59 FR 43539, August 24, 1994 NOTICES DEPARTMENT OF COMMERCE [A-421-806] Color Negative Photographic Paper (CNPP) and Chemical Components Thereof From the Netherlands; Suspension of Investigation Wednesday, August 24, 1994 AGENCY: Import Administration, International Trade Administration, Department of Commerce. ACTION: Notice. SUMMARY: The Department of Commerce has decided to suspend the antidumping investigation involving color negative photographic paper (CNPP) and chemical components thereof from the Netherlands. The basis for the suspension is an agreement by the Dutch producers/exporters, which account for substantially all of the known imports of these products from the Netherlands, to revise their prices to eliminate sales of this merchandise to the United States at less than fair value. EFFECTIVE DATE: August 24, 1994. FOR FURTHER INFORMATION CONTACT: Steven Presing, Office of Agreements Compliance, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-3793. SUPPLEMENTARY INFORMATION: Case History On September 20, 1993, the Department initiated an AD investigation on CNPP and chemical components thereof from the Netherlands based on a petition filed by the Eastman Kodak Company. The International Trade Commission issued an affirmative preliminary injury determination on October 15, 1993. On March 29, 1994, the Department preliminarily determined that imports of CNPP from the Netherlands are being sold at less than fair value in the United States . Scope of the Agreement The merchandise covered by this investigation consists of color negative photographic paper (CNPP) sensitized, unexposed silver-halide color negative photographic paper, whether in master rolls, smaller rolls or sheets. Subject chemical components are sensitized (whether chemically or spectrally) and unsensitized emulsions, couplers and coupler dispersions used in making color negative photographic paper. Unsensitized silver-halide emulsions consist of silver-halide microcrystals dispersed in a gelatin and water matrix after preparation and washing to remove soluble sales. Unsensitized emulsions are naturally sensitive to blue and ultraviolet light, but cannot efficiently convert light to form a color image without further processing. Sensitized emulsions have been treated to increase *43540 their sensitivity across the entire spectrum and/or treated by the addition of spectral sensitizing dyes to make the emulsions selectively sensitive to specific wavelengths of light. A coupler dispersion consists of a coupler dispersed in a water-gel solution, and may contain organic solvents, chemicals to stabilize the coupler and other substances. Specifically excluded from this suspension agreement are: (1) all paper and chemical products not used in the silver-halide process which are used in other imaging technologies; (2) precursors of sensitized (whether chemically or spectrally) and unsensitized emulsions (including "seed emulsions" that are used exclusively in the process of producing unsensitized emulsions and do not exceed 0.25 microns in grain size (in cubic edge length)), couplers and coupler dispersions; and (3) those items entered under the Harmonized Tariff Schedule of the United States (HTSUS) subheadings 3707.10.0000, 3707.90.3000, 3707.90.6000, 2933.19.3000, 2933.90.2500 and 2934.90.2000, which are precursors of couplers, emulsions and coupler dispersions (except couplers dispersed in water gel solution) or are couplers, emulsions, and coupler dispersions not for actual use in the color negative photographic paper production process. Products outside the scope include toner and developer chemicals used in electrostatic or indirect imaging processes (e.g., xerography), products used in laser printing, and instant photography products. Also excluded from the scope of this investigation are paper that is designed exclusively for use in graphic arts proofing, equipment and does not exceed 160 microns in thickness, and emulsions classified under 3707.10.0000 of the Harmonized Tariff Schedule of the United States (HTSUS) that are used in the manufacture of monochrome graphic arts film or paper that are not used in the production of CNPP. The CNPP subject to this investigation are classifiable under HTSUS subheadings 3703.10.3030 and 3703.20.3030. Emulsions are currently classifiable under HTSUS subheadings 3707.10.0000 and 3707.90.3000. Couplers and coupler dispersions are currently classifiable under HTSUS subheadings 3707.90.3000, 3707.90.6000, 2933.19.3000, 2933.90.2500 and 2934.90.2000. Period of Investigation The period of investigation (POI) is March 1, 1993 through August 31, 1993. Suspension of Investigation The Department consulted with the parties to the proceeding and has considered the comments submitted with respect to the proposed suspension agreement. We have determined that the agreement will eliminate sales of this merchandise to the United States at less than fair value, that