market LNPP installation expenses were included in the reported COM. As a result, MAN Roland further contends that the Department erred by subtracting the installation expenses from the COM to calculate CV profit and CEP profit. The petitioner did not address this comment. Department's Position: We agree with MAN Roland. We have corrected the CV profit and CEP profit calculations to add the installation costs, as revised by MAN Roland in its January 24, 2001, submission, to the reported COM for a total installation-inclusive COM. We used this COM for calculating CV profit and CEP profit. Recommendation Based on our analysis of the comments received, we recommend adopting all of the above positions. If these recommendations are accepted, we will publish the final results of review and the final weighted-average dumping margin for the reviewed firm in the Federal Register. Agree____ Disagree___ Bernard T. Carreau, fulfilling the duties of Assistant Secretary for Import Administration (Date) __________________________________________________________________________ footnotes: 1. We note that the Department's decision in MHI's case was a preliminary one; no final determination was ever made because that review with respect to MHI was rescinded. See Final Results of Antidumping Duty Administrative Reviews and Partial Rescission of Administrative Reviews: Large Newspaper Printing Presses and Components Thereof, Whether Assembled or Unassembled, from Japan, 65 FR 7492, February 15, 2000. 2. We note that the CIT has held that the Department's practice of determining LOT for CEP transactions after CEP deductions is an impermissible interpretation of section 772(d) of the Act. See, e.g., Borden, Inc., v. United States, 4 F. Supp. 2d 1221, 1241-42 (CIT 1998) (Borden); and Micron Technology, Inc. v. United States, 40 F. Supp. 2d 481 (CIT 1999). The Department believes, however, that its practice is in full compliance with the statute. On June 4, 1999, the CIT entered final judgement in Borden on the LOT issue. See, i.e., Borden, Inc. v. United States, Court No. 96-08-01970, Slip Op. 99-50 (CIT June 4, 1999). The government has filed an appeal of Borden, which is currently pending before the U.S. Court of Appeals for the Federal Circuit. Consequently, the Department has continued to follow its normal practice of adjusting CEP under section 772(d) prior to starting a LOT analysis, as articulated by the Department's regulations at section 351.412. 3. In the preliminary results, we used date of shipment (or, in the case of multiple shipments, the date of the last major shipment) instead of installation date to separate the production financing period from the imputed credit period. The preliminary results followed the methodology prescribed in the antidumping duty questionnaire issued for this review, and MAN Roland supplied the requested imputed credit data in full compliance with these instructions. For the final results, we have determined that installation date, rather than shipment date is the appropriate date of separation for this calculation.