the agreement can be monitored effectively, and that the agreement is in the public interest. We find, therefore, that the criteria for suspension of an investigation pursuant to section 734 of the Act have been met. The terms and conditions of the agreement, signed August 19, 1994, are set forth in Annex 1 to this notice. Pursuant to section 734(f)(2)(A) of the Act, effective (date of publication of Federal Register notice), the suspension of liquidation of all entries, entered or withdrawn from warehouse, for consumption of CNPP from the Netherlands, as directed in our notice of "Antidumping Preliminary Determination of Sales at Less than Fair Value, Color Negative Photographic Paper and Chemical Components Thereof from the Netherlands" is hereby terminated. Any cash deposits on entries of CNPP from the Netherlands pursuant to that suspension of liquidation shall be refunded and any bonds shall be released. Nothwithstanding the suspension agreement, the Department will continue the investigation if we receive such a request in accordance with section 734(g) of the Act within 20 days after the date of publication of this notice. This notice is published pursuant to section 734(f)(1)(A) of the Act. Dated: August 19, 1994. Susan G. Esserman, Assistant Secretary for Import Administration. Annex 1: Suspension Agreement; Color Negative Photographic Paper and Chemical Components Thereof From the Netherlands Under section 734 of the Tariff Act of 1930, as amended (19 U.S.C. 1673c) (the Act), and 19 CFR 353.18, the U.S. Department of Commerce (the Department) and the signatory producers/exporters of color negative photographic paper and chemical components thereof from the Netherlands enter into this suspension agreement (the Agreement). On the basis of this suspension agreement, the Department shall suspend its antidumping investigation initiated on September 20, 1993 (58 FR 50331), with respect to color negative photographic paper and chemical components thereof from the Netherlands, subject to the terms and provisions set out below. (A) Product Coverage The merchandise subject to this Agreement is the following merchandise which has the Netherlands as its origin: (1) For purposes of the Agreement, color negative photographic paper is all sensitized, unexposed silver-halide color negative photographic paper, whether in master rolls, smaller rolls or sheets. Subject chemical components are sensitized (whether chemically or spectrally) and unsensitized emulsions, couplers, and coupler dispersions used in making color negative photographic paper. Unsensitized silver-halide emulsions consist of silver-halide microcrystals dispersed in a gelatin and water matrix after preparation and washing to remove soluble salts. Unsensitized emulsions are naturally sensitive to blue and ultraviolet light, but cannot efficiently convert light to form a color image without further processing. Sensitized emulsions have been treated to increase their sensitivity across the entire spectrum and/or treated by the addition of spectral sensitizing dyes to make the emulsions selectively sensitive to specific wavelengths of light. A coupler dispersion consists of a coupler dispersed in a water-gel solution, and may contain organic solvents, chemicals to stabilize the coupler, and other substances. Specifically excluded from the Agreement are: (1) all paper and chemical products not used in the silver-halide process which are used in other imaging technologies; (2) precursors of sensitized (whether chemically or spectrally) and unsensitized emulsions (including "seed emulsions" that are used exclusively in the process of producing unsensitized emulsions and do not exceed 0.25 microns in grain size (in cubic edge length)), couplers and coupler dispersions; and (3) those items entered under the Harmonized Tariff Schedule of the United States (HTSUS) subheadings 3707.10.0000, 3707.90.3000, 3707.90.6000, 2933.19.3000, 2933.90.2500 and 2934.90.2000, which are precursors of couplers, emulsions and coupler dispersions (except couplers dispersed in water-gel solution) or are couplers, emulsions, and coupler dispersions not for actual use in the color negative photographic paper production process. Products outside the scope include toner and developer chemicals used in electrostatic or indirect imaging processes (e.g., xerography), products *43541 used in laser printing, and instant photography products. Also excluded from the scope of the Agreement is paper that is designed exclusively for use in graphic arts proofing equipment and does not exceed 160 microns in thickness, and emulsions classified under subheading 3707.10.0000 of the HTSUS that are used in the manufacture of monochrome graphic arts film or paper that are not used in the production of color negative photographic paper. (2) The color negative photographic papers subject to this Agreement are classifiable under HTSUS subheadings 3703.10.3030 and 3703.20.3030. Emulsions are currently classifiable under HTSUS subheadings 3707.10.0000 and 3707.90.3000. Couplers and coupler dispersions are currently classifiable under HTSUS subheadings 3707.90.3000, 3707.90.6000, 2933.19.3000, 2933.90.2500 and 2934.90.2000. (B) U.S. Import Coverage The signatory producers/exporters collectively are the producers and exporters in the Netherlands which, during the antidumping investigation on the merchandise subject to the Agreement, accounted for substantially all (not less than 85 percent) of the subject merchandise imported into the United States, as provided in the regulations. The Department may at any time during the period of the Agreement require additional producers/exporters in the Netherlands to sign the Agreement in order to ensure that not less than substantially all imports into the United States are covered by the Agreement. In reviewing the operation of the Agreement for the purpose of determining whether this Agreement has been violated or is no longer in the public interest, the Department will consider imports into the United States from all sources of the merchandise described in Section A of the Agreement. For this purpose, the Department will consider factors including, but not limited to, the following: volume of trade, pattern of trade, whether or not the reseller is an original equipment manufacturer, and the reseller's purchase price (PP). (C) Basis of the Agreement On and after the effective date of the Agreement, each signatory producer/exporter individually agrees to make any necessary price revisions to eliminate completely any amount by which the foreign market value (FMV) of this merchandise exceeds the U.S. price of its merchandise subject to the Agreement. For this purpose, the Department will determine the FMV in accordance with section 773(e) of the Act and U.S. price in accordance with section 772 of the Act. (1) For all sales occurring on or after the effective date of the Agreement through November 30, 1994, each signatory producer/exporter agrees not to sell its merchandise subject to the Agreement to unrelated purchasers in the United States at prices that are less than its FMV, as determined by the Department based on cost information for the period December 1, 1993, through May 31, 1994, and provided to parties not later than August 19, 1994; and (2) For all sales occurring on or after December 1, 1994, each producer/exporter agrees not to sell its merchandise subject to the Agreement to any unrelated purchaser in the United States at prices that are less than its FMV of the merchandise, as determined by the Department on the basis of information submitted to the Department not later than the dates specified in section D of the Agreement and provided to parties not later than November 20, February 20, May 20, and August 20 of each year. This FMV shall apply to sales occurring during the fiscal quarter beginning on the first day of the month following the date the Department provides the FMV, as stated in this paragraph. (D) Monitoring Each signatory producer/exporter will supply to the Department all information that the Department decides is necessary to ensure that the producer/exporter is in full compliance with the terms of the Agreement. As explained below, the Department will provide each signatory producer/exporter a detailed request for information and prescribe a required format and method of data compilation, not later than the beginning of each reporting period. (1) Sales Information The Department will require each producer/exporter to report, on computer tape in the prescribed format and using the prescribed method of data compilation, each sale (which includes further manufactured sales) of the merchandise subject to the Agreement, either directly or indirectly to unrelated purchasers in the United States, including each adjustment applicable to each sale, as specified by the Department. The reporting of further manufacturing costs shall be in accordance with Appendix A. The first report of sales data shall be submitted to the Department, on computer tape in the prescribed format and using the prescribed method of data compilation, not later than December 30, 1994, and shall contain the specified sales information covering the period August 19, 1994, to November 30, 1994. Subsequent reports of sales data shall be submitted to the Department not later than March 31, June 30, September 29, and December 30 of each year, and each report shall contain the specified sales information for the quarterly period ending one month prior to the due date, except that if the Department receives information that a possible violation of the Agreement may have occurred, the Department may request sales data on a monthly, rather than quarterly basis. (2) Cost Information Producer/exporters must request FMVs for all subject merchandise that will be sold in the United States. For those products which the producer/exporter is requesting FMVs, the Department will require each producer/exporter to report: their actual cost of manufacturing; selling, general and administrative (SG&A) expenses; further manufacturing costs; and profit data on a quarterly basis, in the prescribed format and using the prescribed method of data compilation. Further manufacturing costs will be subtracted from the U.S. sale price to determine compliance with the FMV. As indicated in Appendix B, profit from sales to a third country [FN1] will be utilized, and country-specific and consolidated research and development costs will be reported by the producers/exporters on a quarterly basis. Each such producer/exporter also must report anticipated increases in production costs and may report anticipated decreases in production costs in the quarter in which the information is submitted resulting from factors such as anticipated changes in production yield, changes in production process, changes in production quantities or changes in production facilities. FN1 The Department calculated this figure based on information collected during the period of investigation. The first report of cost data shall be submitted to the Department not later than September 29, 1994, and shall contain the specified cost data covering the period June 1, 1994, through August 31, 1994. Each subsequent report shall be submitted to the Department not later than December 30, March 31, June 30, and September 29 of each year, and each report shall contain specified *43542 information for the quarter ending one month prior to the due date. (3) Special Adjustment of Foreign Market Value If the Department determines that the FMV is determined for a previous quarter was erroneous because the reported costs for that period were inaccurate or incomplete, or for any other reason, the Department may adjust FMV in a subsequent period or periods, unless the Department determines that Section F of the Agreement applies. (4) Verification Each producer/exporter agrees to permit full verification of all cost and sales information semi-annually, or more frequently, as the Department deems necessary. (5) Bundling or Other Arrangements Producers/exporters agree not to circumvent the Agreement. In accordance with the date set forth in Section D(1) of the Agreement, producers/exporters will submit a written statement to the Department certifying that the sales reported herein were not, or are not part of or related to, any bundling arrangement, on- site processing arrangement, discounts/free goods/financing package, swap, or other exchange where such arrangement is designed to circumvent the basis of the Agreement. Where there is reason to believe that such an arrangement does circumvent the basis of the Agreement, the Department will request producers/exporters to provide within 15 days all particulars regarding any such agreement, including, but not limited to, sales information pertaining to covered and non-covered merchandise that is manufactured or sold by producers/exporters. The Department will accept written comments, not to exceed 30 pages, from all parties no later than 15 days after the date of receipt of such producer/exporter information. If the Department, after reviewing all submissions, determines that such arrangement circumvents the basis of the Agreement, it may, as it deems most appropriate, utilize one of two options: (1) the amount of the effective price discount resulting from such arrangement shall be reflected in FMV in accordance with Section D(3), or (2) the Department shall determine that the Agreement has been violated and take action according to the provisions under Section F. (6) Rejection of Submissions The Department may reject any information submitted after the deadlines set forth in this section or any information which it is unable to verify to its satisfaction. If information is not submitted in a complete and timely fashion or is not fully verifiable, the Department may calculate fair value, FMV, and/or U.S. price based on best information available, as it determines appropriate, unless the Department determines that Section F applies. (E) Disclosure and Comment (1) The Department may make available to representatives of each domestic party to the proceeding, under appropriately drawn administrative protective orders, business proprietary information submitted to the Department during the reporting period as well as the results of its analysis under section 773 of the Act. (2) Not later than November 1, February 1, May 1, and August 1 of each year, the Department will disclose to each producer/exporter the results and the methodology of the Department's calculations of its FMV. At that time, the Department may also make available such information to the domestic parties to the proceeding, in accordance with this section. (3) Not later than 7 days after the date of disclosure under paragraph E(2), the parties to the proceeding may submit written comments to the Department, not to exceed 15 pages. After reviewing these submissions, the Department will provide to each producer/exporter its FMV as provided in paragraph C(2). In addition, the Department may provide such information to domestic interested parties as specified in this section. (F) Violations of the Agreement If the Department determines that the Agreement is being or has been violated or no longer meets the requirements of section 734 (b) or (d) of the Act, the Department shall take action it determines appropriate under section 734(i) of the Act and the regulations. In the event that the Department determines that the investigation shall be resumed, it will be resumed on the basis of the original administrative record, and the statutes, regulations, policies, and practices in effect on the effective date of the Agreement. (G) Provision for Existing Commitments Pursuant to Appendix C and the terms and conditions outlined below, producers/exporters may continue shipments under existing commitments and their existing terms for a period not to exceed 60 days after the effective date of the Agreement. Recognizing that certain long-term contracts must be renegotiated and that terminated customers may require time to find alternative suppliers, the producers/exporters may continue shipments under existing contract terms for a period, the deadline of which is equal to the earliest of: (1) the earliest date on which an alternative supplier can begin supplying the customer; (2) the earliest date, not to exceed 45 days, on which an existing customer has renegotiated the contract terms with the producer/exporter, or (3) 60 days after the effective date of the Agreement to customers who are terminated. Appendix C contains a list of companies subject to this provision along with their corresponding requirements that have been approved for shipment by the producer/exporter under this provision. Total shipments to a specific company may not exceed that company's corresponding quantity listed on Appendix C or the aggregate for "all other", in the case for smaller customers. Appendix C also contains the total shipment quantity allowable under this provision for all companies; this amount is less than the sum of the individual company requirements listed on Appendix C. This difference is in anticipation of termination prior to all permitted shipments taking place to individual customers. If a company renegotiates or terminates its commitments with the producer/exporter prior to receiving and accepting its maximum shipments approved, this provision no longer applies and the company will be removed from those eligible under Appendix C. The remaining quantities that have not been shipped, but were approved for a certain customer, may not be used to increase another customer's corresponding requirements. The maximum customer-specific quantities listed in Appendix C cannot be increased to account for undershipments to other customers. If a customer would like to accept additional supply above and beyond its corresponding quantity listed in Appendix C, these sales must be made at or above the applicable FMV. If a company-specific shipment would bring the total shipments for all companies to an amount in excess of the total quantity allowable, the producer/exporter must only ship a quantity that ensures compliance with the total quantity allowable for all companies. Any quantities in excess of the total quantity allowable must be sold at or above the applicable FMV. The producer/exporter shall notify the Department weekly of each shipment made under this provision and provide a written statement from the producer/exporter certifying that each shipment is *43543 pursuant to commitments listed in Appendix C. The certification must contain all particulars concerning each specific shipment including, but not limited to, customer, date, quantity, price, and delivery and particulars concerning the terms and conditions under which the shipment is being made. The Department will review and approve the certification upon receipt, thereby monitoring on an individual basis all such shipments to ensure compliance with this provision. Where there is reason to believe that shipments, which do not meet the criteria described above, have nonetheless been shipped under this provision, and that certification has been made falsely, the producer/exporter will share within 5 days of any such request from the Department all particulars regarding such shipment(s). After reviewing the information, the Department will determine whether the terms of this provision have been satisfied. If the Department determines that a certification has been provided falsely or does not meet the requirements of this provision, Section F of the Agreement applies. At the end of the 60 days, the Department will calculate upon request the total difference between the FMV in effect on the date of shipment and the actual net price at which the goods were sold. The total difference will be added to the FMV to be in effect during succeeding period(s). The resulting FMV will apply to a number of units identical to the number for which a difference was calculated. The specific units to which this resulting FMV will apply will be those units first sold in the succeeding quarter. To the extent necessary, this provision supersedes the dates set forth in Section C of the Agreement. (H) Non-Participating Signatories For signatories which did not receive a questionnaire in the less-than-fair- value investigation on the subject merchandise, the Department will issue, if requested in a timely manner, the initial FMV 9 months after the effect date of the Agreement. The total sales volume made during the 9-month period prior to the issuance of the initial FMV may not exceed the total sales volume made by the signatory during the period January 1994 through June 1994. All sales made by the signatories will be made during this 9-month period at prices that are not less than fair value. At the end of the initial 9 months, the Department may upon request review all sales made during this period. For those sales which have occurred, the Department will calculate an FMV using information for the most recent 9-month period available. The Department will calculate the total difference between the FMV and the actual price at which the goods were sold. The total difference will be added to the FMV to be in effect during the succeeding period(s). The resulting FMV will apply to a number of units identical to the number for which a difference was calculated. The specific units to which this resulting FMV will apply will be those units first sold in the succeeding quarter(s). For all sales of covered merchandise made after the 9-month period the producer/exporter must request an FMV consistent with Section D(2) of the Agreement. Signatories will collect and report all information required by the Department for the calculation of FMV in the format specified under the Agreement. The Department will consult with the signatories regarding data preparation and reporting format in order to ensure that all requirements are met. To the extent necessary, this provision supersedes the dates set forth in Section C of the Agreement. (I) Re-Export Provision Imports into the United States of subject merchandise which are physically incorporated into a further manufactured product by a related party and are subsequently exported by the related party, are not covered by the Agreement if the following conditions apply. Upon request by the producer/exporter, the Department may approve a system which tracks imports of covered merchandise through production, to the point of re-export, and allows for verification. The approved system will reflect an understanding between the Department and the producer/exporter that there have been a historical volume of entries of covered merchandise imported into the United States and subsequently exported in the form of a further manufactured good by a related party. Understanding this history, and taking into consideration an element for growth, the Department and the producer/exporter will agree that the volumes of entries for the duration of the Agreement will not be inconsistent with that history. The producer/exporter agrees to provide quarterly reports detailing the entries and subsequent re-exports which will be subject to verification semi-annually or more frequently as the Department deems appropriate. (J) Other Provision (1) In entering into the Agreement, the signatory producers/exporters do not admit that any sales of the merchandise subject to the Agreement have been made at less-than-fair-value. (2) Changes in U.S. legislation resulting from U.S. implementation of Article VI of GATT 1994, shall be applicable to the requirements and obligations of the Agreement for the period beginning on the first full quarter after the effective date of any such changes. (K) Termination The Department will not consider requests for termination of this suspended investigation prior to August 1999. Termination will be conducted in accordance with section 353.25 of the Department's regulations. Any producer/exporter may terminate the Agreement at any time upon notice to the Department. Termination shall be effective 60 days after such notice is given to the Department. Upon termination, the Department shall follow the procedures outlined in section 734(i)(1) of the Act. (L) Definitions For purposes of the Agreement, the following definitions apply: (1) U.S. PRICE--means the price at which merchandise is sold by the producer or exporter to the first unrelated party in the United States, including the amount of any discounts, rebates, price protection or ship and debit adjustments, and other adjustments affecting the net amount paid or to be paid by the unrelated purchaser, as determined by the Department under section 772 of the Act. (2) FOREIGN MARKET VALUE--means the constructed value (CV) of the merchandise, as determined by the Department under section 773 of the Act and the corresponding sections of the Department's regulations, as determined by the Department. (3) PRODUCER/EXPORTER--means (1) the foreign manufacturer or producer, (2) the foreign producer or reseller which also exports, and (3) the related person by whom or for whose account the merchandise is imported into the United States, as defined in section 771(13) of the Act. (4) DATE OF SALE--means the date on which the essential terms of the contract, including price, are agreed and determinable normally the date of confirmation of sale. The effective date of the Agreement is the date on which it is published in the Federal Register. *43544 For Dutch Producers/Exporters. Fuji Photo Film U.S.A. Inc., and Fuji Photo Film B.V. Date William H. Barringer, Esq., Willkie, Farr & Gallagher. For U.S. Department of Commerce. Date Susan G. Esserman, Assistant Secretary for Import Administration. APPENDIX A--COLOR NEGATIVE PHOTOGRAPHIC PAPER (CNPP) AND CERTAIN CHEMICAL COMPONENTS FROM THE NETHERLANDS SUSPENSION AGREEMENT PRINCIPLES OF COST General Framework The cost information reported to the Department that will form the basis of the FMV calculations for purposes of the Agreement must be: - comprehensive in nature and based on a reliable accounting system (i.e., a system based on well-established standards and can be tied to the audited financial statements); - representative of the company's costs incurred for the general class of merchandise; - calculated on a quarterly weighted-average basis of the plants or cost centers manufacturing the product; - based on fully-absorbed costs of production, including any downtime; - valued in accordance with generally accepted accounting principles; - reflective of appropriately allocated common costs so that the cost necessary for the manufacturing of the product are not absorbed by other products; and - reflective of the actual cost of producing the product. Additionally, a single figure should be reported for each cost component. Cost of Manufacturing Costs of manufacturing are reported by major cost category and for major stages of production. Weighted-average costs are used for a product that is produced at more than one facility (including further manufacturing in the United States); based on the cost at each facility. Direct materials--cost of those materials which are input into the production process and physically become part of the final product. Direct labor--cost identified with a specific product. These costs are not allocated among products except when two or more products are produced at the same cost center. Direct labor costs should include salary, bonus, and overtime pay, training expenses, and all fringe benefits. Any contracted-labor expense should reflect the actual billed cost or the actual costs incurred by the subcontractor when the corporation has influence over the contractor. Factory overhead--overhead costs include indirect materials, indirect labor, depreciation, and other fixed and variable expenses attributable to a production line or factory. Because overhead costs are typically incurred for an entire production line, an appropriate portion of those costs must be allocated to covered products, as well as any other products produced on that line. Acceptable cost allocations can be based on labor hours or machine hours. Overhead costs should also reflect any idle or downtime and be fully absorbed by the products. Cost of Production (COP) Is equal to the sum of materials, labor, and overhead (COM) plus SG&A expenses in the home market (HM). SG&A--those expenses incurred for the operation of the corporation as a whole and not directly related to the manufacture of a particular product. They include corporate general and administrative expenses, financing expenses, financing expenses, and general research and development expenses. Additionally, direct and indirect selling expenses incurred in the HM for sales of the product under investigation are included. Such expenses are allocated over cost of goods sold. Constructed Value Is equal to the sum of materials, labor, and overhead (COM) and SG&A expenses plus profit. Calculation of Suspension Agreement FMVs FMVs (for purposes of the Agreement) are calculated by adjusting the CV and are provided for both PP and ESP transactions. In effect, any expenses uniquely associated with the covered products sold in the HM are subtracted from the CV, and any such expenses which are uniquely associated with the covered products sold in the United States are added to the CV to calculate the FMV. Purchase price--price at which the exported merchandise is sold to the first unrelated buyer when the sale occurs prior to the importation. Typically, when the producer sells directly to an unrelated U.S. importer or to a foreign trading company for export to the United States. For PP FMVs, the CV is adjusted for movement costs, packing costs, and differences in direct selling expenses such as commissions, credit, warranties, technical services, advertising, and sales promotion. Exporter's sales price--price at which the exported merchandise is sold to the first unrelated buyer after importation into the United States. Typically, when a related party in the United States makes the sale. For ESP FMVs, the CV is adjusted similar to PP sales, with differences for adjustments to U.S. and HM indirect-selling expenses. Home market direct-selling expenses--expenses that are incurred as a direct result of a sale. These include such expenses as commissions, co-op advertising, discounts and rebates, credit, warranty expenses, freight costs, etc. Certain direct-selling expenses are treated individually. They include: Commission expenses--payments to unrelated parties for sales in the HM. Credit expenses--expenses incurred for the extension of credit to the HM customers. Movement expenses--freight, brokerage and handling, packing, and insurance expenses. Home market indirect-selling expenses--fixed portion of a corporation's expenses and includes such items as salaries of administrative personnel, warehousing expenses, advertising expenses, and sales promotion. These expenses will not increase or decrease depending on production or sales. U.S. direct-selling expenses--the same as HM direct-selling expenses except that they are incurred in the United States for sales in the United States. Movement expenses--additional expenses incidental to importation into the United States. Typically include U.S. inland freight, insurance, brokerage and handling expenses, U.S. Customs duties, and international ocean, air, or land freight. U.S. indirect-selling expenses--include general-fixed expenses incurred by the U.S. sales subsidiary or related exporter for sales to the United States. They may also include a portion of indirect expenses incurred in the HM for export sales. Further Manufacturing Further manufacturing costs are calculated by taking the sum of COM, plus SG&A expenses, plus profit in the U.S. market for further manufacturing. Where further manufacturing modifies the subject merchandise to the extent that the finished product is no longer within the scope of the investigation, the Department will provide its calculations of further manufacturing. *43545 For ESP Transactions direct materials + direct labor + factory overhead = Cost of Manufacturing + home market SG&A [FN2] FN2 Home market SG&A must be at least 10 percent of the cost of manufacturing. = Cost of Production + Profit [FN3] FN3 Profit must be at least 8 percent of the cost of production. = Constructed Value + U.S. direct-selling expense + U.S. indirect-selling expense + U.S. commission expense + U.S. movement expense + U.S. credit expense HM direct-selling expense HM indirect-selling expense [FN4] FN4 This expense is capped and can be no greater than either (1) the total of U.S indirect-selling expense or (2) the combined total of U.S. indirect- selling expense and U.S. commission when no HM commissions are paid. HM commission expense HM credit expense = FMV for ESP sales For PP Transactions direct materials + direct labor + factory overhead = Cost of Manufacturing + home market SG&A [FN5] FN5 Home market SG&A must be at least 10 percent of the cost of manufacturing. = Cost of Production + Profit [FN6] FN6 Profit must be at least 8 percent of the cost of production. = Constructed Value + U.S. direct-selling expense + U.S. commission expense + U.S. movement expense + U.S. credit expense HM direct-selling expense HM commission expense [FN7] FN7 If the company does not have HM commissions, HM indirects are subtracted only up to the amount of U.S. commissions. HM credit expense = FMV for PP sales For Further Manufacturing direct materials + direct labor + factory overhead = Cost of Further Manufacturing + further manufacturing SG&A = Further Manufacturing Cost of Production + further manufacturing profit = Total Further Manufacturing Costs Appendix B--Profit Calculation The profit figure represents the profit from sales of CNPP to unrelated customers in Germany during the period of Investigation (POI). The Department computed the profit percentage in the following manner: Gross Sales Price --Discounts --Rebates --Movement Expenses =Net Price Less: Cost of Production (materials, labor, overhead, selling, general and administrative expenses, interest, other, packing) =Profit per transaction Profit percentage=Profit from all transactions/COP from all transactions =[ ] percent BILLING CODE 3510-DS-M TABULAR OR GRAPHIC MATERIAL SET FORTH AT THIS POINT IS NOT DISPLAYABLE *43546 [FR Doc. 94-20869 Filed 8-22-94; 8:45 am] BILLING CODE 3510-DS-C 59 FR 43539-01, 1994 WL 455361 (F.R.) END OF DOCUMENT